Good day and welcome to the GoHealth Second Quarter of Fiscal 2020 Conference Call. At this time all participants are in a listen only mode. Following the Company's prepared remarks, we will conduct the question-and-answer session and instruction will follow at that time. [Operator Instructions] As a reminder, this call will be recorded. I would now like to introduce your host for today's conference call. Mr. Jay Koval, Vice President of Investor Relations. You may begin.

Thank you, Joel, and good evening everyone. I want to thank each of you for joining GoHealth's second quarter earnings call. Our first is a newly listed company calling our IPO a month ago. Joining me today are Clint Jones, Co-Founder and Chief Executive Officer; Travis Matthiesen, Chief Financial Officer; and Shane Cruz, Chief Operating Officer. This afternoon's conference call contains forward-looking statements based on our current expectations, numerous risks and uncertainties may cause actual results to differ materially from those anticipated or projected 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 close today, we issued a press release containing our results for the second quarter of fiscal 2020. In addition to presentation materials, both the release and the slides can be found on GoHealth's website under the Investor Relations tab. In the press release, we've listed a number of risk factors that you should consider in conjunction with our forward-looking statements. Other significant risk factors are described in our Form 10-K and 10-Q reports filed with the Securities and Exchange Commission. During this call, we will be discussing certain non-GAAP financial measures. These measures are reconciliation to the most directly comparable GAAP financial measures, and the reason management believes they provide useful information to investors regarding the Company's financial condition, and results of operations are contained in the press release and investor presentation. So, with that, I'd like to turn the call over to Clint.

Thanks, Jay. Good evening everyone and thanks for joining us for our second quarter earnings call. This is our first as a public company and we're excited to announce GoHealth's results and share with investors our unique positioning in the marketplace as well as their future vision for the Company, as we focus on our mission to improve access and healthcare in America. I plan on covering two main topics today including; first, a quick review of our second quarter results in fiscal 2020 outlook; and second, a summary of how we actively manage our business to achieve the right balance of top-line growth, profitability, and cash returns. So with that, let's start with the second quarter results. No surprises here as results came in largely as expected. Total net revenue grew 71% in the quarter, powered by 169% growth in our Medicare Internal segment. This revenue growth is driven by additional agents and increased efficiency, which contributed to 106% increase in Medicare Advantage commercial approved submissions are Medicare CAS. Revenue growth in the quarter was held back due to COVID-related state licensing delays that we experienced from April to June. As of August 1st, we're on track from a hiring standpoint for this upcoming AEP, making up substantial ground on licensing and carrier appointments during July. Despite these significant investments in our workforce, we delivered EBITDA growth of 56% in the second quarter. The Medicare Advantage market is very large and growing quickly, as seniors are increasingly interested in evaluating their plan options, with the expert advice of GoHealth and our agents. COVID has helped to accelerate the secular shift towards our business model as a traditional field force slowed down due to social distancing concerns. We partner closely with carriers to help them grow their member counts and…

Thanks, Clint, and to all of you for joining us today for a review of our first half results. Rather than repeat all of the financials in our release, I will use this time to hit a few key highlights from the first six months of 2020 as well as share some additional perspective on an issue that is front of mind for investors churn. First, let me run through some key numbers from the first half. As Clint mentioned, we delivered strong growth in our Medicare Internal segment, our focus area as a company. Total Medicare submissions jumped a 148% in the first half, as we continue to onboard and licensed new agents in advance of to Q4's annual enrollment period. We are driving increased agent efficiency for better conversion and higher sales per day. And remember that our agents' variable compensation is not only paid upon submission of an application, but also on long-term retention and other aspects from our balanced scorecard including customer satisfaction. This is 100% aligned with our focus on the value of a consumer versus the LTV of an individual policy. Regarding our Medicare External segment, let me remind you that these external agents are not outsourced call center agents, but rather independent virtual agencies that leverage the power of GoHealth's technology, compliance and data to be able to help enroll new members under GoHealth carrier contracts. They are also compensated in a similar manner to our internal agents with an eye towards long-term retention so they are only paid when commissions are received. For the reasons mentioned above, external segment LTVs are not materially different from our internal segments. The dynamics that have been powering our year-to-date growth show no signs of abating. In fact, we believe that, COVID has only served to…

Thank you. [Operator Instructions] Our first question comes from Elizabeth Anderson with Evercore. Your line is now open.

