Q1 2022 Gohealth Inc Earnings Call

May 10, 2022

Okay.

Welcome to the go help Q1 2022 earnings Conference call. My name is Darrel and I'll be your operator for today's call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. During the question and answer session. If you have a question. Please press star zero one on your Touchtone phone as a reminder, this call.

<unk> is being recorded I will now turn the call over to Brian Farley, Brian you may begin.

Thank you and good afternoon, everyone. Thanks for joining <unk> first quarter 2022 earnings call joining.

Joining me today are Quint Jones, co founder and Chief Executive Officer, and Travis T SEC interim 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 in these statements.

Many of the factors that will determine future results are beyond the company's ability to control or predict you should not place undue reliance on any forward looking statements and the company undertakes no obligation to update any of these statements whether due to new information future events or otherwise.

After the market closed today, we issued a press release containing our results for the first quarter of 2022.

We have posted the release on the go health website under the Investor Relations tab.

Also posted on our website the presentation materials that claim and Travis will walk through voluntarily.

In the press release, we have listed a number of risk factors that you should consider in conjunction with our forward looking statements.

Other risk factors are described in our Form 10-K, and Form 10-Q reports filed with Securities and Exchange Commission.

During this call we will be discussing certain non-GAAP financial measures. These measures are reconciled to the most directly comparable GAAP financial measure and a reconciliation are set forth in the press release and investor presentation, and with that I'd like to turn the call over to Clint.

Thank you, Brian and thank you all for joining us to review our first quarter of 2022 results.

As Brian mentioned, we have posted a slide deck to our Investor Relations website.

We will work through before opening up to Q&A.

Starting on slide four.

We had a strong first quarter.

With revenues of $271 million and adjusted EBITDA of $11 million.

Which does not include the impact of our cost actions taken to date.

We grew submission volume by 62% year over year.

Leveraging the investments we made in our agent force last year and continued technology enhancements.

Our strategy. This year is to deliberately slow down and focus on operational efficiencies that will position the company for sustainable long term success.

We continue to focus on serving the Medicare market.

With the best consumer experience, while delivering high quality member growth for our carrier partners.

As more and more plant options are available for consumers.

Have evolving needs our end to end platform aims to be the industry leader in choice transparency and customer experience.

Ah, reducing our growth rates in 2022 relative to previous years, we can maintain attractive margins and accelerate our path to positive operating cash flow, while continuing to be a reliable partner to our members and carriers.

During the first quarter.

We have seen this strategy begin to play out.

We have been strategic with our advertising.

Maximizing the return on each dollar spent.

Leveraging our technology. Our team has worked hard to achieve reductions to our marketing and advertising spend for submission.

Resulting in a 10% decline year over year in the last month of the quarter.

We have also been hard at work improving our quality of enrollments and we observed a decline in <unk> of 20% compared to last year, the very promising agent retention rate.

We are optimistic about these trends and will impact several of our operational initiatives on our next slide.

Through the first quarter, we remain on track to deliver on our annual guidance and in particular cash flow breakeven for the first half of 2023.

As we generated $54 million in cash flow from operations in the first quarter.

Which was up 75% from last year.

Reflecting significant growth in our membership volumes that continues to generate cash commission.

To ensure we achieve.

Our target of positive operating cash flow by the first half of 2023 on a trailing 12 month basis.

Taken certain cost actions continue to focus on cost and cash efficiency.

As we turn to slide five I'd like.

To provide an update on our progress on our key priorities.

Outlined on our last earnings call.

So far the year, we're seeing success across each of these priorities.

On the marketing front, we are leveraging our technology to be more efficient targeting consumers and match them with specialized agents.

We've also been more selective with our marketing spend to maximize efficiency, while focusing on quality.

Together these initiatives have helped us control marketing cost per submission despite strong Medicare enrollment growth.

We entered 2022 with several initiatives to improve agent retention and maximize the return on the large investments we made in 2021 and agent hiring and development.

