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spk00: Welcome to the Select Quotes third quarter earnings conference call. All lines 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 would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. It is now my pleasure to introduce Matt Gunter, Select Quote Investor Relations. Mr. Gunter, you may begin your conference.
spk09: 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, Raf Sadoon. 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 any 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?
spk01: Thanks, Matt. Good morning, and thank you all for joining us. In my remarks today, I'll touch on two topics. First, I'll summarize the quarter and how we saw encouraging sequential improvement in our senior business during OEP, compared to AEP. Second, I'll provide an update on the strategic redesign we discussed on our last call. It is certainly too early to declare victory, but we observed tangible improvement over the past quarter due to our preliminary actions, which gives us confidence, a lower growth. Returns-focused strategy is the best way to capitalize on the significant value opportunity we still see in Medicare Advantage distribution. With that, let's start on slide three with highlights from our fiscal third quarter. As I noted, our senior business performed better in OEP as compared to AEP across a number of key performance indicators. Our agents delivered higher conversion rates, driven primarily by more comprehensive onboarding training and longer agent tenure. Again, early days, but this observed close rate improvement supports our plan to hire earlier and carry a higher mix of tenured core agents in future seasons. The second operating highlight in our senior business was a significant improvement in marketing costs, driven by our decision to optimize marketing partners and refine customer segmentation and targeting. Additionally, better conversion rates by our agents helped reduce costs per approved policy and overall marketing efficiency. Lastly, going forward, we are placing even greater emphasis on the cash flow and profitability of our business, and we are pleased with our early actions to reduce costs as part of our developed plan that should yield over $200 million of cost savings, excluding SelectRx. About 20% of that total comes from fixed cost reductions, which are implemented during the quarter. We'll provide more detail on those actions in a minute, but again, these early steps give us increased conviction and a redesigned path to profitability. Turning to our financials, the quarter was better than our expectations, driven largely by the actions I just summarized. Our revenue totaled $275 million, up 4% compared to a year ago, and our adjusted EBITDA for the quarter was $13 million, compressed primarily because of the year-over-year pressure on MALTVs. Lastly, our population health and SelectRx businesses continued their momentum in the quarter. We ended the third quarter with around 20,000 active SelectRx members and now total over 23,000 active members as of April 30th. we remain very confident in our ability to surpass 25,000 members by the end of fiscal 2022. That would equate to more than a tenfold increase in pharmacy members since we first acquired the business in May of 2021 and demonstrates the potential of the comprehensive healthcare services platform we are building to drive significant future revenue and profitability to our business. It is also important to understand our population health initiatives are much broader than just prescription drugs and SelectRx. Our holistic approach in partnering with a diverse set of leading healthcare service providers will continue to differentiate SelectQuote as well as deepen our relationships with policyholders and carriers. While many of the services beyond SelectRx are not yet significant revenue drivers in an explicit sense, we believe these diverse services will drive new revenue streams and deeper relationships with our customers, carriers, and providers over time and ultimately boost our returns and profitability. On slide four, I'd like to review our ongoing strategy and provide detail on progress we have made thus far. First, it's worth reiterating that the remainder of fiscal 2022 and next season will be a transition year for SelectQuote. That said, we've become increasingly confident in our plan over the past 90 days based upon the early impact we have seen in our results. As you can see here, our strategy encompasses four core pillars, which are all focused on improving Selectwood's profitability and the predictability of our returns. At Luft, we are committed to a growth strategy prioritizing returns, visibility, and growing cash flow over volume. To be clear, we believe the opportunity remains large and long-tailed in our senior business. That said, years of 100% plus growth in policies are candidly less likely in our future, and as we've noted, Our initial policy forecast for 2023 assumes a year-over-year decline in submitted policies to right-size our organization. That point leads to the second component of our strategy, which is to mitigate our operational risk or effectively reduce our operating leverage. As we noted last quarter, we are committed to a senior business strategy that can produce attractive returns in a wide range of environments. Clearly, the 2021 AEP season was unique, but we believe