SelectQuote, Inc.

Hello and welcome to SelectQuote's fourth 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 the star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by the number two. It is now my pleasure to introduce Matt Gunter, SelectQuote Investor Relations. Mr. Gunter, you may begin the conference.

Thank you and good morning, everyone. Welcome to SelectQuote's fiscal fourth quarter and full year 2024 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 on 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 for the period ended June 30, 2024, and other filings with the SEC. Therefore, the actual results of operations or financial conditions 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.

Thanks, Matt, and thank you all for joining us today. Before diving into the results, let me start with a few high-level takeaways. Buckwode had a highly successful fiscal 2024 across each facet of our business. Our senior Medicare Advantage business performed well, driven by strong operational execution, which resulted in high margins. Our healthcare services segment continued to see growth and scale, highlighted by our SelectRx prescription drug business. Overall, we continue to produce results that reaffirm our strategic goal to prioritize unit profitability and cash efficiency. The fourth quarter marks the 10th consecutive quarter outperforming our internal expectations. and we are ever more confident in Slugquot's value within a very large U.S. healthcare ecosystem. I'll share more in a moment, but it's worth noting that we are continuing to make meaningful progress on our capital structure. We recently signed a non-binding letter of intent with certain of our term lenders to complete an initial securitization of around $100 million. Provided the deal closes, we think this transaction will represent a critical first phase in ultimately achieving a more appropriate capital structure for SelectQuote. Perhaps most importantly, the proposed transaction would include an extension of our term debt maturity to the fall of 2027, which would provide us the runway we need to achieve our long-term objectives. We've made significant progress over the last two and a half years since undertaking our strategic redesign. But to give context to our capital structure, SelectQuote is still not as strong as we believe it can be. To be clear, SelectQuote has ample liquidity, but in 2025, our growth will be tempered for two reasons. The first is the later than expected timing of our initial securitization, and the second is a change in commission structure with one of our larger carrier partners for the upcoming Medicare Advantage season. I'll elaborate on both in a minute. Overall, I'd like to emphasize that our growth in 2025 would be significantly higher with a more flexible capital structure. In fact, we've never been more optimistic about the future given our strong underlying performance in both senior and healthcare services. The strong fundamentals in these businesses remain unchanged, and it is our priority to improve liquidity and deleverage so we can capitalize on the large opportunity that we know is ours to win. Blackwood is a leading broker of value-added information and service connectivity for America's seniors. As a critical conduit and enabler of choice for Americans and the insurers and healthcare providers that serve them, our ability to create profit and cash flow for our shareholders continues to increase. Best of all, we are adding value with increasingly diversified services and with less seasonal volatility in results. The constant in all of this is that when our customers do well, we do well, and we believe our shareholders will be rewarded. With that, let me begin with a review of our fiscal year. First, as I mentioned, we have outperformed our guided forecast in each of the past two years. This has been driven by both our Medicare Advantage distribution business and healthcare services, highlighted by the success of SelectRx. Looking at fiscal 24, our actual results significantly outperformed the original outlook We set this time last year. We outperformed the midpoint of our initial revenue expectation by more than 17%, and more importantly, beat our adjusted EBITDA target by over 26%. Ryan will go into more detail, but what's more impressive about fiscal 24 was that we achieved the majority of the revenue beat in healthcare services, but our EBITDA outperformance was driven both by our senior segment and the ramping profitability in SelectRx. Best of all, our outperformance in senior was comped against the fiscal 23 that was tremendously strong for us. This again validates our strategic shift to focus on EBITDA and cash flow over volume. Specifically in senior, we grew overall MA policies by 8% in fiscal 24, which also marks outperformance versus our original outlook for a 10 to 15% decline in policy production. The better than expected results were, again, driven primarily by improved