GoHealth, Inc. Q2 FY2024 earnings call

• In Q2 2024, internal captive team empowered nearly 525,000 consumers, supported over 155,000 new enrollments, and provided Peace of Mind to over 125,000 consumers. • Market factors discussed include CMS rate notices, 2025 marketing rules, product differentiation, marketing efficiency, and plan mix. • PlanFit CheckUp launched, with agents compensated for completing it regardless of enrollment outcome. • Encompass Express launched to streamline processes, reducing consumer on-phone time by 25%. • AI and automation initiatives used in agent training, reducing onboarding time by 40% and doubling new agent productivity in first three months.

Second quarter net revenues were $106 million, down from $143 million in Q2 2023. Submissions from internal captive agents increased 14% year-over-year versus a 33% decline in submissions from external GPS agents. The Change Healthcare cyberattack negatively impacted second quarter revenue by over $7 million. Adjusted EBITDA was negative $12 million for the quarter, a decrease of $13 million from the prior year. Direct costs per submission were reduced by 12% due to targeted marketing efforts and technology investments.

• Evolving market dynamics expected to result in tailwinds for submissions, revenue, and adjusted EBITDA. • Expect a year-over-year decline in cash flow from operations due to shift from non-agency revenue. • Anticipate positive impact from changes like Encompass Express during AEP.

• Change Healthcare cyberattack negatively impacted Q2 revenue and earnings. • Regulatory changes and market competition could lead to broker exits and affect submission volumes. • Cash flow management challenges related to refinancing term loan and revolving credit facility.

Q: Good morning, guys. Quick question on going back to the market dynamics. I was wondering if you could provide some more color on your thoughts on what is driving some of the competitor exits and if there are parallels there to kind of the lower submission volume among your external GPS agents? And then maybe a little more detail on kind of how you’re positioned to address some of the challenges there and opportunities that might present ahead of AEP?

A: Thank you, Ben, for the question. When you’re speaking about market dynamics, I’m assuming you’re talking about other brokerages and agencies and other entities who are in that shopping experience who have exited that space. That’s correct. Right, Ben? ...

Q: If we could shift over to cap structure and your refinancing negotiations. You mentioned you were kind of assessing multiple structures. I wonder if you could give us some more detail on kind of receptivity to those structures. Are you looking at any type of unique securitization of receivables within those negotiations and kind of what are the big sticking points in financing negotiations?

A: Yeah. I think, Ben, let me just start with the fact that we are -- we’ve been working really hard as a company for multiple years to make sure that we’re solid and operating well and that’s coming through in the conversation we’re having about looking at the capital structure of the company and looking at different refinancing options. We’re looking at all the different options that are on the table, and we’ve made good progress on all fronts, and we’re pretty excited about where we stand with this. So I won’t go too far into that, but I’ll say that we wanted to make sure we exhausted all the different potential options for an organization like us and where we are relative to the industry, and so we’re pretty excited about how that’s progressing thus far.

Q: Hi. Thanks for taking the questions. So, if you do have that shift towards agency revenue, do you still expect to be cash flow positive this year and how do you do that?

A: So, let’s -- we -- I think it’s too early for us to get too far into exactly the extent to which shifts will happen. These are the right ways that we think about setting up our contracts. Again, we design the contracts with our assessment of the product qualities and we think our extent to which we can serve the consumers the best. And then whatever those contracts are, year-over-year, we have a distribution of agency versus non-agency. And depending on which product matches best will determine the extent to which that shift may happen between agency and non-agency. So it’s just, it’s too early to tell. I don’t want to get you there. All I know is that it’s likely not going to be the same distribution of non-agency as we saw last year, and therefore, that would lead to a lower than what we experienced last year in cash flow from operations. But again, they’re all for the right reasons. It’s the right plan for the consumer and the way we as appropriately decided which contract and or product that we prefer to be on agency versus non-agency to deliver the greatest value for us as well, right? Meaning on a revenue and adjusted EBITDA basis, risk adjusted from the way we think about it. So I know you’re looking for more of a specific answer, but I just think it’s a little too early for us to get too far into that till we know more about the details of the benefit distribution in a more precise way, which won’t be evident until closer to October.

Q: Hi. This is Sandeep. Can you guys hear me okay?

A: Yeah. Good morning, Sandeep.

Q: This is Sandeep. Can you guys hear me okay?

A: Yeah. Good morning, Sandeep.

Q: Hi. Good morning. Thanks for taking the question. First question was, why did non-agency revenue decline year-over-year given kind of the shifts and the repositioning of the business? And I have a couple other questions but I’m going to ask them one at a time.

A: Yeah. I think the question on non-agency is one that’s really determined on market dynamics. Like we said, there’s one big piece which is market dynamics of which products are most appropriate this year and what are the contracts that we have in place. The other piece that Katie highlighted was the dynamic around the Change Healthcare outage, because there are a number of components of things that we need to do in the way we enroll a consumer to be eligible for non-agency compensation with the different health plans. And due to some of the eligibility challenges we had due to the Crowd, or sorry, the Change Healthcare outage, it led us to needing to write some of those enrollments or those applications under an agency basis. So there was some shift for that alone but generally speaking, it really is just a distribution of what consumers came in and which products best match for them. And we don’t put our thumb on the scale to push it one way or the other. Really the consumer’s needs and who comes in determines what that split will be. And we are comfortable with those splits because we think those are the best value for us as well if those were to match for the consumer’s needs.