SelectQuote, Inc.

Hello and welcome to SelectQuote's fiscal fourth quarter and full year 2023 earnings call. My name is Elliott and I'll be coordinating your call today. If you would like to register a question during today's event, please press star followed by one on your telephone keypad. It's now my pleasure to introduce Matt Gunther, SelectQuote Investor Relations. Mr. Gunther, you may begin the conference.

Thank you and good morning, everyone. Welcome to SelectQuote's fiscal fourth quarter and full year 2023 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, Ryan Clement. Following Tim and Ryan's comments today, we will have a question and answer session. 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. Mike SanClements, Including but not limited to those described in our earnings release annual report on form 10 K, for the period ended June 30 2023 and other filings with the SEC. Mike SanClements, 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 banker TIM.

Thank you all for joining us today. We're pleased to, yet again, share a very strong quarter, which caps a very strong year for SelectQuote. Today, we will detail the ways that our strategic redesign has solidified our market-leading competitive position in Medicare Advantage, but more importantly, we will demonstrate our conviction that SelectQuote has built a diversified platform to drive consistent profit and cash flow in the quarters and years ahead. We'll also review our incredible success with SelectRx, where we have rapidly grown a profitable business with annual revenue now totaling over $239 million. This impressive trajectory was accomplished in a little over two years' time. Beyond the financial results in this business, we're even more excited to review SelectLo's unique ability to create additional businesses and healthcare services, given how our information advantage and comprehensive platform adds value to the full spectrum of stakeholders within the healthcare ecosystem. If we turn to slide three, let me recap the quarter. As noted, SelectQuote outperformed our internal forecast yet again. Fourth quarter revenue of $222 million and adjusted EBITDA of negative $6 million represents the sixth consecutive quarter of outperformance, driven by great execution across each of our businesses. The call out here is the improved profitability produced in what is a seasonally slower and high investment quarter. This is an important result, given our stated strategy to reduce the volatility of our results throughout a given year. Additionally, the strength over the year positions us well for the upcoming 2024 season, as we've been able to invest early, which worked really well for us in 2023. Specifically, our new agents are already hired in our ramping, And similar to the past year, we expect a higher mix of tenured agents. Healthcare services also performed well in 4Q. As planned, we purposely slowed SelectRx member growth to accelerate profitability. And we're proud to have accomplished our goal to drive a positive EBITDA contribution exiting the year. Lastly, our priority to drive cash flow in 2023 is a point of pride and was certainly the case again in 4Q. Specifically, we generated $72 million of cash EBITDA for the year, which includes investments we've made ahead of the upcoming season, as well as the ramp for SelectRx. In fact, excluding the ramp for SelectRx, Fluqua would have driven positive operating cash flow in fiscal 2023. We also significantly improved the cash efficiency of our business given the materially lower operating cost per policy. Our payback period of just over two years on a new MA policy compares very favorably to prior periods despite lower MALTVs. We start fiscal 24 in a strong cash position and feel confident about the season ahead. Overall, Sleco delivered across the board in 2023, and I'd like to personally thank everyone in the organization for the hard work that drove our success. We certainly aren't done yet, but clearly a lot to be proud of as we look to 2024. Let's flip to slide four, where I'd like to briefly give context on the scale of SWCWIS fiscal 23 outperformance, in which the company generated revenue of just over $1 billion and adjusted EBITDA of $74 million. During our 2022 year-end earnings call, we presented four guiding principles for how we'd operate the business during fiscal 23 and beyond. First, discipline policy production with a focus on margins and cash flow. Second, reduced operating leverage. Third, leveraging the scale of SelectRx and healthcare services. And finally, reduced volatility of our results. We're proud to say we executed on each of these principles during fiscal 2023, which resulted in the strong financial results you see on the page. Beginning on the left, it's important to remember that we slowed our policy growth with a specific goal to improve the quality and operating efficiency of our core senior business. In 2023, our MA policy production declined 