Group 1 - SelectQuote, Inc. has signed a new multi-year agreement with a major pharmacy benefit manager (PBM), effective January 1, 2026, which is expected to enhance visibility into reimbursement rates and provide better economic predictability for Medicare [1][2]. - The agreement aims to improve financial stability and consistency for both SelectQuote and the PBM partner, allowing SelectQuote to continue investing in its SelectRx pharmacy [2][3]. - CEO Tim Danker emphasized that the new contract will enhance visibility to reimbursement rates, supporting the growth of SelectRx and improving medication adherence and health outcomes for patients [3]. Group 2 - On January 13, SelectQuote secured a $415 million senior secured credit facility with Pathlight Capital, intended to refinance existing debt and support working capital needs, which is expected to lower the cost of capital and improve overall liquidity [4]. - SelectQuote operates as a direct-to-consumer insurance brokerage, facilitating the comparison and purchase of various insurance policies, including term life, Medicare supplement/Advantage, auto, and home insurance [5].

Core Viewpoint - SelectQuote (SLQT) has experienced a significant downtrend, with a 27% decline over the past four weeks, but it is now in oversold territory, suggesting a potential turnaround due to improved earnings expectations from analysts [1]. Group 1: Technical Analysis - The Relative Strength Index (RSI) is a key technical indicator used to determine if a stock is oversold, with readings below 30 indicating oversold conditions [2]. - SLQT's current RSI reading is 27.27, indicating that the heavy selling pressure may be exhausting, and a trend reversal could occur soon [5]. Group 2: Fundamental Analysis - Analysts have shown strong consensus in raising earnings estimates for SLQT, with a 9.1% increase in the consensus EPS estimate over the last 30 days, which typically correlates with price appreciation [7]. - SLQT holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises, further supporting the potential for a near-term turnaround [8].

Core Insights - SelectQuote reported a strong quarter driven by effective execution during the Medicare Advantage season, achieving near-record senior EBITDA margins of 39% despite modest year-over-year growth [4][10][24] - The company has made significant advancements in its health care services segment, with revenue increasing by 26% year over year, highlighting the impact of SelectRx on the health and quality of life for seniors [4][25] - Recent changes by a national carrier partner necessitated a reduction in fiscal 2026 guidance, with an expected $20 million impact from both the carrier's marketing budget cuts and PBM reimbursement changes, totaling a $40 million aggregate impact [6][7][30] Financial Performance - SelectQuote's revenue grew by 12% year over year, totaling $537 million, driven by both senior and health care services businesses [22][24] - Senior revenue reached $262 million, growing 2% due to increased approved policy volumes, while adjusted EBITDA for the senior segment was $102 million, consistent with last year's performance [24][31] - The company expects operating cash flow for fiscal 2026 to be between $25 million and $35 million, representing a significant increase compared to the previous year [8][32] Strategic Developments - A multiyear agreement with a key pharmacy benefit manager (PBM) enhances visibility into drug reimbursement pricing, which is crucial for expanding profitability [5][37] - The new $415 million credit facility improves capital flexibility, extending debt maturities to 2031 and allowing the company to pursue growth opportunities strategically [5][29] - SelectQuote's operational model focuses on profitability and cash flow over growth, with a commitment to optimizing customer targeting and capital deployment [21][55] Market Dynamics - The Medicare Advantage market is experiencing disruptions, with a significant number of plans being terminated and changes in policy features, leading to increased consumer engagement [13][17] - SelectQuote's strategy during the AEP focused on retaining tenured agents and proactively connecting with policyholders, resulting in a policy volume growth of 4% [9][10] - The company achieved a recapture rate of 33%, indicating strong customer retention and the effectiveness of its service model in a dynamic market [15][17] Future Outlook - Despite the recent guidance reduction, SelectQuote maintains confidence in its long-term growth, profitability, and cash flow potential, with targets of over 20% EBITDA margins for the senior division and an annualized adjusted EBITDA exit rate of $40 million to $50 million for health care services [31][32] - The company is positioned to capitalize on market opportunities, leveraging its diversified model and operational efficiencies to drive shareholder value [65]

