SelectQuote, Inc.

Welcome to SelectCode'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 star followed with the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. It's now my pleasure to introduce Matt Ganter, SelectQuote Investor Relations. Mr. Genter, you may begin the conference.

Thank you, and good morning, everyone. Welcome to SelectQuote's fiscal fourth 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 for the period ended June 30, 2025, 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 Denker. Tim?

Thank you, Matt, and thanks to everyone on the call. Today, I will start with a review of fiscal 2025, which will be brief given the drivers of another successful year. I've been consistent with the recent past. I'll then provide additional color on the unique environment we saw this past quarter. I'll then spend the bulk of my time on what we're planning for the years ahead. Additionally, I'll contextualize the near-term strategic goals for SelectQuote relative to the broad market opportunity we've spoken to in the past. So with that as the outline, let me begin on slide three with an overview of our performance highlights for fiscal 2025. We ended the year with consolidated revenue of $1.5 billion, which grew 16% compared to a year ago. As we've noted all year, the top line increase has been a function of the rapid growth of our healthcare services business and specifically SelectRx. Full-year healthcare services revenue grew by approximately 55% to nearly three-quarters of a billion dollars. This is an incredible result in just a four-year history for the business. Our senior Medicare Advantage business performed very well against the challenging market backdrop for the industry. With significant plan changes by carriers this season, As well as new SEP parameters for beneficiary eligibility, American seniors relied on SelectQuote and our agents to advise and help find the best plans to fit their individual needs. We're most proud of how our model and agents performed under pressure, where we drove another year of record agent productivity up 24% and ultimately drove above target EBITDA margins for the third straight year. On a consolidated basis, SelectQuote drove 126 million of adjusted EBITDA which represents an EBITDA margin of 8%. Margins were relatively in line with last year's results, despite adding $264 million in incremental revenue from our lower margin healthcare services business. In short, we're very proud of what the team accomplished this year and how we are set up for the future. If we turn to slide four, let me put those accomplishments in more detail. We have presented these metrics in the past, and I want to highlight them one more time to emphasize the consistency we have achieved in our senior Medicare business. As you remember, we reset our strategic priorities back in 2022, and since then, our focus on profitability and repeatability has been paramount. We're very pleased with the efficiency gains we've been able to yield in the senior business. We've become more efficient in the throughput of how policyholders are assisted via our year-round agent model and our ever-expanding use of technology. We've become centrally efficient in how our services are marketed and which leads we pursue in a given season or intra-season. It is also important to note that these decisions are rooted in the North Star of driving profitability and cash flow. As a result, Sutcliffe Senior has been able to drive near record margins in each of the last three years, despite wide variations in Medicare selling environments from one season to the next. And finally, SLECWT continues to leverage our information and connectivity advantage within healthcare, which you can see in our revenue to CAC ratios. We are increasingly able to help more beneficiaries, caregivers, and payers by offering a wider set of healthcare solutions. Best of all, the model is well aligned that when our stakeholders do well, SLECWT and our shareholders do well. The revenue to CAC ratio, which includes both our senior and healthcare services revenues, is how we track the reach of our model. Over the past three years, we've expanded our revenue to customer acquisition cost ratio from 1.7 times to 6.1 times. We're excited about the year ahead for healthcare services and believe we are in the early innings of how we can leverage our information advantage, technology, and distribution to connect more services between those receiving care and those that provide it. We're immensely proud of the ways our differentiated model and approach to healthcare serves such a wide breadth of Americans, but we're equally excited about the implications for our company's return and cash flow. Before I get to that, on slide