I had a question regarding your churn levels in the quarter. You gave us a certain nice high to be covered as I think if you could give us a little bit more detail in terms of what you saw with the COVID special enrollment period? And then specifically, any commentary you have in terms of the newest cohort from 2019 to the how that cohort has trended versus prior?

Thanks for the question. Obviously, there's been a lot of noise and conversations in the market around the churn. I want to take a little time to educate you how we think about this, and kind of the key elements and how we run our business around this. So, obviously, churn is one element that goes into your LTV, and why is this important? Obviously, your LTVs, or what you're using to predict future cash flow, and we are hyper focused on cash flow. I think we mentioned that several times in our prepared remarks. So that's kind of how we think about why this is so important. And if you think about, Travis has mentioned, that our cash collections are right in line with our expectations have been. So that's kind of point number one. Point number two, we have not seen material changes in churn in the business. So, I think those are the two main points I'm going to talk about. The way we look at in running the business, we have kind of two points in the period of our customer journey. Our first 90 days which has many levers in there that impact churn, the marketing source, agent performance, type of enrollment is the SNP plan new to Medicare, the carrier, the geography, and many other factors. A lot of these factors are in our control, and we see those elements in real-time and we're able to make modifications and adjustments, if we start seeing negative or positive trends. We don't want to see surprises and we are in a position with our data and insights, where we don't see surprises. So, that disenrollment period that I'm talking about in the first 90 days as we are hyper, hyper focused on there, and we obviously…

And if I can just add in there, Clint really quickly, we do look at that early disenrollment and that 90 day turn very differently. And what we'll continue to build a golf brand, use marketing automation, customer outreach, through TeleCare to improve the post 90 day turn dynamics, we are focusing the majority of our efforts on the disenrollment period. And not only because it has a high impact on our LTVs and cash payback period, but it's the area where we can best leverage our data to de-average the market. So, we talk a lot about how we're going to de-average the market and leverage the different dynamics and that every consumer is different to arbitrage the market and get the results that we've seen. And we see significant variances in attrition across our different data dimensions related to customers and agents during that early disenrollment period. As you mentioned, Clint, some of these, a good example here would be in geography. We see in markets where we have a really strong product footprint, and there's less competition, the 90 day retention of our submissions maybe over 80% and keep in mind that, this includes both the effectuation rate of the submission that actually get to the effective date and become a pain policy as well as it lasts without canceling during that first 90 days. But in other markets where we still are growing our carrier footprint, there's higher competition that 90 day range may be as low as 50% to 60% retention. So, those significant variances are things that, we can leverage with both our business strategy to add carriers to our platform to ensure that we can get higher retention rates in all areas, but also to ensure that we're paying the right price for every single consumer. And again, de-averaging the market in certain geographies, we're going to pay more to acquire consumers because we know those early trends with disenrollment. As we mentioned earlier in the call as well, another example of relates to the types of Medicare beneficiaries that we're enrolling. So, as we target and enroll consumers in SNP plans, they will exhibit lower effectuation rates and higher disenrollment rates during the first 90 days of the policy. But we'll continue to target as consumers do their attractive acquisition costs and the ability for us to leverage this population to reduce the seasonality of our business. And so, these things are just key examples of how we can leverage our data to de-average the market and continue to pay the right price for every consumer. So, instead of focusing on, how are we performing in aggregate from a churn perspective or from a disenrollment perspective? We'll continue to focus on using our data to de-average the market and make sure that we're paying the right price for every consumer. So, we can be laser-focused on the important metric, which is our LTV to CAC.