13% year over year, which you'll recall is well ahead of the original expectation for a 35% to 45% decline. The reason for the outperformance in volume was driven by improved agent close rates, which carried across to our most important financial KPIs, including marketing costs per approved policy. In aggregate, our full year 2023 adjusted EBITDA margin for senior was 26%, which is driven by broad-based improvement in policy throughput. more focused and effective policyholder targeting, and an overall strong AEP and OEP season. As Ryan will detail in our 2024 outlook, we believe our operational improvement is durable and we believe Selectwood is well positioned to generate 20% plus EBITDA margins and core senior in a wide range of Medicare Advantage seasons. The year also underscores the power of our tenured agent model paired with our technology and information. Ultimately, we believe the durability and performance of our unique model sets SelectQuote apart as a distribution partner that can drive high-quality volume rather than simply growing for growth's sake. Better yet, the information advantage SelectQuote has is critical to how we built SelectRx, and we continue to leverage our platform to build other healthcare services revenue streams. In 2023, SelectRx grew by nearly 24,000 members and exited fiscal 23 approaching 50,000 members. This membership growth incurred minimal incremental marketing expense as nearly all of our SelectRx members came from the marketing funnel of our various insurance lines of business. I'll speak more to SelectRx and the power of our healthcare services strategy on the next few slides. Lastly, the six consecutive quarters of execution relative to expectations is a metric we're determined to grow. As you know, 2022 is a challenging year But the success and consistency due to our strategic redesign gives us confidence that SelectWOT will continue to earn credibility and the market through performance. Now, if we shift to the right, let me provide context to the magnitude of our outperformance in 2023. The bars in gray show our original expectations when we provided our full year 2023 guide this time last year. In contrast, the bars in orange show our actual full year results. Our revenue production exceeded the midpoint of our original guide by over 11% to end the year. Additionally, our expectation to break even on adjusted EBITDA in a year was significantly surpassed as SelectQuote generated $74 million in adjusted EBITDA, which represents an overall margin of 7%, all delivered through an increasingly cash efficient and cash generative model. These results give us a high level of conviction that the changes we've made to our operating model are working and position the company to continue to deliver attractive returns well into the future. Moving to slide five, let me give additional context to the evolution of SelectRx as we're increasingly asked about the business from our investors. Here you can see the trajectory of member and revenue growth in what is a very short period of time. In 2021, SelectRx acquired two smaller pharmacy operations, with approximately 4,500 members with a wide range of use cases and prescriptions. Today, we have built a sophisticated and easy to use platform for seniors to save time and importantly, achieve better medication adherence. The value proposition to the patient is clear as we've grown to nearly 50,000 members in just 10 quarters and nearly doubled our membership over just the past year. Given the vast majority of our membership growth today has come from existing Medicare customers, you can see the powerful impact this rapidly growing business, alongside a significantly improved senior business, has had upon our revenue to CAC ratio, which finished the year at over 4x. Most importantly, the business has hit critical mass, and our member onboarding has become increasingly efficient over the past year. Best of all, we have recently been recognized with the patient-centered pharmacy home accreditation, which is an endorsement of the quality and service level we brought to bear to America's seniors with our uniquely well-positioned model. We look forward to talking more about this business in 2024, but ultimately we expect to leverage the platform to drive both top and bottom line growth for years to come. If we turn to slide six, let me give a quick refresh on our approach to healthcare services and how Selectwood is uniquely positioned to capitalize on this market opportunity. There are two key takeaways from this page for when to drive home. First, it's obvious that healthcare in the United States is a tremendously large market where seniors are becoming a larger and larger percentage of the population each day. Additionally, the way that American seniors are treated by healthcare providers and managed care organizations is shifting rapidly in favor of health outcomes. At a high level, that means providing services that are tailored to the