five, let's review the highlights of our year in healthcare services, primarily driven by SelectRx. As I've noted, it was another strong year of growth with revenue of $743 million. Most importantly, we made meaningful progress on the scale and profitability of the business, despite concurrent investments and our new state of the art distribution facility in Olathe, Kansas. We ended the fiscal year with adjusted EBITDA of 25M, which is up significantly year over year, but still small from a margin perspective relative to what we believe is ultimately possible. The best representation of that operating leverage potential is the difference in growth between our revenues and membership in fiscal 2025. As noted, revenues grew nearly 55% over the last year, while our membership grew roughly 31%. As we mentioned last quarter, we believe this year has been a pivotal one in terms of scale of membership. To be clear, we believe there is significant growth capacity for new members on the platform, especially with the addition of our state-of-the-art Kansas distribution facility, which significantly increases our potential capacity. With that said, we expect to see increased margin and cash flow contribution in fiscal 2026 from SelectRx as scale from seasoned members continues to drive results. It is clear that a revenue base nearing three-quarters of a billion dollars is a significant asset and one that we are very focused on leveraging in 2026 and beyond. If we turn to slide six, let me quickly review our strategic vision for SelectQuote as a broader connector within the healthcare ecosystem. Today, we have clearly driven scale in both our senior Medicare Advantage and SelectRx businesses. More importantly, we have operated these businesses with a growing track record of profitability and have done so in a range of market environments for both Medicare Advantage and prescription drugs. As we've noted in the past, we believe SelectWealth's ultimate value is as a holistic solution provider across the $5 trillion US healthcare market. While there is a significant growth in value creation opportunity for shareholders in this endeavor, we also note that our integrated model can be a solution for what has historically been a very inefficient system. The information we harness, the connectivity we create as an intermediary, and the healthcare ecosystem tangibly valuable in a wide number of ways. Americans get better and more tailored care based on individual needs. Payer expenses are reduced because patients have better treatment adherence, which leads to better health outcomes. And ultimately, the broader healthcare system benefits because Americans are directed to payers and caregivers that create the best and most efficient patient results. This is particularly important given the traditionally underserved communities we serve, which view more rural, lower income, and with more chronic conditions than the general population. This alignment across patients, payers, caregivers, taxpayers, and shareholders is why we believe we are just getting started in what is ultimately a very value-enhancing opportunity in healthcare. Today, our challenge is not how to grow, as evidenced by the rapid adoption of our SelectRx platform, but instead, it's how we balance growth while simultaneously generating a growing stream of sustainable cash flows. This is a good problem to have. We believe our current revenue to CAC ratio of 6.1x is a compelling proof point in our ability to address the much broader healthcare market and arrears including healthcare select and select patient management. That brings me to slide seven where I'd like to provide additional detail on our evergreen work to drive operational and cash efficiency. First of all, emphasize that SelectVote has been using technology and computing power to automate tasks and optimize decision-making since our founding 40 years ago. That has not changed, and it never will. We are highlighting it here given we see AI as critical to our goal to become a comprehensive healthcare services platform, and we believe SelectVote has a significant head start versus the competition. In our view, the reasons automation and technology are so important are threefold. First, technology is foundational to SelectQuote, and we know that our customers and partners get a higher level of service quality and reliability because of it. Second, our technology is dynamic and has the flexibility to solve for different market environments. The evidence is in the stability of our financial results relative to the different Medicare Advantage markets we have operated through the past three years. Third, and most pertinent in today's SelectQuote, Technology represents a fixed investment that