[Technical Difficulty] your line is on mute, please unmute.

So on the cash flow slide, I think that's a very important differentiation you guys have that you're able to breakeven on cash less than 12 months. But can you help us reconcile the fact that you expect your other revenue to remain strong? And the fact that you should have renewal commission coming from prior years, but you still expect your cash flow guidance to be negative 60 million to negative 80 million this year. Just trying to understand like why should we expect positive cash flow in this year or even next year? Just help us reconcile that.

So, I'll take the first part of that. So in our other revenue, these are multiyear, in many case, contracts with partners, whether that's around agent costs, enrollment fees, marketing development funds and our newly kind of rolled out Encompass Platform. These are long-term contracts and we expect that recurring revenue to continue. And we do leverage that in a way to drive results in our business and we'll continue to focus on that. And I think Travis can speak from a cash flow standpoint, but at our growth rates from a cash flow, overall cash flow positive, we can slowdown and become cash flow positive really quickly. We don't think that's the right decision for the business and we're going to keep kind of expanding and growing in areas that we that match our LTV to CAC. And Travis, you want to speak a little bit more?

No. Great point, Clint, I would just reiterate. First and foremost, obviously, the cash consumption this year is predicated on growth. And again, continuing to accelerate our growth rate. And then second, I think the other important piece is, again, we gained kind of the full year guidance are as of 12/31. And again, because of the seasonal nature of our business, what that 60 to 80 represents is, again the cash that we will consume during the peak period. With while our payback period is within one year, a lot of that payback will start coming in Q1 as we get that first initial commission, as well as start to receive renewal commissions from our book. So, again, I think that combination of growth combined with the seasonality of the of the 12/31 guidance we're given are the two biggest drivers there.

Thank you. Our next question comes from Steve Valiquette with Barclays. Your line is now open.

It's Jonathan Yong now for Steve. Just in relation to your LTV outlook through mentioned that the large carrier as may impact LTV a bit, because of the mix. Is it something unique about the products that you're adding where the population you're targeting in terms of wide LTV would be somewhat negatively impacted from that regard? And then just quickly on, do you have any data on just to recapture for members that did churn off?

Yes, so I could start. So from a new carrier addition, obviously, as we think about adding new carriers, we may come in at -- there's several elements here lower commission rates. It takes a while for ramp up and agent really, the agents and the carrier on the platform. So there may be an initial period of time where we see lower conversions potentially higher churn as our agents become educated and fully understand this plan. So, we've taken more of a conservative approach, from an LTV standard and think about how we plan and scale this out. We obviously won't roll out, new carriers to the whole business, if you will. We'll start, we'll test, we'll learn, we'll ramp up, we'll gather data and grow from there, but I think it'd be just as prudent for us to take much more of a conservative approach as we roll these out. Now, that will shift over time, as we learn the data gain scale and grow from there. That's just how we think about new carriers and to that point, touching you the new agents.

And then to follow up on the recapture question, as we think about recapture, we think about those consumers that are going to leave us. Travis mentioned the 30,000 consumers that we talked to with our TeleCare team on a monthly basis. We're engaging with consumers and we're using our predictive analytics to figure out which consumers will reach out to base on the likelihood that they will turn based on the product that they selected and how we determined that product fits score using our technology. And as we reach out to the consumers, we find that either they call us or we call them. We end up with about 25% fail rate of those consumers that we speak to that are looking to cancel their plans.

Thank you. Our next question comes from Tobey Sommer with Truist. Your line is now open.

I wonder if you could give us a little bit of color on what your experiences in agent productivity in a virtual setting, and maybe give us a context of how it compares a year ago? And what your assumptions are for that productivity, as we head into the fourth quarter?

