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| Statement |
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| As I noted up top, our growth in the segment year-to-date has significantly surpassed expectations |
| Additionally, we believe our strategy to focus on the highest quality lead sources and carrier partnerships has built significant resilience into our LTVs |
| We believe the value of our current businesses and our ability to leverage our unique information and connectivity advantages in health care provide us with a range of ways to drive repeatable profit and cash flow growth |
| Even more exciting is the positive impact SelectQuote's experience in cash efficiency which we believe is durable given the value we provide our members for their critical prescription drug needs month in and month out |
| But we are very focused on the broader capital structure and setting ourselves up for long-run success and operating flexibility and we're making good progress on that front |
| So we're really pleased with the progress and the path forward |
| We're optimistic we're approaching a workable deal |
| Additionally, we delivered a third consecutive quarter of positive profitability in our Healthcare Services division which will accelerate the overall earnings power and cash flow of SelectQuote |
| So we're really, really excited on what we can do with that business over time |
| Next, I'll touch on our Life and Auto and Home division which also produced a strong quarter with combined revenue growth of 14% and EBITDA growth of 14% |
| So it's investment worth making and we're really pleased with the growth |
| From our vantage point, SelectQuote is not just healthier than it was 2 years ago but it's thriving with a strong foundation to realize the significant intrinsic value for shareholders that we see in our unique model |
| With that confidence, we are pleased to say that we have increased the midpoints for both our revenue and adjusted EBITDA outlook for fiscal 2024 which we will detail later in the call |
| Consolidated revenue grew by 27% year-over-year, driven by both policy and LTV growth in our Senior division and an increasing contribution from health care services which more than doubled revenue year-over-year at $112 million for the quarter |
| Our consolidated adjusted EBITDA also beat expectations growing by 6% compared to a year ago |
| So obviously, on the quarter, low single digits, really, really pleased with the strong performance, the growth in all of that, right? We are onboarding customers |
| In our Senior segment, we continued to achieve strong efficiency of our tenured agent force in 2Q, even when comparing to a very favorable market backdrop in fiscal 2023 |
| As a result, we generated strong EBITDA margins of 32% despite expected marketing cost increases primarily due to the implementation of new CMS marketing roles, including the 48-hour role |
| The -- as we mentioned last quarter, the P&C insurance market has been able to recognize increased premiums given replacement cost inflation for homes and cars |
| In total, we take great pride in the tailored and unbiased service our highly trained agents provide to seniors every day, many of whom live in areas with limited access in many cases, suffer from multiple chronic conditions or are below national averages for income |
| In 2Q, we posted our third consecutive quarter of positive adjusted EBITDA and despite elevated investment in new member growth that occurs concurrent with AEP |
| Select Rx has now nearly 63,000 members which is well ahead of our original expectation for all of fiscal '24 |
| In our view, the growth serves as an overwhelming endorsement of the value our service delivers to customers |
| With a much higher base of members and the continued growth in the operating leverage of the business, we are meaningfully increasing our outlook for revenue within health care services for fiscal '24, while maintaining our expectations for adjusted EBITDA margins as we make investments to capture increased market share at highly attractive economics |
| This was the primary driver of improved results in that division |
| Our term life business increased revenues more than 10% year-over-year, primarily due to improved conversion of policy sales to in-force premium as we continue to expand our accelerated underwriting product, Swift Term Select |
| More impressive, though, is the resilience we've seen in these metrics compared to the fiscal 2023 season which you will recall, was very strong industry-wide |
| The bottom end of our adjusted EBITDA ranges increases from $80 million to $90 million, driven by strong EBITDA results in Senior |
| For our model specifically, we shifted certain processes to incorporate the new CMS marketing roles and are very pleased to have mitigated higher marketing cost per policy with stable agent efficiency |
| We believe the stability we are seeing in persistency indicators creates a solid foundation for more stable and improving LTVs in the long term |
| Statement |
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| As mentioned previously, SelectRx EBITDA generation lags member growth as members slow through the onboarding process |
| As Tim noted, the new rule modestly impacted marketing costs per approved policy and dampened the outsized strength we had in senior EBITDA margins in 2023 |
| As Tim noted, our adjusted EBITDA margin declined compared to a very strong year in fiscal 2023 but the largest driver in the margin difference with a higher mix of health care services revenue |
| But I also call out that the growth in concurrent onboarding muted the blended EBITDA margin for Q2 which we expect to continue in the back half of the year |
| We -- it is important to call out the significant mix shift we've experienced given that EBITDA generation lags member growth in our Healthcare Services business |
| However, this is a great problem to have given those margins will scale as new members mature |
| I think there was an anticipated pullback because of the pressure on MLRs, as you spoke to and the kind dynamic earnings season |
| To be clear, we aren't guiding for 2025 or beyond but we do believe SelectQuote market valuation fails to recognize the embedded value being scaled in health care services and the strong improved fundamentals exhibited over the past 2 years and our distribution businesses |
| As you'll recall, our LTV includes a 3-year look-back provision and has also incorporated a 15% constraint since 2022 which lowered our booked LTV |
| Certainly, if the business wanted to pull back and slow the growth margin rates would improve |
| Competition from other distribution platforms continues to be much more rational than a few years ago |
| We see diversion expectations and growth with [indiscernible] expecting it to come in much lower and CBS coming in much higher than the market |
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