Welcome to SelectQuote's Third Quarter Earnings Conference Call. 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 third 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 March 31, 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 Danker. Tim?

Thank you, Matt and thanks to everyone joining us today. SelectQuote continued to drive strong results in fiscal 2025 and had another successful quarter across each of our 3 segments: Senior, Healthcare Services and Life Insurance. On a consolidated basis, our fiscal third quarter revenues of $408 million grew by 8% compared to a year ago. The growth was again driven by very strong member onboarding in our SelectRx business which now has nearly 106,000 members, representing a 41% increase compared to a year ago. It's remarkable to us that the business has nearly $675 million in trailing 12-month revenues that only started 4 years ago with 2 small pharmacies that had approximately $20 million in revenues and fewer than 5,000 members at the time of acquisition. The business' rapid success remains a touchstone example of how SelectQuote can drive value for customers through personalized coordination of information and service delivery. Our consolidated EBITDA of $38 million in the quarter demonstrates strong execution across our segments as we maintain healthy overall margins despite a large shift in our mix between Senior and Healthcare Services. Mix shift was again a factor in the pace of our consolidated EBITDA growth relative to revenue, given lower relative margins in Healthcare Services compared to Senior. We're proud of the result and believe there remains significant EBITDA opportunity in both our Senior and our Healthcare Services segments. I'll speak more to our strategic focus on Healthcare Services as a source of profit and cash flow later in my remarks. As mentioned, third quarter operating highlights were strong across each of our 3 segments. Senior delivered healthy 27% margins for the third quarter which is very strong considering such a unique and tumultuous Medicare Advantage season. As we indicated on prior calls, given a more restricted…

Thanks, Tim. Starting on Slide 6. SelectQuote generated $408 million in revenue for the third quarter, up 8% compared to a year ago. Similar to last quarter, our top line growth was driven by our SelectRx business. But as Tim mentioned, operating performance across each of our businesses was very strong. For Senior specifically, the OEP period was similar to AEP, where agents delivered higher Medicare Advantage volumes than originally forecasted, driven by impressive productivity and close rates. Consolidated adjusted EBITDA totaled $38 million for an overall margin of 9%. We are pleased to have maintained healthy consolidated margins despite a significant mix shift from the growth in SelectRx which is still a lower-margin business. As Tim noted, we see Healthcare Services as a strategic opportunity, not just for our new revenue streams but for scaled profitability in the coming years. Moving to Slide 7. Our Senior results were quite strong despite operating with a smaller agent population for the season. Revenue totaled $169 million in Q3, driven by the strong agent efficiency we mentioned. Similar to last quarter's AEP, we continue to see seniors seek our tenured agents for much needed answers in such a confusing and volatile Medicare Advantage backdrop. The end result was high-value service to our customers but also significant operating efficiency in both marketing and agent throughput. Put more plainly, more seniors came to us when they needed us most and our aligned model drove very strong margins. Our adjusted EBITDA in Q3 was $46 million which declined by 26%, in line with the 26% reduction in agent headcount compared to last year. Despite a smaller agent population, the senior business drove attractive EBITDA margins of 27%. The performance since our strategic redesign has exceeded our expectations in 3 distinctly different Medicare Advantage environments. As…

[Operator Instructions] Your first question comes from the line of George Sutton with Craig-Hallum.

I wondered if you could walk through the separation of the growth or the decline you saw in Medicare Advantage and obviously, the significant growth of SelectRx. And I'm asking from the concept of the feeder of customer opportunities into SelectRx and any adjustments that you might be making there going forward?

Yes, I'd be happy to. George, thanks for the call. I think on this 2-part question, I might ask our President, Bob Grant, to talk about our Medicare dynamics. I'm happy to touch on health care as well. Bob?

Yes. So on the Medicare side, George, SEP was -- or sorry, OEP was a really strong quarter for us from an overall close rate perspective and cost. But to Ryan's point earlier, we were down 26% on our agent count which is why we ended up seeing a little bit lower volume and lower overall EBITDA there. However, one of the reasons for such a strong quarter which Tim will get into Healthcare Services from a growth perspective in the SRx space is we did have a lot more tenured agents. And we've been very open in the past that they are better at understanding how to deal with customers' needs, both on sales and folks that don't buy a policy where they end up transferring them over to Healthcare Services. So we did see a little stronger, what I would say, attachment rate or just overall efficiency in that number which is why you saw one kind of outpace the other. So that also helps our attachment rates in a good way on the customers that really, really need SelectRx and we see that as a positive. So that's why you saw what you saw there. Tim can broadly speak about Healthcare Services. But from direct to your question, the reason we didn't see kind of the reduction in both on the growth side with that.

Yes, just to add to Bob's good comments there. Overall, we're really pleased with the ability of the model to leverage our strong MA growth and have that translate into opportunities for our Healthcare Services platform. I think you've seen that through the growth of critical mass now over 100,000 members. We will anticipate though that Senior -- Healthcare Services will lag our Senior just a bit and just in terms of timing and there is some seasonality that we called out as well. But overall, really pleased with the synergy between both sides of the platform.

So I wondered if you can give us thoughts on agent growth going into this next season. Are the plans to take advantage of improvements in that market, particularly from a regulatory perspective?

Yes. Great question. Hiring is underway right now. It's not going to be the same as last year per se but we will talk way more about that in our upcoming guide on the next call. So we feel good about where we are with hiring though.

