Q3 2024 GoHealth Inc Earnings Call
Hope: Good morning and welcome to GoHealth's third quarter 2024 earnings conference call. My name is Hope and I will be your operator for today's call.
Currently, all participants are in a listen-only mode.
Following the prepared remarks, we will conduct a question and answer session. As a reminder, this conference is being recorded. I will now turn the call over to John Shave, Vice President of Investor Relations. John, you may begin.
Thanks for watching!
John Shave: Thank you and good morning. Welcome to GoHealth's third quarter 2024 earnings call. Joining me today are Vijay Kotte, Chief Executive Officer, and Brendan Shanahan, Chief Financial Officer.
John Shave: Today's conference call contains forward-looking statements based on our current expectations.
John Shave: Numerous risks and uncertainties may cause actual results to differ materially from those anticipated or projected in these statements.
Hope: 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 or revise any of these statements, whether due to new information, future events, or otherwise.
Speaker Change: Earlier today we issued a press release containing our results for the third quarter of 2024. We have posted the release on the GoHealth website under the Investor Relations tab.
Speaker Change: In the press release, we have listed several risk factors that you should consider in conjunction with our forward-looking statements.
Speaker Change: We encourage you to consider the risk factors described in our 2023 Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission for additional information.
Speaker Change: 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 the reconciliations are set forth in the press release.
Speaker Change: You may also refer to the Investor Relations presentation posted to the Investor Relations section of our website for reconciliations of non-GAAP measures to the most comparable GAAP measures discussed during this quarterly results call.
Speaker Change: I will now turn the call over to GoHealth CEO Vijay Kotte.
Thank you, John, and good morning, everyone.
Speaker Change: First, I'm pleased to welcome Brendan Shanahan as our new Chief Financial Officer.
Speaker Change: Brendan joins us with over 30 years of financial leadership experience, including more than 20 years in the Medicare Advantage space.
Speaker Change: His expertise in financial strategy, mergers and acquisitions, and operational leadership will be invaluable as we continue to execute our strategy and pursue profitable growth.
Speaker Change: With his extensive background and passion for helping consumers navigate their healthcare options, I am confident that Brendan will be a tremendous asset to our team as we capitalize on the opportunities ahead.
Speaker Change: I would also like to thank Katie O'Halloran for her dedication during her time as interim CFO.
Her leadership has been crucial throughout this transition.
Speaker Change: Katie will remain a key leader in the finance organization, continuing to serve as Chief Accounting Officer.
Speaker Change: For those new to the GoHealth story, our mission is to provide support, clarity, and ultimately peace of mind to Medicare consumers in a landscape often marked by confusion and uncertainty.
Speaker Change: There are over 65 million Medicare eligibles in the U.S., about half of whom are enrolled in Medicare Advantage plans.
Speaker Change: Many consumers face an overwhelming number of options as one-third of Medicare eligibles live in counties with 30 or more plans available.
Speaker Change: This complexity often deters consumers from exploring better options, as they may not know who to trust or where to begin.
Speaker Change: At GoHealth, we aim to empower these individuals with proprietary, objective, technological tools and a highly trained and experienced agent team.
Speaker Change: We believe this shift allows us to deliver a more integrated and personalized approach to care, reinforcing our unique role in the Medicare landscape.
Speaker Change: Turning to our third quarter results, I'm pleased to report solid operational progress driven by strong performance from our internal captive team and continued improvements in efficiency and cost-effectiveness.
Speaker Change: Our efforts this quarter were focused on guiding consumers through their Medicare options and delivering value to our stakeholders while ensuring we are adequately prepared for the expected dynamic and disruptive annual enrollment period.
Speaker Change: Notably, we completed the eTelequote insurance acquisition, further strengthening our platform.
Speaker Change: Following the quarter's end, we also refinanced our term loan credit facility with new lenders and a five-year term, reinforcing confidence in GoHealth's financial stability and positioning us for sustained growth.
Speaker Change: More importantly, the five-year new term allows management the ability to fully focus on the investment and optimization of the business going forward. Brendan will provide further details on this shortly.
Speaker Change: Leveraging our Encompass workflow with our internal captive team, supporting nearly 650,000 consumer experiences through this process.
Speaker Change: Overall, this resulted in over 166,000 submissions and added to just under 40,000 consumers' peace of mind by ensuring that their current plans met their needs.
Speaker Change: Our performance during the Q3 special enrollment period exceeded our expectations, particularly in terms of submissions, revenue, and adjusted EBITDA.