Financial Data and Key Metrics Changes - SelectQuote reported a revenue growth of 12% year-over-year, totaling $537 million, driven by both Senior and Healthcare Services businesses [21] - Senior revenue grew 2% to $262 million, with adjusted EBITDA of $102 million, maintaining near record margins of 39% [22][23] - Healthcare Services revenue increased by 26% year-over-year to $231 million, with membership growing 17% to 113,000 [22][24] - Operating cash flow for fiscal 2026 is expected to be $25 million-$35 million, representing a significant increase compared to the previous year [29][31] Business Line Data and Key Metrics Changes - The Senior division achieved an EBITDA margin of 39%, marking the fourth consecutive AEP season above 30% [10][22] - Healthcare Services segment revenue growth of 26% year-over-year reflects strong demand for SelectRx services [5][24] - Life insurance revenue grew 9% to $44 million, driven by a strong quarter for final expense, while term Life business remained flat [24] Market Data and Key Metrics Changes - The Medicare Advantage market experienced significant disruptions, with approximately 7% of plans canceled by carriers, compared to a historical average below 1% [13][14] - SelectQuote's recapture rate improved to 33%, indicating strong customer retention amidst market volatility [15] Company Strategy and Development Direction - SelectQuote's strategy focuses on agent retention and proactive engagement with policyholders to navigate market disruptions [10][15] - The company aims to prioritize profitability and cash flow over growth, leveraging its diversified model to capitalize on market opportunities [20][54] - A new $415 million credit facility enhances capital flexibility, allowing the company to invest strategically while managing debt maturities [7][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth, profitability, and cash flow potential despite recent headwinds impacting fiscal 2026 guidance [8][28] - The company remains committed to providing high-quality service to beneficiaries, which is increasingly valuable in a challenging market environment [17][54] Other Important Information - SelectQuote entered a multi-year agreement with a pharmacy benefit manager (PBM), improving visibility into drug reimbursement pricing [6][34] - The company anticipates a $40 million aggregate impact on fiscal 2026 guidance due to changes in PBM reimbursement and a national carrier's marketing budget cuts [7][28] Q&A Session Summary Question: Details on the PBM deal and its impact - Management confirmed that the new PBM arrangement provides stability and predictability, addressing the $20 million hit in fiscal 2026 as a one-time issue [34][35] Question: Risks of other carriers following the marketing budget cuts - Management indicated that the decision to cut marketing budgets was not unique to SelectQuote and expressed confidence in navigating through these challenges [36] Question: Opportunities for SelectQuote in the current market - Management highlighted the company's unique capabilities and efficiency, positioning it well to capture market share amidst financial stress in the healthcare system [42][43] Question: Negotiating position with SelectRx due to scale - Management noted that the scale of SelectRx has enhanced negotiating power, allowing for deeper partnerships and better terms with PBM [58][60] Question: Incremental volume absorption at the Kansas facility - Management stated that the Kansas facility has significant capacity for expansion without requiring meaningful new capital investment [61][63]

