Q4 2022 SelectQuote Inc Earnings Call
Looking statements. These statements are made based upon management's current expectations and beliefs concerning future events impacting the company and therefore involve a number of uncertainties and risks, including but not limited to those described in our earnings release annual report on Form 10-K, and other filings with the SEC.
Therefore, the actual results of operations or financial condition of the company could differ materially from those expressed or implied in our forward looking statements.
With that I'd like to turn the call over to our Chief Executive Officer, Tim Danker, Tim.
Good morning, and thank you all for joining US we're pleased to report a strong fourth quarter relative to our initial expectations and we are in.
<unk> by the early achievements like what has made since we outlined our strategic redesign back in fiscal second quarter.
Between the operational improvements, we're seeing in our core senior business and continued success of select Rx there was a lot to be optimistic about four slot club.
I'll provide color on each of these strategic initiatives and amendment.
Let's turn to slide three to review the highlights from our fourth quarter and full year 2022.
<unk> drove strong operating results relative to our internal forecast and both of our core senior business and on a consolidated basis in the fourth quarter.
And your revenue was $98 million and consolidated revenue totaled $139 million for the quarter.
Our net loss for the quarter totaled $105 million or negative <unk> 64 per share.
Operationally this was the second consecutive quarter of improving trends in our senior business trends that we believe are tied to our initiatives to optimize select club and drive better returns and more predictable cash flows for instance, our agent close rates increased 31% compared to a year ago.
And our marketing costs per approved policy decreased 35%.
Lastly, our select Rx business finished the quarter above our original expectation of 25000 members.
We feel these results validate the service, we provide to consumers and speak to how well select Rx fits with select quote and the health care services continuum.
We're pleased with the better close rates, which aided revenue growth and more importantly, we are seeing green shoots that are customer retention trends are stabilizing and improving.
And as mentioned our results were also driven by continued success in our select Rx business. Overall. This was the second consecutive quarter of good momentum as we look ahead to 2023.
We believe <unk> is transforming into a more predictable and efficient company focused on consistent returns instead of pure growth to.
To that point as part of our 2023 forecast review in the fourth quarter, we elected to recognize an additional $48 $3 million adjustment for certain cohorts to address potential renewal pressure that could have triggered adjustments in 2023 or 2024 to be clear. The adjustment is not a reflection of recent persist.
Simply trends, which we believe have stabilized and while we're not pleased with another downward revision we have a high degree of confidence this action significantly de risk the potential for further adjustments in the future.
Ryan will provide additional color on that point later in my remarks.
In summary, we believe <unk> is to establish a foundation to drive better returns and cash flow with less volatility in our forward financials, but these actions will position the company and our investors for improving returns in the future.
With that let's turn to slide four and review the pillars of our new strategy and detailed the foundations liquid is built for the upcoming year.
First as noted our philosophy on growth has changed significantly our forecast for 2023 implies a 35% to 45% pullback in our Medicare advantage policy production.
The market opportunity for a very large and growing population of American seniors would clearly support continued growth, but as we've said we're committed to policy sales that generate consistent unit economics and cash flow with our increased emphasis on cash flow, we anticipate our cash EBITDA will be significantly improved in <unk>.
<unk> breakeven for fiscal 'twenty three.
Let's summarize a few of the initiatives in place to drive that goal.
We've identified a number of opportunities and are targeting our marketing to drive better sales efficiency and policy performance.
Similarly, we are confident that our refined approach to our agent population will also improve productivity and customer retention specifically this season, our agents will skew more heavily to core tenured staff of reflects agents in order to achieve our goal to generate improved returns and cash flow through better agent productivity and marketing efficiency.
Great.
Second we have made strides to reduce our operating leverage which we expect will reduce volatility in our results as well as improved returns.
To date, we've identified over $250 million in a year over year cost reductions, including around $40 million and fixed expense. In addition, we believe earlier hiring and training of our agents ahead of next AEP will aid productivity, which in turn would reduce the marketing and operating cost per policy.
We're pleased to announce that we've completed hiring our sales agent force for AEP in July and are already several weeks into training and Onboarding. This new class.