Speaker Change: Overall submissions were up 3% year-over-year with our internal captive agent submissions increasing by 46% highlighting the effectiveness of our training and tools.
Speaker Change: In contrast, emissions from our GoPartner Solutions Channel, or GPS, declined by 46%, reflecting the previously discussed broader market pressures impacting our external broker partners.
Speaker Change: Despite these challenges, we have been actively onboarding several new agencies that we expect will meaningfully contribute to GPS submission during AEP.
Speaker Change: The strength of our internal team has been especially evident given the stable shopping and switching dynamics since last AP.
Speaker Change: As anticipated, the market dynamics have been stagnant through Q3, but we are optimistic about improvements in Q4 as new benefits have become available alongside significant benefit disruption.
Speaker Change: We believe the differentiation and efficiency of our proprietary model continues to show via our Encompass workflow and plan fit checkup process.
Speaker Change: These improvements have significantly lowered our direct operating costs per submission or customer acquisition costs, driving greater cost effectiveness and enhancing both our operational performance and customer experience.
I will address this further later in my prepared remarks.
Speaker Change: The most significant development this quarter was GoHealth's acquisition of eTelequote, which closed on September 30th.
Speaker Change: This strategic move adds approximately $90.5 million in contract assets and $22.5 million in cash to our balance sheet, which is inclusive of our initial $5 million investment.
Speaker Change: Through this investment, we acquired an 18.9% stake in eTelequote, with the previous owner relinquishing their 81.1% ownership, making GoHealth the sole owner of eTelequote and allowing us to secure all assets.
Speaker Change: inclusive of the 5 million dollars paid to e-telequote at transaction closing.
Speaker Change: The acquisition also led to a substantial improvement in net income, largely due to the significant gain on bargain purchase of $77.4 million, as the fair market value of the e-telequote assets acquired exceeded the fair market value of the liabilities assumed.
Speaker Change: The addition of eTelequote also brought nearly 400 licensed agents into the GoHealth fold, significantly expanding our agent capacity and strengthening both our financial and operational capabilities.
Speaker Change: This cash efficient increase in capacity comes at a critical time and we believe it will allow us to meet the high demand for Medicare Advantage shopping without the need for further hiring, thus optimizing our customer acquisition efforts.
Speaker Change: E-Telequote will operate within our GPS program, continuing its operations while maintaining independence and benefiting from our planted tools and marketing channels.
Speaker Change: Integrating e-telequote agents into GPS enhances our reach during AEP, and with reduced broker marketing capacity across the industry, we are confident that GoHealth is well positioned to leverage this expanded agent base without any perceived risk to the typical disk economies of today.
Speaker Change: The transaction is delivering immediate accretive benefits, reinforcing our market leadership and positioning us to seize growth opportunities in the coming quarters.
Speaker Change: Health plan disruption and consumer shopping behavior during the 2024 AEP is unfolding as we anticipated with over 2 million individuals having lost coverage and more than 6 million consumers seeing reduced plan benefits.
Speaker Change: These shifts are driving increased shopping for new plan options, creating a unique opportunity for us to capture demand more effectively, drive continued momentum, and help consumers find better coverage.
Speaker Change: With favorable market dynamics, reduced competition, and our strategic emphasis on quality, we believe GoHealth is well positioned for success this AEP and beyond.
Speaker Change: We anticipate these positive trends to continue through the first three quarters of 2025, driving sustained growth and new opportunities.
Speaker Change: A cornerstone of our transformation into a Medicare engagement company has been the successful rollout of our plan fit checkup introduced in Q4 2023.
Speaker Change: Powered by our AI-driven PlanFit tool, this initiative has significantly enhanced the Medicare Advantage shopping experience for consumers.
Planted Checkup offers three key outcomes.
1. Enrolling in a new plan
Two, informing consumers about a better option.
Speaker Change: or three, reassuring them that their current plan is the right choice.
Speaker Change: By compensating our agents for each completed checkup, regardless of outcome, we ensure a strong focus on delivering the best possible guidance to our consumers.
Speaker Change: Building on the success of Plan Fit Checkup, we continue to roll out Plan Fit Safe, a targeted initiative aimed at retaining existing memberships with our health plan partners.
Speaker Change: Since its initial launch, implementation has been smooth, and we are seeing continued interest from health plans looking to integrate this program.