So it's a great question. Thank you. So obviously, yes, managing a remote workforce is creating unique challenges. And I think it's going into COVID and kind of moving everybody to a virtual, we really didn't know to fully expect. And I think the good news is the productivity has stayed the same, we're actually increased in many cases. And if I look at, kind of our last several years AEP increases in conversion, we expect the modest increase this year, but it's not all driven by just the agent activity. Last year, we rolled out kind of our lead routing, and plan matching capabilities, that really as we understand agents characteristics around what they sell the best, whether that's from a marketing source or a type of consumer, that data set has grown and we've gained more insight, we can better match prospects with that those agents. So we're really excited about that is we get agents on board and I think in years past, we had a lot of hiring right before AEP where we didn't know a lot around these agents and their capabilities. Luckily this year we're able to get people in board sooner or onboard sooner so we can learn more about that, which were really excited as we get into AEP. And we're devising ways to ensure the same energy that we typically see in our call centers during AEP. We can transfer that in home. So, we've got some really unique solutions we've been working on and testing that we've seen or we're really excited about. So I think that would just to be honestly one of the challenges and as we get AEP is maintaining that same momentum and energy levels at home, but we feel that's a really, really great way to do that.

Yes, and I would just add, briefly kind of two key metrics that we look at, when we talk about measuring agent performance. We look at agent conversion rate, their ability to submit applications off of the qualified opportunities they receive, as well as their sales per agent per day. Q2 of '20, over Q2 of '19, we've actually seen increases in both of those metrics. So those are two key reading indicators that we're very excited about as we continue to operate in this remote and post-COVID environment.

Thanks. If I could ask another question. You seem very enthusiastic about the non-commission sources of revenue and the new platform. If possible, could you give us some examples of what the new platform could unlock in terms of those opportunities? Thanks.

Yes, absolutely, and we are extremely excited about it and I think, especially now with this more like telehealth and virtual capabilities, you think about, the senior population that's much more vulnerable and our ability to make an impact there, virtually over the phone, that kind of really gets us excited about how we get help folks out. So, a couple of examples that we can talk through, when you think about a health- risk assessment, right, really understanding once somebody is enrolled. We can help our carrier partners at the time of enrollment. We take them through a health risk assessment process, which is we deliver that now member to the carers, they know exactly who that consumer is, then do they need immediate follow-up there? Did they need to get them into a chronic care program? Do we need to get them in a prevention program? So, it really dialed in a much faster connection with that customer around that carrier and that plan's need, so that's an example. Enrollment and value based care models. Obviously, there's a big industry shift into value-based care. We can help these consumers understand and enroll in value-based care models. We screening for social determinants of health. Obviously, with isolation during COVID, there's a big risk there from a mental health standpoint that we can help identify and go from there, other things around, understanding their transportation needs to get to a provider and back, somebody can't make it to a doctor's appointment from a preventative care standpoint. How do we impact that, meal delivery, right? If somebody is in a situation where they can't get to the grocery or they don't have the means, especially during COVID, is there an opportunity to set that up, right? These are all potential revenue triggers for us and where we can not only help the carriers, but all the consumers as well. So, it's a great ecosystem that we get really excited about, and we've got a list of unique services that we'll be adding to this platform as we move forward.

Thank you. And our next question comes from Lauren Cassel with Morgan Stanley. Your line is now open.

Lauren, you'd like to unmute? Operator, okay, go ahead.

And our next question comes from Michael Cherny with Bank of America. Your line is now open.

Good evening. And thanks for all the color so far. I hate to go back to this churn question, but because I know it's been the dominant topic. You talked about no real material changes also expectations. I guess, just on a more straight forward question. Can you tell us those up or down on a like-for-like basis?

Yes. Again, our churn rates have been relative to our expectations. And again, when we talk about our expectations, those were the LTVs that we recognized in books. And again, we have not seen a material change. And I would just, again, point back to what Clint mentioned earlier is that, churn is not the only driver of LTV, it's carrier mix, it's consumer mix and geography. And again, based off of all of those factors, our LTVs have been in line with our expectations as evidenced by our cash collections today.

