GoHealth, Inc.

Good morning, and welcome to Go Health's second quarter 2024 earnings conference call. My name is Marvin, and I'll be your operator for today's call. Currently, all participants are in listen-only mode. Following the prepared remarks, we will conduct a question-and-answer session. As a reminder, this conference is being recorded. I'll now turn the call over to John Shea, Vice President of Investment Relations. John, you may begin.

Thank you and good morning. Welcome to Go Health's second quarter 2024 earnings call. Joining me today are Vijay Kote, Chief Executive Officer, and Katie O'Halloran, Interim Chief Financial Officer. Today's conference call contains forward-looking statements based on our current expectations. Numerous known and unknown 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 second quarter of 2024. We have posted the release on the GoHealth website under the investor relations tab. In conjunction with our forward-looking statements, we encourage you to consider the other risk factors described in our 2023 annual report on Form 10-K and our other filings with the SEC 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. I will now turn the call over to GoHealth CEO Vijay Kote.

Thank you, John, and good morning, everyone. I'd like to begin by sharing commentary on our quarterly performance, along with updates on our general business activities and initiatives. In the second quarter of 2024, our internal captive team empowered nearly 525,000 consumers to navigate their Medicare options, utilizing the PlanFit Checkup via our proprietary Encompass workflow. Along with supporting over 155,000 new enrollments in Q2, we also provide a peace of mind to over 125,000 consumers, confirming their current plan is best for their needs. Our performance during Q2's Special Enrollment Period, or SEP, exceeded our expectations for submissions, revenue, and adjusted EBITDA. While our total submissions were down 6%, submissions generated by our internal captive agents increased 14% year-over-year, versus a 33% decline in submissions from our external GoPartner solutions or GPS agents. We are particularly pleased with our internal captive results, especially considering that shopping and switching dynamics have remained unchanged since the last annual enrollment period, or AEP, and are not expected to change significantly until Q4 of this year when health plans release new benefits. Due to market dynamics, we anticipated year-over-year declines from Q1 through Q3. Our team has managed these expected factors by driving efficiencies and reducing costs. We believe these results show the benefit of our proprietary Encompass workflow and PlanFit checkout process. At GoHealth, our mission is to provide support and clarity to Medicare consumers in a landscape often marked by confusion and uncertainty. There are over 65 million Medicare eligible individuals in the United States, and approximately half of them are enrolled in Medicare Advantage plans. One-third of Medicare consumers live in counties with more than 50 plans available. The abundance of options can be overwhelming. This complexity often deters consumers from shopping for better options because they are unsure who to trust or where to begin. We believe GoHealth is the premier resource to empower these individuals to make informed and personal decisions because of our proprietary and objective tools as well as our well-trained tenured agent workforce. We are continuing our evolution from a traditional Medicare enrollment company to a Medicare engagement company, focusing on building high quality, long-term relationships with our consumers. We believe this shift emphasizes a more integrated and interactive approach to consumer care, cementing our unique and vital role in the Medicare landscape. On our last two quarterly calls, we highlighted several market factors that could influence our performance this year. Due to the dynamics of the industry, We expect clarity on the impact of these factors in Q4 once AEP starts. As typical, the market dynamics we observe in the fourth quarter of 2024 for AEP will continue for a full four quarters running through the third quarter of 2025. As a reminder, there are five key market factors. One, the final rate notice on commissions for the 2025 plan year. The final 2025 marketing rule from the Centers for Medicare and Medicaid Services or CMS. Three, plan product and benefit differentiation between 2024 and 2025. Four, marketing efficiency within this election season. And finally, relative health plan competitiveness and its effect on plan mix. As we become more selective in the health plans we include in our marketplace, this factor impacts sales per submission or revenue per sale and agency versus non-agency revenue distribution. As we report our second quarter results, we have updates regarding these factors. On market factor one, as we previously discussed, CMS issued the final rate notice, which aligns with our expectations for the base commission schedule. The 2025 final rate notice introduced margin pressure for health plans, which we believe will likely lead to benefit disruptions and market