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Welcome to SelectQuote's Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session. [Operator Instructions] It is now my pleasure to introduce Matt Gunter, SelectQuote Investor Relations. Mr. Gunter, you may begin the conference.

Thank you and good morning everyone. Welcome to SelectQuote's fiscal third quarter earnings call. Before we begin our call, I would like to mention that on our website, we have provided a slide presentation to help guide our discussion. After today's call, a replay will also be available on our website. Joining me from the company, I have our Chief Executive Officer, Tim Danker; and Chief Financial Officer, Ryan Clement. Following Tim and Ryan's comments today, we will have a question-and-answer session. As referenced on Slide 2, during this call, we will be discussing some non-GAAP financial measures. The most directly comparable GAAP financial measures and a reconciliation of the differences between the GAAP and non-GAAP financial measures are available in our earnings release and investor presentation on our website. And finally, a reminder that certain statements made today may be forward-looking statements. These statements are made based upon management's current expectations and beliefs concerning future events impacting the company and therefore, involve a number of uncertainties and risks, including but not limited to, those described in our earnings release, quarterly report on Form 10-Q for the period ended March 31, 2025 and other filings with the SEC. Therefore, the actual results of operations or financial condition of the company could differ materially from those expressed or implied in our forward-looking statements. And with that, I'd like to turn the call over to our Chief Executive Officer, Tim Danker. Tim?