the cost savings we have identified thus far will go a long way in ensuring better returns even during challenging seasons. At this point, the bulk of the $200 million we have identified will come from lower growth in variable costs. That said, I want to emphasize that we will remain focused on high return on investment capital allocation. In the quarters ahead, you can expect updates across a number of these initiatives, including agent hiring, onboarding, marketing, and our G&A. Perhaps even more importantly, the planned pullback in Medicare policy production allows us to refine our sales, marketing, and operational approach, placing greater focus on cash efficiency, profitability, and riding business with greater potential to persist over the long term. For example, we plan to take a more conservative approach to our recruiting, training, and onboarding of new agents, ensuring all will be fully prepared for the AEP busy season. We anticipate by next AEP, our agent force will be a more tenured group than the 2021 AEP team. The pullback also allows us to reassess and optimize our training tools and systems that support our agents and their important role of advising customers on the best plan for their unique needs. And the pullback allows us to optimize our marketing sources and to refine our targeting to focus more investment on the highest LTV producing lead sources going forward. If we move to the next pillar, we continue to bake more conservatism into our expectations for LTV. Recall from the last quarter, we significantly increased our constraint from 6% to 15%. In addition, lower persistency in each of the recent cohorts has been incorporated into our LTV accounting. Raf will expand on this point. The key takeaway is that while we cannot confirm LTV as a bottom, we believe volatility going forward has been significantly reduced. While we're still in the very early stages of layering in additional retention-focused operational improvements following AEP, we are encouraged by the early indicators we are seeing from some of our efforts. For instance, layering in more and more refined customer targeting based upon revised data sets and optimizations of our marketing sources aided in our conversion rates in the third quarter, and we believe that we will eventually see observable improvements in persistency with these customers over the long term. Lastly, as I noted before in the update on SelectRx, we believe our differentiated approach to broader healthcare services will create a significant competitive advantage in the years ahead. From SelectRx to the creation of our Healthcare Advisory Board to the growing number of services we and our partners provide to customers, SelectQuote should become a stickier and more important relationship with customers, carriers, and providers. We are excited to share more about these growing capabilities in the quarters and years ahead. Lastly, let me turn to slide five to briefly describe some of the key differences we observed between the challenging AEP of last quarter and the recent OEP season. We know it can be difficult to track trends in our business, especially in a season as unique as this past one. To be clear, we're not providing this detail to suggest an ongoing trend, but instead want to give context, especially as it relates to the impact of our new strategy. First, we saw a significant improvement in our marketing cost per approved policy. which decreased 27% year over year. As I noted, less competition likely had some impact, but more importantly, we realized benefits from our work to optimize our marketing and to target higher return policyholders. Next, a more seasoned agent workforce in OEP relative to AEP confirmed our strategy to onboard and train earlier next season. We leveraged the interval between the conclusion of AEP and the start of OEP to provide additional product and sales training to our agents and to fine tune our plan recommendation engine. And we feel the conversion rate improvements we saw during third quarter demonstrate that these investments helped. Clearly a tight labor market impacted our 2022 season, but regardless of the recruiting environment, we believe we can drive better productivity and conversion rates in future seasons with earlier onboarding and training. Third, as I highlighted before, we've already identified significant cost savings I will continue to optimize our platform to drive sustainable scale and profitability. Lastly, we are most encouraged by the progress we continue to see in SelectRx and our broader population health initiatives. We continued our strong SelectRx customer growth momentum and ended April with over 23,000 active members. We look forward to sharing more, including our forward growth expectation in the coming quarters. That said, overall, we believe the biggest benefit to our business will come from our differentiated value proposition as we continue to evolve from a pure-play insurance distributor to a comprehensive healthcare services platform, addressing a far greater range of our customers' health needs. To conclude my prepared remarks, I'll summarize by noting that while our work is far from finished, we are pleased with the progress demonstrated in the quarter and have growing conviction in the value our company can generate for shareholders in the future. With that, let me turn the call over to Raf to review our financial results. Raf?
