Good morning, everyone, and welcome to this session of the BofA Healthcare Conference. I'm Michael Cherny, the Healthcare Tech and Distribution Analyst at BofA. It's my pleasure to have with us, GoHealth CEO, Vijay Kotte. Jason Schulz, CFO, along with other members of the team, are in the audience. GoHealth reported earnings Monday, we have a lot to cover. They brought no slides, which is perfect 'cause I don't want any slides. Maybe Vijay, let's just start level set. Just what were some of the key highlights to you of the quarter? I know We're gonna talk about the transition of the business plenty, but maybe start by framing what we saw in the first quarter versus your expectations. I think it was generally in line with our expectations. What we have planned for 2023 was really having a strong exit run rate from Q4 2022, and then carrying that forward and then continuing to prove that in the open enrollment period we can have the same quality, you know, really understand the mix dynamics because carrier mix is gonna become more and more important as we move forward. You know, how do the associates and the agents feel about the experience of moving through our Encompass Platform? We definitely saw that. Obviously, saw positive movement on cash on a year-over-year basis as we start to think about the trailing twelve-month process for us on the cash profile of the business is materially better. Right? $300 million on a trailing 12-month basis, in cash flow from operations improvement. The big part of that was to our efficiency model. Proving that out through OEP, we have an AEP under our belt, an OEP under our belt, showing that we can generate the margins off of it, and having the stability within the revenue bucket as we shift to Encompass has been really exciting. Maybe let's just start there. Yeah. Encompass is taken as a public company name, as one of my colleagues in the audience will tell us. obviously, your focus, and you and Jason and the team have come in, has been on building on this Encompass Platform. Basically, you can tell me if I'm wrong on this, but turning the whole idea of the broker model kind of on its head in terms of your go-to-market strategy and how the economics change for the business. just level set, walk us through why you think this has been the right go-to-market strategy. It's clear it's paying dividends, in early results so far, but what led you to take such a drastic pivot, for lack of a better term? No, we're so excited about it. As you know, the Encompass Platform and the model. Why we did it, one, we need to change the model. The old model wasn't working very well. Let's say that. Let's start there. But when we picked this model, what we loved about it was it got us in the right spot of what we do best, and it made sure that we had a laser focus on who matters most, and that is putting the consumer at the center of it. Whereas previously, the old model served the consumer, but in reality, it was really designed to serve health plans, to give health plans access to beneficiaries. By putting the consumer at the middle of the Encompass model and building the technology around that with specialized resources. We talk about our first level of resource. We have specialized resources who verify eligibility and do that scope of appointment, right? They get the scope, they initiate the intent to actually have a conversation. We have a specialized resource that helps shop and does a personal needs assessment. These are things we never did before. We didn't do a full needs assessment that was algorithmic, that fed into a tool. This is why that's so important in the Encompass model. If you look at 2021 AEP, only 20% of our sales used our PlanFit tool. In 2022, 100% did. Here's the challenge in the industry, right? We talk about on average 43 options for a Medicare beneficiary. If you go to metro areas, go to New York, you could be up to 100 options there, right? A beneficiary doesn't know how to navigate it, nor do agents. An agent has a hard time trying to encapsulate 100 plans and do that. The Encompass model also integrates the technology to say, "I understand your needs." It goes through an absolute scoring algorithm and outputs the primary plans out of those 100 options and now assists the agent to be able to facilitate that process. That's all of what Encompass is. Oh, by the way, we also change the cash flow dynamics of how we get paid for that specific service to work with the carriers to align what's important to them, which is maintaining a long-term relationship with the beneficiary, and what they're having trouble doing on their own, which is getting access to beneficiaries who want a multi-payer type marketplace. I wanna come back to that cash flow dynamic. Sure Obviously incredibly important, but I wanna stick with the technology side. You know, the overarching term that typically is used for your company is an e-broker. In the broker side is always the one that's focused on the agent side. That being said, the E is an incredibly important component in terms of technology. Maybe give us a sense and dive a little deeper. If I'm an agent that's, especially one that's been tenured with you a couple of years, has seen this transition with Encompass, what does my day-to-day interface look