Core Viewpoint - Berman Tabacco is investigating potential stockholder claims against SelectQuote, Inc. regarding allegations of illegal payments received from health insurance providers [1][2]. Investigation Details - Allegations against SelectQuote were unsealed in May 2025, involving claims that the company received illegal payments totaling over 80 million dollars from Humana and Aetna between 2016 and 2021 [2]. - The complaint suggests that SelectQuote was incentivized to direct customers towards Medicare offerings from these insurance carriers [2]. - It is alleged that senior officers of SelectQuote were personally involved in this scheme, leading to a significant decline of approximately 20% in SelectQuote's shares following the Department of Justice's complaint [2]. Board and Fiduciary Duties - Berman Tabacco is examining whether SelectQuote's board of directors played a role in the alleged scheme and if there were breaches of fiduciary duties by its officers and/or directors [3].

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Core Points - Berman Tabacco is investigating potential stockholder claims against SelectQuote, Inc. regarding allegations of illegal payments from health insurance providers [1] - Allegations suggest that SelectQuote received illegal payments exceeding 80 million dollars from Humana and Aetna between 2016 and 2021 to direct customers towards their Medicare offerings [2] - The investigation will examine the involvement of SelectQuote's board of directors and whether there were breaches of fiduciary duties by its officers and/or directors [3] Investigation Details - The allegations were unsealed in May 2025 after the U.S. Attorney's Office for the District of Massachusetts intervened, joining claims initially raised by a whistleblower [2] - Following the filing of the Department of Justice's complaint, SelectQuote's shares declined approximately 20% [2]

Group 1 - The stock market is adopting a risk-off attitude as it approaches the end of 2025, with weaker consumer sentiment becoming a central narrative [1] - The Q3 earnings season is highlighting concerns regarding consumer sentiment and its impact on stock performance [1] - Gary Alexander has extensive experience in covering technology companies and advising startups, contributing to the understanding of current industry themes [1]

Core Insights - The stock market is exhibiting a risk-off attitude as it approaches the end of 2025, with a focus on weaker consumer sentiment [1] Group 1: Market Sentiment - The Q3 earnings season indicates a shift in market sentiment, highlighting concerns over consumer behavior [1] Group 2: Analyst Background - Gary Alexander has extensive experience in covering technology companies and advising startups, contributing to the understanding of current industry themes [1]

Core Insights - SelectQuote, Inc. (NYSE:SLQT) reported a first-quarter EPS of -$0.26, better than the estimated EPS of -$0.32 and the Zacks Consensus Estimate of a $0.27 loss, indicating a 3.70% earnings surprise [2][6] - The company achieved revenue of approximately $328.8 million, surpassing the estimated revenue of about $323.7 million and the Zacks Consensus Estimate by 6.07%, marking an increase from $292.26 million in the same quarter last year [3][6] Financial Performance - SLQT has consistently exceeded consensus EPS estimates three times in the last four quarters, demonstrating its ability to outperform expectations [2] - The revenue growth trajectory is highlighted by SLQT exceeding consensus revenue estimates three times in the last four quarters [3] Financial Metrics - The company has a price-to-sales ratio of 0.19, indicating a modest market valuation of its sales [4] - A negative enterprise value to operating cash flow ratio of -30.33 suggests challenges in generating cash flow relative to its enterprise value [4] - The debt-to-equity ratio of 0.17 reflects a conservative approach to leveraging debt, while a current ratio of 1.60 indicates a healthy level of liquidity to cover short-term liabilities [5]

