SelectQuote(US:SLQT)2022-05-07 16:12Financial Data and Key Metrics Changes - Revenue for the third quarter totaled $275 million, representing a 4% increase year-over-year [11][34] - Adjusted EBITDA for the quarter was $13 million, impacted by year-over-year pressure on Medicare Advantage (MA) Lifetime Values (LTVs) [11][34] - The company expects overall operating costs to be over $200 million lower in fiscal 2023 compared to fiscal 2022, excluding SelectRx [36][61] Business Line Data and Key Metrics Changes - The Senior business saw a 33% increase in total approved policies and a 48% increase in MA approved policies, driven by more agents and improved close rates [37] - Marketing costs per approved policy decreased by 27% year-over-year, contributing to improved marketing efficiency [27][41] - The SelectRx business grew significantly, ending the quarter with over 23,000 active members, with expectations to surpass 25,000 by the end of fiscal 2022 [12][44] Market Data and Key Metrics Changes - The company noted a less competitive marketing environment during the Open Enrollment Period (OEP), which contributed to improved performance [38] - The overall market for Medicare Advantage remains large, but the company anticipates a year-over-year decline in submitted policies for 2023 to right-size the organization [16][60] Company Strategy and Development Direction - The company is focusing on a growth strategy that prioritizes cash flow and profitability over volume, with a commitment to reducing operational risk [15][17] - A strategic redesign is underway, with early actions yielding tangible improvements and a focus on optimizing marketing and agent training [7][14] - The company aims to evolve from a pure insurance distributor to a comprehensive healthcare services platform, enhancing customer relationships and driving future revenue [31][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the early results of their strategic actions and the potential for improved profitability moving forward [32][60] - The company is optimistic about the impact of their cost-saving measures and the growth of SelectRx on future cash flow [44][78] - Management acknowledged the challenges posed by COVID-19 on the Life business but noted improvements in conversion rates and operational efficiency [82][85] Other Important Information - The company is committed to a conservative approach in recruiting and training agents, ensuring they are well-prepared for the upcoming busy season [20][21] - Management highlighted the importance of optimizing marketing sources and refining targeting to focus on high Lifetime Value (LTV) producing leads [21][22] Q&A Session Summary Question: Clarification on guidance for EBITDA and net income - Management confirmed no one-time benefits in the third quarter and reiterated guidance for the fourth quarter, emphasizing a conservative approach [50] Question: Details on marketing channel optimization - The company is optimizing marketing channels without eliminating any, focusing on improving the quality of leads and training agents effectively [54][56] Question: Factors influencing the planned pullback in MA submissions - Management indicated that the pullback is a strategic decision to optimize operations and improve cash flow, with a focus on tenured agents [60] Question: Breakdown of the $200 million in expense reductions - The majority of the savings will come from variable costs, particularly marketing, with some fixed costs also being reduced [62][64] Question: Concerns about market share due to marketing spend pullback - Management expressed confidence in maintaining a significant role in carrier distribution despite the pullback, citing strong relationships with carriers [66][67] Question: Expected increase in spend with SelectRx - The company anticipates some initial costs associated with growth but expects margins to improve as the business scales [78][79] Question: Performance of the Life business in the quarter - Management noted that the Life business faced challenges due to COVID-19 but expects improvements in the fourth quarter as conditions stabilize [81][85]