These investments resulted in a large tenured and more efficient agent workforce that drove strong submission growth in the first quarter.

We are pleased to see agent attrition fall well below the levels, we observed last year.

Our training and development initiatives have also boosted agent productivity and quality scores.

These trends reduce our hiring needs in 2022.

Which we expect to have a positive impact on our Roma quality and growth operational efficiency cash flow and margins.

Our technology enhancements continue to drive more efficient operations across our integrated marketplace.

Helping secure lower marketing cost per submission through targeted marketing strategies and call routing tools to ensure every call is answered quickly by the REIT specialized agent.

Our guidance selling platform aims to improve customer retention rates and lower denial rates leveraging data on millions of enrollments and member retention patterns.

Lastly, our slower growth and narrowed focus this year has enabled our team and resources to focus on quality and results.

Which we are seeing come across in our operating metrics and financials.

We.

You need to invest in our encompass platform to expand customer and carrier customized offerings.

Members that we engaged through our encompass platform see higher satisfaction retention and profitability.

Over the course of this year, we will unpack more on our encompass strategy and results as we believe this will be an important growth driver and improve the cash flow profile of our business.

While helping drive quality member growth for our carrier partners.

Lastly on slide six we have taken steps to improve our profitability and cash flow by becoming more efficient across our business.

We expect these changes to result in cost savings of $200 million in 2022, as we discussed last quarter.

Most of which we will see in the back half of the year.

We are already executing on several cost actions that will fully materialize later in the year.

Before I hand, it off the Travis I want to highlight our first quarter financial results in Q1, we had revenues of $271 million up 33% since last year.

And adjusted EBITDA of $11 million.

In addition, we saw a 75% increase in cash flow from operations compared to the prior year period.

With these results we are reaffirming our full year guidance range with revenues between $900 million and $1 1 billion and.

And adjusted EBITDA between $110 million and $150 million.

All with the goal of achieving positive operating cash flow on a trailing 12 month basis by the first half of 2023.

I would now like to turn it over to Travis to discuss our financials in detail.

Travis.

Thanks Clint.

Slide eight looks at our top line results over the first three months of the year, which were in line with our expectations.

The continued growth in Medicare.

Internal Medicare team of agents delivered commission revenue growth of 20%.

Medicare commissions were fueled by the combination of 62% growth in carrier proved submissions and were offset by a decrease in absolute LTV.

Total revenue grew 33% during the OSP to $271 million, including enterprise revenue of $61 million up 102% in the quarter.

As a reminder, our enterprise solution offerings are made up of marketing enrollment and technology solutions for carriers.

Cliff will touch on it more in a minute, but we anticipate a higher percentage of our revenue will be from an expanded set of encompass offerings going forward, which will be reflected in the enterprise segment.

Overtime. This will provide better predictability transparency and unit economics, while also driving more cash into the business.

Slide nine illustrates our key unit economics for the first quarter relative to last year.

As mentioned earlier strong submission growth was driven by both an increase in agents in the first quarter of this year relative to last year combined with continued growth of our external channel.

We continued to see strong demand during the AEP as consumers continue to seek out our platform.

Moving to revenue per submission, we saw a 5% decline in the first quarter revenue per submission and it includes commissions enterprise revenue and encompass revenue.

As a reminder, we collect cash for enterprise and encompass services on an accelerated basis relative to commission and these accelerated collections continue to improve our payback period.

Encompass is fast becoming a meaningful incremental revenue driver for us last year. The majority of encompass revenue flowed through the commissions line item and impacted Ltvs as the services are tied to the policy or submission. This year, we are expanding our offerings and services across a broader group of carriers.

That are directly tied to our members post sale, meaning that some of these encompass offerings will also impact our enterprise revenue line.

Finally on the far right of the slide you will see our cost per submission. These.

These costs represent our fully loaded cost to enroll inclusive of our cost of revenue <unk> and our marketing and advertising expenses.

We saw a slight uptick in cost per enrollment this quarter.

