SelectQuote(SLQT) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q4 2022, consolidated revenue was $139 million, with senior revenue at$ 98 million, and a net loss of $105 million or negative$ 0.64 per share [9][42] - The company experienced a 31% increase in agent close rates and a 35% decrease in marketing cost per approved policy compared to the previous year [10][28] - Adjusted EBITDA for Q4 was negative $61 million, or negative$ 13 million excluding a $48 million cohort tail adjustment [42] Business Line Data and Key Metrics Changes - Total improved policies from the senior division increased to 144,000, up 23% year-over-year [44] - The Life business saw a reduction in revenue due to lower term life premiums, attributed to fewer agents and COVID-related conversion issues [42] - Auto & Home revenue remained flat year-over-year [42] Market Data and Key Metrics Changes - The company anticipates a 35% to 45% decline in Medicare Advantage policy production for 2023, aligning with its strategy to focus on consistent returns rather than pure growth [15][56] - The healthcare services business, primarily SelectRx, is projected to generate over$ 275 million in revenue for fiscal year 2023 [24][59] Company Strategy and Development Direction - The company is shifting its focus from growth to generating consistent unit economics and cash flow, with a goal of achieving cash EBITDA breakeven in fiscal 2023 [12][16] - Cost reductions exceeding $250 million have been identified, including around$ 40 million in fixed expenses [19][60] - The strategy includes a more tenured agent sales force and targeted marketing to improve productivity and customer retention [18][31] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about early achievements since the strategic redesign, noting improvements in customer retention trends [7][11] - The company is confident that the adjustments made have significantly de-risked potential future adjustments in financial results [13][23] - Management emphasized the importance of establishing credibility with investors through improved financial results [40][110] Other Important Information - The company has completed hiring its sales agent force for the upcoming AEP season and is focused on training and onboarding [20][29] - A credit covenant amendment has been agreed upon with lenders, providing adequate liquidity for operations in the coming quarters [62][106] Q&A Session Summary Question: What is different about the agent hiring for the 2023 AEP season? - Management highlighted that they secured flex agents early and improved training processes, leading to better quality and readiness compared to previous years [65][66] Question: What gives comfort that the $875 LTV is appropriate for fiscal 2023? - Management noted that the majority of switching occurs in the first year, providing better visibility into cash streams from older cohorts, and emphasized the conservative nature of their assumptions [68][70] Question: Can you provide color on MA enrollment and policy growth rates? - Management confirmed a pullback in overall policy production as part of the strategic redesign, but expressed confidence in the market opportunity for future growth [73][76] Question: Can you elaborate on the credit covenant changes? - Management confirmed that the amendments include a step increase in the overall interest rate but provide necessary liquidity for operations [84][106] Question: How will the slowdown in MA membership acquisition impact SelectRx growth? - Management expressed confidence in the synergistic relationship between MA policies and SelectRx, indicating room for growth despite potential slowdowns in MA membership [90][91]