SelectQuote, Inc. Q1 FY2026 earnings call

Management Statement and Operational Highlights

• Senior Business: Performed as expected in the unique SEP compare, with excellent retention of tenured agents and successful preseason hiring/training, well-positioned for AEP.
• Healthcare Services: New Kansas facility ramping with efficiency gains, but impacted by drug reimbursement change. SelectRx provides clinical value, improving MA retention, medication adherence, and health outcomes.
• Life Insurance: Continues to provide steady profit and efficient cash flow, with revenue growth driven by term life and final expense policies.

Segment Performance

• Senior: Generated $59 million in revenue, a 37% decline due to 32% fewer policies written in the fiscal first quarter. EBITDA loss was $21 million, in line with expectations due to lower policy production and investment ahead of AEP. LTVs remained relatively stable at an average of 883 for the last 12 months, and revenue to client acquisition cost was 6.4x.
• Healthcare Services: New Kansas facility ramping as planned but impacted by a change in drug reimbursement rates with a SelectRx PBM partner, resulting in negative EBITDA for the first quarter. Expect second quarter Healthcare Services EBITDA to be approximately breakeven. Medium- and long-term outlook for expanding operating leverage and margins remains intact, with plans to exit fiscal year at an annualized EBITDA run rate in the $40 million to $50 million range.
• Life Insurance: Generated nearly 20% revenue growth driven by balanced growth in term life and final expense policies. Results impacted by near-term expenses related to production in the quarter, but expected to reverse as the season progresses.

Guidance

• Fiscal 2026 revenue expected to be $1.65 billion to $1.75 billion, and adjusted EBITDA $120 million to $150 million.
• Healthcare Services adjustment is a headwind, but will update outlook following fiscal second quarter as more detail on AEP period for Senior business becomes available.
• Confident in being operating cash flow positive during fiscal year 2026.

Risks

• Reimbursement changes with SelectRx PBM partner impacting Healthcare Services EBITDA margin in the short term.
• Policyholder volatility and carrier margin prioritization affecting Senior business performance.
• Market dynamics and competition impacting growth and margins across segments.

Question and Answer

Q: On SelectRx, what gives comfort that reimbursement rates will improve next year and potential for similar headwinds?

A: The PBM remains profitable and sees clinical value in SelectRx solution. Constructive discussions ongoing to solidify longer-term agreement with enhanced visibility and predictability.

Q: Could SelectRx improving MA member retention impact LTV?

A: Yes, see improvement in persistency, but not currently built into LTV calculation, though observed as positive.

Q: What does helping policyholders understand plans better for retention look like in practice?

A: Took actions to help beneficiaries, including leveraging AI, data, and understanding plan changes, with focus on back book of business to ensure members understand options.

Q: Any differences in AEP market relative to last year?

A: Dynamic AEP season with carrier profit actions, high consumer engagement, strong agent performance, and focus on back book management; similar to last year but early days with more innings to play.

Q: How is SelectRx growth managed focusing on profitability?

A: Measured member growth, focused on profitable members and PBMs that appreciate service, expanding clinical aspects like Adherence for All program to improve adherence and work towards stable, clinical-focused contracts