Similarly, we believe more targeted marketing while also provide cost benefits during the upcoming season.
Turning now to LTV as we've noted repeatedly over the past few quarters. We believe we've taken significant action to reflect the current reality of policyholder persistency in both our legacy cohorts as well as our newly written business to summarize modeled Ltvs are now down about 30% from the peak and we've nearly tripled our constraint to.
<unk>, 15% over that same period. Additionally, as noted the <unk> adjustment we made in the fourth quarter further de risks future results. Although early we are quite pleased with how the 2022 cohort is performing relative to LTV expectations. More importantly, we believe the risk of additional cohort tail adjustments has been significantly.
We reduced moving forward.
This is important as we build our profitability and candidly reestablish credibility with investors in the coming years.
Finally, we continue to be very encouraged by our continued success and health care services highlighted by select Rx. We ended fiscal 2022 with over 25000 members and are now forecasting our business with revenues exceeding $275 million for fiscal year 2023.
This is an impressive ramp for our business acquired with just over $25 million of revenue a little more than a year ago there'll be more to share about health care services in the quarters and years ahead, but we're very pleased with the validation of our strategy to leverage <unk> unique position in the healthcare ecosystem and as a reminder, our leverage here stems.
From a synergy of existing customer acquisition spend and our senior distribution business will share more here over time that that unique competitive advantage has potential to yield significant returns for select growth first of all we believe our health care services offering seamlessly aligned with our long term trusted two way relationships with <unk>.
<unk> health plant providers and most importantly, our shareholders.
As we move to slide five let me highlight three key operating trends and our recent results.
First we've seen encouraging early data from our efforts to improve policyholder persistency as summarized in the pillars of our strategy. We've made early strides beginning in OUP to refine our marketing focus targeting and channel optimization. The primary goals here are better persistency trends as well as improved sales and cost efficiency.
For instance, as I mentioned, our customer acquisition cost declined 35% year over year, and our sales conversion improved 31% year over year and <unk>, marking the second consecutive quarter of improvement for both metrics.
And most importantly, while still early days the year over year comparison of our approved policy persistency bottomed in the third quarter and Sn's shown consistent improvement to be clear, we are not declaring victory and continue to closely monitor these trends to discern the impact of our initiatives.
That said, we're encouraged by the retention trends and will pursue incremental improvements as we move into the upcoming AEP season.
We have also prepared our agent population much earlier for AEP as I noted our recruiting class is not fully hired and in the midst of training and Onboarding. We're also doing a good job retaining our highly productive tenured agents evidenced by an improved year over year retention rate.
As you'll recall from our comments in previous quarters, we've historically seen higher levels of productivity and policy retention for tenured core agents compared to newly hired reflects agents, we have conservative expectations, but we believe the combination of a more tenured agent salesforce and more targeted marketing on smaller cohort.
Policies positions us well demonstrate better policyholder retention and overall returns.
Lastly, as we've noted a lower cost base and continue to work to optimize profitability and cash flow should benefit 2023 in the years ahead, while simultaneously reducing volatility in our operating results.
Also want to highlight the significant ramp we've seen in our select Rx membership as you can see here on slide six select Rx offer specialized in home services to medically complex patients managing multiple chronic conditions. This convenient and coordinated prescription drug delivery has been more than well received as.
We exit fiscal 2022 with over 25000 members. We're highly encouraged about the potential of this business for contracts over 70% of our 25000 plus select Rx members were introduced to the business through MA policy acquired through select quote. Additionally, about 15% of those members.
Originated from another business lines lead generation and referral activity the bulk of the remaining new select Rx members came largely from prospects, who originally responded to a Medicare plan marketing, but did not ultimately biomedical policy from us in summary, the vast majority of our new select Rx members came to us without incurring any.
Incremental marketing expense directly associated with the promotion of select Rx. This underscores the power of cycle its ecosystem and why we are uniquely positioned to significantly grow this business with relatively low incremental marketing expense.