Thank you, Matt and thanks to everyone joining us today. SelectQuote continued to drive strong results in fiscal 2025 and had another successful quarter across each of our 3 segments: Senior, Healthcare Services and Life Insurance. On a consolidated basis, our fiscal third quarter revenues of $408 million grew by 8% compared to a year ago. The growth was again driven by very strong member onboarding in our SelectRx business which now has nearly 106,000 members, representing a 41% increase compared to a year ago. It's remarkable to us that the business has nearly $675 million in trailing 12-month revenues that only started 4 years ago with 2 small pharmacies that had approximately $20 million in revenues and fewer than 5,000 members at the time of acquisition. The business' rapid success remains a touchstone example of how SelectQuote can drive value for customers through personalized coordination of information and service delivery. Our consolidated EBITDA of $38 million in the quarter demonstrates strong execution across our segments as we maintain healthy overall margins despite a large shift in our mix between Senior and Healthcare Services. Mix shift was again a factor in the pace of our consolidated EBITDA growth relative to revenue, given lower relative margins in Healthcare Services compared to Senior. We're proud of the result and believe there remains significant EBITDA opportunity in both our Senior and our Healthcare Services segments. I'll speak more to our strategic focus on Healthcare Services as a source of profit and cash flow later in my remarks. As mentioned, third quarter operating highlights were strong across each of our 3 segments. Senior delivered healthy 27% margins for the third quarter which is very strong considering such a unique and tumultuous Medicare Advantage season. As we indicated on prior calls, given a more restricted capital structure last summer, we did not hire as large of a class as we normally would have in this environment. So we're especially proud of our execution given we operated an agent force that was 26% smaller this season which dampened volumes. I'll touch on Senior and the Medicare Advantage environment as a whole in just a minute. Along with others in the industry, we were pleased to see the higher-than-anticipated final rate notice that came through in April for the 2026 plan year. We believe the increase will progressively help carriers with the Medicare Advantage pressures they faced in the most recent season. For SelectQuote, we expect these higher carrier reimbursement levels to create a less disruptive market backdrop for our customer base and seniors more broadly as we prepare for the next AEP. Turning to Healthcare Services. We delivered strong profitability despite rapid growth. As I alluded to earlier, we believe the scale of our membership now provides SelectQuote with a great foundation and we see an opportunity to drive more consistent margins and cash flows going forward. In our Life Insurance business, we drove another impressive quarter on both the top and bottom line. Life revenues grew 13% and profits more than doubled compared to a year ago. The business continues to drive a stable and strong source of EBITDA margin profitability and a highly visible source of cash flow. Across our entire platform, SelectQuote continues to generate highly attractive revenue compared to the cost to acquire customers. For the third quarter, our trailing 12-month revenue to CAC was 5.8x which compares to 4.2x a year ago. We take a lot of pride in this metric as the financial barometer of SelectQuote's overall marketing efficiency and as an indicator of the value we provide to our customer base. When we leverage our superior data and agent-led capabilities, our customers receive better service and care. Clearly, the economic outcome is good for our business but the metric is especially rewarding given the tangible benefit to Americans, particularly in what has been a volatile and confusing year for health care policy. SelectQuote continues to solidify our reputation in the health care ecosystem as a trusted and valuable partner which is more important now than ever. Now on Slide 4. Let me focus on Medicare Advantage and SelectQuote's performance through the OEP period. As noted, we're very pleased with our execution through such a unique and challenging Medicare Advantage season. While our agent force was smaller compared to a year ago, the team drove impressive volume and efficiency results. Third quarter policies totaled 168,000, down less than 10% compared to an agent force that was 26% smaller. As we noted last quarter, carrier plan terminations and significant changes to policy features created noise and decision stress for seniors this Medicare Advantage season. That backdrop made our agent-led model all the more important. We're very proud that we were able to help so many people. Even more impressive are the efficiency and profitability improvements in Senior during 3Q. As you can see at the right of this page, our strong close rates year-to-date serve as a testament to how our technology arms our agents with new data and tools in each unique season. Looking forward to fourth quarter, as we exit the OEP season, we're refining our approach due to the introduction of changes to beneficiary eligibility during the special election period. Although we're pleased with the continued performance of our agents, these industry changes present a headwind to close rates and volume relative to prior years. In addition to throughput, our Senior segment also drove efficiency across both marketing and operating expenses. Marketing expenses per approved policy was down 9% and overall operating expenses per policy were down 4%. We focus each season on optimal profitability but are especially proud of our operating expense performance given a lower year for policy volume. Again, SelectQuote's technology and information advantages continue to benefit our overall business, not just through incremental revenue opportunity but also through operating efficiency. The combination of each of these factors contributed to the strong 27% adjusted EBITDA margins despite lower year-over-year policy volume. Over a year where Medicare Advantage posed challenges for many industry participants, we're proud that our platform not only succeeded but improved on a very strong fiscal 2024. Specifically, our year-to-date Senior margins are currently at 30% which compares to 26% at this point last year. The past 3 years' results across a wide range of selling seasons gives us a great deal of conviction and our ability to consistently drive profit margins above our long-term target of 20%. On Slide 5, I'd like to expand on our plan to drive higher profitability in our Healthcare Services segment. As I noted, we believe 106,000 members in our SelectRx business represents critical mass. Having created a revenue base of nearly $675 million over the past year, we see an opportunity to focus on generating more consistent margins and cash flows to drive shareholder value. As we've discussed, SelectRx profitability has lagged membership and revenue given growth investment and the seasoning of our member base. We're proud of the progress we've made to date but believe there is an opportunity to better identify the customers who will benefit from the SelectRx offering the most. You have heard us speak to the ramp of SelectRx members to full box shipments. While that continues to be a focus for new members, we've also observed a wide range of customer use cases. We'll share more when we speak to our 2026 outlook but we believe there's an opportunity to align SelectRx's best service attributes with those Americans that need us the most. Over the remainder of fiscal 2025 and into fiscal 2026, we plan to increase the mix of members that benefit most from SelectRx who typically also have the most attractive unit economics. Now that we've achieved meaningful scale, our primary goal will be to increase efficiency and build a more consistent margin profile for the business. In the near term, this will likely translate to slower membership growth. As we've announced last September, membership and volume growth required additional investment in facility expansion with the opening of our Olathe facility here in Kansas which shipped its first box on April 7. In the medium and long term, we believe the scale and efficiency gains of this new facility will be accretive but we expect a near-term headwind to profitability which will dampen our fourth quarter results. Ryan will share more about the pacing of this dynamic in our outlook but I'll close this topic by emphasizing 3 unchanged attributes about SelectRx and our Healthcare Services capabilities. First, our SelectRx members drive visible revenue and cash flow. It has been clear to us that the value of our medication management adherence solution is widely proven. Our job now is to improve efficiency and drive a more consistent margin profile for the business. Second, regardless of the membership mix, there remains significant operating leverage potential in Healthcare Services which should continue to grow as we broaden our value-added service offering. Third, while less visible, we know from our policyholders and agents that there's a halo effect to the differentiated value we deliver. Policyholders that are also SelectRx members become further attached to SelectQuote. As a result, insurance providers and caregivers increasingly seek us out for partnership. In the past, we've called this concept a health care information hub or flywheel, whatever we call it; we know that it is a reality with our customers and partners. Finally, before I turn the call over to Ryan, I'd like to briefly comment on the Department of Justice complaint that was recently filed against many participants in the Medicare Advantage system. We've been cooperating fully with the Department of Justice's inquiries since we first received the previously disclosed subpoena in 2022. However, we firmly reject these allegations which we believe represent a misunderstanding of our industry and our business. We planned amount of vigorous defense as this case moves forward. SelectQuote has a 40-year history as a high-integrity organization that has helped millions of Americans find the right coverage for their health needs. Additionally, we've invested significant capital into compliance across our whole organization from our agents to our management and take significant measures to fully comply with all federal laws and regulations. I assure you that the culture at SelectQuote is one where the customers' needs are prioritized. We look forward to detailing this history as the matter develops. We have always been and we will continue to be the compliant and fair dealing standard bearer in the Medicare Advantage industry. We will continue to deliver high-quality advice to the customers we help to navigate the complicated array of Medicare health plan options. This is obviously an active legal matter, so we won't be commenting further on any particulars at this point. And with that, I'd like to hand the call over to Ryan. Ryan?