efficiency in our model. The senior business generated strong EBITDA margins of 25%, which compares to 26% margins in fiscal 23. Our close rates were impressive as our strategy to focus on the best leads and direct them to tenured agents continues to be successful. Additionally, we continue to see strong policyholder retention as evidenced by higher year-over-year LTVs. In healthcare services, the business continued to exhibit momentum as we ended the year with 82,000 members. This was up 68% year-over-year and well ahead of our original guided expectation to grow around 25%. If we turn a page, let me review the key performance indicators for our senior Medicare Advantage business. As I noted, our strategy to produce consistent returns with a focus on cash efficiency was again successful in fiscal 2024. As you can see in the charts at left and in the middle, 2024 experienced modestly higher expenses per policy driven by the implementation of the new CMS marketing standards. Despite these increased costs, ThoughtQuote has maintained stable and strong senior EBITDA production per policy, which was essentially flat year over year when compared to fiscal 23. This was driven by increased LTVs, drawn policy close rates, and overall agent productivity. Put simply, our focus on core tenured agents and the most profitable lead sourcing continues to be successful. Lastly, we continue to drive more revenue per dollar of customer acquisition with our Rev to CAC ratio increasing to 4.5x. As we've said, the synergy of our healthcare services segment is driving these returns, which is core to our strategy to leverage our position as a value conduit within the broader healthcare ecosystem. What is less apparent is that this improved efficiency was also driven by strong LTVs, which demonstrates stability and policyholder persistency. LTV can be a function of benefit trends, but we believe lead targeting paired with our personalized agent-led service is a differentiator for select quote in every MA season. That said, we do expect the upcoming season to potentially see an uptick in policyholder shopping. As you have seen from insurance carrier commentary, there are shifts expected in benefit design this season. As you know, this is not uncommon in any given Medicare Advantage season, and SelectQuote's true choice model becomes even more important to consumers when policy features are in flux. Flipping ahead, let's look at our short but highly successful history in healthcare services highlighted by SelectRx. As we've noted, 2024 was a milestone year for the scale of SelectRx. Members have grown rapidly and continue to mature, which drives top-line revenue. We are now seeing those recurring revenues lap onboarding costs, which will continue to contribute to our profitability. Specifically, our full-year revenue for healthcare services grew nearly 90% to $479 million, underpinned by a membership of 82,000. Our EBITDA ended 2024 at $8 million, which is an impressive turnaround from the $23 million drag experienced in fiscal 23. Best of all, the business is highly cash efficient with a payback on customer acquisition costs of less than six months. Looking ahead, we see SelectRx and broader healthcare services as an increasingly self-funded business, given how critical medication delivery is to the customer. This high value-added service is built around convenience for our members, which supports better medication adherence outcomes, a win for customers and carriers alike. Turning to the next page, now let me expand on our strategy to improve SelectQuotes capitalization. As I noted before, we agreed to another short-term extension on our term debt. More importantly, we recently signed a non-binding letter of intent related to a first securitization with certain of our term lenders and are working through definitive agreements. We see the proposed approximately $100 million transaction as an important first step on the on-ramp to future securitizations and a reduction of our term debt. Provided this deal closes, we expect this initial securitization to improve our cost of capital, establish the legal and operational infrastructure necessary to support future potential securitizations, and enable the extension of our term debt maturity to fall of 2027 with staggered payments. This allows adequate runway to achieve future deleveraging. We currently expect the transaction to close in the coming weeks and look forward to sharing more details at that time. Moving to the next page, I'd like to give context to our fiscal 2025 outlook. Let's start with the foundation of what we see as unchanged in the Medicare Advantage landscape. First, MA demand remains a tail end, and the aging American population continues to grow. Second, policy persistency is stabilizing and has been less volatile, especially for leads and customers we actively target. This allows us to maintain our strong unit economics, which Ryan will detail later. Third, the