SelectQuote, Inc.

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Welcome to SelectQuote's third quarter earnings conference call. All lights have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you'd like to withdraw your question, press the pound key. It is now my pleasure to introduce Matt Gunter, SelectQuote Investor Relations. Mr. Gunter, you may begin the conference.

Thank you, and good afternoon, 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 this afternoon. 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, Raf Sadun. Following Tim and Raf's comments today, we will have a question and answer session. In order to allow everyone the opportunity to participate, we do ask that you limit yourself to one question and one follow-up at a time, and then fall back into the queue for additional questions. As referenced on slide two, 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, annual report on Form 10-K, 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 thank you to our investors and analysts for joining us again. We thank you for your time, especially since we've taken a little more than usual this quarter with our population health announcement last week. We will highlight that important and exciting initiative again on this call, but for those of you that missed it, we'd encourage you to check out our presentation from last week. Population health and value-based care is a large opportunity for SelectQuote, but we're equally pleased to report that our core business continued to excel in the third quarter. So let's begin with a review of our quarter on slide three. SelectQuote generated consolidated revenues of $267 million, up 80% year-over-year, and adjusted EBITDA of $65 million, up 48% over last year. Excluding the impact of a positive tail adjustment from fiscal third quarter 2020, consolidated revenue would have grown 91%, and adjusted EBITDA would have grown 84%, with margins roughly flat year over year. As you know, the third quarter includes the open enrollment period, and it's the second largest quarter of the year from a contribution standpoint. Similar to last quarter, our senior business led the way with our results. Let's start with some of our senior highlights. This quarter, we grew senior revenue 101% and adjusted EBITDA by 63% over last year. Adjusting to the one-time tail adjustment I just mentioned, revenue would have grown 119%, and adjusted EBITDA would have grown 101%. This marks the fifth straight quarter of revenue growth over 100%, and similar to last quarter, this growth comes on a challenging compare. We had already grown revenue and EBITDA by 109% and 54%, respectively, in 2020. We grew both submitted and approved Medicare Advantage policies by over 100%, and did so with stability in both our LTVs and our REVD-CAC. Best of all, we are generating this growth in a much more cash-efficient way than originally anticipated. The key driver here is the consistent gains we've made in agent productivity, which were up again for the quarter as we grew agents 75%, but also expanded agent productivity by 17%. Put very plainly, our results continue to serve as proof points that we have built a differentiated and complete approach to the business that can scale significantly without sacrificing quality or returns. Across our model, we also had highlights beyond senior. Clearly, we're excited about the huge opportunity with value-based care, and our population health platform is highlighted by our announced acquisition of ExpressMed Pharmaceuticals, which is now branded SelectRx, and the creation of SelectLit Ventures, which I'll speak more to that in a minute. In our life division, our final expense premiums grew 176% and 112% sequentially. As we look out over the remainder of the calendar year, we would also note that with AEP and OEP completed, our flex agents will return to the life division, which will help further support these results. Lastly, based upon our strong results in attractive capital markets, we were able to further strengthen our liquidity and reduce our overall interest rate by about 20% to 5.75% with the refinancing of our term debt, which generated an additional $292 million of committed capital to pursue the long-tailed and significant market opportunity available to SelectQuote. In summary, we are very pleased with these results and continue to build on our conviction that SelectQuote is designed to achieve high-quality growth for years to come. Best of all is, with population health, our addressable market is now bigger, and our ability to address that market has never been stronger. With that summary, let's turn to slide four and review the open enrollment period. First, we had approximately 860 active senior agents, which is up 75% over last year, and as mentioned, these agents were 17% more productive compared to the same period last year. Turning to our lifetime values, our Medicare Advantage policies ended the third quarter at $1,362, which was basically flat compared to a year ago. Our REB to CAC ratio of 3.1 also continues to be stable and attractive, especially in the type of policy growth we drove in the quarter. Finally, while so much of our discussion in AEP and OEP focuses on the initial policy sale, we'd be remiss in not highlighting the contribution of our customer care, our CCA teams, as they connected with policyholders throughout the use of their policies. Our CCA team conducted over 600,000 calls with customers during the quarter, representing an increase of 146% over last year. As we turn to slide five, let me provide a brief overview of the exciting population health strategy that will add another growth driver and significant service differentiator for SelectQuote. At the highest level, we all know that healthcare in the U.S. is largely inefficient, complex, and an overly costly system for patients to navigate. This is at the core of how SelectQuote's senior business was built. In terms of the broader landscape in population health, we see three fundamental pillars to improving patient outcomes and reducing healthcare costs. First, helping the patient select the right low-cost and benefit-rich Medicare Advantage or Medicare Supplement plan to meet their unique healthcare needs is the key first step. And our agent and technology-driven model at SelectQuote is optimally positioned as evidenced by the policy growth we've been exhibiting since we've gone public. But enrolling the customer