spk06: Thanks, Tim. Turning to slide six and our consolidated results. During our last earnings call, we did say that while the margins of the business have certainly been compressed, we believe there are meaningful changes we can make that will have a positive impact on the senior distribution business going forward. And this quarter, we started to see some of the early benefits, especially around marketing efficiency and close rates. Consolidated revenue for the third quarter was $275 million, and consolidated adjusted EBITDA was $13 million. Revenue was driven by growth in our senior business, which we will discuss later, somewhat offset by a reduction in our life business driven by lower term life premium, which was the result of fewer agents and continued COVID pressure on conversion of sold policies to enforced policies. Our auto and home revenue was flat year over year, While we did see significant improvement in per-unit operating expenses in our senior distribution business, down 19% year-over-year, the 32% decrease in MA revenue per approved policy more than offset the expense savings. That, plus the investment we're making to grow population health and select RX specifically, negatively impacted adjusted EBITDA year-over-year. During the quarter, we took certain actions to cut fixed and variable costs out of the business. Excluding SelectRx, we expect our fiscal 23 overall operating costs will be over $200 million lower than fiscal 22 as a result of these actions and the lower policy production we are expecting for next year. We also made significant progress in scaling SelectRx, which I will also touch on later. With that, let me now get into our senior operating results for the quarter. Turning to slide seven, we grew our total approved policies 33% and our MA approved policy is 48%. The MA policy growth was driven by more agents and better close rates year over year. This was a reversal of the trend we saw during AAP. We think some of this was driven by a less competitive marketing environment, optimization of our marketing sources, and the benefits of significant training we have done with our agent force, especially flex agents. We saw the biggest improvements in close rates relative to the trends we saw during AAP. MALTVs were down year-over-year as a result of the factors we spoke about last quarter, lower persistency, higher provisions, and higher constraints. We did continue to see pressure relative to first-term lapse rates and increased the first-year provision for policies sold this quarter. We've identified multiple opportunities to address continued persistency and inter-year lapse pressure and implemented some of these initiatives towards the end of the quarter. While we believe these actions can have a positive impact, It is too early to tell, and we expect the impact of higher entry-year lapse rates during OEP will weigh on lapses for the remainder of the year. For policies sold in the second year and beyond, we are seeing modest overall improvements in entry-year lapses year over year, concentrated in years two and three, but still higher than original expectations. Now, moving on to operating costs. While it may not be apparent because of the impact that lower LTV has on profitability, we made significant progress on operating more efficiently. Our per-unit operating costs for our distribution business, excluding Population Health and SelectRx, were down around 19%, or $190, to around $840. The majority of this improvement was driven by lower marketing costs, which were down about 27%. This improvement was driven by much more efficient marketing across the whole funnel, including lower cost per leads, and higher year-over-year conversion rates driven by some of the actions I described above. With respect to the cohort tail adjustment that we took last quarter, we don't currently expect to take any further negative adjustments relative to that calculation for this year's renewals when we formally recalculate the number in the fourth quarter. Now, if we turn to slide eight, let me provide an update on the significant progress we've made growing our SelectRx pharmacy business. We continue to see the high level of consumer interest in and demand for the pharmacy services we offer. We ended our second quarter with nearly 8,000 numbers. As of the end of April, we have now exceeded 23,000 numbers. This demand was generated almost entirely from enrollments of new and existing select quote Medicare Advantage customers at very low incremental acquisition costs to the company. We remain excited about the positive and predictable cash flow impact this business can have on our overall results. And we remain confident with our forecast to exit this fiscal year with over 25,000 active SelectRx members, over 10 times what we started the year with. That member base would equate to a run rate of over $150 million of revenue in fiscal 23, even without adding any net new incremental members in fiscal 23. Now, if we move to slide nine, let me provide an update on our capital positions. Although the second quarter is always our biggest quarter for use of cash, as we have all the expenses of operating during AAP, marketing costs and sales agent commissions, beginning in the third quarter, we start collecting the cash from first-year commissions associated with AAP activity. For the quarter, we generated approximately $21 million of cash from operations. In addition, we used approximately $9 million of cash for CapEx. As of March 31st, 2022, We ended the quarter with $199 million of cash and $715 million of debt. We also ended the quarter with $1 billion of accounts receivable and short and long-term commissions receivable balances. Finally, before I turn the call back to the operator for your questions, I'd like to comment on our guidance for fiscal 22. As noted earlier, we are encouraged by the initial progress we have made and our positive results for the third quarter. Similarly, we do not expect trends to differ meaningfully in the fourth quarter relative to the third quarter. That said, we will not be updating our fiscal year 2022 guidance at this point, and instead are more focused on our fiscal 23 and beyond. We plan to share our specific views with you on next quarter's earnings call. With that, let's get to your questions. Operator?
