SelectQuote, Inc. Q2 FY2026 earnings call

• Strong AEP execution with policy volume growth 4%, near-record senior EBITDA margins of 39%. • Health care services segment grew 26% year over year, with SelectRx having real impact on seniors' health and quality of life. • Entered multiyear agreement with PBM partner to improve Cyclo's visibility into drug reimbursement pricing. • Announced $415 million credit facility to improve capital flexibility. • Need to lower fiscal 2026 guidance due to a national carrier partner cutting marketing budget and PBM reimbursement impact.

Senior segment: Revenue of $262 million, grew 2% year over year with near-record senior EBITDA margins of 39%. Health care services segment: Revenue increased 26% year over year to $231 million, with SelectRx making a significant impact on seniors' health. Life insurance segment: Revenue grew 9% to $44 million, with final expense premiums up 24% and term life flat. Revenue contribution: Senior segment likely a significant portion, health care services growing rapidly, life insurance contributing as well.

• Revised fiscal 2026 consolidated revenue range to $1.61 to $1.71 billion and adjusted EBITDA range to $90 million to $100 million due to $40 million aggregate impact from carrier and PBM issues. • Stand by previously announced fiscal 2026 targets of 20% plus EBITDA margins for senior division and annualized adjusted EBITDA exit rate of $40 to $50 million for health care services division. • Expect fiscal 2026 operating cash flow of $25 million to $35 million, up more than $40 million at midpoint from last year.

• National carrier partner significantly cut strategic marketing budget across distribution channels, impacting fiscal 2026 results. • PBM reimbursement headwind creating impact on fiscal 2026 results. • CMS advanced rate notice for 2027 not reflecting rising utilization and care costs, posing potential challenges.

Q: David Windley asked about the PBM deal and the major carrier's marketing cut.

A: Tim Danker discussed the multiyear PBM arrangement providing stability and the carrier's marketing cut was across third-party distribution, with confidence in navigating through it.

Q: Benjamin Hendrix followed up on MA advanced rate notice and SelectQuote's positioning.

A: Tim Danker noted CMS advance rate notice doesn't reflect realities, and SelectQuote's efficient model positions well.

Q: George Frederick Sutton asked about levers at disposal relative to MA options and operating flexibility.

A: Tim Danker mentioned leveraging marketing dollars geographically, focusing on customer segments like SNPs, and diversified model for capital deployment.

Q: Patrick Joseph McCann asked about SelectRx's negotiating position and Kansas facility's volume absorption.

A: Tim Danker said SelectRx's scale gives negotiating power and the Kansas facility has room for expansion with new technology initiatives to drive efficiency and cash flow.