Welcome to SelectQuote's First Quarter Earnings [Technical Difficulty]. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] 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 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 2, 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, quarterly report on Form 10-Q for the period ended September 30, 2024, 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?

Thanks, Matt, and thank you all for joining today. I'll start with a high-level thoughts on the upcoming year, a few early observations from AEP and an update on SelectQuote's position to add value to each of our stakeholders. As you saw from our press release, the year is off to a strong start and SelectQuote is executing very well in the ongoing AEP season. We are ahead of our original expectations and, as a result, increased our fiscal 2025 outlook on both the top- and bottom-line. Ryan will detail our financials later, but the headline is that SelectQuote prepared well for the Medicare Advantage season and continues to perform in our Healthcare Services segment. As you know, there's been a lot of commentary about Medicare Advantage and how insurance carriers have shifted benefits for the ongoing enrollment period. The predominant question is how changing policy features by carriers would impact industry origination volumes and throughput this season. We'll speak to the strength we've seen in our results in a minute, but the shifts this season are a good example of why our bespoke service model is so important. We employ highly trained agents and support them with significant data and technology to help achieve one goal, find the best Medicare Advantage policy or prescription medication service for each customer's unique set of needs. As we've said, we feel very good about our model in a wide range of Medicare Advantage selling seasons and our high-touch approach is even more critical to both policyholders and careers when decision factors are in flux. We think the ongoing season will validate that claim, and based on our early reads, we expect to be highly successful again this year. So, let me begin on Slide 3 with a brief overview of our quarter.…

Thanks, Tim. I'll start on Slide 7. As you heard, our first quarter consolidated revenue grew 26% to $292 million. The growth was primarily driven by our SelectRx business as the first quarter is seasonally slowest for Senior distribution ahead of the Medicare Advantage selling season. The most impressive year-over-year improvement was in our consolidated EBITDA for the first quarter, which improved by nearly $10 million compared to last year, driven by our highly-tenured agent force in Senior and strong profitability in our Healthcare Services segment. On Slide 8, I'll briefly talk to the key performance indicators of our Senior distribution business. As mentioned, approved policies were stable year-over-year in a seasonally slow quarter. This performance was ahead of original volume expectations, driven by close rates and agent productivity. The 7% improvement year-over-year in our Medicare Advantage LTV to $812 was primarily driven by continued stable persistence and career mix. On the whole, the Senior business is very well positioned to drive strong unit economics and consistent returns in the ongoing AEP season. Looking at Slide 9, the early results of that consistency were displayed in our fiscal first quarter. Revenue for Senior was up modestly to $93 million, driven by strong LTVs, partially offset by lower policy volume. More importantly, adjusted EBITDA improved significantly to $8 million. This improvement in profitability is attributable to the fact that we hired fewer agents this season, which led to more efficient spending on recruiting, training and onboarding. While we would have preferred to hire a larger agent class given the strong economics we still see in the MA market, this operating leverage is a testament to our strategic redesign that took a significant amount of cost out of the business. Moving to our Healthcare Services business on Slide 10, we continue to…

Thank you. [Operator Instructions] Now, our first question comes from the line of Ben Hendrix from RBC Capital Markets. Your line is open.

Great. Thank you very much, guys, and congratulations on the quarter. Just a quick question on a couple of your comments. You noted spending more time on policy education, which makes sense kind of in the very dynamic AEP, a lot of changes in Medicare Advantage, and you also talked about agent productivity being higher. I'm wondering if you could talk a little bit about how you're balancing the two. It seems like we've heard folks talk about having to spend more time on the phone to deal with shopping as opposed to actually kind of closing transactions and that's been kind of a volume headwind. It seems like you guys are balancing that very, very well with productivity. Just wanted to kind of get some color on how you're approaching that, and then also how SelectRx fits into that dynamic. Thanks.

Hey, Ben, good morning. This is Tim. Thanks for the great question. I'll start and maybe ask Bob Grant, our President to speak as well. Again, as we indicated, we're very pleased with the start to AEP. I think we're seeing a very high level of consumer engagement, strong call volumes, while early, very good close rates, agent productivity and that typically leads to enhanced marketing efficiency. It's certainly a different environment this year and that was predicted. We're seeing changes with respect to planned benefits. There's been elevated levels of plan terminations, but it's absolutely what our model has been built on and it's finding that balance to your question of front-end customer acquisition abilities as well as retention. So, we've invested a lot in our retention process and I'll let Bob elaborate on that. Bob?