spk00: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by where we compile the Q&A roster. Your first question comes from the line of Daniel Grossleit with Citi.
spk07: Hi, guys. Thanks for taking the question. You know, I just want to stick on that reiteration of guidance, particularly on EBITDA and net income, because you did outperform pretty significantly on those two line items this quarter. and really in the senior segment, that outperformance really came through. So I'm curious, was there any one-time benefit in the third quarter to senior profitability that's not going to repeat? And can you just kind of walk us through the cadence for 4Q of EBITDA and that pretty steep decline, a reiteration of guidance implies on 4Q EBITDA?
spk06: Yeah, maybe I'll take that one. We're obviously encouraged by the performance of the business in the third quarter, certainly relative to our revised expectations. We decided to leave the guidance unchanged because, quite frankly, we're much more focused on developing the plan for fiscal 23 and beyond, which we plan to share on our fourth quarter earnings call. I think it's important, though, to be very, very clear that leaving the guidance unchanged is not a signal about the fourth quarter performance, and there were no sort of one-time benefits in the third quarter. that the trends that we're seeing so far in the fourth quarter are not meaningfully different than what we saw in the third quarter. So I wouldn't read more into that than just being conservative.
spk07: Understood. Okay. And then very encouraging trends in marketing. You mentioned less competition for leads. which is good, but also optimizing your marketing channels. I was curious if you could dig into that latter point a little more. Are you shifting away from certain areas, perhaps direct TV, direct mailers to other more productive marketing channels? What are those productive marketing channels? And related to that, CMS came out with some new rules that seem pretty prescriptive on how your agents will have to speak to Medicare members, particularly with some stock language at the beginning of the call. Curious how you're thinking about some of these new rules for marketing and agent scripts for fiscal 23 and how that might impact productivity next year.
spk10: Yeah, so this is Bill, and I'll take that. Certainly, as it relates to marketing, I'd say we saw benefit in a number of areas during OEP. One, we had fewer agents in terms of the number of mouths we had to feed, so to speak, that we were delivering. That gives us and our marketing team more ability to optimize the funnel. you know, we had new data sets and learning, so we were able to take a lot of what we saw during AEP, and as Tim mentioned, you know, in the opening remarks, it was a unique AEP, so we were able to layer in, and our data science team did a great job layering in these new data sets and really working with our marketing team, you know, to optimize what we were buying. And I would say to your question around, when we look at optimizing what we were buying, what does that mean? Are we cutting out channels or not? No, not really. We kind of look at it like that we still want a very wide funnel. Within those channels, there's varying degrees of goodness and amount we might cut within a channel. So there may be one channel that is 90% good and then ultimately we can let through the funnel and there may be another channel where only 10% is good and we let through the funnel. We layered on a lot of those things, and again, our marketing team did a really good job along with Data Science getting those things in place. And I think last, just to comment, some of the things that we did in regards to retraining, which Tim spoke about earlier with our agents themselves, and making sure that they were really up to speed on the benefits of this year's plans also made a significant difference in being able to convert the raw marketing material. As it pertains to the CMS things, we feel like we're very well prepared in terms of already a lot of the things that we do within our scripts. And the marketing changes are really more around things that you would see in online presentations in terms of the order in which that they present plans, which for us, we've always been commission agnostic and are always going to go to the best plan for the consumer. you know, no effect there that we see, and we're well prepared on that front.