In future quarters, we plan to share additional detail and disclosure on select our excellent health care services business for now we're excited about both the standalone opportunities and even more excited about the synergy and the advantages we see in healthcare services fits with select quote positioning as a connector within health care more broadly.
Lastly, before Ryan speak to our results I'd like to reiterate our goals and strategy for fiscal 2023 on slide seven.
First as a baseline our business model was originally conceived to be an aggregator of significant market share in what remains a substantial and growing market of American seniors.
We attack this market with a scaling population of agents to consume a rising breath of sales leads this concept with strategically sound and a stable competitive environment, but eroded as competition increased rapidly from other distribution platforms.
Fast forward to today, it's like what has worked incredibly hard over the past six to nine months to pivot our model to ensure attractive policy level returns and disability and those returns are.
Also focus on cash flow and lowering volatility in our financials in parallel with continued to advance the success of select Rx and believe there is significant potential for our competitive positioning as a combined distribution and healthcare services platform to drive profitable growth and cash flow for shareholders in the years ahead.
Again, it is our responsibility to earn that credibility with you all through execution and results, but standing where we are today, we feel confident in our foundation and strategy to achieve that goal.
Let me turn the call to run right.
Thanks, Tim Let me begin with a quick review of our results and then I can give some context on our senior kpis as well as the cohort tail adjustment recognized this quarter. I'll then follow up with a review of the key assumptions in our consolidated guidance for fiscal 2023.
First for the fourth quarter as Tim noted consolidated revenue or <unk> 22 was $139 million and consolidated adjusted EBITDA was negative $61 million were negative $13 million when excluding the $48 million cohort tail adjustment recognized in the quarter revenue was primarily driven by growth in our senior.
And somewhat offset by a reduction in our life business driven by lower term life premium, which was the result of your agent and continued COVID-19 pressure on conversion of <unk> policies enforced policies.
Our auto and home revenue was flat year over year.
Overall, we are pleased with the operating results and believe they are in line with our transmission and show good progress in our strategic goal to drive better returns and cash flow.
If we turn to slide eight I'll give some context on the key API and a senior distribution business total approved policies from the senior Division increased to 144000 up 23% over the same period last year.
As we noted last quarter, we saw ramping productivity from new inflect agents as the season progressed.
As a result comparable close rates increased 31% and marketing costs per approved policy declined 35% year over year.
We would largely attribute these improvements to higher average agent tenure as well as the initial impact of our strategic redesign initiatives and the special election period.
The Middle chart, you can see the 22% year over year decline in our Medicare advantage LTV.
Which as we've noted has been driven by lower policyholder persistency.
Jim details, we are seeing good initial trends and persistency year over year, while encouraging our base operating assumption both for our strategic redesign as well as our 2023 guidance that this level of lower LTV will be the new reality of the industry.
In effort to reduce potential future volatility will maintain our 15% constraint in fiscal year 'twenty three even as we bake lower persistency assumptions into our LTV calculations overall.
Overall, we believe our strategy is very well positioned to drive improving unit economics, and our senior business, even with lower Ltvs.
To that point, we would note that our cost per policy in the quarter declined by 24% year over year, which we believe is a direct result of the strategic cost initiatives, we continue to pursue.
Again to emphasize David's point, we're having success driving positive operating leverage in our core senior business, even as we transition our strategy.
Now if we flip to slide nine let us provide some additional context on the $48 3 million dollar cohort Kale adjustment, we recognized this past quarter and the impact we have seen in our receivables to date.
Naturally the key question. We've received is about how much risk remains within our cohorts from lower persistency.
Following this quarter, so he'll adjustment we feel that the vast majority of the exposure has now run through our income statement we.
We developed this page to provide detail to help you all see why we are confident that we have significantly derisked the portfolio from additional adjustments in future periods.
First as you know we have already recognized significant adjustments to our assumed LTV for those cohorts, which you can see in the chart.
Persistency rates have declined over time with increased competition in the market Ltvs have trended below our initial models.
As you can see here with our adjustments to date, we have now lowered effective LTV by about 20% in the cohorts written from 2018 through 2021.