Yeah. And directly to the question, are we seeing agents kind of spend more time, which leads to less efficiency? We really are. We're seeing them spend, I guess, more time per call taken just given the fact that close rates are higher, as well as look at that balance, right? The worst years are years where talk time per customer is up, but close rates are down. This is not one of those years. We're seeing increased efficiency through that. We're also seeing a big spike in our occupancy. And we did a lot of work on the technology side to ensure that we would get really, really high occupancy. And occupancy is kind of a percentage of time actually on the phone. We changed a lot of our routing technologies, those types of things. So, we're actually seeing increased consumption as well, which is why it's leading us to have outsized results so far. So, not maybe seeing the same thing that others are saying about increased time, which is leading to less efficiency overall, we're actually seeing the opposite effect. I think that also, Ben, has to do with just our strategy of tenured agents, not hiring a big summer class this summer. And those tenured folks really know how to deal with the complex environment that's there, which again is just leading to outsized results given kind of the disruption in the market. And then, on the backend to Tim's point on retention, we spend a ton of time and money on the technology that we have out there, on education materials, those types of things, which have driven really, really strong results so far as far as consumer engagement, answer rates and everything associated that we really track on the retention side. So, we feel really good about both right now given where we are.

Great. And then, how does the sale of SelectRx kind of factor into that? Is that something that takes a little bit extra time that you have to budget in, in terms of the sales process? Or is that kind of seamless or separate after the initial MA sale?

It's a really good question. Just it's completely separate. The way that we set it up, right, we wanted to have a completely separate opt-in, totally separate kind of business model over there. So, it's taking no extra time for the agents. We have staffed up a little bit on the CSA, which is on the Healthcare Select side of the house, which is leading to really, really good results there as well. So, no, we're not really seeing any increased time for our sales agents with that. And we've also done some work to make sure that the no sales side which is also a big funnel for us, has stayed really high as a percentage as well. So, all those things are allowing us to really capitalize on the spend that we have and kind of the overall increase in consumption has led to really good efficiency there. One thing to note too, we have gotten better at using off-peak hours for all of these things. And the reason I highlight that is that's where I talk about that occupancy, where we're doing a lot of our kind of extra work, call it, retention work and those types of things is in times where leads are not in abundance. And we really built our technology around that this year to make sure that we could go into the kind of later hours of early evening and be really efficient during those hours, which is driving our results even higher.

Great. Thank you for that. And is there anything in the performance you saw, the trends you saw this past quarter and in your guidance that's making you think that -- or changing the way you're thinking about the timeline for the next leg of your securitization?

Ryan?

Yeah, I'll take that one, Ben. And that's a great question. Obviously, really pleased with getting this first securitization across the finish line. It does provide -- put the infrastructure in place and provides a meaningful extension of the term debt and the collateral that was used. It's overcollateralized, but it was actually a really small portion of the broader commission receivable balance that the business has. So, we are excited about the opportunity to bring additional securitizations to market. All that being said, like while the securitization market is active and open, it tends to slow down in late calendar Q4, which also happens to be our busy season with AEP. We would look forward to and see a path to providing -- bringing a securitization to market in the first half of calendar 2025.

Great. Thanks for the color, guys.

Thank you. Our next question comes from the line of George Sutton from Craig-Hallum. Your line is open.

Thank you. Nice results. Tim, I wanted to bring two thoughts together, both of them competitive-related. You mentioned in your press release that the benefit plans have shifted significantly, but increasingly, seniors and carriers are turning to SelectQuote. And separately, in your prepared comments, you mentioned your competitive advantage has widened. I wondered if you can go into a little bit more detail on the significance of those statements.

Good morning, George. Thanks for the question. Certainly, I think it's been noted there are certain carriers that have highlighted their need to improve profitability. Some carriers really prioritizing member -- margins over membership, if you will. At the end of the day, I think they are -- all really care about quality distribution. And I think that is certainly something that we feel very passionate about, right? We're helping consumers certainly in dynamic times like this, helping the ability to help navigate some of the market complexity. We're certainly helping the carriers, too. I think beyond just high-quality distribution, we're one of the only distribution partners that has offerings like SelectRx from a pharmacy adherence perspective as well as our SelectPatient Management, our chronic care management. And we think that, that's very differentiated. We think there's two sides of the coin that we can help with both through high-quality MA distribution as well as extending that value to consumers, to carriers, to the broader ecosystem.