like? What do I have available to me that I didn't before? How, as an agent, am I using that technology better beyond just PlanFit in order to make sure that I'm helping deliver the best for the customer? I think there's I'll give you a little bit of, I talked about on the earnings call our uniform agent experience, right? Because today it isn't ideal, that experience. It's not a very efficient model for our agents today. mainly and it never has been. They always had multiple screens up. They had different processes. There wasn't a standard approach for how you take the needs assessment and then use the technology tools. we've developed and deployed right now this unified agent experience, which decreases the number of extra screens they've got. They have more qualified leads that come through. That seasoned tenured agent is at their tier two, right? Tier 1 is really more administrative in the way it's structured. We have the first interaction. We understand they're eligible, then it goes to tier two. Tier two are the ones who are really used to doing the shopping experience. That shopping agent now will have the beneficiary come in with a number of the demographics already populated for them. It flows through into the technology. It primes them to ask the right questions in the needs assessment. To understand what matters most to them, what do they care most about. Some people really care about dental. Other people care about SNF co-pays, right? Whatever it may be, factoring those in, then now they will have a guided process. They see the scripting. They see the tools. It outputs in front of them the force ranking of the plan options that are available by carrier that are appropriate. They, it scripts them as to the key differences between those top three options to then be able to facilitate being an educated personal shopper of sorts to help them decide what plan is best. They hand that off to an enrollment agent that is actually a dedicated agent for the health plan that fit best, right? We get a dedicated agent who understands, let's say, Humana or United. At the tier three, they are absolutely trained on knowing the specifics about that plan that we are now recommending for them. They actually take the application. What did that happen to that tenured agent? They spent less time in the shopping experience because they're not taking the application anymore. They have a secondary partner who's actually verifying all the information again, and they can get back on and take another lead. They've enhanced their efficiency by nearly 10%-15% of being able to get more throughput on that most constrained bottleneck asset that everybody talks about. What do you as an organization need to do to make sure these agents were ready to go? I mean, I know this is a model where having permanent agents is great, but there's also a seasonal aspect to it. How do you redesign the training process, that investment in your people beyond just the platform to make sure that all of these tools are now available to them or allow them to actually use them to generate success? Well, I mean, I think the wonderful part is they were involved in the process, right? We had many of the agents involved in designing this process for themselves. What was gonna be most helpful for them? It's not as much of a, "Hey, here's a brand-new thing we just dropped on you. Go figure it out." They see it coming, they knew it was coming, and then we, in tranches during SEP, do more of that new training on the new tools to give them access to it. We take some of the agents off the line, we have them do the training, we do it in tiers, and we make sure that we don't miss productivity. We're still taking all the calls that are coming in, we also are giving them the opportunity to continue to refine the tools and learn the processes and script through it. It's the uniform process of it has actually given us the opportunity to bring on new agents as necessary, 'cause there's always natural attrition. When you have the Uniform Agent Experience, what we found is we've narrowed the gap between your most tenured agents and your newer agents because they can get up to speed so much faster. This tool is actually both helping the training and onboarding of the new tools for the new agents, but also for the existing agents, it's built around what they've already decided were best practices, and we're making it more efficient for them. You talk about uniform agent experience. Does every agent have access to every tool at this point? That's the goal of this process. Okay. Because before what we found is certain tenured agents would go to different websites to get information that made them really good. We said, "Well, okay, well, if you're going to those websites, let's watch you." We watched what they did, and we said, "Well, let's just make this a standard for everybody and give them access to the information. Let's talk about 2023 guidance. It was something you came out, obviously put out last year, you reiterated. What are the most important line of sights you have into your targets, especially given that even with the changes in Encompass, this is still always gonna be a seasonal type financial model because of the dynamics of AEP? I think in general, the seasonality doesn't