We cannot ensure the ltvs will stay here, we have good visibility into the evening of our back book and believe risk of future adjustments from those cohorts in low specifically, we have now collected around 70% of the cash flows for these policies compared to the adjusted LTV, which we highlight here to emphasize how little tail risk we believe.
In our legacy book and as a reminder for seasoning yeah on the first year the variability on persistency dropped significantly compared to switching that occurs in the first year.
Now if we consider the 2022 cohort as well as our plans for 2023 and beyond it is important for our investors and analysts to recognize that our assumed ltvs for these policies is about 30% lower than what we modeled for the cohorts of the past few years.
The $875 assumed LTV for 2023 is a function of our three year look back taking a lower recent persistency plus the continued utilization of the 15% constraint, which we supplied in <unk> fiscal year 2022.
While it is important for context, the LTV has come down and our assumptions by a wide margin and our accounting assumptions are significantly more conservative than.
The most powerful impact in our view will be our focus on writing policies with the best return dynamics and cash flow instead of solely focusing on volume now if we turn to slide 10, let me outline our key assumptions and outlook for fiscal year 2023.
First we expect consolidated revenue in a range of $850 to $950 million for the year based on the following assumptions.
We're senior policy volumes, we expect the 35% to 45% year over year decline, which is in line with our strategy to prioritize policy level returns and cash flow overgrowth.
As indicated we are focusing more attention on cash flow going forward and with this pullback we anticipate that we will actually generate more cash flow from policy Commission and incentive can we will spend to sell new policy. This year in short we believe the cash flow profile of our business will dramatically improve in 2023.
Next as I touched on in the previous slide our 2023 revenue guide assumes lifetime values of 875, which we believe reflect the current competitive state of the industry and also incorporates a more conservative 15% constraint.
Lastly, we forecast over $275 million in revenue from our rapidly growing health care services business, which is predominantly select Rx as we've noted we plan to provide additional disclosure on this division in the future as the business continues to scale.
In regards to profitability.
As we have noted we expect 2023 to be a year of transition as we continue to implement our strategic changes we.
We are projecting a fiscal 2023 net loss in the range of $113 million to $89 million and expect adjusted EBITDA to be in a range of negative $20 million to positive $10 million for.
For our core senior business, we believe we are well positioned to drive improving policy level economics beyond 2023.
It is important to remember that tied to this strategy is our ongoing effort to optimize cost last quarter. We said, we'd identified around 200 million of run rate cost savings today that number exceeds $250 million.
On the flip side, our health care services business continues to be a compelling growth where select growth and as a result, we continue to invest in that growth given the attractive cash flow and returns we see in the business.
As I mentioned, we will provide additional disclosure on the business in the future, but for your modeling we expect EBITDA will breakeven in the second quarter of the year.
Finally, I am pleased to announce that we have reached an agreement on an amendment to our current credit covenants with our lenders that we believe will provide adequate liquidity to operate the business in the coming quarters with that.
Get to your questions operator.
Absolutely if you would like to ask a question. Please press star followed by one on your telephone keypad.
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As a reminder.
Speakerphone, please remember to pick up your handset.
Asking your question, we will also briefly ask questions not registered.
The first question comes from the line.
So Beth Anderson Evercore Elizabeth.
Feed.
Hi, guys. Good morning, Thanks for the question.
My question was just regarding you talked about the fact that you have all the agents hired for that 2023 AEP season can you talk about sort of what youre doing differently. This year with that I think you mentioned that obviously, it's a more tenured group.
Some of the changes that we've had.
About some of the requirements of what they have to do et cetera.
Trying to understand how you guys see that.
Playing out at this point.
Yes, Elizabeth Good morning. This is Tim thanks for joining and thanks for the question I'll make a few opening comments and then maybe turn it over to Bill I think just more broadly with respect to AEP readiness, we feel very.
Well positioned this year from an agent perspective, and bill can speak to this.
We've secured our flex agents very early this year and we're pleased with their progress in training from a core agent perspective, we look to the past two quarters the improvements in close rates.
Our attrition levels for our core agents are actually better.
Year over year, and Bill can maybe touch on.