could be scaled efficiently. Put another way, our technology has been part of SelectLoad since the beginning. It's not something that we are initiating with the advent of AI. In fact, AI will only amplify our tech-enabled model. The power of that leverage is evident in the efficiency metrics I shared for Senior, as well as the metrics at the bottom of this page. SelectLoad has routed over 7.5 million calls through intelligent automation, and AI has powered more than 300,000 unique healthcare services interactions. Technology is critical in organizing and optimizing those customer touchpoints, and to do so at our high level of customer service is a significant feat. But we are not just a volume processor. Enrollment time has improved by 25% over the past year. Our technology also makes a difference in the lives of our customers, most importantly through better healthcare service fit and process efficiency. Our technology has also reduced its time in our health needs assessment calls with customers by 30%. Most importantly, our technology is critical to our ongoing strategy to drive scaled revenues across the ecosystem, which results in compounding and sustainable cash flows. Which brings me to slide eight. Historically, we've talked a lot about the growth and profitability of our senior and healthcare services segments separately, but we created this view to highlight an emerging attribute of our diversified platform that we believe is underappreciated. As you know, the cash flows for our senior business are different than our health care services business. The diversity of that mix is a valuable input for how we manage the business and ultimately drive value for shareholders. Specifically, health care services revenues and EBITDA are effectively immediate from a cash perspective, whereas our Medicare Advantage revenues accrue over the life of a policy as it renews year after year. As our healthcare services business has continued to scale, it provides us better optionality in how we think about capital allocation from one season to the next. We believe, and we've heard from shareholders, that a sustainable and growing base of cash flow is important. In fiscal 2026, we believe our differentiated ability to accelerate cash flow generation through business mix is the right strategy to drive shareholder value. For context, We know that Medicare Advantage currently is and will remain in flux for fiscal 2026. This has been well documented in the results of carrier partners and others in the industry over the past few earning cycles. As I discussed earlier, we've demonstrated our ability to deliver attractive returns in our senior business over the past three years through three very different Medicare selling seasons. That said, the scale of our healthcare services platform now gives us strategic optionality that we didn't have before. In the year ahead, as we continue to balance cash flow production with growth, we plan for a flatter year in Medicare Advantage submissions through our senior distribution business. To be clear, we believe growth in MA is a choice and we've built a nimble engine that is primed for growth at short notice. We remain highly confident in our view that 20% plus EBITDA margins are achievable for the segment driven by our technology and agent-led model. On the last point I'll make, and Ryan will elaborate on, is that while our fiscal 26 forecast shows a dampening effect on EBITDA margins because of the higher mix of SelectRx, it is important for analysts and investors to recognize the opposite will be true with regard to cash flow generation. In fact, we expect SelectVote to be operating cash flow generative in fiscal 2026, and much of that will be driven by our view that healthcare services EBITDA will grow and will exceed $50 million. As we've noted in our strategic redesign, our focus is to prioritize cash flow and profitability. We're excited about the overall business's embedded cash flow potential, given our commission's receivable balance of approximately $1 billion and our growing healthcare services business, which is approaching $1 billion in annual recurring revenue with an improving margin profile. We believe the decision to drive incremental cash flow will pay significant dividends and how we can compound and deploy that cash flow for more profitable growth and shareholder value in the future. The range of ways that that can unlock the value is broad, from future growth in MA and new healthcare service offerings to continuing to lower our cost of capital. I'll turn the call over to Ryan to detail our financials, but I'll conclude by saying, Blackwood has never been better positioned to harvest the gains of our strategy than we are today. Ryan? Thanks, Tim.

