Q1 2024 SelectQuote Inc Earnings Call

Grant, our president to comment as well, but I'll start just by saying.

We feel good about our overall preparedness coming in to.

To AEP and how things are really shaping up.

In the early innings of AEP to your question about the plan features yep.

We heard that as well and I think it was alluded to kind of going into that.

The season that some of the managed care organizations, we're going to reevaluate.

Some of their planned benefits, but also.

Ensure that they kept their benefits that were most important to Ma beneficiaries.

Now started selling those 24 plants, we got visibility to those plans and I think globally what.

Agree we've not seen degradation in plan designs.

The carriers have largely achieved the goal of really keeping those most critical consumer benefits Bob anything you want to add on planned features.

Then second point or question around shopping behavior.

Yeah, absolutely so Ben.

Sure.

What's been really interesting is we believe that the Washington, what's happening now into humana's comments, Tim that the carriers are just getting smarter about plan design.

It's not that long ago that they introduced ancillary benefits, which have become such a big deal within the plan design and we're really seeing the carriers get more intelligent on where they pulled back on I'd say benefits just aren't used very much are beneficiaries don't seem to care about and getting really intelligent putting more dollars behind benefit that.

Beneficiaries do very much care about so we're seeing actually a further investment in things people seem to like and kind of ancillary benefits world and a little bit of a reduction in things that people don't seem to really focus on as we go through those conversations which actually to that point, we're seeing really strong kind of.

Shopping behavior in a good way for us, but we're actually feel really really good about our book.

And early indications feel very good there so meaning our volume is strong.

But.

Yeah.

What we what we're seeing from talking to our consumers. They are happy with the plan that they are on and Theyre happy with the gem with the changes that the carriers made we also think that the reduction in.

Kind of the industry as a whole and what happened two years ago and kind of all of those things are also helping create a tailwind where there's just not as much kind of noise in the marketplace. So do you want to say, which we've been very open about I also think our targeting of consumers to your second question.

And how we.

Understand where we should.

Really kind of focus and hone our marketing take those customers and in a proper way, we understand now kind of how to help them navigate plan benefits those things all the things we've been talking about which have led to a really really large 90 day increases.

Increased 90 day, persistency, which are great leading indicators, we're seeing those lead indicators play out and we.

Feel great about kind of the way we're doing business.

And what's happening on our books, so I think kind of a win win for us.

Great I appreciate that and just staying on the same track here.

Last night, we heard from media Alpha as well.

And one thing that they noted was.

A slower start to AEP AEP for some of their partners.

Due to some of the implementation of the regulatory changes that we've talked about over the last couple of quarter. Just wanted to see if theres anything that surprise from a regulatory perspective, and if maybe headwinds for some other brokers may be kind of supporting some of your strong volume.

Yeah, Great. Great question Fair question, Ben we are seeing some impact from the 48 hour rule, specifically on the industry, but its certainly in line.

With what we expected again, we've been in this business for almost 13 years.

Very accustomed to rule changes those are not uncommon.

And we expense the better part of the summer all the way leading up into AEP preparing both with our carrier partners as well as our marketing partners.

To make any necessary adjustments so far.

For us not significant.

Disruption.

We can't speak to other industry players to kind of stick around.

But would say we don't see any risk.

Two the fact that we believe we can drive 20% plus.

Full year.

Margins in the senior Division.

Assistant with what we guided to in August.

Great switching over to <unk>.

Switching over to.

Just real quick how do we benchmark the growth trajectory that we're on here.

Like if you guys clearly are ramping this business up nicely, but just wanted to see kind of what we can expect and what you are budgeting for the rest of the year in terms of growth in that business and is there any risk of over growing are going too fast beyond the platform there.

Brian do you want to take the labor.

Yes, absolutely.

As shared with our guide for the year, we are expecting membership growth of around 25% health care services revenue, we are expecting that to grow even faster around 50%.

That's really driven by the continued.

Duration of the base.

We get more and more members to full boxes.

It is important to recognize that.

This.

This offering is different from.

Insurance offerings and that we actually ship this out each and every month and so the membership base continues to grow as we've shared.