change, right? There's a little bit within the 12-month period, you should expect the same volume type seasonalities. you know, as I think about the 2023 guidance and how we built our plans for the year, we didn't assume anything crazy, positive or negative happens. We took the exit run rate, rolled it forward, right? We proved certain things in AEP. We didn't expect any extravagant improvements in, frankly, anything. We said we've got the best tenured agents. We wanna maintain that performance of conversion, of throughput, and with some efficiency through the new tools, maybe they get a little bit more throughput through the model. I mean, as Jason and I alluded to on our earnings call, the seasonality will happen, but we do see that efficiency pick-up that comes in the back part of the year that will make it a solid growth year-over-year in Q4 to Q4. Along those lines, so much of what happens during AEP is the work being done now to prepare for it. How are you tracking the metrics to make sure that you can achieve that 4 Q to 4 Q improvement? Yeah. I think there's a couple of things. One is average handle time. That is one of the most, the strongest leading indicator of the efficiency of the model that we're trying to deliver with a unified agent experience. As we see that come down per call at the tier two level, making sure you're efficient at the tier three level as well, but tier two is really where the throughput efficiency comes. You look at average handle time. You track your attrition rates of your top agents because they're still valuable. You're monitoring attrition on that, and obviously the macro dynamics have been very helpful on that. There's less attrition than historically had been there year-over-year. And then making sure that you do still need to add some more agents every given year, right? We have three tiers. We need to get specialized agents for that, and ensuring that we have the efficiency of this unified agent experience to bring them on, and that we are shrinking the training time, so we don't have as much carrying cost in Q2 and Q3 that you used to have to have to ramp up. That was always a limiting factor. You would spend all this cash in Q2 and Q3, and then you would assume everybody was up at run rate by AEP, and maybe they were, but the quality was really low. That's what we're really focusing on, are those key metrics. You mentioned cash. We have to go there. Sure. This was a business model that was timing-wise and scale spending a lot of cash. Yes. you know, having that weird dichotomy of the faster you grow, the more cash you spend. You literally reversed it almost immediately. I mean, I have to ask the very simple question: how? The major focus was let's not think about LTV to CAC. LTV, we need to spend a little bit more time to figure out the accuracy of, but let's make sure our CAC is as most as efficient as possible. Let's do some analyses of what are the right cohorts of agent volumes and leads that balances that trade-off, right? We talked on the last Q4 call about diseconomies of scale. If we look at what we think is the optimal staffing with the right experience, who can do the right quality of our team, and then we look at where are the sources of leads that we can generate that are still high quality, that convert well, we looked at that balancing act, and the net effect was we decreased our marketing cost per sale by nearly 40% by doing that. Our agent costs are down significantly. When we looked at the Q1-over-Q1 this last quarter, you saw the slide we put out, was a 23% improvement on CAC. Right. When you make that adjustment, now it's a question of what is the revenue against it. If you can keep moving that down faster than anything that was happening on LTV, you've now added that cash dynamic. That was one big thing. We had the $300 million year-over-year improvement, over $200 million of that was just efficiency on what I just described, marketing and headcount. There's only about $70 million that came through contract dynamics, which is timing of cash flow that pulls forward a little bit. The majority was through the efficiency and being prudent about that spend. We made that reduction in force last year, so that we knew that this was the optimal staffing for our current technology structure. As we made the technology more efficient, you actually don't need to add a lot of agents to get more throughput, and so that's what we're delivering this year. Got it. You mentioned something earlier about the dynamics of how you're getting paid by the carriers. It leads me to what I think is obviously an important topic, is that carrier relationship. You know, you've been in healthcare for a long period of time. You've intertwined with companies tied to payers, tied to providers. What has been your biggest focus about making, you know, the carrier partnerships and how the relationship has evolved with GoHealth and the carriers? It's a wonderful question. We definitely have a lot of symbiotic conversations, right? They are an important piece of the puzzle. To have a marketplace, which is what we really wanna be, even calling it the new broker, we are a marketplace first. Yeah. The marketplace that. What's important about the marketplace is having broad option sets. What that brings to