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spk02: Good day and thank you for standing by. Welcome to the Select Code Fiscal First Quarter 2022 Earnings Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. And to ask a question during the session, you will need to press star 1 on your telephone keypad. And if you require any further assistance, you may press star 0. Without a further ado, I would like to welcome your first speaker for today, Mr. Matt Gunter, SelectQuote Investor Relations. Sir, the floor is yours.
spk07: Thank you, and good afternoon, everyone. Welcome to SelectQuote's fiscal first quarter earnings call. Before we begin our call, I would like to mention that on our website, we have provided a slide presentation to help guide our discussion this afternoon. After today's call, a replay will also be available on our website. Joining me from the company, I have our Chief Executive Officer, Tim Danker, and our Chief Financial Officer, Raf Tadoon. Following Tim and Raf's comments today, we will have a question and answer session. In order to allow everyone the opportunity to participate, we do ask that you limit yourself to one question and one follow-up at a time, and then fall back into the queue for any additional questions. As referenced on slide two, during this call, we will be discussing some non-GAAP financial measures. The most directly comparable GAAP financial measures and a reconciliation of the differences between the GAAP and non-GAAP financial measures are available in our earnings release and investor presentation on our website. And finally, a reminder that certain statements made today may be forward-looking statements. These statements are made based upon management's current expectations and beliefs concerning future events impacting the company, and therefore involve a number of uncertainties and risks, including but not limited to those described in our earnings release, annual report on Form 10-K, and other filings with the SEC. Therefore, the actual results of operations or financial condition of the company could differ materially from those expressed or implied in our forward-looking statements. And with that, I'd like to turn the call over to our Chief Executive Officer, Tim Danker. Tim?
spk04: Thanks, Matt, and thank you to everyone joining on the call. Today, we'll review our strong fiscal first quarter results. We'll also give a quick update on our preparation for the ongoing AEP season for our senior Medicare business. And lastly, we'll provide some color on our population health initiatives and SelectRx specifically. Then, as usual, we'll wrap up with Raf's overview of our financial results. So let's begin on slide three, and I'll start with five key takeaways as we see them. First, our results in the first quarter were strong and ahead of internal expectations. Consolidated revenues of $160 million were up 29% year-over-year, driven primarily by higher MA-approved policies and growth in final expense premium. Our adjusted EBITDA loss of $44 million was driven primarily by the seasonal investment to onboard flex agents and accompanying support roles in anticipation of AEP and OEP. Second, our full-year fiscal 22 outlook ranges remain unchanged at $1.25 to $1.4 billion in revenue and adjusted EBITDA of $255 to $285 million, which also includes an unchanged $65 million placeholder for potential tail adjustments. While our first quarter results were ahead of our internal expectations, the pacing of our revenue and EBITDA for the year has moved given the timing of hiring coming into this AP season. Both Ralph and I will speak to this during the call. Additionally, it is important to reiterate that over 70% of our annual production will come over the next two quarters, and as a result, we plan to provide updates to our outlook as we get further through the season. Third, while the timing was delayed, our strategic staffing is in place for the ongoing AP season, and we believe we are well positioned for another year of strong growth despite the tighter labor market. For our senior business, we have also implemented new tools that will enhance our core senior business and our final expense product this year. Fourth, we're thrilled by the progress we've seen in our SelectRx business. Our daily enrollment rate has ramped sharply, which continues to validate the power and synergy of our offering. In addition, we acquired SimpleMeds in the quarter, which is a medication management pharmacy. The platform will further accelerate the expansion of our SelectRx business with complementary and additive operations, capacity, and infrastructure. Also, on our broader population health strategy, we've added in-home care provider ready responders and behavioral health solution providers, ThriveWorks and BrainCheck, to our growing network of provider partners. Ready Responders provides on-demand telehealth for patients that have non-emergency health issues and have been recently discharged from an acute care facility. ThriveWorks offers leading behavioral health and medication management services, both virtually and in person, in over 300 locations. BrainCheck provides cognitive testing to its