Thanks. I appreciate all the color and education on that front. One other question I want to dive into, I liked your use of the term, a rifle approach on a carrier relationships and adding carriers. As you think out, especially in a post election world. How do you think about the future development of terror relationships, especially with any that are any significant one, please don't have relationships with currently?

Yes, I think to take a step back here, we've been offered a health insurance marketplace for nearly 20 years. But Medicare is relatively new for us, right. Actually, only five years. So, we had a lot of the technology capabilities from enrollment and sales capabilities. But when we added Medicare, we said, what, this is a, it's a product that we don't fully understand yet. We want to be thoughtful and methodical and how we do this. We want to partner with a few select key partnerships, and then learn that business and becoming very valuable partner delivering highly skilled and efficient membership. So that's what we did. So now that we kind of fast forward a few years later. We've seen the data around the country, where we can afford to add other carriers, other products and that to better serve customers, which we have begun doing. So I think that, that'll play out over years to come. I think that as we scale, it will be a very important factor for us to ensure that from an LTV to CAC, and this is something we drive down to the leading metric, we're operating in the best area. So if we see in our your LTV, maybe low in some areas or CAC high in some areas, that probably means we can add carrier and there are different plan there to impact and change that. And we've proven that over the years, I think was your second question around the election?

Just in general, we might be looking at different environments and might be a more optimistic environment, potentially for Medicare. And I guess, how do you think about position the business and your relationships in the event that there is a broader time to go after?

No, absolutely. I think that we've been operating the under 65 market and we still are, to an extent but four years. So we don't expect in the big healthcare debate right now sits in the U65, especially around the ACA. Not a lot of discussion around changing Medicare Advantage, other than different potentially the Biden side, bringing the Medicare eligibility age down, which obviously would be a big factor for us and something that we would be well positioned to help those consumers understand and enroll and the products that are available there.

Our next question comes from Steve Halper with Cantor Fitzgerald. Your line is now open.

If I'm doing the back of the envelope math, it looks like Medicare was around 93% of the commission revenue line. Is that correct? And then just generally, can you just talk about what your expectations are around the non-Medicare commission revenue going forward?

Yes. So, you're right, your hard folks have has been on Medicare. That's where we've continued to see the opportunity your right above 90% at this point. And we will continue to drive and invest in that strategy. And around other revenue, it will grow, but we don't expect it to grow as a percentage of overall revenue, just because our revenue streams from commission will outpace that pretty dramatically, but it's still a very important metric and part of our business. And I think about our future opportunity, with additional enrollment fees or agent payback periods around Encompass strategy. We see obviously not a meaningful amount of revenue this year per se where actually we're ahead of thought we'd be. As we get into 2021 and beyond, we get really excited about what that can deliver.

But I was I was just focused on in the commission line the IFP business, the non-Medicare commission revenue in that line. What's sort of the outlook for that specific part of the business?

Yes, I mean, we made a strategic decision last year to not necessarily get out of IFP, but to not really invest in IFP until we fully understand what's going to happen in the election. That's kind of where, there's just such a kind of a turbulent issue around that market today that we wanted to keep it going. So, we still got a lot of calls in and lead flow around, helping people get enrolled in an ACA plan. As we depend on what happens in the election and the opportunities that would come out of that, we'd be in a very good position to again, reinvest and grow that, if it make sense.

Thank you. And our next question comes from Lauren Cassel with Morgan Stanley. Your line is now open.

I just wanted to ask about the new partners that you added. Is there any way to sort of quantify or help us think about your full year revenue guidance in terms of growth from new versus existing partners? And then, you mentioned Kaiser and some other smaller carriers that you're adding. Over the next, I guess, several quarters, I guess, is that a 2020 story? Is that more 2021? And then my follow-up is just on the agent side. Are there any stats that you can give around agent retention?