Higher proportion of our enrollment came from our external channel, which has a higher cost structure and we carried a higher agent count throughout the quarter.

As a reminder, our external channel does it require the same cash usage due to a revenue split arrangements with our partners.

I'll touch on it more in a minute, but we anticipate the cost per submission to decline over the second and third quarters as we focus on our current agent force rather than ramping New ages.

And as we optimize our marketing spend.

Slide 10 walks through our revenue by channel and segment.

You can see we've begun to expand our enterprise revenue as we continue to form and expand our partnerships with carriers through our encompass platform.

We are moving thoughtfully to lengthen our lead of commercializing our encompass program.

We're 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 programs beyond enrollment positively impacting our carrier partners long term profitability as we leverage our position in the value chain to deliver results.

You'll hear more on this from Clinton in a minute.

On the segment side, you can see here that we've maintained strong growth in Medicare revenue driven by the expansion of both our internal and external channels.

Slide 11 walks through the progress we delivered towards our full year investments and resulting EBITDA.

Adjusted EBITDA of $11 million was consistent with our expectations as short term profitability was impacted by our deliberate strategy to slow growth as we optimize unit economics as Cliff previously mentioned this does not reflect the full impact of cost actions taken to date and that benefit will be seen throughout the latter half of the year.

Okay.

Aggregate customer care and enrollment, including telecom and technology investments were up $31 million in the first quarter.

This was driven by us walking into the current year with materially more agents than in the prior period.

As we continue to focus on profitability and cash flow expect these comps and <unk> to come down as we slowed down hiring this year relative to last year.

Increased marketing and advertising spend helped us drive the strong topline growth in the quarter as we optimized across a broad marketing funnel combined cost of revenue and marketing and advertising grew 54%.

Moving on to our 2022 outlook shown on slide 12, we are reaffirming full year 2022 revenue of $900 million to 1 billion and adjusted EBITDA of $110 million to $150 million.

Regarding the seasonal cadence I wanted to call out the following as we think about the upcoming FTP periods for Q2, and Q3 and the AEP period.

As it relates to revenue, we anticipate combined revenue for Q2 and Q3 to be in line with the revenue achieved here in Q1.

This will be driven by a slowdown in enrollments as we pulled back here in Q2, and optimize our marketing spend and continue to focus on the quality of our agents and enrollments during the period.

We then expect to ramp up during AEP to achieve revenue levels slightly exceeding the fourth quarter of 2020.

As it relates to adjusted EBITDA, we anticipate combined adjusted EBITDA levels, ranging from negative 30 to negative $40 million during the S&P.

This will be driven by the cost of carrying our current agent force, while we pull back on marketing and advertising ultimately driving fewer enrollments.

This will also allow us to focus on short to medium term cash flows as we continued to collect cash on our old vintages, while limiting the outgoing cash spent during the seasonally slow period.

As a reminder, last year, we incurred a large amount of cc any cost in Q2 and Q3 as we ramped up prior to AEP.

This year as we focus on optimization and cash flows we will incur lower agent ramp costs as we focus on optimizing and retaining our current agents ahead of this AEP.

We then expect an adjusted EBITDA margin percentage to return to the mid <unk> similar to the fourth quarter of 2020 levels. We.

We believe slowing down now in order to execute well and AEP is a good trade off as the EBITDA upside in Q4, so far outweighs the upside during Q2 and Q3 are historically slowest seasons.

Moving down the P&L, the combined costs related to marketing and cost of revenue will be more heavily weighted towards cost of revenue as our marketing team drives fewer.

Higher quality consumer volume.

<unk> and advertising expenses should represent roughly $100 million less than last year's total advertising costs.

Again this shift also improves short to medium term cash flows.

As we think about the remainder of the year, we won't need an increase in the number of qualified consumers our agents to hit our numbers instead, our focus on better optimizing our current marketing funnel and team of talented agents will drive our results.

Moving on to cash flow.

Slide 13 highlights our current capital and liquidity position.