carriers is access to the shoppers who come to us consistently every year, right from the marketing that we do. What we are able to provide back to them are the insights. What do beneficiaries really want? What matters most to them? A very symbiotic relationship on helping them provide the best product for beneficiaries. They, we have found unique ways to do marketing on our own. We do the lion's share of our marketing is, our leads are self-generated. We don't buy them on the open market. That enables us to have a lot more insight into how to access beneficiaries who want a multi-payer marketplace. I've had a number of health plans tell me that that is the value they see in us, is that there's only so much they can do as a single carrier. They need to have the multi-payer marketplace. As a leading source for enrollment for almost every one of the major carriers, they are very open to trying new things. It was a test last year, and we saw the metrics, CTM down significantly, and OEP down 80% year-over-year. Those complaints that were going to Medicare, 50% down in AEP. The effectuation rates were up, you know, year-over-year in a significant way as well. The quality was coming through. They've leaned into the model with us, and we're super excited about it. I guess this is a market, the MA market, that's gonna always be tied to concentration just by the simple nature of the, where the scale is from the plan perspective. As you make changes to your business, how does that interplay with the fact that you really have, while there's a number of plans of plan shopping, there's a few that are obviously gonna drive the vast majority of everything that goes through your model? like, how much is getting not only buy-in from the carriers, but partnership with them, making sure they understand what you're doing in Compass? How much does that factor in the way that you're rolling out different changes to Encompass? Yeah. I think, it's a great question because if you look at it, our operation, operating, Encompass operating model is consistent for everybody. Tier one, tier two, tier three, works exactly the same for every carrier. The dynamics on how we want to address their specific value props on onboarding at the end and additional tweaks and services that meet their needs while aligning with our core focus are unique. Every contract's not exactly the same. We work with them to partner to, you know, address their needs relative to our pain points and come up with the best relationships and agreements we can. I will tell you that we have more health plans coming to us now that we don't work with, who want to be part of the marketplace, and that selective opportunity for us is really exciting, right? We can bring more quality options to the table. I think the carriers appreciate the fact that in our truly carrier-agnostic platform, if they do something differential with benefits, they'll actually have the effect that they're looking for in their access to new enrollees. When you have those discussions with carriers about the broadening of the marketplace, obviously carriers are spending their own capital on building their own in-house agent forces and sometimes accelerating, sometimes pulling back. What's the best argument or what do you lead with when you tell them, "No, don't spend $50 million, $100 million on your own agent force because we're gonna be able to deliver better returns for you"? I don't know if I could ever really convince them. I don't need them to. It's okay. Sure. I love them doing marketing. It makes our jobs easier because generally, when you think about marketing to Medicare beneficiaries in the AEP period, is it's a series of advertisers that generates action. Right? The more they see the ads, there's always one that triggers them to make a phone call and pick up the phone. We don't mind that. Health plans will always feel better about having control over a fixed pool, and that's why there's been oscillation over the years. Some are all in on captive, some go back to no captive because at the crux of it is, it's a lot of carrying costs, and they'll always likely prefer the efficiency of accessing scaled capacity in those periods of time when they want it most. There's a mutual value proposition there, that seems to make sense. Yes, there is always that desire to control quality, and to control volume of leads access. The question is, can they get access to beneficiaries that want a multi-payer experience by having dedicated in-house? I think the data's proving probably not. The idea of partnering with somebody who's delivering that marketplace is a value to give incremental access that they can't get on their own. Same with the competitive landscape. There's obviously three publicly traded peers that you have in your space, peers, whatever you wanna call it. Other participants that play into this shopping approach, marketplace approach. How have you seen the competitive dynamics evolve, especially, you know, being new to the organization and coming in with a fresh set of eyes, where have you seen the changes that you've made versus changes that others have made in your ability to go out and continue to win your fair share? I mean, even before the Encompass changes, GoHealth was still the number 1 intermediary with