Policy Submissions and Approvals - Total submitted policies decreased by 26% to 87,414 for the three months ended September 30, 2025, compared to 118,537 in the same period of 2024, primarily due to regulatory changes affecting Medicare Advantage enrollment[163] - Total approved policies decreased by 27% to 76,386 for the three months ended September 30, 2025, compared to 104,659 in the same period of 2024, correlating with the decrease in submitted policies[167] - The lifetime value of commissions (LTV) per approved Medicare Advantage policy decreased by 5% to $769 for the three months ended September 30, 2025, compared to $812 in the same period of 2024[170] - The Senior segment accounted for 82% of approved policies in the three months ended September 30, 2025, with Medicare Advantage and Medicare Supplement plans being the primary products[155] Membership and Service Growth - The total number of SelectRx members increased by 24% to 106,914 as of September 30, 2025, compared to 86,521 in the same period of 2024, reflecting the strategy to grow membership[172] - Average prescriptions shipped per day increased to 31,378 for the three months ended September 30, 2025, compared to 24,998 in the same period of 2024[174] - SelectQuote's strategy emphasizes expanding healthcare services and leveraging existing customer engagement to enhance service offerings and shareholder value[155] Revenue and Financial Performance - Total revenue for Q3 2025 was $328.8 million, a 13% increase from $292.3 million in Q3 2024[181] - Pharmacy revenue increased by $65.7 million, or 43%, primarily due to a 24% increase in members from the growth of the SelectRx business[181] - Revenue from the Senior segment decreased by $33,912 thousand, or 37%, to $58,996 thousand for the three months ended September 30, 2025, compared to $92,908 thousand in 2024[219] - Healthcare Services revenue increased by $65,612 thousand, or 42%, to $221,351 thousand for the three months ended September 30, 2025, compared to $155,739 thousand in 2024[218] - Life segment revenue increased by $7,357 thousand, or 19%, to $46,647 thousand for the three months ended September 30, 2025, compared to $39,290 thousand in 2024[218] Operating Costs and Expenses - Total operating costs and expenses rose to $369.6 million, an increase of 21.5% from $304.2 million in the prior year[181] - Cost of goods sold for pharmacy revenue increased by $63.3 million, or 49%, driven by a $59.5 million rise in medication costs[186] - Technical development expenses increased by $0.8 million, or 9%, primarily due to a rise in compensation costs from increased headcount[192] Net Loss and Adjusted EBITDA - The company recognized a net loss of $30.5 million for Q3 2025, compared to a net loss of $44.5 million in Q3 2024[177] - Adjusted EBITDA for the three months ended September 30, 2025, was $(32,079) thousand, compared to $(1,683) thousand in the same period of 2024[199] - Adjusted EBITDA from Healthcare Services increased to $7.2 million for the three months ended September 30, 2025, up from $4.9 million in 2024, despite a $63.0 million increase in cost of goods sold[224] - Adjusted EBITDA from Senior decreased to $(21.0) million for the three months ended September 30, 2025, down from $7.7 million in 2024, primarily due to a $33.9 million decrease in revenue[223] Cash Flow and Debt - Net cash used in operating activities was $21.6 million for the three months ended September 30, 2025, compared to $16.6 million in 2024, with a net loss of $30.5 million[237][238] - Net cash used in investing activities was $4.0 million for the three months ended September 30, 2025, compared to $2.6 million in 2024, primarily due to software and equipment purchases[241][242] - Net cash provided by financing activities was $4.2 million for the three months ended September 30, 2025, primarily from $80.0 million proceeds from the revolving credit facility[244] - Total debt obligations as of September 30, 2025, were $393.1 million, an increase from $385.1 million as of June 30, 2025[232] Interest Expense and Tax Rate - Interest expense decreased by $11.2 million, or 49%, due to lower cost of capital following a securitization transaction[193] - Interest expense, net, decreased to $11,808 thousand for the three months ended September 30, 2025, from $23,031 thousand in the same period of 2024[199] - The effective tax rate for Q3 2025 was 19.1%, compared to (27.2)% in Q3 2024, reflecting changes in state income taxes and valuation allowances[195] Market Sensitivity - A hypothetical 100 basis point increase in market interest rates would increase annualized interest expense by approximately $3.3 million based on outstanding balances as of September 30, 2025[252]