members, value-based care providers, and health plans. It is used in primary care, neurology, and geriatric practices at some of the world's most renowned medical centers. These partnerships underscore our potential to expand the population health platform into new healthcare service areas that will benefit our patients and drive new revenues to select quote. Lastly, we took advantage of the attractive debt market to raise an additional $200 million in committed capital through incremental delay draw term loans. Raph will give more color later in his remarks, but the bottom line is we are very well positioned to pursue growth across our core distribution and population health strategies. Before I turn to AEP, let me quickly put our recent results in growth in context. Over the past three years, SelectQuote has driven revenue and adjusted EBITDA CAGRs of 68% and 31% respectively, and we expect that growth will continue into fiscal 22. The key point is, Despite some persistency headwinds in some recent cohorts and the tail adjustment impact, Selectwood is delivering against our stated goal to grow aggregate EBITDA dollars at attractive and scaled unit economics. Lastly, we'd say that we still see a very long runway for growth in our core senior Medicare Advantage distribution business and are clearly excited by the potential for population health and SelectRx to augment these trends as the business scales. Turning to slide four on senior. Let me provide a brief overview of the first quarter and our strategy heading to the upcoming annual enrollment period for Medicare Advantage. The first quarter was, again, another strong, high-growth quarter. Our senior segment revenues grew at 45%, driven by a 98% year-over-year increase in approved policies. Our final expense unit continues to demonstrate its attractive growth potential with another strong quarter, driven by a 72% increase in premiums. As we are now in the heart of AEP, let me give some color on our preparation for the season. First, we'd reiterate that we believe we are well positioned to achieve the growth outlined in our full year outlook as evidenced by the fact that we've now exceeded our total flex agent hiring goal. That said, we now expect the timing and cadence of that growth will be delayed this year given some slower than expected hiring heading into the season. The beginning of this year's agent production ramp was delayed given the tighter labor market that I noted before. The key takeaway is we have the agents we need, but this will move the mix of earnings from 2Q into the third and fourth quarter. Raf will provide an update on our quarterly cadence a little later. As you know, SelectQuote constantly looks to optimize and use the latest data and technology to enhance our business. I'd like to highlight a couple of the enhancements we have made to our tools and approach for this year. First, we significantly enhanced our retention risk scoring. We have risk scored our existing base of customers and are utilizing specialized retention tactics based upon each customer's risk profile. Second, we have also significantly enhanced our enrollment and customer onboarding processes, both to drive additional efficiency and to ensure enhanced customer awareness of planned benefits and satisfaction. In summary, we are well positioned for this year's peak selling season and look forward to sharing our results in the coming quarters. Now, if we turn to slide five, I'd like to take a minute to provide an update on our exciting population health and SelectRx initiatives. Similar to the past two quarters, we continue to see strong consumer demand for these offerings, particularly for our SelectRx pharmacy solution. As you can see here, our SelectRx enrollments have ramped sharply, and we are now seeing daily enrollment volume that is about seven times the level of acquisition To put that in context, that rate was closer to three times pre-acquisition levels just last quarter. As I noted a minute ago, we continue to build in additional distribution capabilities that should further this progress, like our acquisition of SimpleMeds. In fact, we are now selling in 47 states, which is up from 11 states at launch. While we're very encouraged by these trends to date, we continue to optimize the critical member onboarding and fulfillment process including any patient fall-off that naturally occurs during the migration. It is also important to note that drug sales and the resulting revenues for SelectRx will typically lag the enrollments by about a quarter as we work through this operational process. As a reminder, population health, and SelectRx especially, are truly significant revenue and return opportunities for SelectVote with attractive cash flow dynamics. The strategy capitalizes on the best attributes of our company, and our ability to leverage information at significant value for our policyholders, as well as our carriers and caregiver partners. Best of all, the connectivity that SelectQuote provides between caregivers, payers, and patients improves health outcomes, which we are very proud of. With that, let me turn the call over to Raf to review our results. Raf? Thanks, Tim.