regards to MA enrollments. I guess, what's changed about that dynamic, given the changing landscape of the broker and marketplace market as a whole? Yeah. I think, the observation when I first came in is that you have three primary players, and you have a lot of private players as well in the space, who are all competing with the same value propositions, right? Generally in TV, same general pitch, which were benefit-based, very little brand recognition for anybody, somewhat commoditized, and using the same messages, all working in the same little pond. Now when I think about it, the real competition is that there's a lot of beneficiaries out there who aren't shopping every year. They are just sitting back and waiting, thinking about if there's something else that might happen in their life one time to actually see that there are better options available. If you looked at the data, there was a McKinsey study that was done that said that about $7.5 million switchers or shoppers were there last, let's say, last year. Of that, only about $2 million, if you look at everybody's public data, came through these channels. There's $5 million minimum, up to another $60 million out there that aren't utilizing these resources. As we think about it, we said, "Look, you've gotta change your approach to different cohorts that have different messages that resonate for them." We need to be very targeted in doing that. Part of what Encompass is doing is saying, "Look, if you care about benefits, we'll help you find the best benefits. If you want just a trusted experience, we'll deliver that for you too. I think that's what hasn't been there. Nobody's really gotten that level of proving that you're truly carrier agnostic, more than just saying you are. I know in the past, part of the Encompass model, some of the dynamics is when you saw these switchers, then you had essentially obviously a reset of the LTV and the negative implications on a cash flow perspective. Can you walk us through, I know some of the carriers have talked about the expectations for increased switching, increased shopping this year, what that dynamic would do if you do see those switchers coming through from a cash flow contribution? I think the, you know, obviously the predominance of our business, we've separated into two lines in the revenue. You've got agency and non-agency. The agency is the one that's more of the traditional LTV type models. What we've really done is we've integrated into our modeling an expectation of what we believe the future shopping dynamics will be. Right? We've tried to factor that in as best as possible with the available data to say, yes, as we said on the Q4 call, we are embracing the idea that shopping is gonna happen in a greater rate than it historically has. That's been factored in as best as possible into our estimates for what we've got. I think we're the first ones to really go out that aggressively to say it is happening, we're building our model around it, and then basing our financials to assume that. We're excited about it, frankly, because it just proves that our estimates are probably more aligned with what reality is gonna look like this year, faster than we'd hoped. That's great. Turning to other changes that were made, you made the decision to exit the BPO business obviously not a huge financial impact, small piece relative to the total. Can you walk through the strategic rationale of it wasn't contributing EBITDA? Yeah. Why it made sense to reallocate resources to non-BPO businesses versus having the BPO side? One of the most critical things for us to fix this business is absolute focus on being the best at one thing. When we have multiple things out there, it distracts. It isn't the optimal use of our resources. First and foremost, focus on the one thing. We wanna be the leading Medicare consumer marketplace for Medicare Advantage shopping. To be true to our statement of being carrier agnostic, and as we left those BPO arrangements, we met with those carriers, and we told them, we said, "Look, we can't be true to ourselves if we're gonna put a beneficiary directly into, again, a single health plan experience where they're only considering one health plan. That's not who we wanna be. We will include those plans in our marketplace. We will do a true shopping experience, match them with the right plan, and then we will give them to you. One, it was about focus on let's do one thing great, which is everything's running through one Encompass model. We can get a lot of scaled efficiency out of doing it one way. And again, tenured agents are precious, so I don't wanna put them over there and be dependent on somebody else maybe having leads, not having leads. Let's flow them through our true high value proposition, but most importantly, let's be true to our commitment to be a multiplayer shopping marketplace. Those are the two main drivers why we did it. It did also help us with, hedging against any potential attrition we'd have in our core assumed headcount to get through the year, it gives you a pool to go to that you know. Got it. There's been some confusion, controversy lately on some of the changes that they're making on MA marketing and the dynamics and Scope of Appointment and timing. Maybe just give a sense on GoHealth's