Financial Data and Key Metrics Changes - SelectQuote reported a revenue growth of 12% year-over-year, totaling $537 million, driven by both Senior and healthcare services businesses [21][22] - Senior revenue grew 2% to $262 million, with adjusted EBITDA of $102 million, maintaining near record margins of 39% [22][23] - Healthcare services revenue increased by 26% year-over-year to $231 million, with membership growing 17% to 113,000 [24][25] - Operating cash flow for fiscal 2026 is expected to be between $25 million and $35 million, representing a significant increase compared to the previous year [30][32] Business Line Data and Key Metrics Changes - The Senior segment achieved an EBITDA margin of 39%, driven by strong marketing efficiency and agent productivity [21][22] - The healthcare services segment, particularly SelectRx, saw a 26% revenue increase, indicating strong demand and growth potential [24][25] - Life insurance revenue grew 9% to $44 million, with final expense premiums increasing by 24% [25][26] Market Data and Key Metrics Changes - The Medicare Advantage (MA) market experienced significant disruptions, with approximately 7% of plans canceled by carriers, compared to a historical average below 1% [13][14] - SelectQuote's recapture rate improved to 33%, reflecting effective customer retention strategies in a dynamic market [15][16] Company Strategy and Development Direction - SelectQuote aims to prioritize profitability and cash flow over growth, focusing on operational efficiency and strategic capital deployment [20][32] - The company has established a new $415 million credit facility, enhancing its capital flexibility and allowing for strategic investments [27][28] - SelectQuote's strategy includes leveraging its technology and data to improve service delivery and operational efficiency, particularly in the Senior segment [12][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged recent headwinds from a national carrier's marketing budget cuts, which are expected to impact fiscal 2026 by approximately $20 million [7][29] - Despite these challenges, management remains confident in the long-term growth, profitability, and cash flow potential of the business [8][29] - The company is focused on navigating the current market dynamics and believes it is well-positioned to capitalize on future opportunities [60][62] Other Important Information - SelectQuote's SelectRx service addresses inefficiencies in the medication system, contributing to improved health outcomes for seniors [18][19] - The company is committed to enhancing its negotiating position with pharmacy benefit managers (PBMs) due to its growing scale and successful engagement with complex member populations [68] Q&A Session Summary Question: Details on the PBM deal and its impact - Management highlighted the new multi-year PBM agreement provides stability and predictability, addressing the $20 million hit expected in fiscal 2026 [36][37] Question: Risks of other carriers following the marketing budget cuts - Management indicated that the decision was not unique to SelectQuote and expressed confidence in navigating through the challenges [38][39] Question: Opportunities for SelectQuote in the current market - Management emphasized the company's unique capabilities and operational efficiency, which position it well to capture market share despite current challenges [45][46] Question: SelectRx's negotiating position and scale - Management confirmed that the scale of SelectRx has enhanced its negotiating power with PBMs, allowing for deeper partnerships [68] Question: Incremental volume absorption at the Kansas facility - Management noted that the Kansas facility has significant capacity for expansion without requiring substantial new capital investments [70][71]

Policy Submissions and Approvals - Total submitted policies for all products increased by 1% for the three months ended December 31, 2025, compared to the same period in 2024, primarily due to a 7% increase in the number of average productive agents[185]. - Total approved policies for all products increased by 4% for the three months ended December 31, 2025, compared to the same period in 2024, correlating with the increase in submitted policies[190]. - Medicare Advantage plans accounted for 93% of approved Senior policies for the three months ended December 31, 2025, consistent with the previous year[178]. - Total approved policies decreased by 5% for the six months ended December 31, 2025, compared to the same period in 2024, correlating with the decrease in submitted policies[191]. Membership and Growth - The total number of SelectRx members increased by 17% as of December 31, 2025, compared to December 31, 2024, reflecting the company's strategy to grow SelectRx membership[197]. - Average prescriptions shipped per day increased to 32,578 for