SelectQuote, Inc. Q3 FY2026 earnings call

• CEO Tim Danker noted strong financial results across segments, reaffirmed fiscal 2026 outlook, and is proud of the team and strategy. • Senior segment saw growth driven by healthier OEP, agent productivity, customer retention, and a positive commission receivables adjustment. • Healthcare services segment faced headwinds from carrier reimbursement actions and IRA, but adjusted EBITDA improved sequentially. • Highlighted SelectQuote Local initiative as an extension to help underserved Americans. • Discussed KPIs like agent productivity, marketing efficiency, SelectRx membership growth, and global revenue to cap multiple.

SelectQuote generated $431 million in revenue. Senior revenue grew 8% year-over-year to $183 million, with Senior adjusted EBITDA totaling $59 million (including a $14 million positive adjustment to commissions receivable), and excluding the adjustment, senior margins were 26%. Healthcare services revenue grew 5% to $199 million, with adjusted EBITDA improving sequentially to $5 million. Life insurance revenue grew 4% to $48 million, generating adjusted EBITDA of $6 million.

• Reaffirmed revenue range of 1.61 to 1.71 billion and adjusted EBITDA range of 90 million to 100 million. • Encouraged by increasing visibility in Medicare Advantage ecosystem and potential for Subway to compound cash flow growth. • Will take necessary action to maintain NYSE listing. • Monitor Q4 development, including approval rates, but guidance remains unchanged for now.

• Uncertainties and risks including those described in earnings release, annual report on Form 10-K, and subsequent SEC filings. • Potential impact of timing of approval rates on fourth quarter approved policy levels. • Disruption in Medicare Advantage environment affecting persistency and LTV calculations.

Q: Regarding PBM headwinds for SelectRx, commentary on reimbursement environment.

A: Tim noted reimbursement rate is stable, multi-year agreement with largest PBM partner secured. Ryan elaborated IRA drove revenue sequential decline but actual EBITDA impact low, and $13 million refunds received.

Q: Talk about accelerating cash flow dynamics in 2027.

A: Tim mentioned progress from capital structure changes, OEP results, efficiency in senior distribution, and SelectRx improvement with Kansas City facility.

Q: Increased visibility in Medicare Advantage ecosystem.

A: Tim said mixed story with medical cost trends, STARS rating changes, payer margin recovery, cautious optimism for plan year 2027 and potential growth for 2028.

Q: Remedy for equity disconnect.

A: Tim said evaluating options like securitization, M&A, considering consolidation, and belief in SelectQuote's position.

Q: SelectRx EBITDA run rate.

A: Tim said highly confident to reach $40 to $50 million EBITDA run rate soon.

Q: $14 million positive change in estimate.

A: Tim said due to enhanced visibility on book of business, not modifying guidance yet.

Q: LTV calculation and environment.

A: Tim said LTV impacted by many factors, pleased with recapture rate, and stability in environment could benefit LTV.

Q: Carrier marketing spend and back half of year trends.

A: Michael was told no additional updates beyond second quarter call, back half of year in line with previous strong results, expecting strong year end.