On slide 9, I'll start with our fiscal 2025 results. As Tim noted, it was another successful year across the organization, with both revenue and EBITDA beating our original guidance set last September. SelectQuote grew revenue 15.5% to $1.53 billion. Our full-year adjusted EBITDA totaled $126 million, which grew 8% compared to a year ago. For the full year, our adjusted EBITDA margin was relatively stable, which we view very positively, considering the majority of our revenue growth was generated by our lower margin, but increasingly profitable in cash-generative healthcare services segment. Let's shift to slide 10 to review our senior segment, where full-year revenue totaled $600 million and adjusted EBITDA totaled $162 million. As we noted earlier in the year, our agent-led model performed extremely well in a unique season. With policy features in flux and a significant number of planned cancellations by carrier, we delivered strong results during the season with an agent force that was approximately 26% smaller than in fiscal 2024. We are most proud of the operating efficiency exhibited over the year with this smaller agent workforce. Our revenues were only 8% lower, and more importantly, we drove EBITDA margins that were about 200 basis points higher, which ultimately drove similar EBITDA dollars compared to 2024. Turning to slide 11, let me detail our production and LTV metrics. For the full year, approved MA policies totaled $593,000 compared to $625,000 in fiscal 2024. The 5% decline was the strategic agent staffing choice, but we drove 24% more policies per agent compared to last year. That agent efficiency combined with lower marketing expense per policy were the key drivers of our margin expansion for the year. In the fourth quarter, Our senior segment produced 85,000 approved MA policies, down 20% year-over-year due to the lower agent headcount and the changes to the SEP. LTV for four-year 2025 was $884 per policy, which is 3% lower compared to 2024. As we've mentioned previously, the decline was primarily a function of commission mix and timing. LTV for the fourth quarter of 837 was 1% lower compared to fourth quarter of 2024. which was in line with our expectations. On slide 12, let's move to our healthcare services results. We continue to see strong demand for our SelectRx platform, where year-end members grew 31% compared to fiscal 2024. In the fourth quarter, we grew membership by an additional 2,500. As a reminder, we believe there is significant runway to broaden this important and valuable service for both our senior Medicare Advantage customers and for all Americans with a need for reliable and convenient prescription drug delivery. While the addressable market for our selector X is massive, our business and shareholders can also benefit through the ability to drive higher cash conversion. You can begin to see the impact of our focus on efficiency and refined member targeting in the charts on the right side of the slide. In the fourth quarter, we drove 12 million of adjusted EBITDA in healthcare services, which represents a margin of 5.5%. which on a year-over-year basis compares to a quarter where we effectively broke even for this segment. I'll share more on our outlook for healthcare services in a moment, but as Tim noted, it's an exciting time at Seleuco to have an additional growth engine to not just drive revenue, but increasingly contribute to our profit and cash flow. Moving to slide 13, our life division also performed well in the year and the quarter. Revenues grew 10% for the full year to total $173 million. The fourth quarter was even stronger with growth of 14% given predominantly by our final expense product. As a result, the segment grew adjusted EBITDA by an impressive 32% for the year to $27 million, which represents a 15% margin or more than 250 basis points higher compared to fiscal 2024. This was particularly welcome given the attractive cash flow dynamics of this segment. On slide 14, I'll be brief regarding our ongoing priority to improve SelectQuest's cost of capital and leverage profile. Here we outline what we've accomplished over the past calendar year. While we do not have any specific update over the past quarter, we would simply reiterate that the improving cash efficiency of our model is an increasingly important driver to optimize our balance sheet. The October securitization and the February preferred equity offering significantly improved our operational flexibility and did so at a lower overall cost of capital. We believe the structure can be further improved and expect future transactions will lead to extended maturity, increased operating flexibility, and a lower cost of capital. We look forward to sharing more regarding this initiative as we believe a lower cost of funding will be a more readily apparent part of SelectQuotes' value creation for shareholders. Turning to slide 15, we are excited to introduce our fiscal 2026 guidance. As we've talked about extensively, SelectQuote has built an MA engine that is primed for growth when the market allows, and we have a rapidly growing and increasingly cash-generative healthcare services business. Overall, we are managing both businesses to drive increasing cash flow, which will generate long-term value for our shareholders. We expect revenue in the range of $1.65 to $1.75 billion, which represents year-over-year growth of approximately 11% at the midpoints. This range assumes relatively flat senior policy values for the year based on our ongoing strategy to balance current period EBITDA with cash flow generation. Similarly, our agent productivity was exceptional this past season, and our 2026 forecast assumes a reversion to a more historical average productivity level as we onboard new agents. This measured year for senior will be offset by continued strong growth in healthcare services, where we expect revenue growth of around 20%. Moving to adjusted EBITDA, we expect to end the year in the range of $120 to $150 million, which represents year-over-year growth of 7% at the midpoint. While we expect margins from our senior segment to come down slightly from the mid to high 20s that we've delivered over the past few years, we expect margins to remain attractive and to exceed 20%. For the first quarter specifically, we expect approximately 10% of our annual senior production to come in the quarter, given the SEP dynamics that Tim discussed, This coupled with additional AUP hiring is expected to lead to a consolidated adjusted EBITDA loss of around 25 to 30 million for the first quarter. In healthcare services, we expect to generate more than 50 million in adjusted EBITDA for fiscal 2026 as we continue to focus client acquisition on the patients that benefit most from the service and have the best needed economics. From a margin perspective, we expect relatively flat sequential margins in the first quarter as we ramp investments in preparation for AUP enrollment and then modest sequential expansion as we move through the remainder of the year. Over the last few years, you've heard us speak to the incredible long-term value we see within the healthcare services space. We believe the scale level of profitability we expect in 2026 for a business that will only be five years old demonstrates that value creation opportunity and is just the start of what we think is possible in the future. We also anticipate another strong year for our life division, where we expect double-digit revenue and even a growth with a similar margin profile in the fiscal 2025. Finally, we anticipate generating positive operating cash flow in 2026. This is an important step for us, and we see a path toward meaningful cash flow generation in the years ahead. On an annual basis, we expect to be operating cash flow positive for the foreseeable future as we continue to transition to a comprehensive healthcare services platform. With that, I'll turn the call over to the operator for Q&A.

