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.

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. Today'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 or revise any of these statements whether due to new information, future events or otherwise. 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. In the press release, we have listed several risk factors that you should consider in conjunction with our forward-looking statements. 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. 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. 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. I will now turn the call over to GoHealth CEO, Vijay Kotte.

Thank you, John, and good morning, everyone. First, I'm pleased to welcome Brendan Shanahan as our new Chief Financial Officer. Brendan joins us with over 30 years of financial leadership experience, including more than 20 years in the Medicare advantage space. His expertise and financial strategy, mergers and acquisitions and operational leadership will be invaluable as we continue to execute our strategy and pursue profitable growth. With his extensive background and passion for helping consumers navigate their healthcare options, I'm confident that Brendan will be a tremendous asset to our team as we capitalize on the opportunities ahead. 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, Katie will remain a key leader in the finance organization, continuing to serve as Chief Accounting Officer. 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. There are over 65 million Medicare eligibles in the US, about half of whom are enrolled in Medicare vantage plans. Many consumers face an overwhelming number of options, as one-third of Medicare eligibles live in counties with 30 or more plans available. This complexity often deters consumers from exploring better options as they may not know who to trust or where to begin. At GoHealth, we aim to empower these individuals with proprietary, objective, technological tools and a highly trained and experienced agency. We have evolved from a traditional Medicare enrollment company to a Medicare engagement company, focusing on building long-term high-quality relationships with our consumers. We believe this shift allows us to deliver a more integrated and personalized approach to care, reinforcing our unique role in the Medicare…

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. I am eager to work alongside Vijay and the entire GoHealth team to build on a sturdy foundation that has already been established, driving our strategic priorities, ensuring we deliver sustainable long-term value to our stakeholders. 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. Internal captive agent submissions saw a 46% year-over-year increase, thanks to enhanced training, improved technology and more targeted marketing efforts. This growth was offset by a 46% decline in submissions from our GPS channel, which faced broader market pressures. I would like to address the technology incident involving Change Healthcare and its ongoing impact on GoHealth's financial results. 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. This led to a reduction in third quarter revenue of over $8.8 million and earnings by more than $7.8 million. Our teams adapted swiftly, shifting more submissions to traditional agency contracts and continue to work diligently to mitigate this issue going forward. 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. Our adjusted EBITDA for the quarter was negative $12.1 million, a slight decrease of $600,000 compared to the prior year. While revenues were down, we made considerable progress in reducing our direct operating cost per…

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 multiyear focus on strategic initiatives. 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. Our unique and innovative solutions such as PlanFit CheckUp and PlanFit Save, along with strategic commercial structures, empower consumers and position us well for sustained long-term growth. 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. We are eager to work collaboratively with the incoming administration to continue delivering value to our consumers. 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. 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 question.

Thank you. At this time, we will conduct the question-and-answer session. [Operator Instructions] Our first question comes from Pat McCann with Noble Capital Markets. Your line is now open.

Hey, good morning. Congrats on the on the quarter. I just have a -- 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 with those new agents, how the training process went with them, where they do you feel like the new agents from e-TeleQuote were ready to go for AEP? Were there any surprises in that process?

Thank you, Pat. I appreciate the question. I would start out with this. First and foremost, we are so excited about e-TeleQuote. The team has been amazing. They come in seasoned, 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, we're very thoughtful in the way we entered into the transaction where we also had a commercial relationship. They gave us the time in September to onboard that team into our technology. As you know, our marketplace tools, our PlanFit tool, the automation built within that, that is a real unlock of capacity and consistency that enables agents to be very productive. So, we were able to spend that time effective 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. And we've been very excited about how that's worked so far. And as we said, in our prepared comments, it's been a creative already. So, we're very excited about that. And I would just stress again that the quality of that team and the agents that came along with it and the leadership there was fully aligned with the way we think about protecting and helping consumers. And that was probably the most valuable piece of the integration and onboarding.

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 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 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?

Yeah. Thanks, Ben. I'll actually start now, I'll 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, right? If we see the market dynamics are there that you should be investing in more capacity or more 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 paydown 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. So, with that, I'll let Brendan talk a little bit about how we're thinking about our overall balance sheet optimization.

Thanks, Vijay and 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. Right now, is 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 paydown that debt going forward. 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.

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 -- taking deadline that says you have to pay so much down. We can retain the flexibility to make those investment decisions in other technology capacity or maybe even other potential acquisitions as there may be in the marketplace.

Great. Much appreciated. I'll hand the floor over to someone else.

Thanks, Pat.

Thank you. Our next question comes from Ben Hendrix with RBC Capital Markets. Your line is now open.

Hey, great. Thanks, guys. I was wondering if you can talk a little bit more about the internal captive agent submissions that you received, looks like we had really strong growth there. Total submissions were ahead of our expectations. 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 looks like that was down a little bit. If there are kind of efforts in place to turn that around, or is that how much of a focus is that recovery? Thanks.

Thanks, Ben. Appreciate you joining the call and I appreciate the question. First and foremost, our internal agents, I can't thank them enough for their commitment to what we have used this data to support the way to optimize their performance. So, they have been in lockstep with our technology team to redesign and build this product for purpose that optimize how they want to serve consumers. So instead of having to go to three different websites, how do we integrate that into the tools? So, it's pulling the data in and making it available to them before they even know they need it. 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 having to seek those answers and that yields more capacity for them to serve more consumers and have a higher probability outcome and matching them with a better plan if appropriate and build that confidence. And that's what's coming through and what you saw on a year-over-year performance improvement of 46% 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. So, when you have better marketing targeting to get consumers who likely need the help to come in, as well as having more efficient to serve them that has that set function and capacity. 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 automation is in place and…

Thank you. Appreciate that commentary. And then just one more for me on cash flow. I mean, clearly a strong turnaround from this time last year. Just wanted to get all the pieces and puts and takes of that. I assume most of that is kind of the explained in the shift from non-agency to agency, but just wanted to get your take. Thanks.