Thanks, Tim. Starting on Slide 6. SelectQuote generated $408 million in revenue for the third quarter, up 8% compared to a year ago. Similar to last quarter, our top line growth was driven by our SelectRx business. But as Tim mentioned, operating performance across each of our businesses was very strong. For Senior specifically, the OEP period was similar to AEP, where agents delivered higher Medicare Advantage volumes than originally forecasted, driven by impressive productivity and close rates. Consolidated adjusted EBITDA totaled $38 million for an overall margin of 9%. We are pleased to have maintained healthy consolidated margins despite a significant mix shift from the growth in SelectRx which is still a lower-margin business. As Tim noted, we see Healthcare Services as a strategic opportunity, not just for our new revenue streams but for scaled profitability in the coming years. Moving to Slide 7. Our Senior results were quite strong despite operating with a smaller agent population for the season. Revenue totaled $169 million in Q3, driven by the strong agent efficiency we mentioned. Similar to last quarter's AEP, we continue to see seniors seek our tenured agents for much needed answers in such a confusing and volatile Medicare Advantage backdrop. The end result was high-value service to our customers but also significant operating efficiency in both marketing and agent throughput. Put more plainly, more seniors came to us when they needed us most and our aligned model drove very strong margins. Our adjusted EBITDA in Q3 was $46 million which declined by 26%, in line with the 26% reduction in agent headcount compared to last year. Despite a smaller agent population, the senior business drove attractive EBITDA margins of 27%. The performance since our strategic redesign has exceeded our expectations in 3 distinctly different Medicare Advantage environments. As originally intended, our strategic redesign was undertaken to build a SelectQuote for all seasons. We firmly believe that goal has been achieved and we see a highly durable value creation engine for customers and shareholders as a result. On Slide 8, I'll briefly review our Senior operating performance. As mentioned, with a 26% reduction in our agent workforce compared to last year, we're very pleased with the increased agent level efficiency which led to only a 10% decline in our Medicare Advantage approved policy generation. The difference again was a combination of seniors proactively seeking us out and our tenured agents' ever-improving ability to leverage SelectQuote's data and tools to provide the most effective and valuable service possible. We are proud of the division's strong results. It is worth noting on the heels of meaningful progress on the capital structure, we've already begun planning for the next AEP and OEP seasons. Next, let me speak to LTV which was $915 for Q3, down 8% compared to a year ago. The key driver was a shift in our commission structure. For a select few carrier partners, you will recall that we had shifted to a higher mix of upfront commissions compared to what was historically been a ratable time line. The changes in our modeled LTVs is the result of those upfront structures largely reverting back to ratable structures. On Slide 9, as Tim noted, our SelectRx membership continued to grow substantially in Q3. We ended the quarter with 106,000 members, up 41% compared to a year ago. As a result, Healthcare Services revenue of $190 million grew 53% year-over-year and has a trailing full year revenue base of $674 million. Healthcare Services produced $6 million of adjusted EBITDA which we are very pleased with. We will provide more detail on our outlook for Healthcare Services in fiscal 2026 in our next earnings call. But as Tim noted, our goal is to drive improvements in both profitability and cash flow in the future. We have confidence in our economics and believe the medium-term results will drive value for shareholders. On Slide 10, I'll end the segment review with our Life business, where we continue to be pleased with results. The business performed well on both the top line and from a cash flow perspective. Revenue during the quarter was $46 million and adjusted EBITDA was $6 million which was up 103% year-over-year. EBITDA margins of 14% nearly doubled compared to 8% last year. Both our final expense and term life business contributed to the highly successful quarter with term life premiums up 13% and final expense premium up 17% year-over-year. These results were fueled by strong agent retention and a highly tenured agent force that drove both strong productivity and customer retention. Turning to Slide 11. I will conclude my remarks with an update to our fiscal 2025 outlook. We maintain our full year ranges for revenue and adjusted EBITDA. That said, we do expect to finish the year in or towards the lower half of the ranges based on the following. First, as Tim noted, new beneficiary eligibility parameters during the special election period could drive additional friction for policy volumes and close rates compared to previous seasons. Second, as we ramp our Kansas distribution facility and focus less on member growth and more on achieving consistent margins and cash flow, we could encounter near-term headwinds to our Healthcare Services EBITDA. While accretive in the long term, we expect fiscal fourth quarter EBITDA to potentially take a modest step back. In addition, fourth quarter growth will taper due to seasonal trends as we exit AEP and OEP season. Lastly, we are adjusting our net income expectations to a range of negative $1 million to $28 million to reflect the impact of the change in our stock prices had on the fair market value of the warrants issued as part of the transactions announced during this fiscal year. I'll conclude by echoing Tim's comments about the strength and potential of our overall model. Fiscal 2025 has been a year of significant progress and transition for our company. In addition to the strong growth and results in all 3 business lines, we have made meaningful progress on our capital structure, including the $100 million securitization in October and the $350 million strategic investment in February. These deals have lowered our interest expense, extended our maturities and increased our available liquidity. We produced $71 million in operating cash flow during the quarter and ended the quarter with an $86 million cash balance. Our commissions receivable balance of over $1 billion remains a significant asset and source of future cash flows as we continue to evaluate additional alternatives to further optimize our capital structure. We are proud of the results we delivered this Medicare Advantage season and look forward to sharing updates on the planned scale of our sizable Healthcare Services opportunity. With that, we will open the call up for questions.