spk05: Turning to slide six in our senior division, we drew total revenue 45% to $106 million and generated an adjusted EBITDA loss of $33 million. As I'll discuss in a minute, the increase in revenue was driven by an increase in the number of MA-approved policies, somewhat offset by lower MA LTVs per policy. Revenue also increased as a result of revenue generated from our population health activities. specifically SelectRx, where we made good progress scaling the business this quarter. In terms of expenses, we did ramp up our marketing expenses during the quarter to test and secure marketing channels and vendors in anticipation for AEP and OEP. While this dragged on margins during the quarter, we felt like it made sense to secure the availability of those leads and the quality of those lead sources going into our busiest quarters of the year. We also incurred incremental costs to hire our flex agents and enrollers and to ramp up our activity in SelectRx. Moving on to senior KPIs on slide seven. We grew our total approved policies 60% and our MA approved policies 98%. This growth was driven by a 35% increase in average productive agents and a 30% increase in agent productivity. Agent productivity was driven by an increase in overall marketing costs and an increase in lead consumption. With a big increase in the number of flex agents, we continue to expect that agent productivity will be down year over year during AP and OEP and for the full year. With respect to MALTVs, as discussed in our last call, we anticipated MALTVs would be down for the full year by around 8%, driven by the switch to policy level persistency, lower overall persistency, and higher provision rates for first year and renewal years, somewhat offset by higher rates. From a quarterization perspective, the decline in MALTVs is expected to be higher than 8% in the first three quarters and lower than that in the fourth quarter as we start to lack the impact of lower persistency and the switch to policy level persistency. For our first quarter, MALTVs were down 16% year over year. We said we would update you on lapse rates as we progressed through the year. We continue to see elevated lapse rates versus last year. Having said that, Until we see the initial information from the renewal event in January, we are not adjusting our $65 million placeholder for the potential of a cohort tail adjustment in the fourth quarter. Lastly, before I turn to our balance sheets and give an update on the cadence of our growth for fiscal 22, let me briefly comment on our life and auto and home segments. First, on life, revenue in this segment was primarily driven by a 72% increase in final expense premiums. offset by an 18% decline in term life premium. Our final expense business continues to mesh well with our core senior Medicare offering, and the favorable cash flow dynamics of the product continue to make the product a strategic focus for the business. Our term life business, in contrast, continues to face headwinds from COVID, especially over this summer with the rise of the Delta variant. If we turn to our auto and home segment, Revenues totaled $7 million, which was down from last year, driven primarily by the lower mix of tenured agents within the segment. Now, if we move to slide eight, let me provide an update on the cadence of our growth in fiscal 22 and then update our capital position. First, as Tim noted, the tight labor market delayed the hiring of agents heading into this year's AAP season. While our full-year outlook remains unchanged with forecasted revenues in the range of $1.25 to $1.4 billion and adjusted EBITDA of $255 million to $285 million, this will move the mix of our earnings from the second quarter into the third quarter and fourth quarter. As we noted on last quarter's call, we expected second quarter revenues to be approximately 40% of our annual total. We now expect that mix to be a little higher than 35%, and for the third quarter to be a little lower than 35%. Similarly, we expect our margins to shift given lower operating leverage in the second quarter and increased lead consumption over the third quarter. As a result, we now expect consolidated margins to be in the low 30% range for the second quarter and expect third quarter margins to move to the mid 30% range. We also anticipate the fourth quarter to be closer to breakeven. Let me conclude with a brief update of our capital position heading into AEP. As of September 30th, 2021, we ended the quarter with $184 million of cash and $472 million in debt. We also ended the quarter with $1 billion of accounts receivable and short and long-term commissions receivable balances. During the quarter, we used $87 million of cash from operations driven by the seasonal investment to ramp up for AEP. In addition to the $11 million in CapEx, we also used $7 million for the purchase of SimpleMed, another pharmacy medication management company, which gives us incremental capacity to scale SelectRx and increase the number of states that we are licensed to sell in. Lastly, we recently took advantage of favorable credit market conditions to raise an additional $200 million in committed capital through our credit agreements. To limit the amount of incremental interest expense before we really need access to the capital, we structured this new capital in the form of two delayed draw term loans. The first $100 million trosh needs to be drawn by January of 22, and the second $100 million trosh needs to be drawn by January of 23. We also increased our committed revolver to $100 million. These additional commitments give us plenty of runway for the next several years based on the guidance we gave last quarter on cash flow progression. And with that, I'll turn the call back over to Tim for some final thoughts. Tim?