outlook for healthcare services remains strong, and not just for SelectRx. Fourth, the attractive unit economics that have underpinned the senior business in recent quarters are unchanged, and we're confident in our ability to deliver target margins of 20% plus. As for recent commentary by carriers about Medicare Advantage and the reevaluation of their benefit designs, our view is twofold. First, the range and shape of coverage can and does change from year to year, as it always has. Second, and most importantly, the need and demand for tailored coverage from American seniors remains strong and is growing. Blackwood's importance to both seniors and our carrier partners as a true choice platform is only amplified as shifts in coverage occur from year to year. With that as a level set, let's shift to what is changing and speak about the specific carrier action that will impact our 2025 fiscal year. In the middle of our fourth quarter, a large carrier partner of ours shifted to an industry-wide, ratable commission structure in fiscal 2025 compared to a structure that was more front-loaded in fiscal 24. While the new deal structure remains economically attractive for the business, it does impact our cash flows ahead of the MA busy season. Prior to the shift, our initial planning was to partially fund 2025 AEP and OEP season volumes with these front-loaded commission dollars. As a result, given the balance sheet limitations I noted, we expect our approved policy count in fiscal 25 to be about 10 to 15% lower than it was in fiscal 24. To be clear, our expected growth in fiscal 25 is a reflection of the temporary capital constraints for select quote and not the health of the Medicare Advantage industry. Provided we close, we expect this initial securitization, along with intended future deleveraging transactions, will increasingly mitigate capital constraints. The market remains highly attractive, and without these capital constraints, we would have leaned in by hiring a larger class for this coming AEP, and our policy growth expectations would have certainly been higher. Ultimately, the result of this change, paired with business seasonality, led us to choose to hire a smaller class for this coming AEP season. While we confidently believe we could hire more, produce more, and deliver compelling returns, it was important to manage our capital investment given current constraints. Ryan will speak more to our balance sheet and strategy to improve both liquidity and our overall leverage. Before that, let me speak to our platform and how we believe the diversification of our business and cash flows will dampen seasonality in the future. If we move to the next page, let me end my remarks with what we mean by SelectWit's platform value and how we continue to leverage our information and connectivity advantages within healthcare. To summarize, we know that SelectWit has established a real right to win in multiple business lines within healthcare. Our significant data assets paired with tailored customer service from our agents has proven its value in an expanding number of ways to a growing number of market participants. As you know, we've built this platform since Blackwood's inception, building upon our senior Medicare Advantage distribution business, which is a platform designed to best serve individual needs. With the launch of healthcare services segment in 2021, we began to identify meaningful market inefficiencies, both in how customers access care and how insurance companies and caregivers connect with those consumers in a scaled but tailored way. As healthcare becomes increasingly localized and focused on individual patient outcomes, we see additional services with large demand but inefficient fit and delivery to the end customer. Services that are inherently local, like value-based care and chronic care management, have been challenging for caregivers and insurers to access. For SelectQuote, we are the natural enabler because we already capture and action critical data and are connected to each stakeholder point within the value chain. To bring it all together, we believe the healthcare services opportunity is important for shareholders, not simply for profit growth, but we believe our holistic platform strategy will transform and diversify SelectWOT's revenue and cash flow streams. We already see that with SelectRx, and as we launch new initiatives in the future, SelectWOT will benefit from multiple growth avenues with less seasonality and smoother cash flows. Similar to our strategic focus to prioritize stable profitability and cash efficiency, we believe the select quote of the future can accomplish that in an expanding range of large addressable markets. Not glossing over our need to improve our capital structure, but we want to be clear that we are more confident in our profit and cash flow outlook now than we have ever been. With that, let me turn the call over to Ryan to detail our financial results. Ryan?