At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Ben Hendrix with RBC Capital Markets. Your line is open.

Hey, thanks, guys. Congratulations on the quarter. I appreciate the commentary on the health care services growth. And it seems like you've seen impressive revenue growth versus member growth this year. I just want to talk a little bit about margins and the commentary about the scaled margin as you see more seasoned SelectRx members. Maybe you can kind of talk about the path to your target margins and how you're thinking about that. And as we get to a more scaled margin,

uh how do the fixed and variable cost dynamics work uh uh to get to kind of a target margin from a scaled member thanks this is tim thanks for the question hey bob why don't you uh cover the color on uh the margin progression and and the drivers and then we'll hand it over to ryan thanks bob oh that sounds great tim um so on the the margin progression you know as we

get larger, Ben, and continue to refine our business, have more tenured members, but also, to a point you made later, really drive the variable cost down, you know, as we are scaled and can make more optimizations. You know, I would expect that to continue into the future and pretty meaningfully, right? We are really, really excited about what we can do now that we're at scale from both a, you know, COGS perspective and, you know, just general buying perspective. due to the fact that we're buying so many scripts now, but then also on automation and streamlining and really taking the time to refine the operation through opening Kansas City and then ultimately retrofitting the other facilities that we have. We've got a lot of good findings. We're rolling out a lot of new technology that we are incredibly excited about what that'll do. And I think you've seen the power of what it already can do given the margin progression we've had. So We are very confident that we can get the margins to what we've shared and, you know, have a meaningful kind of path ahead of us to continue to enhance the cash flow dynamics of that really powerful business. Ryan?

Yeah, and I think, you know, obviously as we, you know, ramp our membership, especially within the Kansas facility, we do see a path to margin enhancements. You know, we shared on the call earlier today, you know, we expect our first quarter, To be relatively in line with what we had this most recent quarter that was, you know, five and a half percent, which we were really pleased with. And then as the year progresses, you know, we see modest margin expansion. There will be some investment as we prepare for the AEP season and onboarding new members. But ultimately, we do expect, you know, the business will produce north of $50 million in EBITDA fiscal 2026.

Great. Thank you very much. If I could just one follow-up. As we think about scaling up this business and getting more margin from the healthcare services, it seems like this could be a really powerful driver for the securitization program. I wanted to, just based on your conversations with the market and with lenders, is there any kind of catalytic level of either EBITDA contribution or margin from this business that could really accelerate the securitization program? Thanks.

Yeah, that's a great question. What I say is there's not a threshold, if you will. What I will say is the progression and even a generation, it's obviously becoming significant. And that obviously opens up a number of different paths with respect to the capital structure. So securitization is still very much a path, but also as we generate more and more cash flow, which We do expect this coming year we'll be generating meaningful operating cash flow. We'll be positive operating cash flow for the fiscal 2026. And on the annual basis, on a go-forward basis, we would expect to be, you know, to see that grow sequentially in future periods. So I do expect to be operating cash flow positive for the foreseeable future. Great. Thanks, guys.

Your next question comes from the line of George Sutton with Craig Holland. Your line is open.

Thank you. I just wanted to go back a quarter. Your message, I think, coming out of the last quarter was you were refining the marketing. There was a notable caution, I think, in how fast you were growing SelectRx. It sounds like you're more optimistic now, maybe have found some solutions. Can you just walk through sort of the dynamics that have changed quarter over quarter there?

Yeah, on that, you know, this is different than a growth from a membership and revenue standpoint. And George, where we were talking a little bit last quarter was that, right? We are far more focused now on on EBITDA growth and expansion and what I talked about, kind of getting variable costs down and getting your cost of goods sold, you know, so costing your hard product down and enhancing our margins. I would expect, you know, the kind of membership, and we're not commenting on it too much, but to grow at a lesser pace than we've seen just given we grew so fast in that. I'd also say that, you know, we're not going to have quite, we'll still have good, healthy revenue growth, but not quite what we've seen in years past. Again, kind of essentially going from zero to where we are today. So that's a little bit of a clarification to what we were talking about last quarter, but I would expect our EBITDA to continue to progress and materially grow given the opportunity we have in refinement and just the deep partnership we have with a lot of our carriers now as far as the clinical services that we provide. And again, really last quarter talking about membership growth, well, we'll have really healthy revenue growth of north of 20%, like we talked about. Again, not to the degree of going from zero to what we've come to.