spk04: Thank you. And before we turn to your questions, let me quickly summarize on slide nine. First, we believe SLECWT has significant competitive advantages within a compelling growth industry driven by demographic and secular trends. We have built a differentiated model that delivers value to Medicare Advantage shoppers through significant technology capabilities paired with an agent-led experience. Second, our returns on invested capital are highly compelling, as we've detailed on previous earnings calls. Better yet, we believe these types of attractive returns are achievable in both our core strategies as well as our newer population health growth initiatives. Third, as we detailed earlier, SelectRx is ramping quickly And we are increasingly convinced that our unique value proposition for prescription drug management and distribution has tremendous potential. Lastly, similar to SelectRx, our population health initiatives represent our company's unique opportunity and ability to unlock value for patients, caregivers, and carriers, which also benefits our shareholders. With that, let's turn to your questions. Operator?
spk02: Thank you, sir. As a reminder, to ask a question, you will need to press star 1 on your telephone keypad. In the interest of time, we would also like to remind the participants to limit their questions with one follow-up. Our first question comes from the line of Jalendra Singh from Credit Suisse. Your line is open.
spk01: Yeah, thanks. This is Jalendra Singh from Credit Suisse. Just wanted to follow up on this impact of delayed hiring process. Last quarter when you guys reported in late August, you guys noted that you were on track with respect to your hiring plan. Just curious what happened in the last two months that it is impacting your positioning for AEP with respect to agents, especially when this year I believe you were starting the process much early in the year. So did you see any agent turnover? What exactly happened which is impacting this last two months hiring process?
spk07: Yeah, I'm happy to take that. I think what we talked about last quarter, we felt good about where we are. We certainly noted that the labor market was quite different from last year, but we still had some additional hiring to do. I think the biggest difference that we learned this year from last year, we experienced quite a bit higher rate of verbal offers accepted to start dates. So basically that's somebody who accepted our offer but didn't follow through entirely with the licensing process and just not quite as motivated basically year over year to start. So those rates really were the primary difference, meaning the verbal offers accepted to start, As a result of that fall off, really, it kind of started to push our classes back, especially when you looked at that September class, which the beginning of September class was going to be a large class for us. We had a large number of folks, basically, that pushed back. So in kind of response to that, we did a later class. And really, it was that, I'd say, that final push in terms of getting them, you know, over the finish line, which really caused the delay.
spk01: But given your flex agent flexibility and given how important AEP is to your business model, why not take advantage of moving more agents to your senior business like you did last year from life business, auto home business? I mean, do you not have that much flexibility this year? Just curious, like, why not take advantage of that?
spk07: Yeah, Bob, do you want to take that? Yeah, absolutely. We still have the same strategy, Jolinder. It's just relative to our hiring goals this year. We were hiring more from the outside to actually, you know, fill that funnel of AEP and then ultimately fill after AEP and our goals for Q3 and Q4. We actually, we ended up hitting the hiring goal to Bill's point. It just delayed it because we had a little bit more fall off in the summer classes after our last call. And then more folks kind of came in that September timeframe. So we always, you know, rely on a lot of external hiring mixed with shifting folks. We still shifted a lot of folks over and are seeing really good results from that. It's just the delayed hiring put pressure on because of the number of bodies we were talking about that ended up shifting. And, Jalinder, one thing that I would point out is while our verbal offer is accepted to – you know, to start date with down. One thing that we have learned here is the folks that are, that have come on are actually, we're trading at a lower rate. So we feel the people that we are getting this year are very committed to the job. They're performing well. And we feel like it positions us at just, There is a time it takes those folks to ramp. And, you know, as we push it back and push those classes later, we're a little earlier. They're a little earlier in the process than we would like them to be in terms of, you know, in terms of that ramp period. So that's really the primary difference. But, again, feel good about where they are. They're sticking at a high rate. Feel like it puts us in a good position moving forward.
spk01: Just a quick follow-up beyond this agent dynamic. In general, anything you can share about AEP in terms of cost around lead generation, any change in the focus from health insurance partners, anything different from what you saw in the prior AEPs?
spk04: Yeah, Jalinder, this is Tim. I'll make a quick comment and turn it over to Bob. I think Bill hit on the biggest thing with respect to the hiring and the ramp into production, I think. On the operational front, we feel very well positioned with some enhancements we've made to our process, enrollment notably, as well as other things that I think will drive a lot of quality and efficiency throughout AEP and OEP. Bob, do you want to comment just in general around plan design, general market environment as you see it?