in the right plan fit is only the first step in that journey. As customers may choose to enroll as free members in population health, we will help them fully understand and utilize the great benefits in their MA and MedSupp plans. Our population health customer success agents will periodically contact customers to review Medicare plan benefits. The population health team will also gather and regularly update our records through healthcare literacy assessments, health risk assessments, and prescription drug assessments so that we and our partners can better facilitate care for improved patient outcomes. These regular profile updates also create new, meaningful revenue streams at low incremental customer acquisition costs and feature attractive cash conversion. Second, we have realized that we can do more for both our MA and MS members and non-members to help with their healthcare journey. With Population Health, we have partnered with a network of leading value-based primary care providers. At their request, we will provide Population Health members introductions to best-in-class VBC providers available in their area. While we continue to explore relationships with additional providers, our current partners, including such market leaders as ChinMed, Conviva, Iora Health, Oak Street Health, and others, operating 430 clinics in 25 states and are rapidly expanding. Through our partnership with leading telehealth provider, HEAL, we can expand the reach of value-based care offerings to much of the rest of the United States, including patients in smaller towns and rural areas. In addition to providing patient education about value-based primary care, we can offer these service providers valuable data and insights to target their expansion and growth. Third, we are deeply committed to reducing patient complications and worsening chronic conditions brought on by poor drug adherence and by adverse drug events. We feel this pillar is so foundational that we recently acquired ExpressMed Pharmaceuticals, a leading specialized medication management pharmacy, ExpressMeds Medicare members average taking over 10 prescription drugs each, yet ExpressMeds has been able to achieve drug adherence in excess of 95% compared to a national average for seniors on 5-plus drugs of around 50% adherence, and that has led to high member retention. Through SelectRx, we will provide patients with a personalized home delivery pharmacy solution featuring customized pill packs and automatic prescription refills, along with regular population health CSA touchpoints to improve adherence and patient outcomes. As we noted last week, we will supplement these three foundational pillars with a growing array of complementary services to make SelectWood and Population Health a true one-stop shop to meet patient needs. Best of all, our flexible and adaptable tech platform makes the integration and rollout of new service offerings relatively straightforward and immediate. Our goal is to turn population health into a complete healthcare ecosystem that can transform the health and wellness of our members all in one place. As you've heard us say in the past, we believe the TAM for SelectQuote's core senior MA business is as large as $30 billion. As we consider the possibilities for population health, we believe the combined market for pharmaceutical and value-based primary care for Medicare Advantage could represent a $1 trillion market opportunity. We are really excited about our early progress. In about a month's time, over 30,000 customers have opted in to become population health members, representing an opt-in rate of over 80%. We've conducted nearly as many health risk assessments and health literacy assessments over that same period. And since launching our initial trial in September 2020, we have provided around 7,000 customers with introductions to value-based care service providers. On slide six, I'd like to drill down a little more about why population health is important beyond a large market opportunity. We feel population health creates a compelling opportunity to provide even more value to the customers we serve and will reinforce our core Medicare distribution business. To put it bluntly, the initiative is so exciting because the value we provide to the inpatient is so well aligned with each of the stakeholders in the ecosystem that Patients benefit from improved healthcare literacy and through better coordination, driven at improved outcomes with less inefficiency and unnecessary costs. The service providers we work with win through accelerated customer acquisition on the proven platforms they have built, and best of all, benefit from a stickier customer base because of the heightened service quality our approach will provide. Our carrier partners also win with a more complete picture of the unique health challenges, chronic conditions, and prescription drug profiles of their patients, which ultimately translates to better retention, higher satisfaction rates, and lower medical loss ratios. And finally, when patients win, service providers win, and carriers win, then population health and FLECWIT wins, which will accrue to earnings growth and value for our shareholders. As I noted before, it's hard to overstate how exciting an opportunity population health is as the natural next chapter for SelectQuote. Again, kudos to Bob Grant and his team for leading the charge on this important effort. Before I turn the call over to Ralph, let me wrap up quickly on slide seven. First, similar to last quarter's most successful AEP, this was the most successful OEP in SelectQuote history and the fifth consecutive quarter of 100% plus growth in senior revenues, which speaks to the strength of our model. Second, we continue to drive strong growth and productivity with our agents posting 17% higher productivity than 3Q of 2020. Third, our disciplined, quality-focused approach to growing the business continues to deliver stable and industry-leading retention and LTVs. Fourth, as we have stated in prior quarters, we continue to grow both revenues and adjusted EBITDA faster while using less cash than contemplated prior to our IPO. And finally, it's hard to overstate our excitement for the population health opportunity. And most importantly, the ability to realize that potential is enabled by the way SelectQuote is uniquely built and connected to our customers. With that, let me turn the call over to Raf to detail our results.