Speaker Change: Given the expected market dynamics for the 2025 planned benefit year, with more justified scenarios for appropriate plan switching, we expect a smaller target population for plan fit saves versus the 2024 benefit year.
Speaker Change: As we expand Plans that Save, we remain focused on growing our partnerships and enhancing the value we deliver to both consumers and health plans, regardless of what the future dynamics will be for the benefit plan year 2026 and beyond.
Speaker Change: We remain committed to reducing our direct operating costs per submission through AI, automation, and our plan fit tools.
Speaker Change: We have already achieved material improvements, some of which I will describe to you in further detail, and expect this multi-year effort to drive continued, substantial reductions while enhancing marketing efficiency.
Speaker Change: As we scale our agency business, these strategies will support a strong profit profile by combining ongoing cost savings with higher lifetime value from deeper consumer relationships.
Speaker Change: Advancing our technology is also central to improving consumer experiences, agent efficiency, and service quality.
Speaker Change: We have streamlined processes, cutting average call times from 90 to 67 minutes, a 25% reduction.
Additionally, we have deployed AI to
Speaker Change: With the introduction of PlanGPT, an AI-driven tool for quicker access to extensive plan details, we are boosting productivity and allowing for more accurate comparisons and personalized support.
Speaker Change: Further enhancements include chronic condition special needs plans, optimization, making it easier for agents to verify eligibility, driving efficiency and retention while increasing sales.
Speaker Change: Additionally, our automatic prescription drug lookup tool has shown a reduction in drug lookup time by approximately 40 percent, providing convenience and simplicity for both agents and consumers.
Speaker Change: These innovations via our proprietary, built-for-purpose technology and platform are anticipated to deliver strong financial outcomes during AEP by improving speed, precision, and service quality, positioning GoHealth for sustained growth.
Speaker Change: And with significant runway ahead, we believe we are well positioned to continue making improvements and enhancements, further extending our multi-year lead in developing and implementing proprietary solutions against competitors in our space.
Speaker Change: With that, I will turn it over to Brendan to detail our financial results.
Brendan Shanahan: Thank you, Vijay. I am thrilled to join GoHealth during such an exciting time for the company. The Medicare landscape is evolving rapidly and I believe GoHealth's focus on delivering clarity and value to consumers, combined with its commitment to innovation, positions us exceptionally well for growth.
Speaker Change: I am eager to work alongside Vijay and the entire GoHealth team to build on the sturdy foundation that has already been established, driving our strategic priorities, ensuring we deliver sustainable, long-term value to our stakeholders.
Speaker Change: Now, let me turn to our results. In the third quarter of 2024, GoHealth achieved net revenues of $118.3 million, compared to $132 million in the same period last year.
Speaker Change: Internal captive agent submissions saw a 46% year-over-year increase thanks to enhanced training, improved technology, and more targeted marketing efforts.
Speaker Change: This growth was offset by a 46% decline in submissions from our GPS channel, which faced broader market pressures.
Speaker Change: I would like to address the technology incident involving Change Healthcare and its ongoing impact on GoHealth's financial results.
Speaker Change: We rely on Change Healthcare to assess Medicaid eligibility during enrollment, and their cyber attack earlier this year and subsequent outage disrupted our ability to enroll some consumers.
Speaker Change: This led to a reduction in third quarter revenue of over $8.8 million and earnings by more than $7.8 million.
Speaker Change: Our teams adapted swiftly, shifting more submissions to traditional agency contracts, and continue to work diligently to mitigate this issue going forward.
Speaker Change: Though we expect this to be materially mitigated going into the annual enrollment period, despite our efforts, this situation continues to impact our financial performance.
Speaker Change: Our adjusted EBITDA for the quarter was negative 12.1 million dollars, a slight decrease of $600,000 compared to the prior year.
Speaker Change: While revenues were down, we made considerable progress in reducing our direct operating costs per submission by 11 percent, a testament to the cost-saving initiatives we have implemented.
Speaker Change: These savings stem from our targeted marketing strategies and the operational efficiencies gained through investments in our proprietary technology and updated operating model.
Speaker Change: Third quarter 2024 trailing 12 months, or TTM, had a positive cash flow from operations of $35.1 million, an increase of $38.3 million compared to the TTM negative cash flow from operations of $3.2 million in the prior year period.
Speaker Change: Our use of cash is strategically aligned with the opportunities we identify in the market.
Speaker Change: Last year, we anticipated challenging market dynamics which led us to prioritize paying down $75 million of debt during 2024 as the most prudent use of our cash.