individual. In order for a caretaker to provide that level of service or for a carrier to underwrite that care, a substantial amount of information is required. SelectQuote's agent-led model across each of our businesses, combined with the investments we've made in technology, afford us the unique ability to be the facilitator and connective tissue between each of these stakeholders. As we've talked about in the past, there's a tremendous amount of value that SelectQuote provides in brokering the connection of each of these participants within healthcare Our core senior business is a reflection of the value we create for both a policyholder and a carrier when we match the best fit. SelectRx is an example of the differentiated value we deliver for seniors by leveraging a platform built to provide bespoke services at scale. The market opportunities for these services are broad, given the more than 55 million Americans over the age of 65. In the future, we expect to create additional businesses similar to how we've built SelectRx. What we can share today is that our strategies and healthcare services will leverage our existing platform and will share in our aim to drive consistent profitability and cash flow. Put another way, we plan to provide better solutions and higher value, knowing what we know about the needs of healthcare stakeholders. We do not intend to create markets, but instead we'll seek to capitalize on demand and less efficient markets that already exist. The second takeaway is our firm belief that SelectQuote wins because of the value we provide to each party within the healthcare ecosystem. Similar to my comments on our core senior business, we provide quality at scale as opposed to just one or the other. And it's foundational to our approach in healthcare services that any business we pursue benefits SelectQuote only if we deliver value to each and every other participant in the service. Clearly, this is something we're excited about. and we look forward to sharing more about the healthcare services opportunity in the future. If we now turn to slide seven, I'd like to end my remarks on the strides we've made with regard to cash efficiency and long-term value creation. As we've talked about, SelectQuote's strategic redesign prioritized improvement in cash flow in two main categories. First, each of our businesses from our core senior, to life and auto and home, have made significant improvements in operating efficiency which in turn has improved cash conversion. For instance, in Core Senior, our shift to more tenured agents and a refined set of lead targets has driven a significant benefit in our cash EBITDA, in line with our decision to slow policy generation in 2023. As you can see at the top of the page, both our adjusted EBITDA and cash EBITDA were materially better year over year. As we've spoken about, these metrics were aided by a strong season but more so by improvements in our own execution. In 2023, our agent close rate was 24% higher than in 2022. Similarly, our marketing cost for approved policy was down 34% compared to a year ago. Lastly, we would note that LTV stabilized over fiscal year 2023. And while we don't forecast increases in LTV as a practice, we can contextualize the improvement from two perspectives. First, Starting early in 2022, we undertook a rigorous overhaul of our policyholder underwriting, and as a result, we have significantly improved our own observed persistency. Second, our carrier partners have become more discerning in the quality of their volume, and as a result, competitive pressure that existed in seasons past has eased as carriers exhibit a flight to quality partners like SelectClose. The second way we're improving cash flow is through the mix of our businesses, as well as the way that we partner with carriers. First, in terms of business mix, we believe Suckwood has become a business that generates more year-round profit and revenue, given our strong SelectRx and Life and Auto and Home businesses. These and additional healthcare services opportunities dampen the seasonality of our business, but also benefit our cash conversion, given the upfront nature of their cash flow streams compared to the Medicare Advantage business. Second, Medicare Advantage continues to evolve, where carriers are focused on working with distribution partners that can generate high quality policy volume. This was evident in 2023, as the percentage of revenues received in year one increased 63%, up from 53% the year prior. In the Medicare Advantage seasons ahead, we expect carriers to continue to move towards partners like SelectQuote and believe the best distribution partners will earn better structures, which may improve commission timing or lead to better overall LTBs. In both cases, we believe SelectQuote is very well positioned to take high-quality market share without taking on marginal risk. With that, let me turn the call over to Ryan to detail our strong financial results. Ryan?