the three months ended December 31, 2025, compared to 26,846 for the same period in 2024[198]. - The number of SelectRx members increased by 17% over the prior year, contributing to the rise in medication and fulfillment costs[216]. Revenue and Income - Total revenue for the three months ended December 31, 2025, was $537,102,000, a 12% increase from $481,069,000 in the prior year[203]. - Pharmacy revenue increased by 26% to $227,209,000 for the three months ended December 31, 2025, primarily due to a 17% increase in members[207]. - Operating income for the three months ended December 31, 2025, was $75,311,000, representing a 6% increase from $70,940,000 in the prior year[203]. - Net income for the three months ended December 31, 2025, was $69,293,000, a 30% increase from $53,236,000 in the prior year[203]. - Total consolidated revenue for the three months ended December 31, 2025, was $537.1 million, an increase from $481.1 million in the same period of 2024, representing a year-over-year growth of approximately 11.7%[241][247]. Expenses and Costs - Cost of goods sold for pharmacy revenue increased by 31% to $205,194,000 for the three months ended December 31, 2025, mainly due to a $47.2 million rise in medication costs[214]. - Marketing and advertising expenses increased by $7.3 million, or 7%, for the three months ended December 31, 2025, primarily due to a $5.8 million increase in lead costs[218]. - Selling, general, and administrative expenses decreased by $6.1 million, or 14%, for the three months ended December 31, 2025, primarily due to a $6.3 million decrease in corporate development costs[222]. - Cost of commissions and other services revenue increased by 2% to $103,034,000 for the three months ended December 31, 2025, primarily due to a rise in compensation costs[211]. Segment Performance - Healthcare Services segment generated external revenue of $259.2 million for the three months ended December 31, 2025, up from $253.8 million in the same period of 2024, reflecting a growth of approximately 2.7%[241][247]. - Senior segment reported external revenue of $230.4 million for the three months ended December 31, 2025, compared to $183.3 million in the same period of 2024, marking a significant increase of about 25.7%[241][247]. - Revenue from Healthcare Services increased by $112.9 million, or 33%, to $452.0 million for the six months ended December 31, 2025, driven by a 17% increase in SelectRx members[268]. - Revenue from Senior decreased by $28.0 million, or 8%, to $320.5 million for the six months ended December 31, 2025, primarily due to a $24.1 million decrease in commission revenue[269]. Financial Position and Debt - The Company had total debt obligations of $405.8 million as of December 31, 2025, up from $385.1 million as of June 30, 2025[286]. - The Company entered into a new $415.0 million credit facility on January 8, 2026, which includes a $325.0 million senior secured term loan and a revolving credit facility of up to $90.0 million[284]. - As of December 31, 2025, the Company had $23.3 million in cash, cash equivalents, and restricted cash, down from $37.1 million as of June 30, 2025[287]. Adjusted EBITDA - Adjusted EBITDA for the three months ended December 31, 2025, was $84.7 million, compared to $87.5 million for the same period in 2024[234]. - Adjusted Segment EBITDA for the three months ended December 31, 2025, was $108.9 million, compared to $110.2 million for the same period in 2024, indicating a slight decrease of about 1.2%[242][248]. - Adjusted EBITDA from Senior for the six months ended December 31, 2025, was $81.4 million, a decrease of $26.8 million compared to the prior year[274]. - Adjusted EBITDA from Healthcare Services increased to $8.1 million for the six months ended December 31, 2025, reflecting a $112.9 million revenue increase, despite a $111.8 million rise in cost of goods sold[275]. Impairments and Charges - The Company recognized an impairment charge of $1.0 million during the three months ended December 31, 2025, representing a full write-off of its equity-method investment[246][257]. Interest and Tax Expenses - Interest expense decreased by $12.1 million, or 51%, for the three months ended December 31, 2025, primarily driven by a lower cost of capital following the completion of the securitization transaction[227]. - Income tax expense for the three months ended December 31, 2025, was $13.7 million, with an effective tax rate of 16.5%[229].