Speaker Change: As Vijay has already covered, we completed the acquisition of eTeleco under unique circumstances.
Speaker Change: Specifically, the company obtained control of e-telequote without the ultimate transfer of any consideration.
Speaker Change: On the acquisition date, we recognize the gain on bargain purchase of approximately $77.4 million. This gain is recorded in the Gain on Bargain Purchase line in our Condensed Consolidated Statement of Operations.
Speaker Change: To provide additional context, this gain reflects the difference between the fair value of eTelco's net assets at the acquisition date and the fair value of the consideration transferred, which in this case was zero.
Speaker Change: After the quarter end we completed the refinancing of our term loan credit facility. This refinancing demonstrates confidence in GoHealth's financial stability and positions the company for long-term growth.
The new $475 million term loan facility, maturing in 2029.
Speaker Change: Features improved financial terms, including an interest rate of SOFR plus 7.5%, with a 25 basis point reduction upon the termination of our current revolver.
Speaker Change: This refinancing extends the maturity of GoHealth's term loans through November 2029 and positions the company to continue investing in growth initiatives and innovation.
Speaker Change: We are pleased with the outcome of this refinancing, which not only extends the maturity of our term loans, but also signals renewed confidence from our investors in GoHealth's business model and financial health.
Speaker Change: The strong demand for this offering underscores the market's trust in our operational and financial capabilities. With the extended maturities, we can remain laser-focused on growing our business during this incredibly unique and opportune time.
Speaker Change: We believe our strategic focus on cost control paired with the integration of eTelequote and the rollout of initiatives like Plan Fit Save positions us well to navigate the current environment.
Speaker Change: We are confident that the enhancements to our encompassed workflow, plan-fit tools, and the addition of licensed agents from eTelequote have bolstered our operational capacity and set us up for success.
Speaker Change: This AEP, Evolving Market Dynamics, are driving strong demand, which we expect to boost our submissions, revenue, and adjusted EBITDA.
We anticipate a year-over-year decline in cash flow from operations.
Speaker Change: Due to the shift away from non-agency revenue and the investments of available cash into high return on investment marketing, our conservatism in calculating lifetime values, or LTVs, ensures that our projections remain sustainable and risk-managed.
Speaker Change: This disciplined approach not only underpins our current strategy, but also sets a solid foundation for future growth.
Speaker Change: Our commitment to this conservative data-driven strategy is an under-appreciated strength of GoHealth, and one of the key reasons I was eager to join Vijay and the GoHealth team.
Speaker Change: I believe it uniquely positions us for long-term success, allowing us to navigate industry challenges while maintaining a focus on delivering value to our stakeholders.
Speaker Change: As we move forward, we remain highly confident in our performance outlook for the remainder of 2024 as we continue to leverage our strategic initiatives and technology advancements to capitalize on unique growth opportunities while maintaining financial discipline.
Speaker Change: We believe that the favorable market dynamics driving demand today will persist throughout the first three quarters of 2025, positioning us strongly for sustained success.
Speaker Change: Thank you to our Gohealth team for all their hard work and to our investors and analysts for your continued support. I will now turn the call back to Vijay for closing remarks.
Vijay Kotte: Thank You Brendan and thank you to everyone joining us today. This annual enrollment period is generally developing as we expected and we believe it is set up to be an outside success for GoHealth, driven by our multi-year focus on strategic initiatives.
Vijay Kotte: Through sustained investments in market-leading technology, operational efficiency, and reductions in our direct operating costs per submission, we have built a solid foundation that uniquely positions us within the industry.
Vijay Kotte: Our unique and innovative solutions, such as plant-fit checkup and plant-fit save, along with strategic commercial structures, empower consumers and position us well for sustained long-term growth.
Vijay Kotte: As we look ahead, we remain committed to providing exceptional service to Medicare consumers, building lasting relationships, and adapting seamlessly to changes in the regulatory landscape.
Vijay Kotte: We are eager to work collaboratively with the incoming administration to continue delivering value to our consumers.
Vijay Kotte: With our strategic approach and the dedication of our team, I'm confident that we will continue to be a market leader and significantly outpace the competition, creating lasting value for our stakeholders.
Vijay Kotte: Thank you for your continued support, and I look forward to sharing our progress as we close out 2024 and enter the new year.
We are now ready to take your questions.
Speaker Change: Thank you. At this time we will conduct the question and answer session. As a reminder, to ask a question you will need to press star 1 1 on your telephone and wait for your name to be announced.