Other things regarding marketing certainly we'd note the improvements in cost of acquisition not only in fourth quarter, but in the third quarter. So we feel overall very well position bill.
Yes, so specifically around the class what we did to address.
Yes.
Prudent the problems from what occurred last year I guess.
We learned a lot from certainly what happened last year and how the market I would say post COVID-19.
How they reacted with kind of the hiring environment. So to speak I think if you remember last year, we had a lot of folks that would say, yes, and then wouldn't go through the licensing process. So we had to move a lot of our ratios around we started significantly earlier and then we're recruiting less folks. So all of those things combined I think led to a.
Earlier class being hired as well as we think and believe higher quality in all of our kind of leading indicators would suggest.
That thus far.
Got it and then as a follow up what gives you comfort I know that you talked about signet that cohort analysis on on.
On slide nine what gives you comfort that <unk> 75 really is the right number for fiscal 'twenty three.
Tim.
LTV.
Yes. Thanks.
I think on that slide as you move from left to right. We had 875 in 2023 into the right.
You saw that in prior periods. It was the Ltvs were much higher we've obviously brought those down significantly I think it's.
It is important to note that the vast majority of the switching and the highest persistency pressures does occur in the first year to second year and so when we look at those older cohorts.
We are beyond that point until we have better visibility into the cash stream, we would expect to generate from those policies going forward.
As we move.
I guess one other point there is we have collected 70% of the lifetime value that we'd expect to calculate or to generate.
Those policies as we move into more recent cohorts in 2022, obviously.
Yes, it does.
Incorporate lower persistency as a result of the past couple of years and the prices we've experienced but we've also layered in that incremental constrained, 15%, which is nearly triple what we had in prior periods and worked out to about $100 per policy that cohort the fiscal year 2022.
<unk> is performing very well.
When we look to 2023, obviously another year of higher persistency falls off.
So the calculation is a little bit lower we have decided to maintain that 15% constraints just to keep a conservative.
So overall, we do believe that the vast majority of the back books.
It's secure and that there is the risk is largely behind and we feel good about.
The economics that we're writing the new policy.
Got it thank you very much.
Thank you.
The next question comes from the line of Jonathan <unk> with Credit Suisse you may.
Proceed.
Hi, Thanks for taking the question I know, we're not nave.
Within the context of your guidance can you give us color on how you're thinking about M&A and momentum on the number of policies or directional growth rates I know it will be down year over year insight you can give us any color there.
Yes, so we are assuming.
The AEP period, a pullback in overall policy production that is part of our strategic redesign we do have all the agents hired and we feel good as we're entering in the AEP season, but there is a.
A pullback.
Okay.
Don.
Jonathan.
Got it.
Yes, I might I might add to that Jonathan I think as we looked at.
'twenty three and we've highlighted this on the prepared remarks, certainly a year of transition a fiscal 'twenty two it was a very difficult year for the company yet.
Certainly see greener pastures ahead.
As we looked at it I mean, the market opportunity is certainly large enough to bear more production, but we wanted to base the pullback on growth, where we thought we could drive the best returns on invested capital.
As we've committed to.
We needed to reduce operating leverage and some of the operational risk factors that were problematic last year and ultimately put a stronger focus on cash flow and so we were very deliberate with the plan this year.
How could we drive our best marketing sources with our best and most productive.
Agents.
And that's really what we've outlined in this 30% to 45% policy pullback.
Year over year, and we think that.
That certainly will dramatically improve the cash flow profile of our business and again, we're marching towards cash EBITDA breakeven this year.
Okay great.
And then on the.
You increased.
Cost savings from 200 to 250 now.
Fixed components, staying the same but I guess relative to tower models in consensus.
Your EBITDA guidance is actually slightly worse than consensus about in line with ours, maybe it was a little bit in this modeling, but I guess with that increased $50 million I thought there would have been a little bit more pull through in the EBITDA line. So can you give us any color there on what may have changed maybe it's timing or anything of that nature.
Yes.
With respect to.
Go ahead go ahead Ron.
Yes, I think there's two pieces in place of one.
When you are calculating shares $200 million were actually slightly above that in total but secondarily are there is some timing when you're looking at.