Thanks, Tim. If we turn to slide 8, let's take a look at our consolidated fourth quarter and fiscal year 2023 results. As Tim summarized, as a result of strong execution on our strategic redesign, we had a very successful quarter and year. Year over year, revenues increased 59% and 31% for the quarter and year respectively. This is a great result driven by the growth in Selector X, but also by better than expected efficiency in our core senior business. More importantly, we made a significant improvement in profitability. As Tim mentioned, our full year adjusted EBITDA of $74 million ended materially above our original expectations, driven predominantly by the improvement in our cost efficiency within senior. Equally as encouraging was the strong improvement in our fourth quarter results where adjusted EBITDA approached breakeven. As you know, the fourth quarter has historically been a seasonally light quarter for our business, but the ramp of SelectRx and our overarching strategy have made SelectQuote a more year-round business. If we move to slide nine, let's review the key performance indicators for our senior distribution business. In the quarter, we wrote 110,000 Medicare Advantage policies which was down 5% compared to a year ago. For the year, our total Medicare Advantage policy account of $578,000 was 13% lower compared to fiscal 2022. Again, as Tim mentioned, this production was materially better than our original expectation of a 35% to 45% decline. Driven by the efficiency and cost gains we picked up through our strategy to employ a higher mix of tenured agents and to better target leads. Moving to the right of the page, LTVs for Medicare Advantage policies continue to stabilize down just 5% for the quarter and the year. I'll speak to the trends that make up these LTVs in a minute, but we are clearly seeing stabilization and improvements in the factors that build up lifetime values. In fact, our full year LTV of 877 was better than our original expectation. Put another way, the declines year over year were largely driven by the three-year look back in our methodology. Turning to slide 10, let me speak to the efficiency gains we realized in our core senior business for fiscal 2023. As we have reported all year, our Medicare Advantage platform picked up significant improvement in each of the key components that make up our unit economics and profitability. First, our overall operating expense for approved policy declined by 27%, driven primarily by the significant reduction in our marketing expense for policy, which you can see dropped by one-third. When looking at these two metrics, it is important to remember that while we invested more in our tenured agent count, the 24% improvement in agent close rates you see on the right goes a lion's share of our marketing efficiency. The improvement on both marketing and close rates was also aided by the refined lead targeting employed this past season. Put all together, these metrics are a great representation of our new strategy in action. While we originally set out to write significantly fewer policies with higher quality agents and leads, The efficiency gains we realized allowed us to serve more customers without sacrificing a paramount goal to drive profitable and cash efficient growth. I'd simply echo Tim's congratulations to our teams for how well we executed our Medicare Advantage strategy in fiscal 2023. Before I turn to our segment financial results, I'd like to expand on some of the metrics underlying our LTVs. As I noted, we certainly saw stabilization over 2023 We also saw improvements in policyholder persistency and the mix of customers. Our 90-day active rates, which are the primary indicator for policyholder persistency, continued to improve and were up compared to a year ago. The majority of these gains were due to our change in lead targeting and our higher mix of tenured agents. For instance, our mix of what we would consider highly transactional customers has declined meaningfully compared to last season. which drove better overall persistency as well as increased efficiency. As a result, our approval rates in the 2023 season were up over a year ago. Let's now turn to slide 11, where you can see how all these efficiency improvements led to very strong results in the senior segment. Our revenue grew 51% and 12% for the quarter and year, respectively. For the year, we grew despite the year-over-year decline in policies written. The primary driver of the year-over-year improvement was the sizable cohort adjustment taken in fiscal 2022, which did not recur in 2023, given the steps we have taken to de-risk our receivables. While the revenue results were strong, we were most focused on profitability, and 2023 was very successful in that regard. As Dan mentioned, we delivered consolidated EBITDA well above expectations for the fourth quarter, which is our highest investment quarter of the year. This was driven by the strong fourth quarter for senior, which produced $16 million of adjusted EBITDA at a 16% margin. On the year, we drove $155 million of adjusted EBITDA in senior at a margin of 26%, about $110 million better on a full-year basis when accounting for cohort adjustments in fiscal year 22. We have detailed all of the operational improvements that drove these margins and have also noted how 2023 is a strong season for the industry. Most importantly, we firmly believe our current strategy in senior can drive durable future EBITDA margins above 20% in a range of Medicare Advantage selling environments. If we flip to slide 12, you can see the strong growth and scale that Tim talked about for our SelectRx business. Our membership approached 50,000 as of the end of the quarter, which is effectively double what we began the year with. For the quarter, we grew