spk07: Yeah. You know, one thing on plan design, the carriers have definitely – come together a little bit more on how large the networks are, OTC benefits. Other things that we were seeing were quite differentiated last year. So we do see a little bit more of a competitive environment from each of the carriers as far as not being quite as differentiated from each other. So that's definitely been an interesting start, just watching that and, you know, adjusting kind of messaging and lead buys based on that. But I feel really good, you know, about that plan design, and the carriers did a great job putting the things that have been very important to people, especially through COVID, in those plans.
spk01: Thanks, guys.
spk02: Our next question comes from the line of Elizabeth Anderson from Evercore. Please ask your question.
spk00: Hi, guys. Thanks so much for the question. I was just wondering if you could comment on the factors that impacted the LTV and the quarter, maybe differentiating some of the ones that might be a little bit transitory versus some of the longer-term trends. Thanks.
spk05: Sure. This is Raf. I'll probably take that one. So I think on the call, we stated that the LTV was down for MA policies was down 15% year over year. Roughly one third of that was a function of the move to policy level persistency, which is a reminder is net revenue neutral has no impact to revenue because we effectively just approve 6% more policy. So a third of it was that. And then two thirds of it was really a combination of a lower overall persistency based on the three-year weighted average, trailing three-year weighted average, and then increased provision rates for both first-year and renewal year lapses, offset by a little bit of commission rates. Those are kind of the primary drivers of the 16% decline.
spk00: Okay. That's super helpful. And is it possible to talk about sort of how much specifically population health contributed in the quarter? from a revenue perspective?
spk04: Yeah, I think you'll see, or go ahead, Ross, if you want. Go ahead.
spk05: Well, we're not going to provide that many specifics. I think you'll see in the queue when we file that that SelectRx specifically generated around $4 million of revenue for the quarter. And that was probably the biggest driver of that. But all the initiatives that we're working on there are wrapping quite nicely. And again, they're expected to continue to rank during the course of the year.
spk00: Okay. So you would say that the general, the population house is on track with your initial expectations for the year? Absolutely.
spk04: Yeah. Yeah, absolutely. Maybe we can touch on that a little bit, Elizabeth, and ask Bob to chime in here. I mean, I think as you've seen from the information we shared, we're very encouraged by the strength of the enrollment growth, just the overall consumer demand. that we are seeing with our synergistic customer base. We feel very good about what we shared in the prior call and 25,000 members by the end of the fiscal year. Obviously, we made the acquisition with SimpleMeds, which was a very cost-effective way for us to increase scale and some of the demand that we really see and some redundancy as well as picking up some great experts in medication management. Bob, what would you want to add to that?
spk07: Yeah, I mean, I think one thing different than the other businesses too, Elizabeth, is that we can't count the revenue when we sign up a customer, right? They have to actually start on filling their drugs and things like that. Or, you know, on some of the other things that we've gotten into, it's really at the time the service is fully fulfilled, even as we get into, I think, We're doing other things, as Tim alluded to, within brain check, within cognitive exams. And that kind of follows the same path, a little shorter cycle, but still have to finish the kind of overall consumer experience until we actually book revenue. So we feel really strong about consumer demand and the demand for population health. The membership has grown tremendously, and the consumer experience and consumer feedback has been great. But that will be a little bit of a delayed revenue, as Tim talked about, on the medication side and others.
spk00: Yeah, that makes sense. Okay, thank you very much.
spk02: Your next question comes from the line of Jeff Garrow of Piper Sandler. Your line is open.
spk06: Yeah, good afternoon, and thanks for taking the question. I want to ask maybe a little bit more about marketing costs and leads. you know, if you could just expand on cost trends you've seen for leads and what you're able to tell us further about the quality of those leads, whether it's through conversion rates or any other factors.
spk07: Rob, do you want to comment on first quarter and then I can comment on kind of the trends that we're seeing? Sure.
spk05: Sure. Yeah. So first quarter, we did ramp up some of the marketing spend. really to make sure that we were testing certain lead providers, both in terms of the quantity of leads that they could provide during AAP and OAP and also sort of the quality of those leads. So that generated a little bit higher marketing spend during the course of the quarter, but I think sets us up nicely for the busiest part of the season here. Bill, do you want to talk about more generally marketing that we're seeing right now?