Vijay Kotte: To please limit to one question and one follow-up question only. To withdraw your question please press star 1 1 again. Please stand by while we compile the Q&A roster.
Thank you for watching!
Speaker Change: Our first question comes from Pat McCann with Noble Capital Markets. Your line is now open.
Pat McCann: Hey, good morning. Congrats on the on the quarter. I just have, I guess my first question would be regarding the acquisition. Of course we know we're heading into or we're in a strong season now and I'm just wondering what those new agents...
Pat McCann: how the the training process went with them, you know, were they, you know, did you feel like the the new agents from eTeleco were ready to go for AEP? Were there any surprises in that process?
Thank you, Pat. I appreciate the question.
Speaker Change: I would start out with this. First and foremost, we are so excited about eTelequo. The team has been amazing. They come in, seasoned.
Speaker Change: very skilled, focused on doing the right thing, and that's the right starting point. And so when we started with that, and we're very thoughtful in the way we entered into the transaction, where we also had a commercial relationship that gave us the time in September to onboard that team into our technology.
Pat McCann: As you know, our marketplace tools, our planned bid tools, the automation built within that, that is a real unlock of capacity and consistency that enables agents to be very productive.
Pat McCann: So we were able to spend that time, effectively the second half of September, and the early parts of October making sure that they were trained on it, prepared for it, and that we could help them understand how to optimize their performance.
Thanks for tuning in.
Speaker Change: Great, thanks. And then I just wanted to ask about your balance sheet, maybe one for Brendan, and by the way congrats Brendan on the position. So you talked about
the refinance and of course
using
Speaker Change: using capital to invest in the growth of the business, given the strong market dynamics that we're in. But I was just wondering as we look further down the line, what would be
Speaker Change: your plans as far as additional paydowns to reduce the total amount of debt as we go forward and then maybe going along with that, what would be a target debt-to-EBITDA ratio if you do have one there?
Speaker Change: Thanks, Ben. I'll actually start now and turn it over to Brendan. What I would start with is, as he said in the earlier comments, we are always looking at the best use of capital.
Speaker Change: opportunities to help more consumers, then you should do that. If you see a better, if you don't see the dynamics being positive and you really stare at what's the best use of that capital, then you pay down debt because obviously there's a cost to that capital. So you're always looking at the return on invested capital in such a way to ensure that we're optimizing the outcomes.
Speaker Change: So with that, I'll let Brendan talk a little bit about how we're thinking about our overall balance sheet optimization.
Brendan Shanahan: Thanks, Vijay. Thanks, Pat, for welcoming me to GoHealth. I'm really excited to be here with the team. And as Vijay said, right, we look at the situation in the market and deploy cash.
you know.
Brendan Shanahan: Right now it's a good place to put it into our marketing efforts to Increase our consumer base and who buys health insurance through us for MA and then over time we'll evaluate What is the best place for us and timing to pay down that debt going forward? But that's you know, we have a new five-year term with new lenders We're excited to work with them. And so we will figure that out as we're going forward
Speaker Change: Yeah, I think that's just one good thing to highlight again is giving us the five-year runway allows us to have the flexibility as opposed to having any
Speaker Change: taking deadline that says you have to pay so much down, we can retain that flexibility to make those investment decisions in either technology, capacity, or maybe even other potential acquisitions as there may be in the marketplace.
Speaker Change: Great, much appreciated. I'll hand the floor over to someone else.
Thanks, Pat.
Thank you.
Speaker Change: Our next question comes from Ben Hendricks with RBC Capital Markets. Your line is now open.
Ben Hendricks: Okay, great. Thanks guys. I was wondering if you could talk a little bit more about the internal captive agent submissions that you received. Looks like it had really strong growth there.
We're ahead of our expectations.
Speaker Change: I just wanted to get your comments first on that internal piece, the sustainability of that momentum, and then on the flip side, kind of what your plans are on the GPS agent side. It looks like that was down a little bit. If there are kind of efforts in place to turn that around, or is that, is that how much of a focus is that recovery thing?
Speaker Change: Thanks Ben, appreciate you joining the call and appreciate the question. First and foremost our internal agents. I can't I can't thank them enough for their commitment to what we have used as data to support the way to optimize their performance.
Speaker Change: So they have been in lockstep with our technology team to redesign and build this product for purpose and optimize how they want to serve consumers.