We collected a record $335 million of cash commissions during the quarter and 83% increase in cash collections relative to Q1 of last year.

Even with these record cash collections, we still have over $1 $1 billion of accounts receivable on the balance sheet today.

Strong cash collections combined with our highly efficient funnel led to positive operating cash flow of $54 million in the first quarter, a 75% increase in cash flows from last year.

Clint will now walk you through some of the exciting updates to our encompass platform and why we're so encouraged about the future potential Clint.

Thanks, Travis before we close I am excited to turn to slide 15, which covers the future of our evolving encompass platform.

Our encompass platform was launched in 2020 to serve unique needs of our members post enrollment and quickly proved to be a powerful tool and connecting seniors to the care they needed the most.

We're proud to announce that we're expanding our encompass platform to serve our carrier partners as a holistic enterprise solution.

Historically, we provided outsource marketing enrollment and technology solutions to carriers as an enterprise capability.

We've now expanded upon that capability to serve our carrier partners most pressing needs introducing two new modules encompass connect and encompass engage.

Encompass connect is an enterprise solution designed to help carriers target the right consumers in the right geographies, then leverages proprietary data and technology to enroll those consumers in the best plans.

Encompass connect will be a strategic and competitive force multiplier.

Carriers to adopt our platform.

Our second module and compass engage expands on our legacy offering to help carriers elevate the sophistication with which they serve their members post enrollment.

This system of engagement harnesses deep consumer insights to customized contact strategies for specific member segments.

Ultimately, increasing engagement retention and driving positive outcomes at scale.

This offering will be essentially powerful for connecting at risk populations and underserved Americans with a critical health care they deserve.

Early response to our expanded enterprise solutions has been incredibly positive and we're actively discussing the adoption of these modules with several of our carrier partners.

We expect these industry, leading offerings to improve member outcomes.

And the value, we bring to carriers and drive more predictable and attractive economics within our revenue model.

You can expect to hear more updates throughout the year on these new exciting services and tools.

I'd now like to turn the call over to the operator for Q&A.

And if anyone has a question it's zero one on your Touchtone phone. Once again, if you have a question. It's zero one on your Touchtone phone, if you wish to be removed from the queue. It's zero too.

Once again, if you have a question.

Zero one.

On your Touchtone phone.

Once again.

We do have a question from.

Brad He'll go go ahead, Brad yes. Thank you.

And regarding a deficiency notice.

For being under a dollar.

Are there any strategic plans to get that over a dollar what they would be and.

Is there any talk about a reverse stock split to do it.

Yes, we are aware of the issue thanks, Brad for the question.

Obviously, there's a variety of options at our disposal to maintain compliance with NASDAQ trading rules and our board is considering all those options okay great.

No where you go out with that because.

Could be an issue here pretty soon.

Once again, if anyone has a question.

Zero one on your Touchtone phone.

Once again Thats zero, one on your Touchtone phone.

And we have a question from Jonathan Young go ahead Jonathan.

Yes. Good afternoon, guys. This is Carl for Jonathan.

And my question is just in company revenues are higher they were leading to higher enterprise reps.

Just trying to see if you guys can discuss how much <unk>.

<unk> uplift.

Cocoa gets from the encompass on a policy basis.

Also I believe most of the investments that encompass were from last year, just kind of curious if Arizona.

Much investments you are putting into encompass this year.

Okay.

Yes, thanks for the question.

Yes, so the arrangements we have within our encompass programs vary by different carrier.

And as far as investments goes yes, we will.

Continue to invest in the platform as we bring out additional services and features for our carrier partners. We continue to have technology investments throughout the year as we expanded relationships.

Okay.

Just a follow up question.

This was kind of curious also on I know some of the peers are pulling back given their own situations, but.

Carrier partner sound like they are increasing their spend.

At least with Humana, so theyre, playing a lot into marketing and benefits, but just kind of curious any thoughts on this aspect.

There may be taking share and turned our share with your sales force.

Yes, so we're not seeing.

Material changes.

With different spend in different channels, we are seeing kind of overall pullback in the market.

