SelectQuote Earnings Call: Mixed Sentiment and Strategic Outlook

SelectQuote Inc ((SLQT)) has held its Q1 earnings call. Read on for the main highlights of the call.

SelectQuote’s recent earnings call revealed a mixed sentiment, reflecting both achievements and challenges faced by the company. On the positive side, SelectQuote reported significant revenue growth in its consolidated and Life Insurance business, alongside operational successes with the new Kansas facility. However, the company encountered difficulties with declining revenues in the Senior segment due to policy changes and a substantial EBITDA impact in Healthcare Services caused by reimbursement rate adjustments. These hurdles have led to unmet fiscal targets, impacting the overall sentiment of the earnings call.

Consolidated Revenue Growth

SelectQuote reported a consolidated revenue of $329 million, marking a 13% growth over the same period last year. This growth was primarily driven by strong performance in the Healthcare Services segment, showcasing the company’s ability to expand its revenue streams.

Life Insurance Business Growth

The Life Insurance segment saw a nearly 20% increase in revenues, fueled by balanced growth in term life and final expense policies. This expansion highlights the company’s effective strategies in capturing market opportunities within the life insurance sector.

New Kansas Facility

The new Kansas facility is progressing as planned, delivering efficiency gains that align with expectations. This operational achievement is a testament to SelectQuote’s commitment to enhancing its infrastructure and operational capabilities.

SelectRx Clinical Value

SelectRx has demonstrated its value by improving medication adherence and health outcomes, reducing hospital days by around 20% for its members. This improvement benefits the broader healthcare system, underscoring SelectQuote’s contribution to healthcare efficiency.

Senior Revenue Decline

The Senior segment experienced a significant decline in revenues, dropping to $59 million from $93 million a year ago. This 32% decrease in policies was driven by changes in beneficiary eligibility requirements, posing a challenge for the company.

Healthcare Services EBITDA Impact

The first quarter saw a negative impact on Healthcare Services EBITDA due to changes in drug reimbursement rates with a SelectRx PBM partner. This adjustment affected the fiscal year’s first half by approximately $20 million, highlighting a significant financial challenge.

Consolidated EBITDA Loss

SelectQuote reported a quarterly EBITDA loss of $32 million, which fell below the guided loss range of $25 million to $30 million. This shortfall was attributed to SelectRx margin dynamics, reflecting ongoing financial pressures.

Unmet Fiscal Targets

The company no longer anticipates reaching its $50 million EBITDA target for fiscal 2026. Instead, SelectQuote aims for an annualized run rate of $40 million to $50 million by year-end, indicating a revision of its financial goals.

Forward-Looking Guidance

Despite the challenges, SelectQuote remains optimistic about future prospects. The company expects to exit fiscal 2026 with an annualized EBITDA run rate between $40 million and $50 million. Additionally, SelectQuote projects revenues of $1.65 billion to $1.75 billion and adjusted EBITDA between $120 million and $150 million, with expectations of being cash flow positive for the year. The company is also working towards a longer-term agreement with its PBM partner, aiming for normalized reimbursement rates by January 1, 2026.

In summary, SelectQuote’s earnings call presented a mixed picture, with notable achievements in revenue growth and operational advancements, contrasted by significant challenges in the Senior segment and Healthcare Services. While the company faces financial hurdles, its forward-looking guidance suggests a strategic focus on overcoming these obstacles and achieving long-term growth.