The AEP and kind of what we're hearing early reads as well as recent business performance from a cost per client acquisition.
We do believe that the overall cost is going to come in favorable so thats really whats driving the total savings of 250, we are still expecting the fixed cost savings of $40 million.
$40 million range.
Okay. Thanks.
Thank you.
Ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your telephone keypad. The next question comes from the line Amaya.
Here sales with Keefe Bruyette <unk> you May proceed.
Great. Thanks. Good morning, Thank you for taking my question.
Can we get a little more detail on the credit Covenant is there a change in.
The integrated with the dollars that you expect to spend on interest in fiscal year 'twenty three.
Yeah.
Yes. So we're obviously very pleased to have the amendment.
In hand, and <unk> had lenders are willing to work with us.
As customary with amendments there is obviously, an economic component to that and with that in the coming year. There is a step increase in the overall interest rate a portion of that is payment in kind.
Fully one third of it is actual cash interest.
Okay.
With regard to the tenured agents is there in other.
There was looking at the same cohort.
Sorry, it's the same group of tenured agents relative to last year. The year before is there any change to their compensation.
Okay.
No Meyer good good question Theres, not any change to their compensation on a per policy basis, we do.
Expect with a more tenured force and just kind of arps.
Our planning for AEP that their overall compensation will be a bit higher because the productivity will be a bit better we didn't necessarily model. It that way, but we are confident we can drive good results there, but no no overall change.
Okay perfect. Thanks, so much.
Thank you.
The next question comes from the line of Daniel Carlson.
Your line is now.
Hi, Thanks for taking the question.
I'd like to focus a little bit on the synergies that you mentioned between your let's call. It the core Medicare advantage comparisons solution and select Rx.
It said around 70% of select Rx members are actually introduced to select Rx through that core may solution, and then theres. Some more on top of that that didn't actually select the EMEA policy through you guys, but ended up on select Rx anyways.
I'm curious how the slowdown in MAA.
<unk> acquisition is going to impact the growth of select Rx given a bulk of those select Rx members are acquired through your core and make comparison solution.
Yes, Daniel good morning, and thanks for the high quality question.
We're very pleased with.
The synergistic relationship, we're saying here extremely strong consumer demand, we eclipsed the goal that we set out for the year of 25000 members.
And I think we're seeing as we highlighted on our prepared remarks.
This is business that we're generating for Rx that's fantastic for the consumer and is absolutely leveraging the existing Ma.
But we're seeing that across both.
Customers that purchased MMA policy with us as well as those that.
But ultimately.
It's a policy, but I might ask Bob.
Speak more to that and how we're looking at that going into 'twenty three.
Yes.
Thank you for the question. It's just as a reminder, we didn't.
We did not start really growing that business until late in the year. So we don't think that that will come with any really pull down or anything like that the 70% that we referenced is 70% of the members in select Rx are ones from our core business.
Not necessarily 70% total attachment rate if you look at the two numbers and therefore, we still have a lot of room for upside with that so very very excited about the progress there.
And what it does for our customer and really helps their overall medication.
<unk>, we see really really strong adherence rates within that and then also when eligible we see really strong.
<unk> rates as well so we are very excited about our progress.
They're in the revenue and value that's driving.
Got it okay. So still have room to grow select Rx and that kind of existing membership.
Membership base.
And then I guess.
Picture question for you guys.
Listening to the earnings reports of all your public competitors and even talk to some of your private competitors to everyone on the brokerage side is cutting marketing an agent hiring costs pretty dramatically and then if you look at what the carriers are saying and what CMS is projecting for EMEA overall.
We use to grow rapidly. So obviously a shift in where members are going to be getting their policies from.
So two questions. There are you assuming more beneficiaries going forward are just going to go direct to the carriers are.
Our access through traditional agents.
And secondly, how do you think the slowdown broadly and marketing an agent hiring for the sector is going to impact persistency ltvs and tax going forward.
Great question, then I'll maybe address your second question first and then Bill and Bob comment on the first one.
I would say with respect to the competitive environment and we are.