Gotcha. I wondered if you could discuss the actual AEP hiring plans that you have and how significant you are using AI as part of the mechanism to serve more customers? You mentioned the 300,000 plus interactions.

Yeah, George, let me start. This is Tim, and then Bob, you can comment on AI. I think just kind of macro here for the AETCs, and we are expecting an elevated level of planned disruption again this year. You know, some similarities to last year, given where carriers are with respect to their kind of profitability get well plans. And so while we don't have full visibility to what those plan designs are going to look like just yet, we do expect further benefits pullbacks, plan terminations. Last year, that certainly aided our front end customer acquisition dynamics. things like close rates and agent productivity. From a retention perspective, certainly, given the level of disruption last year, we were really pleased with the outcome. We've had good experience there. We're making incremental investments. We'll be prepared. Bob, you want to speak to the technology and AI point?

Yeah, I think that the tech team on our end has done a really, really nice job of continuing to supplement our agents and drive more efficiency. It's what we've touted in the past that we use technology and AI to make simple interactions faster and more efficient and ultimately save our agents time. And then that's the same on the healthcare services side. We will continue doing that. We are not in any, you know, we don't think anybody's close to fully replacing the 45-minute very very high-powered conversations right that our agents have and or complex interactions that our healthcare services business has but we've made a ton of progress in making them more efficient which is why you've seen our productivity per agent continue to rise we're confident we can continue to do that as they said we're going to continue to invest in the same way we have in the past in technology and you know we are very hopeful that that will continue to lead to time savings uh for our agents, which every minute is extremely precious to us. So we've seen 25% reductions in enrollment time for our agents specifically. That's not necessarily for a customer. And we've also seen for less complex conversations, as we touted, Bill's team have more than 300,000 interactions on the healthcare services side with just using AI standalone.

Just one other question on select patient. Could you give us any details in terms of where you're headed there, what kind of contribution you expect in 26 from that segment?

Yeah, we're continuing to make really, really good progress on select patient management and FlexSync Medical, which is our telemedicine practice as a whole, right? There's complexity there on carrier contracts and what we're doing, but we are building that the right way, and we do think in the future it'll provide material value. In 2026, we don't I think it'll scale right as quickly and provide meaningful EBITDA this year. But again, it is a huge path to our future. So we're really excited about what we can do. And I think we've proven our ability to scale businesses with LHA and with SelectRx. We think that that's another door that's a big opportunity for us, given the fact that our clients, a lot of them don't have access to quality care. They're homebound, and they really need to virtually interact, and we think there's a big gap in the marketplace today where that is.

Okay. Thanks, guys.

Before going to the next question, again, if you would like to ask a question, press star 1 on your telephone keypad. Your next question comes from the line of Matt McCann with Noble Capital Markets. Your line is open.

Hey, thanks for taking my question. I just want to piggyback really quickly on on George's question about the AI usage. I think you have the. You have the slide on that in this quarter, and I know that's something that that you have been using previously, trying to use technology to increase agent efficiency. But I was wondering if you could talk a little bit about to what extent there have been significant recent enhancements on that front, and if you could provide any further details on maybe some examples of what what new additions you've made to the agent process in terms of added technology and AI?

Yeah. So we have made a ton of recent advancements. And that's when we say, for example, like the healthcare services, that's really an extension of our agents, because that was work that they transfer over. And those interactions are brand new to us. Again, Our technology team did an incredibly nice job with that. When you look also higher level, every step of the funnel we use to our enrollments and taking, you know, kind of the mundane work out of that and pushing that over to AI. Those are all big levers that we continue to enhance. And what we really focus on is, you know, let's say right now we're saving five minutes per enrollment. by using technology, can we push that to six, seven, eight, and make those more complex enrollments? Because again, every minute is extremely valuable to us. We think the same thing on the agent side, right? Can we automate certain functions, whether that's gathering data, whether that's, you know, gathering prescription drugs, those types of things, those are all big levers for us that we are continually trying and optimizing. And, you know, again, some um don't pan out but mostly ours do and we've been uh really really really proud of that i think too i would love bill to talk about how we're using it on uh the retention side and ultimately the um the compliance kind of qa side because i think we're using as a big enhancement there too bill