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Core Insights - SelectQuote (SLQT) reported a quarterly loss of $0.26 per share, slightly better than the Zacks Consensus Estimate of a loss of $0.27, and consistent with the loss of $0.26 per share from the previous year, resulting in an earnings surprise of +3.70% [1] - The company achieved revenues of $328.81 million for the quarter ended September 2025, exceeding the Zacks Consensus Estimate by 6.07% and showing an increase from $292.26 million year-over-year [2] - SelectQuote shares have declined approximately 42.7% year-to-date, contrasting with the S&P 500's gain of 15.6% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.19 on revenues of $520 million, while for the current fiscal year, the estimate is -$0.10 on revenues of $1.71 billion [7] - The trend of estimate revisions for SelectQuote was unfavorable prior to the earnings release, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Insurance - Multi line industry, to which SelectQuote belongs, is currently ranked in the top 27% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - The performance of SelectQuote may be influenced by the overall industry outlook, as empirical research indicates a strong correlation between near-term stock movements and earnings estimate revisions [5]

Financial Data and Key Metrics Changes - The company generated consolidated revenue of $329 million, representing a 13% growth year-over-year, primarily driven by strong growth in healthcare services [4][17] - Senior revenues declined to $59 million from $93 million a year ago, a decrease of 37%, attributed to lower policy production due to new eligibility requirements [4][18] - The company reported a quarterly EBITDA loss of $32 million, which was below the guided loss range of $25-$30 million [8][17] Business Line Data and Key Metrics Changes - The senior business segment experienced a 32% reduction in policy production compared to the previous year, leading to a negative EBITDA of $21 million [5][18] - Healthcare services EBITDA was impacted by changes in drug reimbursement rates, with an expected second-quarter adjusted EBITDA of approximately break-even [6][20] - The life insurance business saw nearly 20% revenue growth, driven by balanced growth in term life and final expense policies [22] Market Data and Key Metrics Changes - The company noted an elevated level of policyholder volatility due to shifts in planned benefits and structures from carriers, which is expected to continue in the upcoming AEP season [9][10] - The Medicare Advantage (MA) market is experiencing a high level of consumer engagement as beneficiaries evaluate options, with a focus on simplifying benefits [34][36] Company Strategy and Development Direction - The company aims to leverage its data-enabled agent-led model as a competitive advantage in the dynamic Medicare Advantage market [9][10] - There is a strategic focus on improving policyholder retention and understanding their plans better, which is seen as critical in the current environment [10][27] - The company is negotiating a longer-term reimbursement agreement with its PBM partner to enhance visibility and predictability for its healthcare services business [6][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term economics of healthcare services despite short-term reimbursement challenges [7][20] - The company remains optimistic about the upcoming AEP and OEP seasons, supported by strong agent retention and successful preseason hiring [10][23] - The fiscal 2026 financial outlook remains unchanged at $1.65 billion to $1.75 billion in revenue and $120 million to $150 million in adjusted EBITDA [23] Other Important Information - The company is actively working on improving medication adherence through its SelectRx program, which has shown positive results in reducing hospital days and improving health outcomes [16][12] - The company is expanding its healthcare services offerings to address social determinants of health, enhancing its value proposition to members [31] Q&A Session Summary Question: Concerns about SelectRx reimbursement headwinds - Management reassured that they are in constructive discussions with their PBM partner to solidify a longer-term agreement, emphasizing the clinical value of their solution [24][25] Question: Impact of SelectRx on LTV - Management noted that while they observe improved persistency among SelectRx members, this is not currently factored into the lifetime value calculations [25][26] Question: Strategies for helping policyholders understand their plans - Management highlighted their proactive approach to assist beneficiaries in navigating plan changes, utilizing AI and data to enhance customer engagement [27][29] Question: Market dynamics in the AEP season - Management indicated that the current AEP season is dynamic, with high consumer engagement and a focus on profitability among carriers [34][36] Question: Managing growth in SelectRx - Management emphasized a measured approach to member growth, focusing on profitability and partnerships with payers that value their services [38][40]