view on that and whether or not you think it's a risk or some of the mitigating factors that you have, especially within the Encompass Platform, to offset any potential changes that would come? Yeah, I, it has been a big topic of discussion. A lot of confusion on this on this item. I think everybody's intentions are pure, right? The pure intention is let's do best for consumers to have a non-pressure shopping opportunity to see their options and make choices. We continue to be very supportive of that and what CMS has been doing there. It's part of why we even built the Encompass Platform. As we think about every year, there are changes that happen with CMS. They issue new marketing guidelines when they see risks that are happening, that are putting beneficiaries at unintended pressure situations or maybe lack of clarity of information. They do this every year. With our Encompass Platform, another motivation there is that when you have specialized resources, you're able to be more responsive to those adjustments. Though there has been more clarification that's come out about not applying to inbound phone calls in the e-broker spaces, et cetera, we were actually excited that it was doing a lot of what we were already planning to do and what we think is not bad for beneficiaries in a lot of ways. Because of the Encompass Platform, the investments we've made in it already, we see those types of changes as a strategic advantage for us. We're able to be more nimble now than we were in previous years to those types of changes. Got it, and certainly helpful to have an understanding of. Maybe as we get towards the end of our time here, you know, again, going back to the cash flow dynamic. This is a company that was going, you know, heavily scaling or pushing towards cash flow to now being cash flow positive again, fairly quickly. What does that do in terms of your view of cash and how the organization can best use the cash that's now being generated to help fund the business over time? Yeah. We have been able to support ourselves in a lot of ways of investing in these new technologies and everything that's linked to the Encompass Platform. It takes real cash, right? There's CapEx that, yeah, obviously hits the financials. You're seeing actual expenses coming through in the current period. It's been an opportunity for us to make the right investment to drive efficiency going forward. It also gives us optionality to think about optimizing our debt structure. We do have, you know, a lot of debt there still, just over $500 million worth, and we've paid down a significant amount of that. Even with all the other investments we've been making, we've been paying down that debt to be most frugal there. At the same time, we got a lot of good options. The great part about the positive cash flow is it gives us optionality to decide are we better serving shareholders by deploying technology that we think has long-term returns and efficiencies in the current period? Do we believe that it's better to pay down debt and optimize that debt structure? Is it better to just keep ourselves some optionality as we know the nimble market's there, and if we see marketing creative opportunities that come about, that we can actually deploy against them in an efficient way. I guess my last question is kind of a big picture future question. This has always been a model where you can only grow so fast as your agents or grow as you hire. That being said, Encompass somewhat changes that dynamic a bit. So as you think about scalability, you know, building this company for the next five, 10 years, how do you feel those pivot points have changed with Encompass, and where do you see that ability to scale and what would be the bottlenecks over time? We don't see a world where you're doing a whole bunch of non-agent related enrollments. We believe this is in healthcare. Tech wrapped in services is the most confident thing that we've seen work, right? When you just do technology, it leaves, especially in the care delivery setting, it is a very difficult thing for the beneficiary to accept. There's a lot of fear that goes along with that, not having somebody facilitate it. When we see tier one, tier two, tier three, and the use of our technology, as I alluded to earlier, we see efficiencies in trying to isolate those key activities that a human needs to do to complete the process. Beyond that, no different than how people talk about machine learning and automation in general, let's make those individuals as efficient as possible. They'll be more successful, they'll have more throughput, it'll be a better consumer experience in general because there'll be shorter time frames that they're actually on a phone or facilitating that. That's where we see it, is that we will grow volume without having to grow agents. There'll be scale leverage that comes out of that, and that's how we get to the economies of scale. That's why we haven't just doubled down on adding a bunch more agents again. The economies of scale is the key to say that you benefit from growth as opposed to it actually compressing your margins. Got it. Well, Vijay, I know a ton going on with the business, but really appreciate the update. Really appreciate you being here, and thanks everyone for joining us. Thank you.