spk07: Got it. Appreciate the color. Thank you, guys.
spk00: Your next question comes from the line of Jeff Garrow with Piper Sandler.
spk03: Yeah, good morning, and thanks for taking the questions. I want to ask about the planned pullback in MA submissions for FY23. What are the factors over the next couple months that will influence the magnitude of that pullback you've signaled?
spk01: Yeah, Jeff. So this is Tim. Good morning. And yeah, I think we're definitely pleased with the progress that we're making on the operational front. Obviously, we think in light of the current market conditions, it's made sense to pull back a bit and really optimize. I think we highlighted on the prepared remarks, we are seeing a lot of Really good early signs around what we're doing with respect to marketing optimization and segmentation. A lot of good work done on the sales side on retraining. We're going to come into next year with a much higher percentage of core tenured agents as opposed to more historically a higher percentage of flex agents. We think there's some natural benefits from that. A lot of good work that we're doing on the carrier side really. This is a drive for us to get cash EBITDA break even moving forward. We look forward to providing more specifics on that in the fiscal 23 guide we provide in August.
spk03: Got it. Thanks for that. And to follow up, maybe ask a little bit more on the $200 million in expense reductions. It might be helpful for us if you could give a little more detail how that $200 million breaks down across the different line items in your P&L.
spk01: Yeah, I'll start, maybe have Raf provide some additional detail. As I just mentioned, I think it makes sense to pull back and really focus our attention on cash flow unit economics. In total, we're going to move about $200 million of run rate cost savings in fiscal 23, excluding the necessary investments in SelectRx, which is very cash generative. That's a total of both variable sales and marketing costs. Those are our biggest cost driver, our people and leads, if you will. But we'd also notice part of that $200 million, we did identify about $40 million of fixed expenses that we're going to start to realize some benefits as early as this fiscal fourth quarter. Raph, anything you want to double-click down on?
spk06: Yeah, I guess just to reiterate, the biggest part of that savings is going to be on the marketing side, probably two-thirds or so of the savings, followed by agent headcount, fulfillment, and then what six costs.
spk03: Great. That helps. Thanks again. Thanks, Jeff.
spk00: Your next question comes from the line of Jonathan Young with Credit Suisse.
spk05: Hey, thanks for taking my question. I guess just in relation to the pullback in marketing spend that you're talking about, are there any concerns that the pullback may be too much where you may actually end up seeding market share as some of the MCOs have also talked about bulking up their own marketing capacity and internal sales force?
spk01: Jonathan, this is Tim. I'll speak first and then maybe ask Bill to comment. I think in In any scenario, we're going to continue to be a very significant and critical part of carrier distribution. This is a business that's historically policy growth of three-year CAGR north of 80%. So even if we pull back, it's going to be a very significant player relative to almost anyone in the industry. We continue to see a significant amount of momentum with our carriers. I know there's been chatter in the industry about their commitment to direct-to-consumer. We're certainly not seeing any of that pullback. They've remained very strongly committed and aligned to select quote compensation. Still no changes there. Quite frankly, looking to continue to expand with our high-quality model. So I think we're in very good shape there. Bob, anything you'd like to comment on?
