SelectQuote, Inc. (SLQT) Q2 2026 Earnings Call Transcript
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Overview
The earnings call reveals strong financial performance, with a 12% revenue growth and 26% increase in Healthcare Services revenue. The company maintains a stable fiscal 2026 outlook and anticipates positive cash flow. Despite increased competition in life insurance, the company has strong operational execution and marketing efficiency. The new PBM deal offers stability, and the strategic plan for Medicare Advantage is promising. The Q&A section supports management's confidence, with positive analyst sentiment, suggesting a likely positive stock price movement in the short term.
Key Financial Performance
Senior EBITDA margins 39%, a modest growth year-over-year. This was driven by strong operational execution and marketing efficiency.
Healthcare Services revenue Increased by 26% year-over-year. This growth was attributed to the rapid expansion of the SelectRx service and its impact on the senior population.
Operating cash flow for fiscal 2026 Expected to be $25 million to $35 million, up more than $40 million at the midpoint compared to last year. This improvement is driven by increased cash flow from the Healthcare Services business and optimization of the capital structure.
Policy volume growth 4%, modestly ahead of expectations. This was achieved through a focus on tenured agent retention and proactive connection with policyholders.
Marketing cost per approved policy $326, in line with last year and 20% lower than 2Q fiscal '24. This reflects refined customer targeting and focus on owned and operated marketing channels.
Senior adjusted EBITDA $102 million, in line with last year's strong season. This was supported by near-record EBITDA margins and efficient marketing.
Healthcare Services members Grew 17% year-over-year to 113,000. This growth reflects the demand for SelectRx and its value to patients.
Life insurance revenue Grew 9% to $44 million, driven by a 24% increase in final expense premiums.
Life segment adjusted EBITDA $6 million, down modestly year-over-year. This was due to modest marketing expense pressure and increased competition in the Term Life business.
Consolidated revenue $537 million, a 12% year-over-year growth. This was driven by strong performance in both Senior and Healthcare Services businesses.
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Operating Highlights
Medicare Advantage season: SelectQuote's execution during the Medicare Advantage season drove a successful AEP, with a focus on tenured agent retention and proactive connection with policyholders. Policy volume growth was 4%, and agent productivity increased by 12% compared to two years ago.
SelectRx: SelectRx continues to grow rapidly, increasing revenue by 26% year-over-year. It provides significant clinical value, including a 20% reduction in beneficiary hospital days and addressing nearly 50,000 potential dosage or adverse interaction concerns in 2025.
Healthcare Services: Healthcare Services segment revenue grew 26% year-over-year, driven by demand for SelectRx. Membership grew 17% to 113,000, and the segment is expected to exit fiscal 2026 with an annualized adjusted EBITDA run rate of $40 million to $50 million.
Life Insurance: Life Insurance revenue grew 9% to $44 million, driven by a 24% increase in final expense premiums. The Term Life business remained flat year-over-year.
Agent Productivity: Agent productivity increased by 12% compared to two years ago, supported by investments in technology and information systems.
Marketing Efficiency: Marketing cost per approved policy was $326, 20% lower than 2Q fiscal '24, reflecting improved customer targeting and focus on owned and operated marketing channels.
New Credit Facility: A $415 million credit facility was secured, extending debt maturities to 2031 and improving capital flexibility.
PBM Agreement: A multiyear agreement with a pharmacy benefit manager (PBM) was established, improving visibility into drug reimbursement pricing and supporting profitability expansion.
Carrier Marketing Budget Cuts: A national carrier partner reduced its strategic marketing budget, impacting fiscal 2026 revenue and adjusted EBITDA by $20 million.
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Risk or Challenges
Carrier Marketing Budget Cuts: A national carrier partner significantly cut their strategic marketing budget across all distribution channel partners, including SelectQuote. This decision is expected to impact fiscal 2026 revenue by approximately $20 million.
PBM Reimbursement Changes: Changes in pharmacy benefit manager (PBM) reimbursement rates are expected to create a $20 million headwind to fiscal 2026 EBITDA. This impact is temporary but affects near-term profitability.
Medicare Advantage Policy Disruptions: The Medicare Advantage market has experienced significant disruptions, including elevated plan terminations (7% of plans canceled in each of the past two years) and negative impacts to plan benefits. This creates challenges in customer retention and policyholder management.
CMS Advanced Rate Notice: Preliminary rates from CMS for 2027 have disappointed carrier partners, potentially leading to further disruptions in the Medicare Advantage market. This could negatively impact beneficiaries and SelectQuote's operations.
Agent Productivity and Retention: While agent retention remains high (above 90%), the mix of tenured agents has decreased due to new hiring, which could temporarily impact productivity and operational efficiency.
Increased Competition in Life Insurance: The Term Life business faces increased competition, leading to modest marketing expense pressure and flat premium levels compared to the previous year.
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Guidance & Outlook
Fiscal 2026 Guidance Revision: The company has revised its fiscal 2026 consolidated revenue range to $1.61 billion to $1.71 billion and adjusted EBITDA range to $90 million to $100 million due to two factors: a $20 million headwind from PBM reimbursement changes and a $20 million impact from a national carrier partner's reduced marketing budget.
Senior Division EBITDA Margins: The company maintains its fiscal 2026 target of 20%+ EBITDA margins for the Senior division.
Healthcare Services Division EBITDA Exit Rate: The company expects an annualized adjusted EBITDA exit rate of $40 million to $50 million for the Healthcare Services division by fiscal 2026.