[Operator Instructions] Your first question comes from the line of George Sutton with Craig-Hallum.

I wondered if you could walk through the separation of the growth or the decline you saw in Medicare Advantage and obviously, the significant growth of SelectRx. And I'm asking from the concept of the feeder of customer opportunities into SelectRx and any adjustments that you might be making there going forward?

Yes, I'd be happy to. George, thanks for the call. I think on this 2-part question, I might ask our President, Bob Grant, to talk about our Medicare dynamics. I'm happy to touch on health care as well. Bob?

Yes. So on the Medicare side, George, SEP was -- or sorry, OEP was a really strong quarter for us from an overall close rate perspective and cost. But to Ryan's point earlier, we were down 26% on our agent count which is why we ended up seeing a little bit lower volume and lower overall EBITDA there. However, one of the reasons for such a strong quarter which Tim will get into Healthcare Services from a growth perspective in the SRx space is we did have a lot more tenured agents. And we've been very open in the past that they are better at understanding how to deal with customers' needs, both on sales and folks that don't buy a policy where they end up transferring them over to Healthcare Services. So we did see a little stronger, what I would say, attachment rate or just overall efficiency in that number which is why you saw one kind of outpace the other. So that also helps our attachment rates in a good way on the customers that really, really need SelectRx and we see that as a positive. So that's why you saw what you saw there. Tim can broadly speak about Healthcare Services. But from direct to your question, the reason we didn't see kind of the reduction in both on the growth side with that.

Yes, just to add to Bob's good comments there. Overall, we're really pleased with the ability of the model to leverage our strong MA growth and have that translate into opportunities for our Healthcare Services platform. I think you've seen that through the growth of critical mass now over 100,000 members. We will anticipate though that Senior -- Healthcare Services will lag our Senior just a bit and just in terms of timing and there is some seasonality that we called out as well. But overall, really pleased with the synergy between both sides of the platform.

So I wondered if you can give us thoughts on agent growth going into this next season. Are the plans to take advantage of improvements in that market, particularly from a regulatory perspective?

Yes. Great question. Hiring is underway right now. It's not going to be the same as last year per se but we will talk way more about that in our upcoming guide on the next call. So we feel good about where we are with hiring though.

Certainly as you highlighted -- yes, George, real quick. Certainly, as we highlighted on the last call, I think the improved capital position that we're in gives us an opportunity. We're very focused and feel good about where we're at in the early stages of hiring and do look forward to sharing more on our fiscal '26 guide in August.

And then, just finishing up on your better financials. Can you talk about receivable securitization? My anticipation has been that we might see additional receivable securitization.

Yes. Great question, George. Obviously, we've made great progress on the capital structure more broadly with the first securitization. We've been obviously focused on getting the pref across the finish line which we're happy to share with our last earnings call. And we've hired Jefferies to explore a variety of options. We do see securitization as a potential path. It's not the only path. We look forward to sharing additional updates when the time is right but we do have several irons in the fire.

Your next question comes from the line of Ben Hendrix with RBC Capital Markets.