So, I'm kind of stunned that politics hasn't come up at all in this call. Obviously, we're engaged in a horrific season of politics until tomorrow and that's been a big chunk of the AEP. So, you're -- you seem to be very encouraged about what you've seen so far. I would have expected a little bit more caution based on slowness due to the political season. Can you just talk about that dynamic? And would you expect any extension of AEP?

Yeah. I'll make a few comments and then maybe I can ask Bill Grant to chime in from a marketing perspective. But again, we're very pleased with the results thus far. A lot of this is based upon two facts. One, we had a very strong Q1. And secondly, we get increased visibility early on into AEP. That visibility has made us confident in the underlying dynamics that we're seeing in terms of strong call lead availability, consumer engagement, close rates, agent productivity. We all feel like that has positioned us well for a strong AEP. Bill, do you want to talk a little bit about kind of marketing dynamics in some seasons, right, that has been something we've had to navigate?

Yeah, absolutely. So, I think with some of the CMS regulation, right, that we supported around some of the TV advertising that happened starting really last AEP, you started to see a shift away from television in kind of Medicare marketing. And certainly, within our mix, we relied on it very, very little where it used to be a pretty significant size of the book. So, I think that's important because television is by far the most affected by the political environment in terms of advertising. So, you can't turn on the TV, obviously, without seeing different political ads this time of year in that space that's taken up by those ads. So, I think because it was kind of an unintended consequence, I guess, that was positive. We started looking and I think one of the benefits of our kind of wide funnel approach, we started seeing different opportunities and really got away from television. So certainly, I think that's been something that hasn't affected us. And then, I think second and really important, we're -- as Tim mentioned, as we differentiate ourselves more and more, I think we're one of the few that's spending dollars and not pulling back, right? I mean, they're significantly pulling back when you look at a lot of our competition. We have a lot of tailwinds of folks that have either recently transacted or have dramatically pulled back in the environment. So, I think overall, when you look at it, the good, it certainly outweighed the bad even with some of the pressure that you might have within television or other that it's caused, we really haven't seen it and really optimistic about how things are playing out with AEP.

Got you. Just a comment. I don't think you could turn anything on that doesn't cause you to see or hear political ad. So, it really has, I think, crowded out everything else. But one other thing is as we get into the latter part of the season, given that you have a reduced agent count relative to what you would have liked, what kind of mechanisms do you have if you start to see excess flows? Are there ways for you relative to your guidance to exceed expectations if the flows are much stronger?

I'll make some initial comments and turn it over to Bob. We're definitely pleased with what we're seeing thus far. And I think we are absolutely capturing efficiencies as we see them. And I think those that have followed the story over the past two years, our Senior MA distribution team has done a really, really nice job when efficiencies present themselves to be able to capture those. Obviously, we talked last quarter about some of the capital constraints and what that meant for hiring going into this year. But we are -- with that said, we're working, obviously, to resolve the balance sheet and we're very pleased with what our embedded tenure agent force is doing. As to incremental opportunities, I'll turn it over to Bob.

Yeah. I'd say really what it allows us to do is be pickier and lean on the marketing sources. As Bill said, we're wide funnel. We can really see kind of what's driving oversized results. And as we get later and later into the season, we can take advantage of that and lean into that. To Tim's point, though, we can't necessarily make up for the fact that we don't have the people there. It would be great to have an extra 300, 400 people like we sometimes do. I would say, though, that our close rates are a little bit higher because of not having those people because these people are all tenured. So, it does allow us to take a different advantage of it and really, really see incremental policies with that. So, if we do see an excess environment, I wouldn't necessarily say that it allows us to take more leads. It allows us to take kind of better and lean on our better marketing sources.

Great. Thanks, guys. Appreciate it.

Thank you, George.

Thank you. Our next question comes from the line of Pat McCann from NOBLE Capital Markets. Your line is open.