Financial Data and Key Metrics Changes - SelectQuote reported a revenue growth of 12% year-over-year, totaling $537 million, driven by both Senior and healthcare services businesses [20][21] - Senior revenue grew 2% to $262 million, with adjusted EBITDA of $102 million, maintaining near record margins of 39% [22][23] - Healthcare services revenue increased by 26% year-over-year to $231 million, with membership growing 17% to 113,000 [24][25] - Operating cash flow for fiscal 2026 is expected to be between $25 million and $35 million, reflecting a significant increase compared to the previous year [30][32] Business Line Data and Key Metrics Changes - The Senior segment achieved an EBITDA margin of 39%, driven by strong marketing efficiency and agent productivity [21][22] - The healthcare services segment, particularly SelectRx, saw a 26% revenue increase, indicating strong demand and growth potential [24][25] - Life insurance revenue grew 9% to $44 million, with final expense premiums increasing by 24% [25] Market Data and Key Metrics Changes - The Medicare Advantage (MA) market is experiencing volatility due to carrier plan changes and terminations, impacting growth strategies [20][22] - Approximately 7% of total plans in force have been canceled by carriers in the past two seasons, compared to a historical average below 1% [12][13] Company Strategy and Development Direction - The company aims to prioritize profitability and cash flow over growth, leveraging its diversified model to navigate market challenges [19][60] - SelectQuote's strategy includes focusing on tenured agent retention and proactive engagement with policyholders to enhance service delivery [10][14] - The new $415 million credit facility enhances capital flexibility, allowing the company to capitalize on growth opportunities when market conditions are favorable [6][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth, profitability, and cash flow potential despite recent headwinds, including a $40 million aggregate impact from carrier actions [8][29] - The company remains focused on delivering high-quality service and maintaining strong customer retention rates in a challenging market environment [15][46] - Management anticipates continued dialogue with carriers regarding advance rate notices to address rising utilization and care costs [45] Other Important Information - SelectQuote's SelectRx service addresses inefficiencies in the medication system, contributing to improved health outcomes for seniors [17][18] - The company has made significant improvements in cash flow generation, with a focus on operational efficiency across both Senior and healthcare services divisions [30][32] Q&A Session Summary Question: Details on the PBM deal and its impact - Management confirmed that the new PBM arrangement provides stability and predictability, addressing the $20 million hit in fiscal 2026 as a one-time issue [35][36] Question: Risks of other carriers following the marketing budget cut pattern - Management indicated that the decision to cut marketing budgets was not unique to SelectQuote and expressed confidence in navigating through the challenges [38][39] Question: Opportunities for SelectQuote in the current market - Management highlighted the company's unique capabilities and efficiency, positioning it well to capture market share amid financial stress in the healthcare system [44][46] Question: Negotiating position with SelectRx due to scale - Management noted that the scale of SelectRx has enhanced its negotiating power, allowing for deeper partnerships and improved terms with PBM [65][66] Question: Incremental volume absorption at the Kansas facility - Management stated that the Kansas facility has significant capacity for expansion without requiring substantial new capital investment, supported by automation and technology initiatives [67][69]

2nd Quarter Fiscal 2026 Earnings Presentation February 5, 2026 | We shop. You save. Disclaimer Forward-Looking Statements This presentation contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as "may," "should," "could," "predict," "potential," "believe," "will likely result," "expect," "continu ...

