SelectQuote, Inc.

Hello and welcome to SelectQuotes Fiscal First Quarter 2024 Earnings Call. My name is Terry and I'll be coordinating your call today. There will be an opportunity to ask questions and you can do this by pressing star followed by one on your telephone keypads. It is now my pleasure to introduce Matt Gunter, SelectQuotes Investor Relations. Mr Gunter, you may begin your conference call.

Thank you and good afternoon, everyone, and welcome to SelectQuote's fiscal first 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, 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, including but not limited to those described in our earnings release, annual report on Form 10-K, quarterly report on Form 10-Q for the period ended September 30, 2023, 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?

Good afternoon, everyone, and thanks for joining us. We're proud to share that Slugfoot produced stable and strong profitability in the first quarter of fiscal 2024. We've now achieved seven consecutive quarters of materially improved operating results in each of our business segments. At the risk of repeating ourselves, we have made significant strides across both our senior distribution and healthcare services segments and are confident in the platform's ability to produce consistent fundamentals and, most importantly, expand consolidated profitability. Our core senior business continues to perform well, driven by our strategy to overweight tenured agents and arm them with high-quality leads. As a result, the first quarter again exhibited strong agent close rates and policy approval rates, efficient marketing cost per approved policy, and stable retention metrics, all of which give us substantial confidence as we enter the 2024 AEP and OEP seasons for Medicare Advantage. Similar to last year, we've hired and trained agents earlier and are very well prepared for the season. In fact, early results for AEP have been good and in line with our expected execution. Our healthcare services business, driven by continued strength in SelectRx, generated strong growth and was again profitable in the quarter, despite one cue being a higher expense period to prepare for the lead flow SelectRx is expected to receive during the busy AEP and OEP selling seasons. Put another way, the scale of SelectRx is ramping, which is great to see as SelectWhat becomes an increasingly year-round business. For SelectRx specifically, we have now surpassed 52,000 members and continue to see significant runway for both growth and increased profitability. As a point of reference, healthcare services revenues exceeded our senior revenues for the first time in company history this quarter, which speaks to the increasing diversity and power of our integrated model. Lastly, our life and out-and-home businesses were solid and continue to provide a strong base of cash flow for the overall organization. Overall, we're proud of the successful results delivered in the first quarter, which is the slowest seasonal quarter of the year. The company delivered consolidated revenue of $233 million, resulting in adjusted EBITDA of negative $11 million as the company geared up for the 2024 AEP season. which exceeded our internal expectations and represents a year-over-year improvement of more than 16 million compared to 1Q fiscal 23, driven in large part by the positive and growing contribution from healthcare services. As a result, we're very well situated to execute our fiscal 2024 and reiterate the guided financial ranges provided last quarter. If we turn to slide four, let me provide color on our approach to AEP and what we have observed so far this season. As we've communicated previously, we believe our strategic redesign has repositioned the company to deliver consistent and strong returns in a range of Medicare Advantage selling seasons. Represented here are the pillars of our strategy, which should all look familiar because this is the same playbook we have run the last seven quarters. Let me begin with the pillars that are within SelectQuotes control, our agents, marketing, and technology. First, our agent-led model continues to be Sleclet's biggest competitive advantage. And again, we're prepared for the upcoming season by hiring, training, and onboarding those agents earlier than in years past. The strategy to employ a higher mix of tenured agents has been a winning formula as those agents have historically been about two times more efficient than newly hired agents. Better yet, because the Sleclet model empowers our agents and provides a compelling career opportunity, our tenured agent retention remains very strong and has strengthened over the course of the past year. We believe this is a key strategic advantage for Select Close, and we've entered the AAP season with what we believe is the best and most prepared sales force, which is critical as we know each season can be different. Second, our marketing strategy will again focus on quality leads where policyholders exhibit factors that predict higher persistency and less shopping behavior. And third, we have further developed our technology and agent desktop tools, which enable our agents to serve policyholders with the best solutions for their specific needs as efficiently as possible. As I mentioned, these three pillars are within our direct control, and we believe we have designed the best model to ensure success at each point in the value creation chain. This brings us to the plans designed by our carrier partners. As expected, plan features this year are largely similar to last season, especially amongst the largest carriers with continued investment and the most important plan benefits. We're also encouraged by the increased emphasis on healthcare services as part of the Medicare Advantage ecosystem. This is clearly aligned with SLECWT's view of the world and where it's going. Bottom line is we feel good about SLECWT's preparation and the early indicators point to our ability to close and win policies effectively this season. Lastly, beyond the policies themselves, Selectwood has been recognized by carriers as a quality distribution partner, and we've seen this exhibited in deeper coordination to ensure the best onboarding experience and retention behavior once policyholders have chosen their plan. I'll conclude my remarks on slide five with another perspective on how unique the SelectRx platform is, both in terms of our ability to successfully onboard and rapidly scale the business. At left, we detail two pharmacy platforms we acquired in 2021. Despite the excellent consumer value proposition, the businesses were subscale with only about 4,500 members. The businesses also experienced high customer acquisition costs and were hampered by disparate systems, which made customer service and logistical efficiency difficult to manage. On the right is what we have built in SelectRx, which is rapidly scaled in terms of both member growth and profitability. Aside from a lot of hard work by our team, the key success factor has been how we interact with and know our customers. Similar to the senior distribution platform, we are successful when our customers get the best care that is tailored to their specific needs. The only way to achieve that goal is with information and personal engagement. We've utilized that engagement to drive growth for SelectRx. Member growth today does almost entirely come from the population of seniors we have assisted with Medicare Advantage plans, effectively requiring zero additional marketing spend. At Attractive Unit Economics, we believe SLECO is also well positioned to reach consumers outside of our Medicare Advantage business. Additionally, our platform and information advantages mean we have the scale and capabilities to serve all 50 states. Our single pharmacy system is more efficient and is seamlessly integrated with our automated fulfillment and shipping functions. The scale and efficiency translate directly to our unit economics, evidenced by our revenue per member per month being more than 35% higher than what the prior business achieved. Lastly, we're becoming more efficient as we grow, both as we scale our fixed costs, but also as we continue to use our buying power to negotiate improved drug pricing. In sum, SelectRx is the prime example of why SelectQuote is not just a Medicare Advantage distribution company. but as an information hub that enables differentiated customer acquisition and engagement. Both we and our partners see SelectVote as competitively unique and positioned at an advantage intersection of the rapidly shifting healthcare ecosystem. SelectVote has always approached our value proposition holistically to each of the key stakeholders in healthcare and insurance. Medicare Advantage is simply one product facilitated by our model. Tailored prescription drug delivery driving higher patient medication adherence and convenience is another. We noted last quarter there are additional market opportunities for us to leverage Selectwood's platform to deliver value to participants in the healthcare ecosystem. We plan to share more as we develop these strategies in the coming quarters and years. I'd like to emphasize that we believe our company is being viewed through the wrong investment lens. To be clear, it is our responsibility to execute and produce financial results for our shareholders. What is less clear to us is how the value of Sleklik seems widely dislocated relative to the broader market opportunities we pursue and the unique approach we take to deliver financial results in that pursuit. With that, I'll end my remarks and turn the call over to Ryan. Ryan?