Yeah, sure. I mean, in terms of specific examples, I mean, we've really, really ramped up kind of our overall usage. We use it all the way through from our initial recruiting process. Our initial scoring now is based on AI in terms of understanding how we're understanding applicants relative to their ability to produce for us. We use it a lot in our training process. in terms of our QA and providing real-time coaching, so call listening as opposed to having to be kind of more retroactive. We can be proactive and we can be real-time and provide instant feedback. We use it a lot in our recaptures and basically our ability to look at our block of business and analyze it quickly and decide how we're going to treat people and understanding what plans they're on to try to know recapture them we use it also in our plan scoring to help us decide okay are they on you know the right are we making sure our plan rank is as accurate as it possibly can be so uh really kind of list goes on and on uh but we're using it uh more and more and it's really we think having a compounding effect on our business uh great question sorry for the long the long answer but one final point the the proof is really in the results

If you look at all these things that Bob and Bill spoke to, you can see this evidence in our margins, you know, three consecutive years of EBITDA margins and senior, you know, in the mid to high 20s. You're seeing this also ramp through our healthcare services business and our comments on, you know, our confidence around, you know, creating a diversified cash generative platform. We think we are finding through technology, with highly skilled human agents, right? We're getting the best of both worlds, data driven, high touch. We're doing it at scale, and we think the results speak for themselves.

Great. I really appreciate that. And I'll just ask one more regarding capital allocation. I was just wondering if you could say any more about how you're thinking about how, you know, your priorities in terms of additional balance sheet improvement versus, uh you know maybe a potential acquisition or things that you know anything you might do to uh to expand your healthcare services platform and and when it comes to yeah when it comes to capital allocation uh what are your priorities there and how do you think about potentially making expansions in healthcare services while uh you know being able to continue to uh prioritize improving the balance sheet as well

Yeah, great question, Pat. I'll start and see if Ryan has additional comments. I mean, the immediate focus, you know, for the business, hopefully it came through in our prepared remarks, is balancing, right, balancing growth and the underlying market opportunity with driving, you know, a strong cash-generative business. We know that by driving a strong cash flow business. That's the key to a better balance sheet. As many other benefits, you started to highlight some of those, right? Optionality that we have from capital allocation around future growth in MA to new healthcare service offerings, certainly to a better cost of capital. So we're going to, in the near term, be very focused on execution of this plan that we've outlined. driving stronger cash flow. We certainly, and Bob did a good job highlighting and the results have demonstrated what we've been able to do and select our X, the green shoots and select patient management. And so we see additional opportunity on the horizon, but that's really kind of our near term focus. We think that we are proving that we can make a meaningful impact on health care that helps improve health outcomes while also being beneficial to the shareholder. Ryan, any additional comments you'd make from a capital allocation perspective?

I really think you laid it out well. The capital structure is our priority. We're obviously, we see lots of opportunity to grow the healthcare services business, but we also see a lot of opportunity to improve the capital structure, which really sets the stage for those subsequent actions and growth within healthcare services. And so the capital structures, the focus at the moment, but we are making great progress and we feel great about the financial plan and the guidance we shared today expect to generate meaningful, unlevered operating cash flow, which I think certainly sets the stage for additional transactions to improve the balance sheet.

Great. Thanks. That's it for me.

I will now turn the call back to Tim Denker, CEO, for closing remarks.

I want to thank you all again for taking time this morning. A very big thank you to our team here at SelectQuote for a very successful fiscal 2025. We all should be very proud of what we've accomplished thus far. I'll close the call with one piece of perspective. We've spoken over the past three years about the operational stability we've built into SelectQuote since our strategic reset in 2022. If that was an initial stage, I believe 2026 and the years ahead represent the realization of the model we built on that foundation. It's an exciting time for the company. We appreciate your time and support as we show you what Selectbook can be. I want to thank you again. Have a great rest of your week.

Ladies and gentlemen, that concludes today's call. You can disconnect. Thank you and have a great day.