No, it's a great question, Ben. I would actually say that most people have assumed it was that shift from agency to non-agency, but more material driver of that was really good, thoughtful decisions around operational efficiencies and capital deployment. We have invested in operational standardization that yielded -- I think as we map some of that in prior conversations and other presentations externally, nearly two-thirds of the gain in total cash flow from operations came from operational simplicity standardization, deployment of technology. Agency, non-agency mix, yes, does have a factor in that. But it's more about how we decide to deploy the capital. As we said in last AEP, we saw the market dynamics so we pulled back on the spend so that we could retain more of that capital, because it wasn't a good ROI to continue to deploy it. We saved it and we paid down debt of $75 million because we thought avoiding that interest expense was more important at that point time and a better investment. As we come into this AEP, if you think about those dynamics, we're seeing a very different market dynamics. So, I guess, what I'm saying is there's a lot of operational efficiency that drove our cash improvement. 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.

Thanks, guys and congratulations on the quarter.

Thanks, Ben.

[Operator Instructions] Our next question comes from Robert M. McGuire with Granite Research. Your line is now open.

Good morning. Thank you for taking my questions. Can you -- Vijay, can you kind of give us a discussion on your efforts to reduce CAC? And I'm interested in just to understand how you anticipate CAC to play out in the fourth quarter with the e-TeleQuote acquisition, how that'll play out over time? And then, would love to hear what you're thinking a few years out from now where you think CAC could go.

Great. Welcome, Rob. I appreciate you asking the question today. A very thoughtful question and a really timely given the amount of progress we've made on the direct cost for submission as we reported, we also some refer to as a tax cost of acquisition. And the way we think about it is, we've had continuous improvement in it by automating some decreasing average handle time is one piece of it. The other piece is better marketing targeting. So, if you look at our direct cost for submission, the three primary buckets, right? The first one is going to be marketing cost. The second one is going to be really what we call PC&E [ph] or is it going to be the selling time or average handle time is my best KPIs, there are 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 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 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. And then you have it -- so you can look at that distinctively one way with one bucket. The second bucket is on the overall efficiency of the technology platform to ensure that we can decrease the amount of…

That is. I appreciate it. Maybe I'll just move on for the for the e-TeleQuote acquisition, is that repeatable? I guess that is probably one page of your playbook. But are there other opportunities out there you can talk about with or without the abandonment structure?

Yeah. It's a great question, Rob. There's been a lot of different attempted transactions in the marketplace by large entities, standalones, et cetera. Not everybody has been able to really think through the investments that are necessary to be great in this business. And I think because of the platform, the technology and tools we build. 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 continue to get more efficient and give us more opportunity to tap into consolidation in the industry, if it makes sense.

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 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?

So, it's a very -- it's a simple question, a little bit more complicated to answer. But let me try to keep it as efficient as possible. Any given year, we think about the probabilities of a product as it's written that year and think about what is the likelihood of a benefit accretion stable or the degradation, and that will help us illuminate whether we should go through an agency or non-agency structure. If you think there's likely more likelihood of disruption, you want to be on a non-agency structure. Do 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 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 into the contracting thing. But what ultimately comes out on the back end of the mix of the agency versus non-agency is more dependent upon the consumers that we connect with and what made more sense for them. So, we don't put our thumb on the scale there. Whatever we ultimately start out with contracts and then however competitive 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. And we want to make sure that we implore our ability to be nimble within that. 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 needs and that's how we operate. Is that responsive to your question, Rob?

Thank you. Our next question comes from Jim Sidoti with Sidoti & Co. Jim, your line is now open.

Good morning and thank you for taking the questions, and welcome, Brendan. 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?

Thanks for the question. Good to hear from you, Jim. It's still early, right? We've got 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 was a result from the election. So, we're staying ahead down, focused on delivering this AEP, right now serving as many consumers as possible. 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. And for us to be one of the leaders in helping them choose between those and finding great coverage, that's a program is going to be valuable to any administration. And our role in that of 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 for, 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.

And it sounds like with the current environment, you're in a mode more to deploy cash than to keep it. And what are the things you think or make the most sense to spend the cash on, is it bringing on new agents, new marketing initiatives? Where do you think you'll be spending money over the next six months?

It's a great question. How would we deploy cash over the next six months? Because you highlight a great point when you asked 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 needs to reach the top and it's opportune for organizations like us who are set up for it. And so, we already made some of those best by things like the e-TeleQuote acquisition to give us the capacity with experienced agents that you can onboard and deploy on our technology. Then if you see more opportunities, what you would do is you would invest in more marketing to do it in more hours and send your access points to consume. So, you can meet more of that demand 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. So, it's not really efficient at this point in the game, meaning for AEP. But if you think about it, what [Technical Difficulty] 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. So, we look at all those tactics, but agents aren't necessarily the place to focus on. We've got a great space and our attrition is actually doing better than we expected, given the market dynamics and the amount of efficiency they get through our tools. So, it's really about making sure we can access more consumers by extending more availability of our agents that exist and are trained and giving them great opportunities for marketing.

All right. Thank you.

Thank you, Jim.

I'm showing no further questions at this time. I would now like to turn it back to Vijay for closing remarks. End of Q&A:

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 and making sure that the 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. As we continue on that journey to serve as many consumers as possible, I would 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 with the highest quality as possible. And that's from our corporate support infrastructure, all the way to the frontline associates who 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.

Thank you for your participation in today's conference. This does now conclude the program. You may now disconnect.