spk07: Yeah, absolutely. So I'd say, you know, the biggest difference or the biggest factor in marketing right now really isn't the marketing itself. It's who's consuming the marketing, meaning, you know, we mentioned that in a little bit later start dates than we would have liked on our class, you know, obviously we achieved our goals, but there's a little bit of a ramp period and The earlier we can get them trained and on the phone, the better that they convert. You see different close rates and conversion by the classes that started, whether they started July, August, September. The more we push back, the more pressure that it can put on marketing. So I would say on an apples-to-apples basis, as you compare, we feel really good about the marketing. But if you look at the consumption of marketing, it's causing a little bit of pressure on on close rates. With that said, still during AEP, you know, very attractive returns on our investment, and we feel really good about the class in terms of, you know, how they'll ramp and the quality that we got. We also did face a bit of a challenges coming out of the gate with kind of an industry-wide issue with carriers and some approved language in terms of you know, some last-minute kind of challenges where they didn't approve some language in ads that basically disrupted a little bit of our ramp there. Luckily, you know, with kind of our wide funnel approach, we were able to quickly pivot and get that back on track. And subsequently they did approve all the things, but that was really more of an industry-wide thing. So really those are kind of the difference. I'd say primary, you know, primary is who's consuming. Other than that, you know, we feel good about the volume we're delivering, all those things, and, you know, think that we're on good track to a really strong finish to AEP and OEP.
spk06: Excellent. That really helps. So maybe following up a little bit there on the industry issue you mentioned, and just, I guess, more broadly, you know, clearly it's important to get people productive as fast as possible, and some of that's within your control. So maybe if you could break down a little bit further what you're doing to accelerate the ramp of agents that's within your control, and then, you know, what are those things, whether they're, you know, carrier quality goals or other regulatory headwinds or tailwinds that are outside your control as we think about productivity and growth over the, you know, important next four or five months.
spk07: Yeah, Bob, do you want to talk about? Sorry, go ahead, Tim.
spk04: Yeah, as you say, Bob, hit the operational side and I can cover some of the regulatory.
spk07: Perfect. Yeah, on the operational side, you know, it's a really good point. We are constantly focusing on tools to try to create a faster ramp to make the job easier easier to understand for consumers, get to benefits faster, so that we can really focus a lot of our attention on education and facilitation and then create tools that kind of guide people in their workflow. We are continuing to make a ton of investments in that, and every year the plan design changes a little bit, so we do make kind of evolutions throughout the process, and that's exactly what we're doing this year. As the carriers have come together a little bit more on plan design, there's been a little bit bigger emphasis on some ancillary benefits in there that are a little harder to find for people, so we are building a lot of our technology to make that easier for people to understand and consume. and get that ramp quicker. So we feel like we're making a ton of progress there, but we're always kind of evaluating that. And thankfully, the platform that we're on and the flexibility of our technology allows us to do a lot of releases and very unique stuff since we're on such modern technology that we've described before. So we feel really confident about that.
spk04: Yeah, Jeff, this is Tim. To your second question, what Bill was alluding to and kind of the industry-wide change, there are There was some late-breaking changes in the week preceding to the launch of AEP. You know, CMS sent a memo to carriers and distributors essentially requesting that we file all of our various marketing materials so that it would be filed and inventoried with CMS, which we absolutely welcome and appreciate these efforts by CMS. We think this will provide additional transparency and consistency of marketing for the industry. We think it's a great opportunity. important first step. It's in the long-term best interest. We run a very highly compliant business. We have established marketing review processes. So we were able to kind of, you know, leverage our process to be able to meet this request on a very short timeline. It did apply a little bit of short-term pressure on, you know, some select marketing channels as we work with third parties and all industry players kind of work to interpret the regulations. I think that's materially. behind us. I think folks will decide, you know, what's the practical application of these new requirements. But again, we reiterate, we think this is a very good move by CMS. I think it's going to improve the consumer experience, and that will be good for the industry in the long term.