membership by 92% year over year while driving total revenue growth of 176%, which demonstrates the compounding effect membership growth has on revenues as members mature over time. The impact is even more pronounced when looking on a full year perspective as fiscal 2023 revenue were up 260% compared to fiscal 2022. If we look at just the fourth quarter, our member count grew by 9% which by design was slower as we prioritized profitability in the back half of the year. At Wright, you can see we delivered on that goal as we generated positive EBITDA in the fourth quarter, which contributed to our overall profitability and will continue to scale as we look to 2024. I'll speak to our outlook shortly, but one point we would like to emphasize here is that nearly 50,000 members is just the tip of the iceberg for a significant market of seniors we speak to on a daily basis. It is also important to reiterate that Today, nearly all of our SelectRx members were generated via acquisition costs associated with selling Medicare Advantage and Medicare Supplement policies. Given the vast market opportunity and favorable lead economics we see, we'll begin lead testing in 2024 for SelectRx. There are many avenues beyond our Medicare distribution business to provide high-quality introductions to our SelectRx platform, and we have only scratched the surface there. While future membership growth may incur incremental marketing spend, we expect the return profile on this spend will be highly attractive. And lastly, as Tim discussed, we believe SelectQuote's advantages as a central hub and connector within the evolution in healthcare provide us additional revenue opportunities similar to SelectRx. Our current outlook for 2024 does not contemplate any of these new initiatives But our parameters for scale in these initiatives would follow a similar roadmap to what we were achieving with SelectRx. All of these potential growth avenues are aligned not just to our financial goals to further dampen seasonality and drive profitable cash flow, but also to make SelectQuote more valuable to all of our partners and stakeholders. This means better and more convenient care for seniors and better coverage in coordination with insurance carriers and caregivers. To reiterate Tim's point, it is very rewarding to see results like these knowing that they are improving lives. Now, if we move to slide 13, similar to last quarter, we are pleased to see the impacts of our strategic redesign continue to drive improving profitability in our life division. While life as well as auto and home are smaller businesses, both are important to our goals to make SelectQuote a more year-round business. These segments also provide strong cash flow that supplement our ability to fund and invest in our overall business. Our life division delivered strong profitability during the year, with $23 million in adjusted EVA at a 16% margin. In the fourth quarter specifically, we continued to benefit from efficiencies created with our SwiftTerm Select life insurance product, which offers an easier customer onboarding experience. Additionally, we applied the same strategy for our final expense product that we had with Medicare Advantage, and the results have been encouraging, and we believe scalable. Turning to slide 14, the core results in our auto and home business remain very strong this quarter. Our financial results were impacted by a $10 million change in estimate related to a mutual agreement with a carrier to separate our partnership, which we believe is in the best interest of our customers. The change in estimate reflects the outstanding renewal of commissions with that carrier. We've seen strong interest in the book and will recognize a portion of that revenue in EBITDA in 2024 as we place the book with other carriers. In the quarter, excluding the one-time change in estimate, both revenue and adjusted EBITDA expanded year over year, primarily due to increasing premiums and expense discipline. Excluding the change in estimate, revenue was $9 million, an increase of 29% year over year, and adjusted EBITDA was $3 million, an increase of 116% year over year. Similar to our core senior business, in auto and home, we plan to continue with our renewed strategy as we look ahead to 2024. Lastly, if we turn to slide 15, let me conclude with our guidance for 2024. We expect consolidated revenue in a range of 1.05 billion to 1.2 billion, which represents year-over-year growth of 12.5% at the midpoint. This contemplates revenue growth of around 50% in our healthcare services division on membership growth of approximately 25%. Adjusted EBITDA is expected to range from 80 million to 105 million assuming roughly 20% margins in our core senior segment and low single-digit margins in our healthcare services business as it continues to ramp. We anticipate consolidated adjusted EBITDA to follow a similar seasonal pattern to fiscal year 2023. Turning to volume, we expect core senior MA policy volume to decrease approximately 10% to 15%. On LTVs, while we don't explicitly guide to LTV, I'd like to note two things. First, we remind analysts and investors that the historical seasonal pattern of LTV will repeat in 2024, where LTVs are lowest in 1Q and 4Q and higher in 2Q and 3Q. The key reason for the 1Q drop being that commissions booked in 1Q are prorated for a shorter initial year duration. Second, our revenue and volume guide implies a year-over-year increase in LTV for fiscal 2024, which is consistent with what we've observed in policyholder persistency. Finally, On cash efficiency, as we start fiscal 2024, our goal is to finish the year approaching operating cash flow positive on a consolidated basis. That concludes our remarks, and with that, let me turn the call back to our operator for your questions.