Financial Performance - Consolidated revenue for Q2 FY 2026 was $537.1 million, up 11.7% from $481.1 million in Q2 FY 2025[1] - Consolidated net income for Q2 FY 2026 was $69.3 million, an increase of 30.1% compared to $53.2 million in Q2 FY 2025[1] - Adjusted EBITDA for Q2 FY 2026 was $84.7 million, down 3.2% from $87.5 million in Q2 FY 2025[1] - Total revenue for the three months ended December 31, 2025, was $537.1 million, a 11.7% increase from $481.1 million in the same period of 2024[38] - Net income for the six months ended December 31, 2025, was $69,293,000, up from $53,236,000 in 2024, reflecting an increase of approximately 30.2%[46] - Adjusted EBITDA for the six months ended December 31, 2025, was $84,731,000, compared to $85,835,000 in 2024, reflecting a slight decrease of about 1.3%[46] Segment Performance - The Senior segment achieved a 39% Adjusted EBITDA margin, driven by strong agent productivity and marketing efficiency[2] - Healthcare Services segment revenue increased by 26% to $230.7 million in Q2 FY 2026, compared to $183.4 million in Q2 FY 2025[14] - Life segment revenue for Q2 FY 2026 was $43.6 million, a 9% increase from $39.9 million in Q2 FY 2025[23] - Adjusted Segment EBITDA for the Healthcare segment was $102.5 million for Q4 2025, compared to $100.5 million in Q4 2024, indicating a growth of 2.0%[42] - Total revenue from reportable segments for the six months ended December 31, 2025, was $862,810,000, an increase from $766,746,000 in the same period of 2024, representing a growth of approximately 12.5%[44] Membership and Policy Growth - Total SelectRx members grew by 17% to 113,483 as of December 31, 2025, compared to 96,695 in the previous year[16] - Approved Medicare Advantage policies increased by 4% to 257,279 in Q2 FY 2026, up from 247,849 in Q2 FY 2025[11] - Total revenue per MA/MS policy increased by 23% to $2,482 for the twelve months ended December 31, 2025, compared to $2,012 for the previous year[21] Financial Guidance and Projections - Revenue guidance for FY 2026 is projected to be between $1.61 billion and $1.71 billion, with Adjusted EBITDA expected between $90 million and $100 million[5] Asset and Liability Management - SelectQuote's total assets increased to $1,352,259 thousand as of December 31, 2025, up from $1,249,356 thousand on June 30, 2025, reflecting a growth of approximately 8.2%[35] - Current assets rose to $424,815 thousand as of December 31, 2025, compared to $341,042 thousand on June 30, 2025, marking an increase of about 24.6%[35] - Total liabilities increased to $732,616 thousand as of December 31, 2025, up from $673,838 thousand on June 30, 2025, reflecting a rise of about 8.7%[36] - SelectQuote's preferred stock had a current liquidation preference of $394.2 million as of December 31, 2025, compared to $367.1 million on June 30, 2025, showing an increase of approximately 7.5%[36] Cash Flow and Expenses - The company reported a net cash used in operating activities of $21.6 million for the six months ended December 31, 2025, an improvement from $45.3 million in the same period of 2024[41] - Total operating costs and expenses for the three months ended December 31, 2025, were $461.8 million, up from $410.1 million in Q4 2024, marking a 12.6% increase[38] - The company incurred interest expense of $11.6 million for Q4 2025, a decrease from $23.7 million in Q4 2024, showing a reduction of 51.0%[38] - Interest expense, net, for the six months ended December 31, 2025, was $23,421,000, compared to $46,752,000 in 2024, indicating a reduction of approximately 49.9%[46] Other Financial Metrics - The company reported a comprehensive income of $69.3 million for Q4 2025, compared to $51.9 million in Q4 2024, reflecting a 33.4% increase[39] - The cost of goods sold for pharmacy revenue in the six months ended December 31, 2025, was $395,181,000, compared to $283,375,000 in 2024, showing an increase of about 39.5%[44] - Marketing expenses for the six months ended December 31, 2025, totaled $121,686,000, slightly down from $122,775,000 in 2024, a decrease of about 0.9%[44] - The company reported a change in fair value of warrants of $34,332,000 for the six months ended December 31, 2025, compared to a loss of $7,642,000 in 2024[44] - The company experienced an impairment of equity-method investment of $1,000,000 for the six months ended December 31, 2025, consistent with the same amount in 2024[46] Business Model and Strategy - The company operates three core business lines: SelectQuote Senior, SelectQuote Healthcare Services, and SelectQuote Life, focusing on a demographic of approximately 10,000 individuals turning 65 each day[32] - SelectQuote emphasizes the importance of proprietary technology and a skilled agent workforce in driving its business model and consumer engagement[30]

Core Insights - The stock market has experienced significant volatility in January, particularly affecting major healthcare insurers due to news regarding Medicare reimbursement rates [1] Group 1: Industry Impact - Major healthcare insurers, including UnitedHealth Group, have seen their stock prices shaken by recent developments in Medicare reimbursement rates [1] Group 2: Analyst Background - Gary Alexander, with extensive experience in technology and healthcare sectors, has been a contributor to Seeking Alpha since 2017 and has provided insights on industry trends [1]