Certainly as you highlighted -- yes, George, real quick. Certainly, as we highlighted on the last call, I think the improved capital position that we're in gives us an opportunity. We're very focused and feel good about where we're at in the early stages of hiring and do look forward to sharing more on our fiscal '26 guide in August.

And then, just finishing up on your better financials. Can you talk about receivable securitization? My anticipation has been that we might see additional receivable securitization.

Yes. Great question, George. Obviously, we've made great progress on the capital structure more broadly with the first securitization. We've been obviously focused on getting the pref across the finish line which we're happy to share with our last earnings call. And we've hired Jefferies to explore a variety of options. We do see securitization as a potential path. It's not the only path. We look forward to sharing additional updates when the time is right but we do have several irons in the fire.

Your next question comes from the line of Ben Hendrix with RBC Capital Markets.

This is Michael Murray on for Ben. I appreciate your commentary on MA LTV and the impact of the shift in commission structure. Just wanted to see how should we think about MA LTV moving forward? Do you anticipate an ongoing headwind as the shift continues?

Yes. So we -- I mean, as you noted, we did see a shift from upfront to ratable which did lead to a decline. That's simply a continuation of changes we had announced in prior quarters. All that said, we do expect in the fourth quarter, it will be down year-over-year. We'll look forward to sharing additional details on our longer-term outlook on our next earnings call. But in fourth quarter, we do expect it to be down year-over-year.

Okay. And then just shifting to SelectRx. Obviously, another great quarter. It's exciting to hear about the new facility opening in Kansas. Obviously, we heard your commentary on fourth quarter margin expectations. But just longer term, bigger picture, how should investors think about the growth and margin targets for this business?

Yes, Michael, I'll comment on that and Ryan, maybe have you add to it here. But yes, I do think just stepping back, we're really pleased with the progress. We've got critical mass and scale here with over 100,000 patients. And so I think we would ask investors to also think that part of our job now is to further prioritize efficiency and consistency of margins. So we are spending a lot of time focused on that and analyzing that. And I think we are finding that those members that generally benefit the most from our adherence solution also have the best unit economics. Again, customers with multiple chronics, they're juggling a lot of prescription drugs. And so we're seeing some opportunities to refine that so that we can drive even improved margins and cash flow profile. We had mentioned on the call some investment in the Kansas facility. We think longer term, that is certainly going to drive these efficiency gains but there is some near-term cost there in the fourth quarter as we scale that up. Ryan?

I think you said it well. I think for the fiscal 2025, we still expect single-digit EBITDA margins for the year. And as we refine our membership parameters and scale the Kansas facility, we do see a path to margin enhancement and expansion in future quarters.

Your next question comes from the line of Pat McCann with NOBLE Capital Markets.

I wanted to ask about the final rate notice. Could you -- I know it's early but could you give your -- kind of your view on how you think the upcoming AEP, how the environment should look relative to the one that we just came out of as far as market dynamics. What would be your early read given the final rate notice and how that changes?

Pat, great question. We definitely believe the final rate notice was a positive development as the carrier reimbursement rates were substantially higher than the preliminary rates as we've been in discussions with carriers, they definitely have felt like this is a step in the right direction. This helps improve revenues and you've heard many carriers commented on higher medical cost trends and elevated plan utilization. So we certainly view that as a positive development. We would say that the carriers -- some carriers are still focused on increasing margins. They're in the middle innings of a multiyear plan to get to their target profitability but we certainly believe that this is a positive development. Bob, anything you'd like to add?

No. I mean I think that, to Tim's point, was a little bit, I think, up in the air as far as what CMS was going to do, right, just coming in early and then also the rate, frankly, being a little bit higher too in December, I think, than people anticipated but it was great that they took into account this year versus a lagging year like they had in the past with where inflation is going and other things. So I think shows that CMS has support for the private side of Medicare. Now do they want to clean some things up that we're very supportive of, frankly, as far as making sure that everyone has access to quality health care, especially a lot of the focus that we have which we've talked about in the past on rural areas, things like that, yes. But as far as just the advanced rate notice and the rate notice, very positive from all kind of sides.

And then, I just wanted to briefly touch on the Healthcare Services segment. First of all, congrats on opening the new facility. And with that, I'm wondering maybe if you could reiterate the benefits you expect to realize the incremental benefits from that facility as well as maybe if you could touch on the profitability drag that you mentioned for fiscal Q4? And would that go beyond Q4? Or what's sort of the time frame for the initial drag on profitability before you sort of get through that?

Yes. So with respect to the Kansas facility, we're obviously really excited about having it open. And longer term, see benefits in operating efficiency, throughput and even customer experience. With that all being said, there is a short-term lag in terms of profitability or drag on profitability as a result of simply investments into the facility as we scale up, we will outgrow and we'll see margin expansion. But in the near term, I think on a quarterly basis, you can think of it as low-single digit million dollar investment. And again, that we'll scale into it over the next couple of quarters.

I will now turn the call back over to Tim for closing remarks.

Thank you, everyone and we appreciate your time and support this morning. Most of all, thank you to our incredible teams at SelectQuote for another season of world-class service and execution. Our customers needed you more than ever this year. And because of our high-touch and information-driven approach, they received the help they needed and our business benefited as well. Looking ahead, we're energized and have conviction that our overall business can generate additional operating leverage and resulting value to our shareholders. We'll share more on our view for fiscal 2026 on the next call and hope to see and speak to many of you between now and then. Thank you again for your time this morning. Have a good day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.