Thank you. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If you would like to withdraw your question, please press star followed by 2. When preparing to ask your question, please ensure your device is unmuted locally. First question today comes from Jonathan Young with Credit Suisse. Your line is open.

Hey, thanks for the question, guys, and congrats on the results here. Just curious on, you know, as you got a look at the carrier plans, you know, if you have any thoughts on how it tracks relative to your expectations, and is there anything that is a surprise from your perspective there, just any color on what you're kind of seeing there?

Yeah.

I'll ask Bob Grant to... Yeah, go ahead, Bob.

Yes, sorry. That's a really good question. We are excited about the plan design. It really fits the consumers that we deal with most. I think we've talked about before that we work a lot with lower income seniors and duals and DSNFs, and the carriers are really making a concerted effort to make those plans more competitive and expand those plans to different counties so that more folks can get on them. And we feel really, really good about that, especially given kind of where our mix has been over the last year. In those plans, we see that our book will have a little bit more stability than maybe others that are more geared towards normal Medicare Advantage plans. So we're really excited about the upcoming AEP. I think the carrier is really focused on benefits that are important to people. And I think that gives us a big competitive advantage.

That's helpful. And then turning to the services business, EBITDA turned positive this quarter, guiding to low single-digit EBITDA margins to select. I guess as you think about building out additional service lines, how much incremental investments will kind of be needed? And should we think that as if you were to build those service lines out, would the services EBITDA line go negative or Do you expect to maintain that positive contribution? Thanks.

Yeah, Jonathan, great question. And we're really excited about what we've built with SelectRx. I think if you look at the rapid member growth, also the speed at which we achieved profitability, we think that's a really critical proof point to the market about what we can do. We're leveraging, again, our core consumer acquisition and engagement capabilities to drive immediate value in healthcare so as to other opportunities like in terms of categories I mean first and foremost it's got to be a significant value to the consumer that's been our North Star for 38 years as far as the approach I would think you know more of a services type platform where we can leverage you know existing tech and infrastructure and those capabilities to create higher margins We're really pleased at which we got the business to profitability. And, you know, we'll continue to, I'd say, be opportunistic. We think there's a lot that's out there, given our information advantage with the consumer. And we think we can deploy that capital in a very efficient way. Bob?

Yeah. You know, in looking at that space, we'd like to repeat, obviously, what we've done in SelectRx. not just from a financial perspective, you know, clearly that's working extremely well. We, we earn cashflow positive, really high revenue growth. But, you know, if we look at what it is, it's really designed to bring convenience and adherence to a really tricky population that's on, you know, eight or more drugs or average, you know, is north of that folks that are typically, you know, lower income, lots of D SNFs. And again, If you look at the other spaces where we're looking, it is all in kind of that same convenience play that supports the value-based system that's being created. So really what we're looking at is, you know, specialized home care, specialty pharmacy, and remote kind of patient interaction. The reason I say it differently than just remote patient monitoring is because there's a lot more to it than that, but those are really the areas that we're hyper-focused on to try to bring to our consumers because that's the areas that our consumers express the most interest in. Really, it's just that convenience to make their life easier. And thankfully, as Tim said, we've built a lot of our infrastructure around kind of getting a hold of people and those adherence plays. We believe we can do that at a really efficient kind of cash flow with high margins.

Yeah, one last point to Bob's great points. I mean, one of the great advantages that we have is this level of connectivity with our MA customers. That has been the story of SelectRx. There's other things that we can do there, but we were able to do that at very low incremental marketing costs. We referenced in the prepared materials today our rev to CAC for the full year at over 4x. We think that's really compelling. We think there's a lot more that we can do there, and we can do that in a very capital efficient manner.

Great, thanks.

Our next question comes from Daniel Crosslight with Citibrook. Your line is open.

Hi, thanks for taking the question. And that's on another strong quarter here. On the fiscal 24 guidance, it's a pretty wide range at this point, which I know is not unusual for you guys, given just all the volatility in the market. But I'd love to hear your thoughts on some of the puts and takes that would drive you to the bottom and top end of both the top and bottom lines. lines on the guidance?

Great question, Daniel. Thanks for joining this morning. First, we're really pleased with how 23 played out. We felt like the strategic redesign really showed up in our operational financial results. Broadly speaking, we plan to run the same playbook in 24. We think it's worked really well, and we think overall that our guidance range properly reflects variables such as the 24 MA plan designs that have yet to be released. That's one factor that we continue to evaluate and we'll get more visibility to. But I think as the 23 results demonstrate, we built a very nimble model, one that's able to adapt in real time should there be an attractive situation that presents itself. We feel like we did that in 23. We can capture those efficiencies.