Yes, I'd like to carry one first. So, we added United kind of around the beginning of Q2, and really focused on the SNP population and where that is. So, that's obviously grown as we kind of gone throughout the year. Some of the other carriers, we're not going to add until later on in the year to begin to AEP. We don't believe it'll be a meaningful part of this year, as we think about, adding a new carrier. And you really have close to a year to get fully integrated, build all the technology capabilities, all the reporting, all the data, training agents, get them up to speed and go from there. So, we don't think there's going to be, kind of a meaningful change necessarily this year. But as we think about future years, and with that kind of carrier concentration looks like we think there'll be a much more diversified. And then, the question on agent churn, so, our top, let's kind of break it down into cohorts. And obviously if there's a good churn and bad churn, so our top kind of cohorts of agents that are strong performers, we see very little churn. By design, they have strong kind of commission model setup that are really around retaining not only the consumer but retaining the agent through future opportunities with a business they write for us. Now on the flip side, if the lower end of that there will be forced churn and that's really driven around performance that we're constantly evaluating, how they just perform, and there's certain expectations and standards we need to hit. And I think that would just go as any other sales organization out there, how they would manage that population around performance.

And just to add to that, when we think about LTV to CAC, we look at LTV to CAC even of our agents. So, we look at how our agents are performing, and to Clint's point. Our top performers are continue to be rewarded have really great careers with us. And we tell them lose those agents, but we do aggressively manager or bottom performers. And I talked earlier about some of the examples of different 90 day retention characteristics for different data dimensions. A big one that I didn't get into was the agents, and we see significant variances in retention. So we look at obviously conversion rates, sales volume, but even on the retention rates and 90 day active rates of the businesses those agents are writing, and we will manage out those agents that are not kind of fulfilling the balance scorecard that we've laid out because we want to make sure that, their incentives are aligned with us and what the agents have hit the goal culture and are helping consumers in the way that we want to help them.

Yes. I would just add, as we think about, again, the back half of the year and the forecast we gave, we have a plan of having a little north of 2,000 licensed agents enrolling consumers into plan. I'm happy to announce that where we sit here today 96% of that workforce has been hired. And so again, as we think about the seasonal nature of our business, we've been very successful at on-boarding, adding, and training our agents early in the process and we're really excited about the opportunity it can drive this upcoming annual enrollment period.

Thank you. And the last question comes from Yaron Kinar with Goldman Sachs. Your line is now open.

Hey, guys. This is Rob Cox filling in for Yaron. But I just wanted to ask, we got some updated views on, online enrollment from some of your peers, and I just wanted to know. What percent of your policies are enrolling online in this new environment and to what extent are you investing on or investing in this capability going forward?

Great question. We really focus and believe that connecting consumers to a licensed and trained expert is a right way to go now. So that's where the majority of our enrollments occur. We obviously have the technology that a consumer can enroll on their own and we do get some, but it's a very small part of our business. We do have the ability that will redeploy kind of a more aggressive strategy kind of an agent assisted or kind of an emailed enrollment packet during peak times, especially during AEP, around deadline days or deadline weeks. So, if we have a huge call queue, we can enable our agents to talk to the consumer, help them choose a plan. But, as opposed to enrolling them over the phone, we can then send them on electronic capability where they can do it themselves, which has been enables our agents to get back on the phone with the next consumer as our call queue are higher, we can bring them down. So, there are periods of time during AEP will deploy that technology that's very successful. We believe over time, we'll see more and more people enrolling online. We don't think that trend has occurred yet, but we have the capability of doing it and we'll continue to watch it. But our best characteristics around our LTV to CAC still remain strongest, when talking to one of our experts.

Great. Well, thank you very much to all of you for joining us for our second quarter earnings call, and please feel free to reach out to us with any additional questions that you might have. Take care.

Ladies and gentlemen, that concludes today's program. You may all disconnect. Everyone have a great day.