Based on the channels, we're in but we can't.

Pretty big wide net when it comes to the areas we target.

We are seeing kind of competitive pressures come down, but we will kind of maintain kind of focus throughout the year on what our competitors are doing.

Okay.

Okay perfect. Thanks.

And once again, it's zero one on your Touchtone phone.

And we don't have any more questions I'll turn it back to the speakers for final comments.

Thank you all for attending today to hear our Q1 2022 results. We look forward to updating you further throughout the year.

On the progress today. Thank you so much.

And thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.

Okay.

[music].

Thank you.

Yes.

Thanks.

[music].

Welcome to the go help Q1 2022 earnings conference call. My name is Darrel and I'll be your operator for today's call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. During the question and answer session. If you have a question. Please press star zero one on your Touchtone phone as a reminder, this.

France is being recorded I will now turn the call over to Brian Farley, Brian you may begin.

Thank you and good afternoon, everyone. Thanks for joining go Health's first quarter 2022 earnings call joining.

Joining me today are quite Jones, co founder and Chief Executive Officer, and Travis <unk> interim 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 in these statements.

After the market closed today, we issued a press release containing our results for the first quarter of 2022, we have posted the release on the <unk> website under the Investor Relations tab.

Also posted on our website the presentation materials that client and Travis will walk through voluntarily.

In the press release, we have listed a number of risk factors that you should consider in conjunction with our forward looking statements.

Other risk factors are described in our Form 10-K, and Form 10-Q reports filed with Securities and Exchange Commission.

Thank you, Brian and thank you all for joining us to review our first quarter 2022 results.

As Brian mentioned, we have posted a slide deck to our Investor Relations website.

We will work through before opening up to Q&A.

Starting on slide four.

We had a strong first quarter.

With revenues of $271 million and adjusted EBITDA of $11 million.

Which does not include the impact of our cost actions taken to date.

We grew submission volume by 62% year over year.

Leveraging the investments we made in our agent force last year and continued technology enhancements.

Our strategy. This year is to deliberately slow down and focus on operational efficiencies that will position the company for sustainable long term success.

We continue to focus on serving the Medicare market.

With the best consumer experience, while delivering high quality member growth for our carrier partners.

As more and more plant options are available for consumers.

Have evolving needs our end to end platform aims to be the industry leader in choice transparency and customer experience.

By reducing our growth rates in 2022 relative to previous years, we can maintain attractive margins and accelerate our path to positive operating cash flow, while continuing to be a reliable partner to our members and carriers.

During the first quarter.

We have seen this strategy begin to play out.

We have been strategic with our advertising.

Maximizing the return on each dollar spent.

Leveraging our technology. Our team has worked hard to achieve reductions to our marketing and advertising spend for submission.

Resulting in a 10% decline year over year in the last month of the quarter.

We have also been hard at work improving our quality of enrollments and we observed a decline in <unk> of 20% compared to last year, the very promising agent retention rate.

We are optimistic about these trends and will impact several of our operational initiatives on our next slide.

Through the first quarter, we remain on track to deliver on our annual guidance and in particular cash flow breakeven by the first half of 2023.

As we generated $54 million in cash flow from operations in the first quarter.

Which was up 75% from last year.

Reflecting significant growth in our membership volumes that continues to generate cash commissions.

To ensure we achieve.

Our target of positive operating cash flow by the first half of 2023 on a trailing 12 month basis.

Taken certain cost actions and continue to focus on cost and cash efficiency.

As we turn to slide five I'd.

I'd like to provide an update on our progress on the key priorities, we outlined on our last earnings call.

So far in the year, we are seeing success across each of these priorities.

On the marketing front, we are leveraging our technology to be more efficient targeting consumers and match them with specialized agents.

We have also been more selective with our marketing spend to maximize efficiency, while focusing on quality.

Together these initiatives have helped us control marketing cost per submission despite strong Medicare enrollment growth.