But hopefully that gives you a sense of how we're thinking about the guide Yep, yep got it and as we think about 24 and really productivity and in revenue per Revenue to CAC ratio Did you think we'll see that stabilize in in 24 around the core senior segment or is there more juice to squeeze there? And I'm thinking in particular just given some of the more onerous marketing rules that will come into play in 24, how we should think about productivity, marketing efficiency for this upcoming AEP?

Yeah, sure. Great question. I'll comment and ask Bob to add on to it. I think from an agent perspective, as we indicated on the call, we feel really good there. We've done all of our hiring earlier this summer. Our agents are onboarding, ramping, and training mode. I feel very good about that. As we indicated on our two prior earnings releases, we've made these investments in our core tenured agent force, and we're running the business in a more year-round fashion. We've had very low agent attrition, and so we feel very good on that front. On a marketing perspective, again, it's like a very small victory lap. Our marketing costs were down. I think about 34% year-over-year and contributed to about two-thirds of the nearly $300 of operating expense for policy leverage that we picked up in the year. We're going to continue down the path of a refined segmentation on marketing, very disciplined around cost, and we would expect for that to play through with respect to, I think, the last comment you made on on CMS and some of the rules that came out, maybe most notably the 48-hour rule. Our viewpoints haven't really changed from the last time we spoke with you and others. We feel that we're very close dialogue with our carrier partners. We don't see a material impact to that with the business moving forward. Bob, any other comments on other levers as we think about fiscal 24 for the senior business?

Yeah. I'm going to kind of double down on Tim's statements on the retention. You know, not only has it been good, it's really been our record retention of agents, especially our higher level agents. You know, what that gives us coming into this AEP is the most level one agents we've ever had. The highest percentage of core agents we've ever had, even more than last year, you know, through our strategic redesign. This year will be even higher. And we feel really, really good about that, where we are. And I think we've been really open in the past that You know, having tenured agents, especially level one, gives us a huge leg up on close rates and just predictability and those things, which is why we've gone through the strategic redesign. I think, you know, it really gives us a huge win for AEP coming in. We feel really good about that.

Yeah, good to hear. And last one for me, just on cash flow, good to hear that you're going to be kind of approaching breakeven on operating cash flow for fiscal 24th. Just curious how you're thinking about capital deployment and really how you're thinking about the debt. You've got more than a year left on until you're going to see maturity there. But just curious how you're thinking about the debt potential refinancing. And then on the asset coverage ratio, that bumps up to around 1.8 times by the end of the next fiscal year, by the end of fiscal 2014. which would imply you would need, assuming you don't pay down a bunch of debt, around $1.2 billion of commissions receivable. Are you comfortable, you know, with that asset coverage covenant?

Yeah, no, that's a great question. With respect to operating cash, so obviously it's Curio focused on the organization. We had a Really fantastic 2023, kind of set out cash even to break even, you know, significantly beat that with $72 million. And actually, you know, setting aside health care services would have been positive, the investment in health care services would have been positive on a four-year basis in 2023. As you mentioned, expect to be approaching operating cash flow break even in 2024. It is what we're managing towards, it is the next big key milestone for the business. With respect to, you know, the impending maturity, we're in regular dialogue with our term liners. We absolutely recognize an opportunity to improve the overall capital structure and total cost a day. So, you know, I think that's, first and foremost, it's priority. It's something we're working on. We do believe that there's a path to a lower cost. Business results have been very strong. And, you know, certainly when you look at That paired with our cash position and commission receivable balance, it remains steady. It really broadens the option set with respect to refinancing and facilitates discussions with our existing lenders. So, yeah, those certainly bode well and help with the cause. With respect to the covenant in Q4 of 2024, we've recently worked with our term lenders on an amendment on that. So we do have clear runway, our fiscal 2024 plan. David Miller, Planned we have adequate cash and liquidity that's you against it. And from a covenant compliance perspective, you know, we feel good about where we sit relative to the amendment that's been put in place.

David Miller, Thanks for the color.

David Miller, Next question comes from Ben Hendrix with RBC your line is open.