Speaker Change: So instead of having to go to three different websites, how do we integrate that into the tool?
Speaker Change: That's part of what the AI automation tools that we've been able to deliver. And what comes out of that is that they're able to focus more time on listening to the consumer, focus more time on answering questions very specifically as opposed to having to seek those answers, and that yields more capacity for them to serve more consumers and have a higher probability outcome of matching them with a better plan, if appropriate, and build that confidence.
Speaker Change: And that's what's coming through in what you've shown, a year-over-year performance improvement of 46%.
Speaker Change: for our internal captivation. And most of that is coming through more efficiency through the tool and being able to be more targeted in the way our marketing is identifying consumers who need support.
Speaker Change: So when you have better marketing targeting to get consumers who likely need the help to come in, as well as having a more efficient tool to serve them, that has that step function and capacity.
Speaker Change: and therefore we believe that is going to continue. There's no reason to believe that it can't maintain that, if not continue to improve as we add more tools and automations in place, and allow the AI to keep learning off of the more interactions that happen and building off of our 30 million consumer interaction data set.
That will always help refine that and make it better.
Speaker Change: As we think about the GPS channel, our external channel, there should be no...
Speaker Change: What we have been communicating all year is that there's been instability in those external channels of brokers Which has also let their tail wind for us Which is in that competitors generally speaking of those other brokerages who maybe didn't make it work. They couldn't optimize the cash equation
channel that we just discussed.
Speaker Change: And so, we had to reset and re-recruit, and we recruited a number of new downline GCS partners to participate under that structure.
Speaker Change: We purposely sought to not launch those in Q3, given that we saw those dynamics were still not great, a lot of uncertainty as to product stability. And so we have really supported that growth to come into Q4 as we've onboarded a number of those to have a material contribution to the volume and number of consumers we can serve in the fourth quarter.
Speaker Change: And just on the last piece there, that you asked how strategically important it is to us, we believe it's an opportunity to one,
to the end.
Thanks for tuning in. We'll see you then.
Speaker Change: Thank you, appreciate that commentary. And then just one more for me on cash flow. I mean clearly a strong turnaround, you know, from this time last year. Just wanted to get all the pieces and flips and takes of that. I assume most of that is kind of explained in the shifts from non-agency to agency. I just want to get your take. Thanks.
Speaker Change: It's a great question, Ben. I would actually say that most people have assumed it was that shift from agency to non-agency. The more material driver of that was really good, thoughtful decisions around operational efficiencies and capital deployment.
Speaker Change: We have invested in operational standardization that yielded, I think as we've mapped some of that in prior conversations and other presentations externally, nearly two-thirds of the gain in total capital from operations came from operational simplicity, standardization, deployment of technology.
Speaker Change: Agency, non-agency, yes, does have a factor in that, but it's more about how we decide to deploy the capital.
Speaker Change: As we come into this AEP, if you think about those dynamics, we're seeing a very different market dynamic. So, I guess what I'm saying is, there's a lot of operational efficiency that drove our cash improvement.
Speaker Change: then there is a portion of agency versus non-agency. And more materially, it's about reading the market opportunity to determine whether you're going to deploy the cash or retain the cash that you've generated through those efficiency and contracting efforts.
Thank you.
Thanks guys and congratulations on the quarter.
Thank you, guys.
Speaker Change: As a reminder to ask a question you will need to press star 1 1 on your telephone and wait for your name to be announced. Our next question comes from Robert M. McGuire with Granite Research. Your line is now open.
Good morning and thank you for taking my questions.
Speaker Change: Can you, Vijay, can you kind of give us a discussion on your efforts to reduce CAC?
Speaker Change: And I'm interested just to understand how you anticipate CAC to play out in the fourth quarter with the e-telequote acquisition, how that will play out over time, and then we'd love to hear what you're thinking a few years out from now, where you think CAC could go.
Vijay Kotte: So, great, welcome Rob, appreciate you asking the question today. A very thoughtful question and really timely given the amount of progress we've made on the direct cost for submission as we reported or also some referred to as a CAF cost of acquisition.
Speaker Change: And the way we think about it is, we've had continuous improvement in it by automating, so decreasing average handle time is one piece of it.
Vijay Kotte: The other piece is better than marketing targeting. So if you look at our direct cost per submission, there's three primary buckets, right? The first one is going to be marketing cost. The second one is going to be really what we call TC&E, or is it going to be the
Vijay Kotte: The average channel time is my best KPI- they're our agent costs. And then the third one is going to be the cost related to ... ... the GPS channel, right? So, all that flows in there. Put the GPS channel aside because that's really going to be a factor based on the mix of that volume to our total number of submissions.