We entered 2022 with several initiatives to improve agent retention and maximize the return on the large investments we made in 2021 and agent hiring and development.

These investments resulted in a large tenured and more efficient agent workforce that drove strong submission growth in the first quarter.

We are pleased to see agent attrition fall well below the levels, we observed last year.

Our training and development initiatives have also boosted agent productivity and quality scores.

These trends reduced our hiring needs in 2022.

Which we expect to have a positive impact on Roma quality and growth operational efficiency cash flow and margins.

Our technology enhancements continue to drive more efficient operations across our integrated marketplace.

Helping to secure lower marketing cost per submission through targeted marketing strategies and call routing tools to ensure every call is answered quickly by the REIT specialized agent.

Our guided selling platform aims to improve customer retention rates.

And lower denial rates leveraging data on millions of enrollments and member retention patterns.

Lastly, our slower growth and narrowed focus this year has enabled our team and resources to focus on quality and results.

Which we are seeing come across in our operating metrics and financials.

We continue to invest in our encompass platform to expand customer and carrier customize offerings.

Members that we engage through our encompass platform see higher satisfaction retention and profitability.

Over the course of this year, we will unpack more on our encompass strategy and results as we believe this will be an important growth driver and improve the cash flow profile of our business.

Helping drive quality member growth for our carrier partners.

Lastly on slide six we have taken steps to improve our profitability and cash flow by becoming more efficient across our business.

We expect these changes to result in cost savings of $200 million in 2022, as we discussed last quarter.

Most of which we will see in the back half of the year we.

We are already executing on several cost actions that will fully materialize later in the year.

Before I hand, it off the Travis I want to highlight our first quarter financial results in Q1, we had revenues of $271 million up 33% since last year.

And adjusted EBITDA of $11 million.

In addition, we saw a 75% increase in cash flow from operations compared to the prior year period.

With these results we are reaffirming our full year guidance range with revenues between $900 million and $1 1 billion and.

And adjusted EBITDA between $110 million and $150 million.

All with the goal of achieving positive operating cash flow on a trailing 12 month basis by the first half of 2023.

I'd now like to turn it over to Travis to discuss our financials in detail.

Travis.

Thanks Cliff.

Slide eight looks at our topline results over the first three months of the year, which were in line with our expectations.

The continued growth in Medicare.

Internal Medicare team of agents delivered commission revenue growth of 20%.

Medicare commissions were fueled by the combination of 62% growth in carrier proved submission and were offset by a decrease in absolute LTV.

Total revenue grew 33% during OUP to $271 million, including enterprise revenue of $61 million up 102% in the quarter.

As a reminder, our enterprise solution offerings are made up of marketing enrollment and technology solutions for carriers.

Chris will touch on it more in a minute, but we anticipate a higher percentage of our revenue will be from an expanded set of encompass offerings going forward, which will be reflected in the enterprise segment.

Overtime. This will provide better predictability transparency and unit economics, while also driving more cash into the business.

Slide nine illustrates our key unit economics for the first quarter relative to last year.

As mentioned earlier strong submission growth was driven by both an increase in agents in the first quarter of this year relative to last year combined with continued growth of our external channel.

We continued to see strong demand during the AEP as consumers continue to seek out our platform.

Moving to revenue per submission, we saw a 5% decline in the first quarter revenue per submission and it includes commissions enterprise revenue and encompass revenue.

As a reminder, we collect cash for enterprise and encompass services on an accelerated basis relative to commission and these accelerated collections continue to improve our payback period.

Encompass is fast becoming a meaningful incremental revenue driver for us last year. The majority of encompass revenue flowed through the commissions line item and impacted Ltvs as the services are tied to the policy or submission. This year, we're expanding our offerings and services across a broader group of carriers.

That are directly tied to our members post sale, meaning that some of these encompass offerings will also impact our enterprise revenue line.

Finally on the far right of the slide you will see our cost per submission. These.

These costs represent our fully loaded cost to enroll inclusive of our cost of revenue <unk> and our marketing and advertising expenses.