Sin.
A pullback in spend and competition and we do think that that is.
Could we could certainly benefit from that it could lead to more rational behavior long term.
But with that said I mean, we're not this is.
And the strategy based upon hope.
We are controlling the controllable.
Certainly think that we can drive better returns in the business and we haven't talked a lot about it on the Q&A here, but the persistency results that we're seeing from a series of actions that we've taken really starting late in third quarter across marketing segmentation to agent retraining modifications to sales.
So changes on our tech stack, we're starting to see.
Persistency pressure stabilize and actually are witnessing a little bit of year over year improvement. So we think that that's all.
Encouraging early signs.
If you could maybe turn it over to <unk>.
Bill or Bob on your first question.
Yeah, I mean, I can certainly comment from the marketing side.
We certainly see it kind.
Kind of right now.
A tailwind all the way around both from just the volume that is available.
As well as the quality and we've been able to do two things one we've been able to decrease cost fairly significantly while getting a better quality customer.
As it relates to where the business will go.
I think that that.
You don't kind of see how that plays out and certainly you know the combination of carriers, obviously with COVID-19 kind of winding down some of the <unk> channels in terms of the face to face agents is coming back a bit.
And then certainly.
The E channels I also think that there will be a bit of just.
Less marketing that's driving those call sometime so last year. If you look at it you have.
The Airways where kind of.
<unk> really jammed and over and over and over again with adds more and more ads I think youll see less of that this year.
So hopefully you will see with that Tim mentioned.
Maybe.
Better persistency or folks jumping plan to plan thinking that there is something better out there for them.
Got it and then the carriers.
I was going to say I think bill spoke to it well but.
They are well diversified can't necessarily speak to there.
To their overall growth strategy, but <unk> channel, it's definitely come back a bit.
And they're diversified within our channels. So yes, you've seen the public.
Company's pullback really focused on growth in those things but.
I don't really want to speak to exactly how they're planning their growth.
Yes, yes. Thank you.
Thank you.
Our final question comes from the line of Ben Andrew with RBC capital markets.
Your line is now open.
Thank you very much I just wanted a quick follow up on the credit agreement covenants.
Having elected to recognize that additional $48 million of tail adjustment.
Here in the quarter can you talk about the cushion that you have under the new minimum asset coverage ratio and kind of give us an idea of your tolerance for additional potential tail adjustments should should persistency declined further.
Yes, I think it's a couple of parts in there one with respect to persistently in the $48 3 million.
Worth pointing out that this is not as a result of new persistency pressures.
And in fact, we're actually feeling good about some of the positive trends that we're seeing from a persistency perspective.
As we are preparing the guide for.
Fiscal year 2023, and during the <unk>.
Quarterly analysis that we do each quarter it may become clear that.
Cohort had not fully exhausted their constraint would be doing so in the coming.
Quarters ahead, and so it made sense to go ahead and take that at this time that has been all factored into.
The governance and compliance ratios on a go forward basis.
We spent a lot of time with the lenders walking them through our.
Planned for fiscal year, 2023, and our covenants are set in line with those.
<unk>.
The compliance counts that are embedded within our guidance, we do have some buffer.
We've been intentional about making sure that we have a plan that we can execute against.
Yes, I would just emphasize that last point Ben.
<unk>.
This amendment provides the covenant adjustments and the liquidity, we need to operate the business.
For fiscal 'twenty, three and we feel good about.
That position in our preparation going into April .
Thanks, guys.
Thank you.
There are no questions waiting at this time I would now like to pass the conference over to Tim Dec anchor for closing remarks.
Yes, Thanks again for joining us this morning, as we've noted before.
We take our responsibility to produce improved and more stable financial results very seriously, we're committed to earning that credibility with investors through our results.
As we stand here today, we are clearly shifting our strategy for fiscal 'twenty three but we're increasingly confident of the success of that strategy based upon that.
The early results that we've seen from our initiatives. So we look forward to sharing more with our about our progress on that and we look forward to talking with you soon thanks again.
That concludes the conference. Thank you for your participation you may now disconnect your lines.
Okay.
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