This is Michael Murray on for Ben. I appreciate your commentary on MA LTV and the impact of the shift in commission structure. Just wanted to see how should we think about MA LTV moving forward? Do you anticipate an ongoing headwind as the shift continues?

Yes. So we -- I mean, as you noted, we did see a shift from upfront to ratable which did lead to a decline. That's simply a continuation of changes we had announced in prior quarters. All that said, we do expect in the fourth quarter, it will be down year-over-year. We'll look forward to sharing additional details on our longer-term outlook on our next earnings call. But in fourth quarter, we do expect it to be down year-over-year.

Okay. And then just shifting to SelectRx. Obviously, another great quarter. It's exciting to hear about the new facility opening in Kansas. Obviously, we heard your commentary on fourth quarter margin expectations. But just longer term, bigger picture, how should investors think about the growth and margin targets for this business?

Yes, Michael, I'll comment on that and Ryan, maybe have you add to it here. But yes, I do think just stepping back, we're really pleased with the progress. We've got critical mass and scale here with over 100,000 patients. And so I think we would ask investors to also think that part of our job now is to further prioritize efficiency and consistency of margins. So we are spending a lot of time focused on that and analyzing that. And I think we are finding that those members that generally benefit the most from our adherence solution also have the best unit economics. Again, customers with multiple chronics, they're juggling a lot of prescription drugs. And so we're seeing some opportunities to refine that so that we can drive even improved margins and cash flow profile. We had mentioned on the call some investment in the Kansas facility. We think longer term, that is certainly going to drive these efficiency gains but there is some near-term cost there in the fourth quarter as we scale that up. Ryan?

I think you said it well. I think for the fiscal 2025, we still expect single-digit EBITDA margins for the year. And as we refine our membership parameters and scale the Kansas facility, we do see a path to margin enhancement and expansion in future quarters.

Your next question comes from the line of Pat McCann with NOBLE Capital Markets.

I wanted to ask about the final rate notice. Could you -- I know it's early but could you give your -- kind of your view on how you think the upcoming AEP, how the environment should look relative to the one that we just came out of as far as market dynamics. What would be your early read given the final rate notice and how that changes?

Pat, great question. We definitely believe the final rate notice was a positive development as the carrier reimbursement rates were substantially higher than the preliminary rates as we've been in discussions with carriers, they definitely have felt like this is a step in the right direction. This helps improve revenues and you've heard many carriers commented on higher medical cost trends and elevated plan utilization. So we certainly view that as a positive development. We would say that the carriers -- some carriers are still focused on increasing margins. They're in the middle innings of a multiyear plan to get to their target profitability but we certainly believe that this is a positive development. Bob, anything you'd like to add?

No. I mean I think that, to Tim's point, was a little bit, I think, up in the air as far as what CMS was going to do, right, just coming in early and then also the rate, frankly, being a little bit higher too in December, I think, than people anticipated but it was great that they took into account this year versus a lagging year like they had in the past with where inflation is going and other things. So I think shows that CMS has support for the private side of Medicare. Now do they want to clean some things up that we're very supportive of, frankly, as far as making sure that everyone has access to quality health care, especially a lot of the focus that we have which we've talked about in the past on rural areas, things like that, yes. But as far as just the advanced rate notice and the rate notice, very positive from all kind of sides.

And then, I just wanted to briefly touch on the Healthcare Services segment. First of all, congrats on opening the new facility. And with that, I'm wondering maybe if you could reiterate the benefits you expect to realize the incremental benefits from that facility as well as maybe if you could touch on the profitability drag that you mentioned for fiscal Q4? And would that go beyond Q4? Or what's sort of the time frame for the initial drag on profitability before you sort of get through that?

Yes. So with respect to the Kansas facility, we're obviously really excited about having it open. And longer term, see benefits in operating efficiency, throughput and even customer experience. With that all being said, there is a short-term lag in terms of profitability or drag on profitability as a result of simply investments into the facility as we scale up, we will outgrow and we'll see margin expansion. But in the near term, I think on a quarterly basis, you can think of it as low-single digit million dollar investment. And again, that we'll scale into it over the next couple of quarters.

I will now turn the call back over to Tim for closing remarks.

Thank you, everyone and we appreciate your time and support this morning. Most of all, thank you to our incredible teams at SelectQuote for another season of world-class service and execution. Our customers needed you more than ever this year. And because of our high-touch and information-driven approach, they received the help they needed and our business benefited as well. Looking ahead, we're energized and have conviction that our overall business can generate additional operating leverage and resulting value to our shareholders. We'll share more on our view for fiscal 2026 on the next call and hope to see and speak to many of you between now and then. Thank you again for your time this morning. Have a good day.