exits, particularly for non-special needs plans. Major health plans confirm significant upcoming benefit disruptions in their Q1 earnings calls. Similarly, we expect on average 20% plus increases in premiums for beneficiaries currently on Medicare supplements. We believe these rate increases and disruptions could lead to a significant increase in consumer shopping and switching during the upcoming AEP, presenting a positive opportunity for Go Health's business model. More recently, Many health plans had the opportunity to resubmit their bids due to a series of successful lawsuits on STARS scores. While this may change AP's competitive dynamics, we know that many health plans are targeting growth in specific markets and products. Notably, some are focusing on the special needs population, a segment that GoHealth is uniquely equipped to attract and serve. These strategies and priorities will vary by health plan and geography. but we believe we are ideally positioned to help plans achieve targeted and measured growth. On market factor two, in April, CMS published the final 2025 marketing rules addressing independent agent and broker compensation and introducing new guidelines. However, the U.S. District Court in Texas stayed the effective date of the compensation provisions of the rule, and later, CMS acknowledged that because of the court's order, the status quo would be maintained through AEP. As we have already commented, we believe the final rule, as published, had minimal impact to our business model, but the court order and subsequent CMS guidance confirms that it is business as usual. The one part of the rule that we expect to be implemented as planned pertains to the restrictions in the new rule surrounding conduct commonly attributed to lead generators. Those restrictions should not affect Go Health because we held ourselves to the standards of the new rule years before the rule was even proposed. And accordingly, we think these restrictions are good for the industry at large to protect consumers from confusing and unintended sales calls. As we contemplate the remaining factors, we are cautiously optimistic about shopping and appropriate switching during AEP. As part of our strategic shift from enrollment to engagement, we believe in building trusted relationships with consumers and putting them in the right plan for their needs. As a reminder, we have always indicated that we plan to have a portfolio of agency and non-agency contracts, varying by health plan and product, but mix would be dependent on the plans most suitable for the consumers we serve. Based on our early reads, though still to be refined based on actual benefit releases later this year, we see a mix shifting towards contracts with agency arrangements versus non-agency arrangements. The evolving market dynamics are expected to result in tailwinds for submissions, revenue, and adjusted EBITDA. However, we expect a year-over-year decline in cash flow from operations due to the shift from non-agency revenue. We are committed to supporting the consumer throughout their Medicare journey and believe doing the right thing will ultimately increase engagement and retention. We look forward to providing an update during our November quarterly results call once AP dynamics start to play out. Additionally, there are two emerging market factors that I'd like to discuss. First, several mid-sized brokers have ceased operations due to evolving market dynamics and poor management of customer acquisition costs. We believe this will lead to less competition for leads and generally for the attention of Medicare consumers during AEP, a potential tailwind for GoHealth. In addition, the seasoned agents entering the market offer us the opportunity to pick up tenured new hires as we ramp for AEP. Second, GoHealth's external GPS agents have seen fewer submissions year over year through Q2. GoHealth partners with several smaller brokers as downlines who leverage our technology platform, health plan relationships, and support teams to operate effectively. These brokers are also experiencing market pressures resulting in lower production. To offset their lower production, we are in the midst of onboarding several new agencies who we expect to meaningfully contribute to GPS submissions to this AEP. Now let me move from market factors to some exciting developments regarding our strategic investments. In the fourth quarter of 2023, we announced the launch of PlanFit Checkup. This innovative service powered by our proprietary AI-driven PlanFit tool is designed to alleviate stress and enhances the experience for consumers shopping for a Medicare Advantage plan. As we have previously shared, PlanFit Checkup delivers three key consumer outcomes. Enrolling a consumer in a new plan that better suits their needs. Two, informing the consumer about a superior plan, even if they choose not to switch. And three, reassuring the consumer that their current plan remains the best option for their needs, resulting in no enrollment change. Importantly, GoHealth agents are compensated for completing a plan fit checkup, regardless of whether the assessment leads to a new enrollment. This ensures