We saw a slight uptick in cost per enrollment this quarter as a higher proportion of our enrollment came from our external channel, which has a higher cost structure.

And we carried a higher agent count throughout the quarter.

As a reminder, our external channel doesn't require the same cash usage due to a revenue split arrangements with our partners.

I'll touch on it more in a minute, but we anticipate the cost per submission to decline over the second and third quarters as we focus on our current agent force rather than ramping new agents.

And as we optimize our marketing spend.

Slide 10 walks through our revenue by channel and segment.

You can see we've begun to expand our enterprise revenue as we continue to form and expand our partnerships with carriers through our encompass platform.

We are moving thoughtfully to lengthen our lead of commercializing our encompass program. We are 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.

<unk> in the value chain to deliver results.

Youll hear more on this from Clinton a minute.

On the segment side, you can see here that we've maintained strong growth in Medicare revenue driven by the expansion of both our internal and external channels.

Slide 11 walks through the progress we delivered towards our full year investments and resulting EBITDA.

Okay.

Aggregate customer care and enrollment, including telecom and technology investments were up $31 million in the first quarter.

This was driven by us walking into the current year with materially more agents than in the prior period.

As we continue to focus on profitability and cash flow expect these comps and <unk> to come down as we slowed down hiring this year relative to last year.

Increased marketing and advertising spend helped us drive strong topline growth in the quarter as we optimized across a broad marketing funnel combined cost of revenue and marketing and advertising grew 54%.

Moving on to our 2022 outlook shown on slide 12, we are reaffirming full year 2022 revenue of $900 million to 1 billion and adjusted EBITDA of $110 million to $150 million.

Regarding the seasonal cadence I wanted to call out the following as we think about the upcoming FTP periods, where Q2 and Q3 and the AEP period.

As it relates to revenue, we anticipate combined revenue for Q2 and Q3 to be in line with the revenue achieved here in Q1.

This will be driven by a slowdown in enrollments as we pulled back here in Q2, and optimize our marketing spend and continue to focus on the quality of our agents and enrollments during the period.

We then expect to ramp up during AEP to achieve revenue levels slightly exceeding the fourth quarter of 2020.

As it relates to adjusted EBITDA, we anticipate combined adjusted EBITDA levels, ranging from negative 30 to negative $40 million during the S&P.

This will be driven by the cost of carrying our current agent force, while we pulled back on marketing and advertising ultimately driving fewer enrollments.

This will also allow us to focus on short to medium term cash flows as we continued to collect cash on our old vintages, while limiting the outgoing cash spend during the seasonally slow period.

As a reminder, last year, we incurred a large amount of cc any cost in Q2 and Q3 as we ramped up prior to AEP.

This year as we focus on optimization and cash flows we will incur lower agent ramp costs as we focus on optimizing and retaining our current agents ahead of this AEP.

We then expect adjusted EBITDA margin percentage to return to the mid <unk> similar to the fourth quarter of 2020 levels. We.

We believe slowing down now in order to execute well and AEP is a good trade off as the EBITDA upside in Q4 far outweighs the upside during Q2 and Q3 are historically slowest seasons.

Moving down the P&L, the combined costs related to marketing and cost of revenue will be more heavily weighted towards cost of revenue as our marketing team drives fewer.

Higher quality consumer volume.

Getting an advertising expenses should represent roughly $100 million less than last year's total advertising costs.

Again this shift also improves short to medium term cash flows.

Moving on to cash flow.

<unk> highlights our current capital and liquidity position.

We collected a record $335 million of cash commissions during the quarter and 83% increase in cash collections relative to Q1 of last year.

Even with these record cash collections, we still have over $1 $1 billion of accounts receivable on the balance sheet today.

Strong cash collections combined with our highly efficient funnel led to positive operating cash flow of $54 million in the first quarter, a 75% increase in cash flows from last year.

Clinton will now walk you through some of the exciting updates to our encompass platform and why we're so encouraged about the future potential Clint.

