SelectQuote, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Medicare Advantage Enrollment: Senior segment performed well in a disruptive selling season, with tenured agents and targeted marketing proving effective. Buckwood had strong policy close rates.
• Financial Performance: Consolidated revenue grew 19% to $481 million, and adjusted EBITDA grew 30% to $88 million. 2025 guidance for EBITDA and net income raised.
• Capital Structure: Completed a $350 million preferred equity offering to improve capital structure, providing operational control and growth flexibility.
• Agent Efficiency: Agent headcount was 22% lower than last year, but produced 6% more MA policies. Strong agent close rates and efficient marketing/operating spend.

Segment Performance

• Senior Segment: Generated $256 million in revenue in Q2, better than original plan. Adjusted EBITDA was $101 million, up 28% year over year with a margin of 39%. Policy volume was 248,000, a 6% growth. Medicare Advantage lifetime value decreased 3% to $907.
• SelectRx: Ended Q2 with 97,000 members, up 54% year over year. Revenue was $183 million, up 64% year over year, with an annual run rate exceeding $700 million.
• Health Care Services: Produced $2 million of adjusted EBITDA. AEC quarter is typically high upfront spend, with margins expected to be low single digits in 2025.
• Life Business: Revenue was $40 million, adjusted EBITDA was $7 million, up 62% year over year, with a margin of 19%.

Guidance

• Raised 2025 revenue guidance to $1.5 billion to $1.575 billion.
• Raised adjusted EBITDA guidance to $115 million to $140 million.
• Raised net income guidance from a loss of $59 million to income of $11 million.
• SelectRx membership growth expected to moderate in the second half but continues to scale.

Risks

• Uncertainties in forward-looking statements, including market conditions, carrier plan changes, and regulatory risks.

Question and Answer

Q: Thoughts on guidance midpoint and OEP/investment?

A: Tim and Ryan discuss ongoing investments in health care services and senior division margins, noting investments in a Kansas facility and senior division margins expected in low to mid-twenties.

Q: SelectRx synergies?

A: Ryan talks about attachment rate, market opportunity, and the correlation between SelectRx and the senior segment, highlighting synergies in customer engagement and market penetration.

Q: Use of proceeds from $350 million offering?

A: Tim discusses using proceeds to pay down debt, improve liquidity, and continue securitization efforts, stating it sets the business up for growth in health care services and insurance distribution.

Q: Agent force and potential business?

A: Tim and Ryan discuss agent efficiency, strategy, and how capital allows for responsible growth, noting tenured agents outperformed and capital enables growing at a responsible pace.

Q: Regulatory outlook and SelectRx adoption?

A: Ryan and Tim discuss a favorable regulatory environment for Medicare Advantage and factors driving SelectRx adoption, including improved customer satisfaction and regulatory changes reducing donut holes.