So really where we're focusing our efforts is on marketing.
making sure that we have really
Vijay Kotte: align contracts with partners when we do partner marketing, and also optimizing the internal marketing we do to make sure that we're identifying consumers at the top of the funnel who have the most significant or highest likelihood of needing to make a switch or to need different coverage options. That is critically important to getting that efficiency out of marketing.
Speaker Change: And then you have it so you can look at that distinctively one way with one bucket. The second bucket is on overall efficiency of the technology platform to ensure that we can decrease the amount of time, the average handle time, for a enrollment or a non-enrollment or a sale, no sale. So you want to be efficient on both, but you don't want to be so efficient that you're walking away from consumers who really need help. So there's a balancing act there that we use our technology to enable.
And then...
Speaker Change: There's the way you look at both of them together and what I've been most proud of of our team is our marketing and our sales Operations team working tandem to do what I think is really not highlighted enough, which is that supply-demand matching
Speaker Change: Our ability to look minute-by-minute to make sure you're not over or under staff, that you have the right amount of acute time.
Speaker Change: And being able to manage that throughout the day, when you have peaks in the middle and you have off hours in the beginning and the end, and then being able to optimize that against your outbound and inbound phone calls, and then layering in when mail hits so that you pull back digital. And if the TV is not running, you pull back digital, and if it's not working, you pop it up. Those are the components that, together with marketing and sales, those two buckets I highlighted, that gives you that step function improvement that we've been seeing.
Speaker Change: So I would really say it's a few different things. Again, it's targeting and marketing.
Speaker Change: is making sure that we continue to use AI and automation to make the tools more efficient. So you decrease the average handle times in those calls. And then finally, it's the way you do the matching together so that we can continuously more real time. You know, if it's not, you know, might not might take every two to three minutes to make the modifications that provide the matching.
Decrease the amount of time to even refine it further.
Is that responsive, Rob, to your question?
Speaker Change: That is, I appreciate it. Maybe I'll just move on. For the e-telecode acquisition, is that repeatable? You know, I get that it's probably one page of your playbook, but are there other opportunities out there you can talk about with or without the abandonment structure?
Speaker Change: It's a great question, Rob. There have been a lot of different attempted transactions in the marketplace by large entities, standalones, etc. Not everybody has been able to really think through the investments that are necessary to be great in this business.
Speaker Change: and I think because of the platform and the technology and tools we've built.
Speaker Change: We have a unique synergy opportunity to unlock potential of these types of organizations. And we do keep an eye open and an ear out and listening to see if there are other opportunities to do more of that. So we're excited about the opportunity to do it. And by having the technology continuously getting more efficient, as we think about the long term as part of your first question, we expect that to continuously get more efficient and give us more opportunities to tap into consolidation in the industry, if it makes sense.
Speaker Change: Okay, great. Thank you. And then a separate topic, just on agency versus non-agency, can you just talk to us about what you anticipate the mix is going to be going forward and then tell us what are you seeing from your perspective in terms of how are you determining
Speaker Change: that you want to go with more agency at this point in time. What are some of the factors you're looking at that's telling you that that lifetime value is going to be greater with one plan over another?
degradation and that will help us
Speaker Change: Illuminate whether we should go through an agency or non-agency structure. If you think there's more likelihood of disruption, you want to be on a non-agency structure. If you think there's more likelihood of stability or upward movement, you want to be on an agency structure. And then it's also based on track records.
Speaker Change: And sometimes we also choose to go non-agency just because we have a more exhaustive enrollment process where we're doing additional services on the back end to support a health plan for onboarding or continuous engagement. But all that said, that is how we go in into the contracting phase.
Speaker Change: But what ultimately comes out on the back end of the mix of agency versus non-agency is more dependent upon the consumers that we connect with and what made most sense for them.
Speaker Change: So we don't put our thumb on the scale there. Whatever we ultimately start out with contracts...
Speaker Change: and then however competitive the products end up being on a relative basis and how that individually matches for that unique consumer who called us. That will determine ultimate mix of agency versus non-agency.
Speaker Change: and we want to make sure that we implore our ability to be nimble within that.
Speaker Change: And that's why things like the refi that we did for five years gives us that opportunity, right? Of being able to be nimble and just present the best products available, as opposed to only wanting to provide products that give us a different cash profile on any given year. You want to let the product speak to the consumer's needs, and that's how we operate.