Thanks, Tim. I'll start briefly with the summary of our results. On a consolidated basis, SelectQuote grew fourth quarter revenues 39% to $307 million, driven by double-digit growth in our senior business and continued strength in SelectRx, where revenue was up 75%. More importantly, our consolidated EBITDA expanded by over $20 million, driven by a strong balance of execution in our senior business and the continued scale of our healthcare services platform. In senior, we delivered another strong year of 25% EBITDA margins, which was well above our long-term targeted range of 20% plus. Stable persistency and higher resulting LTVs for fiscal 2024 helped profitability. That said, our teams deserve the lion's share of the recognition as our strategy to target the best leads for our core tenured agents led to excellent close rates and throughputs. Shifting to healthcare services, the story in 2024 was similar to 2023, but better. SelectRx member and revenue growth continue to demonstrate the significant value we are delivering to our prescription drug customers. As a segment, healthcare services delivered the fifth straight quarter of profitable adjusted EBITDA, contributing close to 8 million in adjusted EBITDA for fiscal year 2024. This was accomplished despite the rapid growth in SelectRx members, which ended the year at 82,000. As a reference point, our healthcare services segment finished fiscal 2023 with an adjusted EBITDA loss of $23 million as the business was still ramping. The rapid time to scale is the prime example of how our position in the healthcare services market can be leveraged to drive synergistic value for our customers and ultimately our shareholders. On the next page, we present another view of our consolidated results for 2024. As Tim noted, it was an impressive year relative to our original expectations. The revenue outperformance was driven predominantly by Selector X, and the overall improvement in profitability was driven by both our senior and healthcare services segments. Our full-year consolidated revenue expanded by 32% to $1.3 billion. As Tim mentioned, the more important pivot in 2024 was the inflection of profitability in our healthcare services segment, which eliminated the drag on our consolidated EBITDA. Overall EBITDA for 2024 grew 57% to 117 million, resulting in a full year margin of 9%. Again, very strong outperformance compared to our original expectations. The only point I'd add here for context is on revenue growth relative to EBITDA growth. In the recent past, our revenues have outpaced our EBITDA as Selector X members continue to mature. 2024 will mark the year where we begin capturing operating leverage in the business. Now let me detail the results in our senior segment. Stable growth in production resulted in an 8% expansion in MA approved policies to 625,000 for the full year. As Tim noted, we maintained discipline in the leads we targeted and the growth we saw in policy production was largely driven by the execution and efficiency of our agents. Moving to the right side of the page, we saw a modest increase in LTVs for the policies written in fiscal 2024. While the impact to our top line is favorable, the more important takeaway is the underlying stability we have seen in policyholder retention in recent years. As Tim noted, the upcoming season will likely see increased policy changes, but we do not expect the type of volatility experienced in fiscal 2022. As a reminder, our LTVs today are nearly 30% lower on average than our high water mark a few years ago, much of which is due to our own changes in the conservatism of our persistency assumptions. But another way, since our strategic redesign, SelectQuote has targeted and underwritten policyholders to a much more predictable and narrow range of persistency outcomes. Now I'll quickly summarize the top line and profitability performance of our senior segment. Total revenue of $656 million represents growth of 11% in fiscal year 2024. Our Q4 results were similar with revenue of $114 million or growth of 10%. As Tim noted, the highlight of the quarter and year was the pull through select quote achieved in senior profitability, which ended both the quarter and the year with mid 20% EBITDA margins, which for the second consecutive year was well above our target of 20% plus. Moving to our life and auto and home division, which both contributed positively to our overall results. Starting with the life business, revenue for the fourth quarter was 42 million, up 11% year over year. For full year 2024, the segment grew revenue by 8% year-over-year to $158 million. The life business continues to be a strong EBITDA contributor, generating $7 million and $20 million for the fourth quarter and full year, respectively. Moving to auto and home, revenue was $8 million for the fourth quarter and $36 million for the full year. Adjusted EBITDA for the fourth quarter was $2 million and $14 million for the full year. In line with our commitment to disciplined capital allocation and cash generation, we have made the strategic decision to rationalize our auto and home business by pulling back on agent headcount and external lead sourcing. We believe it is in the best interest of shareholders to deploy our capital in other parts of the business where the cash efficiency is more attractive. As a result, this is the last quarter where we will break out the auto and home results. Before we jump into our outlook for fiscal 2025, It's worth calling out that our 2024 adjusted EBITDA of $117 million would have been approximately $103 million when the auto and home results are backed out. While we expect there will be some modest EBITDA contribution from the runoff, it's important to note for comparison purposes. Revenue is expected to be in the range of $1.4 to $1.5 billion, which at the midpoint represents growth of 10% year over year. Adjusted EBITDA is expected to be in the range of 90 to 120 million, representing a year-over-year decline of 10% at the midpoint before normalizing for the auto and home impact I just mentioned. We will walk through the main drivers of the decline on the next slide. Finally, net loss is expected to be in the range of 42 to 6 million. Now I'll provide more context on the drivers of our EBITDA guide for fiscal 2025 across each of our businesses, starting with Senior. Again, the primary drivers of the 2025 decline in adjusted EBITDA is an approximate 10% to 15% pullback in anticipated senior MA production as we enter the year with fewer agents. As Tim mentioned, the new commission structure implemented by one of our carriers resulted in a temporary capital constraint, which prevented us from hiring a larger agent class ahead of the upcoming AUP season. This pullback in volume is the direct result of that constraint and is not reflective of what we believe would be possible in the otherwise strong and attractive Medicare Advantage markets. From a unit economics perspective, we are confident we can continue to deliver even to margins of 20% plus in a range of Medicare-selling environments. The temporary MA value headwind will be partially offset by continued strength within healthcare services, in particular, Selector X. We anticipate continued strong membership growth in the range of 20% to 25%, which should drive revenue growth of about 35% to 45%. We expect membership growth to be higher in the second half of 2025 versus the first half in line with normal seasonality trends as we onboard more SRX members on the heels of the busy AEP and OEP periods. We expect even the margins in healthcare services to be in the low to mid single digits range for fiscal 2025 and expect margin improvement as the year progresses. Finally, as I mentioned before, we are rationalizing the auto and home business, and while we plan to maintain a small presence in the space, Auto and home will no longer be a material contribution to Selectwood's earnings and therefore will be a headwind for fiscal 2025's adjusted EBITDA, but a tailwind to overall operating cash flow for the year. While Selectwood's underlying business trends remain strong, I'd reiterate Tim's point that we see an abundance of opportunity. We remain highly committed to further improving our balance sheet to capture the value we know is available within the large and attractive markets we serve. With that, I'll turn the call over to the operator for questions.

