SelectQuote(SLQT) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - SelectQuote's consolidated revenue for Q2 2022 totaled $195 million, a decrease of 45% year-over-year, while adjusted EBITDA was negative$ 163 million [9][10][44] - The company recognized a cohort sale adjustment of $145 million, reflecting lower persistency primarily due to higher intra-year loss rates experienced in 2021 [9][10][45] - The new outlook for full-year revenue is projected to be between$ 810 million and $850 million, with adjusted EBITDA expected to be negative between$ 235 million and $260 million [10][71] Business Line Data and Key Metrics Changes - The total approved policies grew by 22%, and Medicare Advantage (MA) approved policies increased by 27%, although the growth was lower than submitted policy growth due to higher switching activity [51][52] - Agent productivity declined by 45%, with average close rates down more than 20% compared to the previous season, significantly impacting overall performance [52][54] Market Data and Key Metrics Changes - The Medicare Advantage market experienced increased shopping behavior among consumers, but this led to lower close rates due to greater parity in plan features across carriers [17][19][76] - The company noted that the competitive landscape has changed, with carriers focusing on specific benefits, which has created challenges in closing sales [88] Company Strategy and Development Direction - SelectQuote is actively reviewing its business strategy, particularly in the senior Medicare Advantage distribution business, aiming to reset growth philosophy to focus on repeatable unit operating margins and predictable cash flows [11][25][30] - The company plans to reduce the number of flex agents and hire core agents earlier to improve training and onboarding, thereby enhancing close rates and agent productivity [40][48] Management's Comments on Operating Environment and Future Outlook - Management described the quarter as disappointing and acknowledged the need for a strategic shift to mitigate volatility and improve profitability [7][10][47] - The company remains committed to leveraging its unique position in the healthcare landscape, particularly through its Population Health initiatives, which are expected to contribute to future growth [29][72] Other Important Information - SelectQuote's SelectRx pharmacy solution has seen strong consumer interest, with over 40,000 gross customer enrollments and 10,000 active members receiving prescriptions [12][64][67] - The company ended the quarter with$ 193 million in cash and $717 million in debt, indicating a significant cash outflow during the quarter due to operational expenses [68][70] Q&A Session Summary Question: Understanding the impact of plan parity on close rates - Management explained that the AEP was unique due to industry-wide CMS issues and a tight labor market, which masked underlying issues, with plan parity being a significant factor in lower close rates [76][77] Question: Long-term growth expectations - Management indicated that while they are not providing specific guidance for fiscal '23, they plan to reset the baseline for policy production and expect modest growth thereafter [79][81] Question: Correlation with competitors' results - Management acknowledged that while some issues may correlate with competitors like Humana, they believe their engagement with carriers remains strong and beneficial [86][87] Question: Cash flow breakeven timeline - Management stated that by pulling back on growth and resetting the baseline, they expect to see benefits in cash flow and aim for breakeven in the near future [91][93] Question: Customer acquisition and lead generation - Management noted that while lead costs have remained stable, the focus will be on optimizing lead channels and improving the quality of leads to enhance close rates [94][96]