Operating Cash Flow for Fiscal 2026: The company forecasts operating cash flow of $25 million to $35 million for fiscal 2026, representing a $40 million improvement at the midpoint compared to the previous year.
Healthcare Services Membership and Revenue Growth: Membership is expected to remain flat or modestly decline from the current 113,000 level by fiscal 2026, while revenue is projected to grow 20%+ year-over-year.
Cash EBITDA Growth: The company forecasts a 20% increase in cash EBITDA for fiscal 2026 compared to the previous year.
Capital Structure and Debt Maturities: The new $415 million credit facility extends debt maturities to 2031, providing operational flexibility and a path to reduce the term facility interest rate by up to 100 basis points.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you provide more details about the PBM deal struck during the quarter?
A:The new PBM arrangement with a large PBM is a multiyear term that provides stability and predictability. It aligns with expectations and solidifies visibility moving forward.
Q:What risks are there of other carriers following the marketing budget reduction pattern?
A:The decision to reduce strategic marketing investment was made across all third-party distribution, not unique to SelectQuote. The company does not anticipate similar material moves from other carrier partners and emphasizes its role in driving high-quality volume and retention.
Q:How might SelectQuote stand out and specialize ahead of 2027 given the MA advanced rate notice?
A:SelectQuote believes its efficient and high-quality model positions it well. The company highlights its 39% margins for Senior and strong retention results, which make it a valuable partner for carriers seeking quality and efficiency.
Q:Does the new PBM contract have cost-plus components, and could this stabilize the SelectRx business?
A:The new contract is similar to a cost-plus structure with a guarantee, reducing risks like MAC pricing updates. While not identical to other models, it aligns with market trends and could stabilize the SelectRx business.
Q:What levers does SelectQuote have to address MA options given the carrier move?
A:SelectQuote can adjust marketing dollar deployment geographically, focus on customer segments like SNPs, and leverage its diversified model, including the cash-accretive SelectRx pharmacy.
Q:What does the new loan agreement's operating flexibility mean for SelectQuote's strategy?
A:The agreement allows SelectQuote to pursue areas with the best returns, leveraging its synergistic model between Medicare distribution and healthcare services. The company focuses on growing cash EBITDA and operating leverage.
Q:How has SelectRx's scale affected its negotiating position in recent discussions?
A:SelectRx's scale and ability to manage complex members have strengthened its negotiating position, making it a valued partner and enabling favorable terms in pharmacy negotiations.
Q:How much incremental volume can the Kansas facility handle before requiring new capital investment?
A:The Kansas facility has significant capacity for expansion due to efficient machinery and new technology initiatives. These improvements enhance efficiency and reduce costs, allowing for substantial growth without immediate capital investment.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the specifics of how much incremental volume the Kansas facility could handle before requiring new capital investment, providing only general statements about efficiency and capacity.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
America
PBM reimbursement
Services division
Term Life
action
agent productivity
agent service
agreement
announcement
balance sheet
bespoke
capital flexibility
channel
concern
cost policy
credit facility
debt maturity
demand SelectRx
division exit
exit rate
flow flexibility
flow segment
headwind
improvement cash
information technology
medication
mix agent
physician
policyholder carrier
priority
profitability cash
rate notice
recapture
record
return
season year
visibility
SLQT Transcript
SelectQuote, Inc. (SLQT) Q2 2026 Earnings Call Transcript
Positive2-5
The earnings call reveals strong financial performance, with a 12% revenue growth and 26% increase in Healthcare Services revenue. The company maintains a stable fiscal 2026 outlook and anticipates positive cash flow. Despite increased competition in life insurance, the company has strong operational execution and marketing efficiency. The new PBM deal offers stability, and the strategic plan for Medicare Advantage is promising. The Q&A section supports management's confidence, with positive analyst sentiment, suggesting a likely positive stock price movement in the short term.
SelectQuote, Inc. (SLQT) Q1 2026 Earnings Call Transcript
Unknown11-6
The earnings call reflects several challenges: increased costs in the Life Insurance division, dependence on SelectRx amidst reimbursement headwinds, and a decline in Senior segment revenues and EBITDA. Despite revenue growth, the company faces significant short-term financial hurdles, with a negative quarterly EBITDA and declining policy production. The Q&A section reveals uncertainty in reimbursement rate improvements and vague management responses, further dampening sentiment. Without a clear positive catalyst or partnership announcement, these factors collectively suggest a negative stock price reaction in the short term.
SelectQuote, Inc. (SLQT) Q4 2025 Earnings Call Transcript
Unknown8-21
The earnings call presents mixed signals: while there is growth in SelectRx membership and improved EBITDA margins, revenue and Medicare Advantage policies declined. Management's focus on EBITDA and margin expansion over rapid growth, along with AI investments, is positive. However, lower revenue and strategic agent staffing choices raise concerns. Q&A insights do not significantly alter the sentiment, as there are no major catalysts or risks highlighted. Given the lack of market cap data, a neutral stock price movement is predicted.
SelectQuote, Inc. (NYSE:SLQT) Q3 2025 Earnings Call Transcript
Unknown5-13
The earnings call reveals several challenges: missed EPS expectations, regulatory issues, and operational challenges with a reduced agent force. Despite revenue growth, profitability is hindered by facility expansion costs and a focus on consistent margins over membership growth. The Q&A session highlights uncertainties in agent growth and receivable securitization. The lack of a shareholder return plan further dampens sentiment. These factors suggest a negative stock price movement in the next two weeks.
SLQT Slides
SLQT Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
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Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