Thank you. Just a quick question on your growth expectations and seeing your growth slowed 13% this year, and I think you said 25% expected in guidance. Just wanted to get your sense of kind of how you're thinking about a run rate for the industry and for you guys going forward, and if, you know, the extent to which there is influence there from expectation we've heard from carriers of this being increased shopping year this year and should we expect that 25% to moderate as we go forward? Or how are you thinking about the go forward run rate and growth?

Yeah, I'll be happy to answer your first question and maybe have Bob talk about the second one. Certainly here, you know, we operate a large market and if you really look at healthcare, an even bigger market, you know, Ben, we're really focused on delivering high quality business for our carrier partners. driving attractive returns. We certainly felt like we did that in 23. And ultimately, we're going to prioritize profitability and cash flow and take any extra volume that might fall through to the bottom line through the efficiency of the model. I think last year we guided to a 35% to 45% pullback and ended up with the pullback only being 13%. So I think that shows you what's possible in the model. you know also make a note that uh you know when you think about growth um you know growth and market share is not all created equal if you look at what we did from a senior perspective we had 26 margins you also need to tack on that additional benefit of select rx that came at very low marketing costs and i think that right it kind of underscores the power of our model and we'd really kind of point the market to the collective growth. It's a combination of what we're doing on our senior business coupled with our healthcare services and kind of a perspective on enterprise growth. Bob, to Ben's second question.

Yeah, we try to be very, you know, I'd say balanced and measured coming into AEP on what our expectations of close rates will be. And, you know, to the point that the carriers have made on increased shopping, you know, we believe we've attracted a really sticky customer this year, given what the focus has been on, which again, it's kind of the demographic that we bring on. And, you know, historically increased shopping has been a windfall for us or a good guy for us tailwind. I should say, sorry. As far as is what we see, you know, especially if, if those D steps do, you know, take shape and we see that group, the one that shops more, especially if they're not on a special needs plan today and they're eligible to get on one. So I think when you look at what we've done, we are being very measured on our approach towards what we expect. But there could be some tailwinds to that if what the carriers are saying plays out, especially towards the demographics we attract.

Thank you.

And in your prepared remarks, you alluded to changes in lead targeting strategies. I'm just wondering if there's any lessons learned from 2023 that are informing your 2024 strategies and how we expect kind of lead generation and targeting to evolve for next year.

Yeah, sure. Great question, Ben. You know, broadly in terms of the market, we do think the market environment has continued to be favorable. But kind of the rationalization that we've seen in the industry over the past two years has created a favorable backdrop. But I think most importantly, kudos to our entire operational team who's done a great job with respect to marketing segmentation, target marketing, the cost discipline, everything that we've done internally and with our partners to just you know, demand higher quality and find it's a very big market. And so we really feel like we're finding that sweet spot. So by and large, we're going to continue with the approach that we had in 23. I think we'll also have an eye to kind of the pull-through economics we get on our healthcare services business. That's very powerful for us. And, you know, we highlighted the red ducat over 4X. And increasingly, that's the way we're thinking about the business. We certainly demand, as investors should, solid unit margins and profitability for senior, and we think we deliver that and we expect to continue to deliver that. But we also got to look at the platform more broadly in the way that we target marketing with respect to how it will benefit consumers on the healthcare side of the equation. You're starting to see some visibility to that, and I think that will continue to inform our marketing approach moving forward. Thank you. Thank you, Ben.

This concludes our Q&A. I'll now hand back to Tim Danker, CEO, for closing remarks.

Yeah, thank you all again for joining us this morning. I'll close by underscoring what is really clear to us, but maybe not as clear to the market. It's like which diversified platform is much more valuable than what is really perceived as a standalone Medicare distribution business. Clearly, we see that. Our carriers see that. We think undoubtedly our policyholders see that. So our priority is to realize value, not just for our core senior business, but for what Sleclet represents as a broader information hub and facilitator for how healthcare services are delivered, administered, and covered. We believe we're uniquely positioned to be the accelerant of that change, and we plan to emphatically prove to our shareholders there is significant unrecognized value in our company. We very look forward to talking with you more about this opportunity on future calls. Thank you again for your time.

Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines. Ladies and gentlemen, today's call is now concluded.