Thank you, if you would like to ask a question, please dial star followed by one on your telephone keypad now, if you change your mind please dial star followed by two to exit the queue. Finally, if you're using a speakerphone then please pick up your handset before asking your question and when preparing to ask a question, please ensure that your phone is unmuted locally. Our first question today is from the line of Ben Hendrix of RBC, please go ahead, your line is open.

Thank you very much, guys. Wanted to talk about the securitization in the $100 million of letter of intent you signed. You noticed that that's non-ramp to future securitizations. I'm wondering if you can kind of let us, give us some idea of how you're thinking about the bridge from the current LOI to the fall 2027 maturity and kind of the prospects for kind of ramping that securitization up over the next couple of years. Thanks.

Good morning, Ben. This is Tim. I appreciate the question. We are very excited about this LOI and feel that it's definitely the right deal for SelectQuote and our shareholders. As we highlighted, there's several benefits here. I think most importantly, the maturity extension of our term debt into fall of 2027. This first $100 million securitization is that critical first step to unlocking further delevering in the balance sheet. This is something we've been very focused on. A lot of work has gone on to carrier contracts, technology, operational infrastructure. And we think that once this, you know, proposed transaction closes, that gives us further optionality for future securitization. This also, you know, helps reduce our cost of capital. It's meaningfully inside our current cost of capital. But securitization is a lever. It's not the only lever. for the company. And so, you know, we will continue to evaluate other options. The company is blessed with lots of assets, a significant back book, a very robust business, a growing healthcare services business. And so we feel like there are lots of options. We feel very confident in our ability to continue to operate well, to grow, and certainly to deliver. And so, you know, we'll provide You know, more clarity here in the coming weeks as we work through the, you know, the definitive documents and hopefully bring this sale to market.

Thank you for that. And if I could ask one about SelectRx, you know, NYSEBA dot contribution in the, in this past quarter. Kind of how do we think about margins for 2025 and that ramp up and where that could go over time?

Yeah, thanks for the question, Ben. I think we're certainly pleased with the SelectRx business and the rapid growth exceeding 68% over the past year and well ahead of our original guide. As the year progresses for 2025, we've highlighted we expect customer growth 20-25%, revenue growth of 35-45%, and highlighted margins in the low to mid single digits. And we do see this continuing to progress as, you know, as the year unfolds. So second half, we would expect to be higher. And long term, you know, our position is still that the EBITDA margin potential within this business is in the low to mid teens. And we are making investments to drive operational efficiency in the business. We think that there's a meaningful opportunity there, including making investments in a new facility in the Overland Park, Kansas area.

Gotcha. And then going back to the senior side, I appreciate the commentary about the insurance carrier kind of going back to a ratable commission structure. And then that producing kind of along with the balance sheet considerations kind of, I guess, driving some slower growth than you had maybe hoped for in guidance. But is there any reason to believe that this slower growth and maybe the smaller new agent pool could de-risk? the growth that you do see this year, kind of what I'm thinking about, you know, the switching period and chance for churn through that period. Is there a reason to believe that the new members that you do onboard, just given a more tenured structure than maybe some of your peers might have, that we could see better retention this quarter and essentially de-risk the chance of churn in the switching period?