spk06: Just one quick one there. Anything that's differentiated about SelectPost's lead sources, preferred channels, and then how you verify them and what you do with them from there that's differentiated from the rest of the industry. Bill, you want to cover that?
spk07: Yeah, happy to. I mean, I think that the nice thing for us was, I think, was differentiated is that we were already doing the things that actually kind of came out in terms of we were filing, we were going through. So really, it was just the rework of things. So I'd say what I believe was, you know, was differentiated is the fact that this wasn't anything new and which actually just reaffirmed that we were doing the right things. It just was the timing of things. So, I'd say that's something that, you know, is a differentiator in itself because there was really no change, just a little bit of a timing challenge. But, you know, it took us a few days to get everything. Actually, it kind of shows how quickly we can adapt. It took us a few things or a little bit to both refile and be able to kind of turn the dials to make sure we're getting the volume that we need. But all that's kind of on track and feels good about where we are and actually really, as Tim mentioned, embrace the changes to clarify to make sure that everyone's playing by the same set of guidelines.
spk06: Got it. Thanks for taking the questions.
spk02: Your next question comes from the line of Daniel Groslight from Citi. Please ask your question.
spk08: Hi, guys. Thanks for taking the question. Going back to the labor issue and getting people ramped a little slower than initially expected, what incentivized people to really come on board? I get that you got a lot of good verbal in early September, and then they kind of rolled off. Did you have to increase wages or incentives? Is there some cost pressure in that line item that we should be building into our model? Thanks.
spk07: Yeah, nothing that we feel like in terms of significance on, you know, what we had to do to get them on. But we did offer some incentives, you know, to make sure that they would come on in terms of pushing that licensing through. I believe, though, on a per-unit basis that it will kind of come out in the wash as we look at, okay, well, what did we do to adjust that? you know, later. So, really, I think, you know, we thought that our offer was attractive in terms of, you know, what we did to, which we mentioned on earlier calls, to change kind of our base wage. And our top end of the funnel was extremely strong. Like, we had no worry, I mean, in terms of when you look at the number of verbal offers accepted, the interest level we were getting, I think really it was just the motivation, it seemed like, in the market to ultimately go through the number of steps that are required to do this job. So, you know, it was some learning, and we did provide some, you know, I would say kind of softer bonuses to push it across. But I think certainly, so anyway, I guess I feel like that really no in terms of the full boat that we offered in terms of having any, you know, major, major effect. But Raph, you want to comment on that?
spk05: Yeah, I think we talked about it on our last call, just the mix of some of the compensation, I think. We restructured it a little bit to make it a bit more appealing, especially someone coming on board to begin with before they start earning commissions. Having said that, I don't think there's anything that you need to do relative to the model to change the expectations for sales costs. I think we said last time that it would all sort of work within the range that we've had before.
spk08: Okay, that makes sense. And in Medicare Advantage, can you remind us what your current recapture rate is and what you expect that to be for the full year?
spk05: Sure. From a recapture standpoint, it's in sort of the mid to high 20s. It is up year over year. It does fluctuate seasonally just in terms of, you know, when masks are happening and And once every cash activity does occur, but that's kind of where it is now. I don't know that we would expect it to be dramatically different than that. We've continued to have good improvements year over year, and that's kind of where we are right now.
spk08: Okay, and one last one for me. I don't know if you track a stat like this, but with regard to SelectRx, is there any way to quantify of the seniors you're calling on that would be a good candidate for this product? What percent are actually choosing to switch their meds to SelectRx?
spk07: Yeah, absolutely. As far as percentage that are really ideal for this, it is, you know, not a massive percentage of our book, but big enough that we're making a really big impact and you kind of see the number of enrollments. As far as success of getting those members kind of that say yes to it, it's about a little north of 50%. Got it. Thanks, guys.
spk02: Your next question comes from the line of Frank Morgan of RBC Capital Markets. Please ask your question.
spk03: Good afternoon. I guess I want to go back to the comments you made about some of the plans becoming more generic, for lack of a better term, less variation in the benefits. I'm trying to figure out if that's a good thing or a bad thing. In one sense, maybe it would help – since you're hiring people later and you're going to be behind the eight ball on the productivity, does this maybe help selling easier or does this make it more difficult? Or on the flip side, does the fact that all these plans are more uniform now, does that in some way diminish sort of the value add you can bring by helping these clients pick plans? So I'm just curious about your thoughts, if that's good or bad.