Is that responsive to your question, Ron?
Thank you for watching. Bye.
Speaker Change: Thank you. Our next question comes from Jim Sadati with Sadati & Co.
Thank you.
Jim, you're now, yep, Jim, your line is now open.
Jim Sadati: Good morning and thank you for taking the questions and welcome, Brendan.
Jim Sadati: Can you talk about what you think the impact will be from the election earlier this week? What do you think will happen with the new administration? How do you think you can adapt to it?
Speaker Change: Thanks for the question. Good to hear from you, Jim. It's still early, right? We've got to listen more, pay more attention. Obviously, we're going to do all the right things and want to serve as many consumers as possible under whichever scenario would have resulted from the election.
Speaker Change: So we're staying heads down, focused on delivering this AEP right now, serving as many consumers as possible.
Speaker Change: And we expect to be prepared for whichever way the path goes forward with the new administration and how they want to direct the product. But we believe and continue to believe that when you have over 50% of the Medicare population choosing Medicare Advantage programs,
Speaker Change: and for us to be one of the leaders in helping them choose between those and finding great coverage.
Speaker Change: That's a program that's going to be valuable to any administration, and our role in that, making sure we do it the right way and putting the consumer at the center of it, will be valuable to all relevant constituents. So not much more to say, I know it's not a great answer as to how things may play forward because we still haven't learned enough about that, but long story short, we think we're a contributor to value in the overall equation, and we're happy to partner with the new administration to help them achieve their goals as well.
Speaker Change: All right, and it sounds like, you know, with the current environment, you're in a mode more to deploy cache than to keep it. You know, and what are the things you think make the most sense?
Speaker Change: to spend the cash on? Is it bringing on new agents, new marketing initiatives? You know, where do you think you'll be spending money over the next six months?
Speaker Change: It's a great question. How would we deploy cash over the next six months? Because you highlight a great point when you ask that question, is that the market dynamics we see in the fourth quarter actually extend all the way through the first three quarters of next year.
that there's continued instability, there's continued need for...
Speaker Change: and it's opportune for organizations like us who are set up for it.
Speaker Change: And so we've already made some of those bets by things like e-teleport acquisition to give us the capacity with experienced agents that you can onboard and deploy on our technology.
Speaker Change: Then, if you see more opportunities, what you would do is you would invest in more marketing to do it in more hours and extend your access point to consumers so you can meet more of that demand.
Speaker Change: that's out there. As we already know, there's not as much supply of agent capacity this year than there has been in previous years, given to the challenges that many organizations in the broker space outside of us have had in being able to maintain and or grow their capacity.
Speaker Change: So, it's not really efficient at this point in the game, meaning for AE3, but if you think about it, what you need to do to maintain the performance of AE3...
Speaker Change: to go into next year for OEP and then continuously to kind of feed that engine of growth and opportunity through the special enrollment period next year as well.
Speaker Change: So, we look at all those tactics, but agents aren't necessarily the place to focus on. We've got a great agent base, and our attrition is actually doing better than we expected, given the market dynamics and the amount of efficiency they get through our tool. So, it's really about making sure we can access more consumers by extending more availability of our agents.
Speaker Change: that exist and are kind, and giving them great opportunities for marketing.
Alright, thank you.
Thank you, Tim.
Speaker Change: I'm showing no further questions at this time. I would now like to turn it back to Vijay for closing remarks.
Vijay Kotte: I really would like to extend my appreciation and thanks to all of you for joining your time and focusing your interest on our continued evolution into an engagement company that's really focused on serving consumers.
Speaker Change: and making sure that they're center of everything we do. We don't bring them services that we'd like to sell them. We match the consumers based on their personalized needs and try to find things that can give them peace of mind and help them access the best healthcare for them and using our tools to find the most suitable plan that meets those needs.
Speaker Change: As we continue on that journey to serve as many consumers as possible, I'd be remiss not to thank my team, who is committed to doing this every day with a laser focus on serving as many consumers as possible at the highest quality as possible.
Speaker Change: and that's from our corporate support infrastructure all the way to the frontline associates group have the privilege of helping consumers on a day-to-day basis. So thank you all. I appreciate it and I look forward to updating you on our progress as we continue that evolution. Thanks.
Speaker Change: Thank you for your participation in today's conference. This does now conclude the program. You may now disconnect.
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