SelectQuote Inc ((SLQT)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for SelectQuote Inc. radiated an overall positive sentiment, highlighting strong performance metrics such as significant revenue and EBITDA growth. The company’s successful outcomes in Medicare Advantage and SelectRx, coupled with strategic improvements in its capital structure, were focal points. However, challenges remain with increased Medicare Advantage plan terminations and a projected slowdown in SelectRx growth.
Revenue and EBITDA Growth
SelectQuote reported an impressive 19% increase in revenue, reaching $481 million, alongside a 30% rise in adjusted EBITDA, totaling $88 million compared to the previous year. These figures underscore the company’s robust growth trajectory and efficient operational strategies.
Medicare Advantage Performance
The company’s Senior division showcased strong results, with Medicare Advantage policy volume growing by 6%. This growth was accompanied by remarkable agent productivity and a substantial increase in the adjusted EBITDA margin, which rose to 39% from the previous year’s 32%.
SelectRx Membership Expansion
SelectRx saw a remarkable 54% membership growth year-over-year. Revenues in this segment surged by 64%, reaching $183 million, with an annual run rate now exceeding $700 million. This expansion speaks to the program’s effectiveness and market appeal.
Capital Structure Improvement
SelectQuote made strategic strides in improving its capital structure through a $350 million preferred equity offering, spearheaded by Bain Capital and others. This initiative is projected to decrease ongoing capital costs significantly and reduce annual cash interest obligations by approximately $30 million.
Medicare Advantage Plan Terminations
The company faced challenges with Medicare Advantage plan terminations, which reached 6% this season—about fifteen times higher than usual. Although SelectQuote managed to recapture over 30%, the net cash impact was still estimated at around $5 million.
Moderation in SelectRx Growth
Despite earlier successes, SelectQuote anticipates a moderation in SelectRx membership growth in the latter half of the fiscal year. This expected slowdown follows initial strong performance in converting Annual Enrollment Period (AEP) enrollees.
Guidance Increase
SelectQuote has raised its fiscal 2025 guidance, reflecting confidence in continued strong performance. The company expects revenue between $1.5 billion and $1.575 billion, with adjusted EBITDA projected between $115 million and $140 million. These forecasts are supported by the company’s operational efficiencies and strategic capital enhancements.
In closing, SelectQuote’s earnings call painted a largely optimistic picture of the company’s current state and future prospects. While there are areas of concern, such as Medicare Advantage plan terminations and a slowdown in SelectRx growth, the overall sentiment remains positive, driven by strong financial results and strategic moves to bolster the company’s capital structure.