spk07: No, it's a really good question. It makes the experience a little bit more nuanced. And we're adjusting some of our, I guess, just call it top of funnel marketing and things like that to adjust to finding consumers that really need to make that change. And then also adjusting our tools to really go into what is different about the plans this year. Because there's always big differences, Frank. They just may be in different places. So it makes the sale a little bit more nuanced, but again, you know, we're tracking for exactly where we need to be or want to be and are building our tools around what we see in those plans.
spk03: Okay, my follow-up is on this CMS, the recent memo about providing more of the advertising information. It seems like something is bothering CMS. I know they have made rumblings before this. But do you think they are in some way trying to push carriers to maybe make plans more consistent? Because it seems like maybe they're sort of worried about this churn issue that's going on in the industry as well. So do you have any thoughts about what CMS' real endgame is here? Thanks.
spk04: Yeah, I'll make a few comments and maybe have Bob chime in. I mean, I think, you know, there's been some discussion over the past couple quarters just around kind of quality in general. And, again, we feel, you know, very good about that, Frank. I think quality has always been part of our DNA, part of every conversation we have with our carrier partners. We think most importantly it's exhibited every day on the sales floor. So it's a big differentiator for us. I think, you know, some of the – managed care organizations have talked about. The e-brokers are critical, though, to that education and awareness and growth of MA. So overall, you know, if there's more, you know, they're shining more of a light on it, I think it's good for us. I think part of that is what we're seeing in the marketing. Certainly what you do once you get the marketing and the sales practices, we think, make a big impact. That's why we feel so good about our position. Bob?
spk07: Yeah, I mean, I think it's a good observation, Frank, and I think we sit in a really good position because we do have really low CTM rates, and if we're partnered with our carriers to try to understand the market, what leads to lower CTM rates, sales practices, marketing practices, and I think CMS wants to understand the marketing materials that are out there, and we're very supportive of that. As Bill said, this wasn't a big change for us. I think it was a bigger change, you know, potentially for some others and things like that. But we feel good about our positioning. And to your point, I think they just want to see, you know, the things that are out there more frequently so that they can understand, you know, if things are leading to churn due to marketing materials or anything like that, which, again, we're very supportive of.
spk08: Okay, thanks.
spk02: The next question comes from the line of Mayor Shields of KBW. Please ask your question.
spk08: Thanks so much for taking my questions. One, has there been any impact on longer term employees in the context of what people are calling the great resignation?
spk04: I think on our end, Mayor, we're seeing very good employee retention across the board, especially with our top-level agents. There's been some modest attrition, but nothing of any significance. And more importantly, I think our career-based opportunity, the fact that we've always paid, I think, significantly better than the industry has kept very, very high retention rates. So I think we're well positioned there.
spk08: Okay, fantastic. That's good to hear. And then, second, I know last quarter, I think, you spent some time differentiating between lapse rates of most recent cohort years and some of the older years that were holding up better, and I'm just hoping for an update on that.
spk05: Yeah, so I think in our remarks, my remarks earlier, we sort of stated that We've seen higher lapse rates both first year and renewal year relative to last year. Nothing has really changed during the last quarter on that, so either up or down. So they still remain elevated by about the same percent year to year. But that's kind of what we're seeing right now. I think we also talked about, I think you know this, that as you get into this part of the year, just lapse rates in general tail off significantly. much lower than they are in the first half of the year.
spk08: Okay. And by renewal, you mean something other than the stuff that was new last year?
spk05: Correct. I think we've seen higher lapse rates both on first-year policies that are in their first year as well as on renewal policies.
spk08: Okay. Perfect. Thank you.
spk02: We have no further questions at this time. I will now turn the call over back to Mr. Tim Danker for closing remarks.
spk04: Thank you all again for your time and questions. We really do look forward to executing another successful Medicare Advantage season. We also look forward to updating you on our progress on both SelectRx and population health. We want you all to have a great holiday season in the meantime, and we'll speak to you again in the new year. Have a good evening. Thank you.
spk02: Thank you again for participating. This concludes today's conference call. You may now disconnect.
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