Yeah, Ben, great question. Let me address the front part and ask Bob to maybe address the specifics on retention. But I do think with respect to our overall goal, and we've been on record on this quite a bit, has been to be able to deliver in a range of selling seasons. That was the whole part of the strategic redesign. That was everything about a highly tenured agent force right, even better targeting and customer segmentation. And I think if you look at the last two years' results, you can see what we've been doing from a unit economics and margins perspective. We would reasonably expect that to continue. With respect to retention, I'll kick that over to Bob.

Yeah, and specific, I'll go specific to new policy retention and then also book retention, because it was kind of a blended question, which is a good question. Yeah, I mean, Ben, what data would say on our more tenured agents, they do a significantly better job of placing people on the right policies and then ultimately those persisting throughout AEP and to that kind of vital 90-day period. We'd also say that when we drive inbound calls on all the plan changes and everything that everyone has talked about this year, that we have a very tenured right choice team and very tenured agent force. So When we answer those calls, we feel really, really confident about our ability to really drive home the benefits of the plans people are on and temper worries of folks in the market, which there's definitely going to be given the changes on the plans that are out there that the carriers have been very open about. So it's a really thoughtful question. And yes, we believe that our more tenured force is better equipped to deal with that complexity than anybody.

Thanks for that. And then my last question was just on the CMS marketing standards. I know you had some, a little bit of margin pressure from that. Can you talk about how much of that maybe you might be able to kind of mitigate going forward? Is that something that you believe you could fully offset? Is that something that will be ongoing at current levels? Or just how do we think about that progression?

Bill, would you like to address that? Yeah, absolutely. So, there's both, you know, the historical CMS kind of changes that cause a little bit of pressure, and then there is, you know, some of the newer stuff regarding kind of the one-to-one consent. We're always, you know, we feel like we're very well equipped to deal with changes that CMS kind of throws at us. And feel like, you know, it took just a little bit to kind of figure out exactly, you know, with the 48-hour rule, some of the things that we're doing, exactly, you know, what we needed to do there because it was just change. But I feel like we're very well equipped and that's pretty stable now. So I wouldn't expect anything going forward in terms of additional pressure related to those rules. Also, you know, the new stuff in terms of the one-to-one consent, we've always done one-to-one consent. So that's no change for us. So don't feel like any of the rules that came out for this year have any additional will put any additional pressure on on as relates to kind of lead buys. Also feel like, you know, kind of back to your other question just a bit on, you know, what kind of a smaller force does in terms of allowing us to be used the same wide funnel we've always had, but of let fewer leads through the funnel. It just allows us to be more and more specific about what we take. It helps in terms of, you know, both not only close rates, but, you know, policies that go in force, all those things. So I believe we're well equipped to deal with those both through, you know, what we've seen with the way we've dealt with those and through our lead by strategy itself.

Thank you very much, guys.

Our next question today is from the line of Pat McCann of Noble Capital Markets. Please go ahead. Your line is open.

Hey, good morning, and thanks for taking my questions, and congrats on a strong year. My first question has to do with marketing. I was just wondering if, given the prospect for heightened shopping and disruptions in the upcoming AEP, I was wondering if you were making any adjustments to your marketing strategy, any changes there? Yeah, could you comment about that?

Bill, do you want to go ahead and address that?

Bill, I think you might be able to. Sorry about that, I was on mute. Going back to your question, we think while certainly it creates some challenges with the changes, absolutely it creates a massive opportunity with the marketing and our strategy is built around the changes. So when you really look at where we'll target, we'll target within the disruptive areas, right? So when you look, we know exactly as example, you know, where plant terminations are occurring. They are in kind of isolated areas, so we can target those areas and, you know, provide, we think, a huge, you know, service to, you know, to those folks, which should really play into close rates and, you know, those things. As it relates to, you know, the election, I think that we're very well equipped to be able to handle the election in terms of kind of our wide funnel approach. TAB, Mark McIntyre, we've handled election years in the past, and you know, while certainly could put a little bit of pressure on TV, we think you know with certainly with the awareness that's going to be around. TAB, Mark McIntyre, The plan changes this year that that that that won't really present a challenge, but as a marketer we're I think we're very excited about about being able to really target and again believe with that wide funnel. that target those areas and what we let through that we can really have a good opportunity to maximize close rates as they come through.