Thanks, Travis before we close I am excited to turn to slide 15, which covers the future of our evolving encompass platform.

Our encompass platform was launched in 2020 to serve unique needs of our members post enrollment and quickly proved to be a powerful tool and connecting seniors to the care they needed the most.

We're proud to announce that we're expanding our encompass platform to serve our carrier partners as a holistic enterprise solution.

Historically, we provided outsource marketing enrollment and technology solutions to carriers as an enterprise capability.

We've now expanded upon that capability to serve our carrier partners most pressing needs introducing two new modules encompass connect and encompass engage.

Encompass connect will be a strategic and competitive force multiplier for the carriers to adopt our platform.

Our second module encompass engage expands on our legacy offering to help carriers elevate the sophistication with which they serve their members post enrollment.

This system of engagement harnesses deep consumer insights to customized contact strategies for specific member segments, ultimately increasing engagement retention and driving positive outcomes at scale.

This offering will be essentially powerful for connecting at risk populations and underserved Americans with a critical health care they deserve.

Early response to our expanded enterprise solutions has been incredibly positive and we're actively discussing the adoption of these modules with several of our carrier partners.

We expect these industry, leading offerings to improve member outcomes.

Strengthen the value, we bring to carriers and drive more predictable and attractive economics within our revenue model.

You can expect to hear more updates throughout the year on these new exciting services and tools.

I'd now like to turn the call over to the operator for Q&A.

And if anyone has a question it's zero one on your Touchtone phone. Once again, if you have a question. It's zero one on your Touchtone phone, if you wish to be removed from the queue. It's zero to.

Once again, if you have a question.

It's zero one.

On your Touchtone phone.

Once again.

We do have a question from.

Brad Hill.

Brad Yes. Thank you.

And regarding the efficiency notice.

But we're being under a dollar.

Are there any strategic plans to get that over a dollar what they would be and is there any talk about a reverse stock split to do it.

Yes.

Yes, we are aware of the issue thanks, Brad for the question.

Obviously, there's a variety of options at our disposal to maintain compliance with NASDAQ trading rules and our board is considering all those options okay great.

Where do you go out with that because.

Could be an issue here pretty soon.

Once again, if anyone has a question.

019, your Touchtone phone.

Once again Thats zero, one on your Touchtone phone.

And we have a question from Jonathan Young go ahead Jonathan.

Yes. Good afternoon, guys. This is Carl for Jonathan.

Yes.

And my question is just and Compass revenues are higher they were leading to higher enterprise reps.

You guys can discuss how much <unk> uplift.

Cocoa gets from the encompass on a policy basis.

Also I believe most of the investments that encompass were from last year, just kind of curious if Arizona.

Much of the investments you are putting into encompass this year.

Okay.

Yes, thanks for the question.

Yes, so the arrangements we have within our encompass programs vary by different carrier.

And as far as investments goes yes, we will.

Continue to invest in the platform as.

As we bring out additional services and features for our carrier partners. We continue to have technology investments throughout the year as we expanded relationships.

Okay.

Just a follow up question.

This was kind of curious also on I know some of the peers are pulling back given their own situations, but.

Your partner sound like they are increasing their spend.

Lease with Humana, So theyre play a lot into marketing and benefits, but just kind of curious any thoughts on this aspect.

They may be taking share and doing our share with your sales force.

Yes, so we're not seeing.

Serial changes with different span of different channels.

Are seeing kind of overall pullback in the market.

Based on the channels, we're in but we cast a pretty big wide net when it comes to the areas we target.

We are seeing kind of competitive pressures come down, but we will kind of maintain kind of focus throughout the year on what our competitors are doing.

Okay perfect. Thanks.

And once again, it's zero one on your Touchtone phone.

And we don't have any more questions I will turn it back to the speakers for final comments.

Thank you all for attending today to hear our Q1 2020 through results. We look forward to updating you further throughout the year other on the progress to date. Thank you so much.

And thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.

Q1 2022 Gohealth Inc Earnings Call

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