Thanks for taking my question, and congratulations on the quarter. My first question has to do with your use of technology. It certainly seems that with such a complex marketplace for Medicare Advantage policies that the use of technology could really help out the agents. And I guess I'm wondering, since you did touch on it, if you could give more color on what sort of technology enhancements you've made, and how they'd bear on the consumer interactions with your agents.

Yeah. It's a great question. And what we have done is just continue to double-down on agent-led technology. And what I mean by that is the enhancements that we've made bring in more and more data to allow the agent to kind of intake a customer's needs faster and more efficiently and then ultimately make recommendations using technology a lot better and then a lot more efficiently. And then, on top of it, we have a lot of AI-based and people-based call monitoring that really allows us to more effectively coach and get everyone on the same page to have a little bit tighter mix of agents. This is the record number of Level 1 agents we've never had. We know exactly kind of who to pull off the phone and why and how to coach them and how to do those things, which has allowed us to be significantly more efficient. So, a lot of what we do is, right, focused on just not having to necessarily gather word-of-mouth data. We can use third-party data to kind of supplement and then ultimately validate stuff, but then also really focus in on who needs kind of what coaching and guidance and lean there, which is why we're seeing record high kind of consumption mix with close rates.

Thanks. And then, my next question was regarding the marketing spending. I guess, I'm wondering if you could touch on how you optimize within the AEP period as far as your flexibility to see where the best ROI is coming and change your marketing strategy. Is that something that you're very flexible with? I know you said that you're having a nice return so far with your marketing strategy, but I'm wondering if you could touch a little bit on the flexibility of that within the AEP.

Yeah, absolutely. I can take that. So, yeah, we've kind of set up ourselves with our wide funnel. So, we have kind of max flexibility in terms of where we can focus of where we're seeing positive results. So, we can look at and zero-in on where we're seeing those things. So, we have a read -- pre-AEP starting, right, where we get a pre-look at the plan and try to understand where we might see outsized results. So, like, if we see an area where we believe it's going to have major disruption because there's a lot of plan terminations and we have a good solution, we'll weigh that as the highest ranking, right, because by percentages, we think we can get somebody who had a plan termination and we have a very positive solution. So, we'll look at each of those areas and target and then we'll adjust those based on what we're seeing in real time to understand where we want to spend our money. And obviously, I think that the results themselves will speak for themselves in terms of what we're seeing in terms of our high close rates that are basically allowing us to do more with less in terms of -- or more with the same in terms of the results we're seeing there. So yeah, great question, absolutely can adjust in real time. And what we set up over years has allowed us to be able to do that from source to area to whatever -- wherever we're seeing those positive results.

Great. If I could ask just one more question, it would just be on the Healthcare Services side of the house. Given the prospect for you to continue to improve your balance sheet, but that, of course, being a priority, I'm wondering how that impacts how you view the potential for acquisitions in the Healthcare Services segment to bring an even more holistic approach to serving the consumer needs on the healthcare side.

Yeah, great question, Pat. I think absolutely for us right now, you've heard us outline the priorities. We've done a great job on business execution. We plan to continue to do that. We've got a great business that needs some balance sheet improvement. We're really pleased with the $100 million securitization, but we're going to be very, very focused on improving our balance sheet. We believe that that provides the company a lot of opportunity to do exactly what we've done with SelectRx, along with SelectPatient Management, while those are early days. And so, we want to get through our current areas of focus, but we absolutely will keep our eye on additional opportunities to build out our healthcare ecosystem. We think we are in an extremely unique position with consumers that have lots of needs. We have a strong -- very strong level of connectivity informed by self-reported data that really enables us to capture additional opportunities. So, look for us to sequence those, as I kind of indicated there, but certainly part of our go-forward plan.

Great. I appreciate the color. That's all I got.

Thank you, Pat.

Thank you. Seeing as there are no more questions in the queue, that concludes our question-and-answer session. I will now turn the call over to our CEO, Tim Danker, for closing remarks.

Thank you, again, for joining us. I'll close by, again, noting our commitment to unlocking further growth and profit potential with SelectQuote. We believe we have the operating model, the talent and the asset base to be the leading information and service connectivity hub for the healthcare industry. We look forward to accelerating those efforts in the year ahead. Thank you all again and have a great week.

Thank you. The meeting has now concluded. Thank you for joining. Have a pleasant day. You may now disconnect.