Yeah, I would just underscore, Pat, that two consecutive years of EBITDA margins in the mid-20s, our guide for this year implies EBITDA margins for senior north to 20%. So I think great question on the marketing front, but we feel very well equipped there, feel very well equipped with respect to our agent force and you know, we're looking forward to the upcoming season.

Great. Thanks for that. My next question was regarding the new distribution facility there in the KC area. I think, as you mentioned, it would increase the capacity, and, of course, the pharmacy business is growing rapidly, so that makes sense. I was just wondering if there are any other specific improvements, or anything else to note about that new facility and how it enhances the business outside of strictly capacity, which of course is a good enough reason on its own, I would think.

Yeah, it's a great question. It does have a ton of other benefits. We came in and retrofit two facilities that were older, right? And when you do that, you don't have the opportunity, one, to kind of design it the exact way that you want to. And then two, you don't really get the benefit of using newer technologies that are more efficient because your size and scale was lower. So we definitely think there is a big opportunity in cost savings on shipments out the door. One, you know, no surprise, Kansas City is in the middle of the country. Right now we're going east coast to west coast on a lot of our shipments, which costs you more money than it should. I know that doesn't sound like a big deal, but when you're shipping out as many scripts as we are, it does start to add up. But more importantly than that, the streamlined facility and modernization that we can put into it should get significantly more efficiency out of it. And it allows us to test some new things that we could retrofit the old facilities with. So, yes, there are definitely other benefits, which is why we think that, you know, the back half of the year should start, you should start to see that increase in margin even more, not just tied to growth, but also tied to efficiencies.

Joseph Baeta, Supt of Schools, Great in fact you asked just one last question I was wondering what when it came to the comes to the Commission structure for for the large carrier that you guys mentioned would would sort of impact impact 2025 I was wondering if you could just juxtapose. Joseph Baeta, Supt of Schools, The committee original Commission structure in the new Commission structure for me that would be very helpful Thank you so much.

Yeah, I'll take that one. You know, as you noted, and as we called out on the call, you know, we didn't have a carrier make change. And it wasn't unique to Selectwood at all. And I think it's also important to note that, like, the overall compensation is still attractive, but it is moving back to what would be kind of a more traditional structure where it's, you know, you're compensated up front for the sale, and then there's more, you know, revenue that's generated as the policy persists over time. And so there is, you know, it's just a little more back-end loaded, and it does create a working capital constraint, which led to, you know, some pressure in the decision to hire a smaller class. But again, we're, you know, absolutely confident in our ability to generate strong and compelling margins and to work through this kind of short-term capital need. And, you know, the value here is that you actually do have more revenue in subsequent years But in the near term, it does create a little bit of a trough.

Yeah, and I would just add, Pat, I mean, you know, we have, you know, materially de-risked that particular element moving forward. And if you think about securitization that we've talked a lot about, I mean, clearly securitization is the lever to help, a lever to help us, you know, de-lever the balance sheet. But it also, as we think about the potential for future securitizations, right, we can move to an even more working capital light model and really kind of be agnostic, if you will, about the types of the commission structure from the carriers.

Excellent. Thanks so much, guys. I appreciate it. Thanks, Pat.

Thank you, and this will conclude the Q&A session, so I'd like to hand back to Tim Danker for any closing remarks.

Yes, thank you, Harry. I want to thank you all for joining us. Clearly, our priority is to accelerate growth initiatives with an improved capital structure. We're confident in our ability to do so and are taking an important first step as we work towards closing on our initial securitization. Fiscal 2024 was another successful year for SelectQuote. And I'll repeat what I said before. We know there's a significant opportunity for the power of our holistic healthcare platform to connect participants in a growing number of ways. We believe these opportunities are ours to win, and we're committed to delivering that value to our customers and investors in fiscal 2025. We want to thank you all again, and we'll see you this fall.

This concludes SelectQuote's fourth quarter earnings conference call. Thank you to everyone who was able to join us. You may now disconnect your lines.