spk02: No, I think that was really well said. And I think just simply put, no, we are not concerned about that right now we've had really good conversations, you know, with the carriers about it, you know, that focus on quality, 90-day persistency, and all of the things that we are doing to bolster the quality of the policies the carriers are extremely supportive of and understand, you know, what that looks like and really, you know, could come with a, it's obviously a decline in the overall number of submissions, not as big of a decline in the overall number of approved, sorry, of effective policies there.
spk05: Okay. And then just in terms of the marketing spend again, everyone's kind of talked about optimizing their spend and going to specific marketing channels. I guess, is there a concern that everyone may end up flooding a specific channel that they believe to have the highest return and then thus inflating the CAC? Any thoughts there?
spk10: You know, I think that we're really well positioned to be able to deal with that with our approach because we're not narrowing down to, you know, to a single channel. Like, we're not saying, hey, we're eliminating TV or we're eliminating, you know, some other source. I'd be concerned about it for us if we were saying, okay, we're solely going to rely on one of those. But, you know, our attitude is more, hey, let's expand that. the number of channels kind of when you look at the top, but let's tighten ultimately what we actually let through the funnel. So we've got an extremely tight, ultimately we'll look at a lot, but we'll only kind of consume a certain amount. We're very specific now about, you know, really what we've layered on in terms of our algorithms on what we'll buy and what we'll take. So we'll only take, you know, 5% of a certain channel. or, you know, maybe 10% depending on kind of the quality that's coming through. But we certainly think that by remaining open and using kind of data to decide what we buy with the in-channel will be kind of a winning approach.
spk05: Great. Thanks.
spk00: And as a reminder, if you would like to ask a question, please press star then 1 on your touchtone phone. Your next question comes from the line of Mayor Shields with KBW.
spk04: Hey, good morning, guys. This is Tommy McJoynt on for mayor. Thanks for taking our questions here. I just wanted to clarify on the $200 million. Is it meant to say that 80% of that is variable, kind of the marketing, and 20% is fixed? And then is that 20% or $40 million that that implies of fixed costs already actioned in terms of the takeouts, or are those just identified in the third quarter?
spk06: Yeah, no, great question. So 80% is variable, and the biggest piece of that is marketing. But there's obviously agent cost reductions there just based on the pullback that we're expecting next year, year over year, policy production, and then corresponding performance as well. So it's a mix of all those things, but marketing is the biggest piece of the six. And then on the variable, sorry, and then on the six side, Yes, we took some actions in the third quarter to drive the vast majority of those fixed cost savings. They're not necessarily reflected in the full quarter results, but will start being reflected starting this quarter.
spk04: Great. Thanks for clarifying that. And then switching over, could you talk about the expected increase in spend with SelectRx as that continues to grow? And just how do the benefits of scale improve those economics over time?
spk01: Yeah, I'll start there. I think we're very pleased with the progress in SelectRx. I think we're becoming more and more confident about the potential of the business. As we stated, 23,000 active paying members. We're very confident about the ability to exceed our original goal of 25,000 members by the end of fiscal 22, a tenfold increase in a very short period of time. I think it really demonstrates in a very tangible way the potential we have and and healthcare services. Bob, you want to speak to other metrics and things around scale of the business?
spk02: Yeah, there is, you know, some dollars that go into that growth because, you know, just like a more traditional kind of, I'd say, SaaS or delivery business, right? You have to plan for the growth that's ahead. So it's got lower margins, to your point, as you're scaling, but then it gets to a more stable place. I'll let Raf speak to what percentage that is but it's still an extremely cash efficient business. You know, when you look at it and those margins expand pretty quickly through the life of a customer and the payback period is pretty fast. Raf, do you want to comment on payback and then ultimately what those margins look like?
spk06: Yeah, I guess certainly a new member, we still expect to be cashflow positive within the first year as we are scaling the business and as new members represent a very large percent of the overall book. That obviously weighs on margins in the short and medium term, but as the business grows over time and new members added are a smaller percent of the overall membership base, most of the costs outside of drug costs really are geared towards onboarding new customers. And so as that percent of new goes down over time, the margins will increase from there. We also expect to get some drug margin scale benefits as we continue to scale the business.