that our agents remain focused on providing the best advice, and service to our consumers. Based on our launch results, we are well on our way to operationalizing reimbursement for a subset of these PlanFit checkups in what we call a PlanFit Save with a select few strategic health plan partners. A PlanFit Save is a PlanFit checkup where our agents reassure the consumer that their current plan remains the best option for their needs, resulting in no enrollment change, and we help the consumer understand and navigate the benefits of their current plan that are most valuable to them. In this process, we earn compensation for doing the right thing for consumers, as well as protecting the existing membership of our health plan partners. This year, we are focusing on streamlining processes and improving call handle times. As part of this effort, we launched Encompass Express, an enhanced consumer-centric model built on the foundation of our original Encompass workflow. Encompass Express includes streamlined scripting and handoffs, utilizing tech-driven standardization and automation to deliver efficiency and enhance the consumer experience while maintaining quality. Notably, we have reduced consumer on-phone time by approximately 25% from 90 minutes to 67 minutes. We anticipate these changes will positively impact our financial results more substantively this fall during AAP. We are dedicated to advancing our technology to elevate the consumer experience, boost agent efficiency, and enhance overall quality. Our strategic investments focus on several key areas. First, we are running programs integrating AI and automation into our operations. This initiative aims to streamline processes, including agent onboarding, enhance agent efficiency, and deliver more precise, data-driven insights to improve the overall consumer experience. One great example of this is how we have deployed AI to support AgentRAM. History has shown us that training and onboarding of new sales agents is a cash drain given their low initial productivity and long ramp time. We've used conversational AI role-play simulations in our agent training program, reducing onboarding time for new agents by 40%. In addition, new agents are now providing double the productivity in their first three months compared to new agents last year. You'll see this efficiency reflected in our AAP results this year. Next, our Customer 360 capabilities empower us to drive essential business insights. For example, We can now track a single consumer across multiple shopping seasons and monitor her progression across all touchpoints. When a returned consumer calls us, we're able to recognize that consumer and auto-populate where we left off the last time we spoke to them, be it five minutes, five months, or five years ago. This memory of the consumer both reinforces the trust built with them that motivated their proactive outreach to us, as well as provides valuable information to the agent to support added effectiveness and efficiency during the call. Keep in mind, on average, 30% of the calls we get each AEP are from consumers we have served before. Additionally, we can analyze the behaviors of repeat consumers versus first-time consumers at GoHealth, delivering customized messaging and services to best serve their needs. We continue to be the industry leader in implementing technology and automation and we believe we are extending that lead. These initiatives are integral to our long-term transformation from a company focused on Medicare enrollment to one that prioritizes continuous engagement with Medicare consumers. This shift aims to build lasting relationships and improve the overall consumer journey in the Medicare landscape. As we prepare for this year's AEP, which begins in 67 days, we are intensifying our targeted marketing efforts to better identify and reach consumers in need of new options. I am proud of our team's innovation and adaptability, which have led to just over 11% improvement in consumer acquisition costs or direct cost per submission, while upholding the integrity of our Encompass workflow and delivering exceptional service. Market dynamics have remained consistent since the last AP, which are expected to yield lower volume at higher costs until those dynamics change in Q4. Due to the resiliency of the team, we have been able to offset some of these headwinds via operating efficiencies. You can expect us to continue delivering a superior direct cost per submission compared to the industry. We believe a focus on direct cost per submission enables us to effectively manage expenses and investment in a highly regulated industry where benefits change annually, contracting dynamics change annually, and consumer behavior can vary. We remain confident in our performance expectations for 2024 and beyond and continue to be driven by our commitment to transforming the consumer healthcare journey through continuous innovation and strategic foresight. I want to thank our team for their dedication to our values and our stakeholders for their ongoing support and commitment to delivering long-term value. With that, I will turn it to Katie to detail our financial results.