spk04: Great. Thanks for taking questions.
spk00: Your next question comes from the line of Jim Masaga with FactSet. Jim, your line is open.
spk08: Hi, this is actually Joe on for Elizabeth Anderson from Evercore. Apologies for that. But maybe just asking a bit about the life business in the quarter. You know, life business EBITDA was, you know, a little bit weak in the quarter. You know, was there anything that in particular that caused that? You know, and then kind of how are you thinking about it in 4Q? And then just a quick follow-up after that.
spk06: Yep. Maybe I'll touch on that first. So the life business is predominantly driven by sort of legacy term life part of that business, which is actually consistent with our expectations during the quarter. The third quarter is seasonally a strong quarter for sales. So we have costs and specifically marketing in the third quarter that drive fourth quarter revenue. In terms of the third quarter revenue, we had less agents selling year over year during our second quarter. And given the three-month lag between upfront sale and enforced policy, that impacted the third quarter revenue and hence sort of the profitability of the third quarter. It was also compounded by continued COVID pressures early in the quarter with the rise of Omicron that impacted our in-force conversion rates. So, you know, paramed examiner visits were impacted by that. I think those examiners also had staffing issues um and some of the carriers had processing delays so we did start to see some of those pressures improve towards the end of the quarter um and uh and then the fourth quarter you'll see the you know the sort of the benefit of the seasonal selling season within the third quarter bill anything that you would add to that no i would say uh just to re-emphasize i mean kovid certainly um
spk10: has impacted the term life business fairly significantly. And when you look at kind of the, I'd say twofold, right? You have getting in people's homes, which people were very reluctant, lots of cancellations in our exams, delays, and what we call our CRI, you know, ARS, which is basically moving that along in the funnel was delayed. And then you had major kind of staffing issues beyond that, that existed in a tough labor with a lot of the carriers actually processing some of that. We are seeing some very positive signs as we kind of are getting out of what feels like light at the end of the tunnel with the decline with COVID and feel like we're pretty optimistic that we can get back to kind of where we were traditionally on how that business moved through the funnel.
spk08: Now, thank you for that. That's super helpful. And then maybe just as a quick follow-up, obviously the conversion rate was strong within senior. You know, I think there had been a trend to try to have some more tenured agents potentially flexed between different divisions within the business. You know, was there any element of shifting some of those more tenured, maybe traditional life agents over into senior, knowing those dynamics were kind of
spk02: happening within life you know within the period no good question but no that was not due to shifting really the tenured agent percentage we're talking about was just more of a steep you know cut to the flex group retraining of kind of the lower performing flex agents and then ultimately really optimizing the way we deliver also if you look you know through our productivity we actually were mildly down year over year with the large decline in cost for acquisitions. That's because we did limit more of lead volume to our lower performing agents, given kind of some of the economic pressure and things like that, which did drive our CPA down. So really, really pleased with the results there on what that looks like. Also pleased with what that means for the future, you know, as that kind of, what we had on paper came true in Q3. So I feel really strong about what we can do with that, but that was not due to flexing. Awesome. Well, thank you. Congrats on the quarter. Thank you.
spk00: That concludes our question and answer session. I will now turn the call back over to Tim Denker for closing remarks.
spk01: Yeah, thank you all again for joining us this morning to recap. We're really proud of the early results of the strategy update. I think most notably the sequential improvements we've seen in OEP, certainly the momentum we have in SelectRx. As I noted, SelectQuote will continue to transition over the course of this year and next, but overall we're very encouraged by the early results of the actions we're taking. I would look forward to sharing more about our progress on the quarters ahead. Thank you very much. Have a great day.
spk00: This concludes today's conference call. Thank you for participating.
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