The vast majority of the members to date have been.

Generated through.

The interactions we've been having on the senior Medicare distribution platform, but we do see an opportunity to grow.

And generate really attractive margins outside of that.

We absolutely are.

Prepare for the AEP season ramped up and expect.

Strong membership growth over the coming quarters.

Yes.

Oh go ahead I'm sorry go ahead sorry.

I was just kind of talk about your question on growing too fast we feel really really good operationally, where we are I would say.

That kind of 4000 member at a 50000 membership base was significantly harder operationally than what we anticipate this kind of growth period, because to Ryan's points, yes, we're growing members, but we're growing revenue at a greater pace by getting more full boxes more tenured customers more happy customers and were very.

We're very excited with where we are operationally our customers are extremely satisfied our NPS scores are incredibly strong relative to most pharmaceutical.

Our pharma businesses, that's a really friction filled space, which we talked about and ours are above excellent. So we feel great about that and the Tam is massive so we we feel really good operationally, where we are just supplement that sue to Tim's point, we've really done this on the backs of senior customers in conversations that seniors.

We do see an opportunity to go.

And really click down on that business in a responsible way.

Through finding customers from other channels. So now that we've built this mouse trap now that we are kind of one of the largest players in this space in a very very large necessary Tam we feel good about our ability to find new customers and I think we've proven that out in the past year with final expense. When we started that out as an offshoot of our life insurance business and our senior business and now it's a.

Great kind of independent business that takes its own finds its own customers same thing with auto and home years ago. So we are really really bullish on our ability to market towards that.

Got it and then last question on collector Rx.

Just wanted to get an idea or thoughts on receptivity among leading carriers.

Program, the extent to which like our X gene can work hand in hand with some of the plans you are distributing.

Does it.

Mentioned that supplemental benefits are popular mail order drugs are popular is there anywhere way reflect our clash with plan design.

You know you go back a year ago, when we said Hey, we're doing a good job partnering with carriers I'd say today, we are doing a great job partnering with carriers, we're proving that not only does this have a benefit to overall happiness in the plan. It actually has a positive persistency changes more data better stars.

Significantly better adherence and other programs because of the design of the boxes and everything associated so we feel great. We also have industry, leading MTM completion rates per kind of one of our partners. That's also a carrier in our health care business within a carrier. So we feel stronger than we ever have about what that partnership.

Looks like.

We've talked about this before these arent really mail order eligible clients, they're not folks that should be unveiling right. Our average box has over seven drugs in our average member has over 10 drugs that enrollment.

And they are expressing extreme concern around taking those drugs drugs as prescribed.

That one through five drugs is really what.

We believe as the space for mail order and we're very supportive of the carriers actually one of our partners we're their largest kind.

Kind of referral source or we do an opt in so that they have the ability to call. The consumers on behalf of their mail order pharmacy, and where the most successful shop doing that while building. This business. So we don't really see it as friction we see it as an opportunity to continue that partnership beyond just the MA plan.

Yes, I think that's really well said, what Bob mentioned, we feel that we are very aligned with all participants in the value chain.

Clearly a very different solution and high adherence solution, one that can help the consumer lead healthier happier lives.

Can help with through that adherence than cost curves.

And I think all the feedback that we've gotten from the broader ecosystem has been very positive.

Great. Thanks shifting gears again, just real quick I appreciate the comment on the P&C hard market cycle, any thoughts or any forecast of kind of when we.

It feels like we may be getting towards an inflection point, but any thoughts on kind of when we see material change.

In that space.

Yes.

Certainly as we noted last quarter.

P&C market is certainly not a hard market I don't know that we have.

Any prognostication exactly when that May soften there are some signs.

But also some carriers that are that a resetting of that right in terms of their underwriting.

Specific to our brokerage business continues to perform.

Right well, it's a good.

Yeah.

Obviously very strong value proposition, but also is helping create meaningful cash flow for the customer for the company and.

We feel like that.

Even some of the activity that we've seen in terms of close rates and our ability to help convert customer.

Customers through re shopping we're having good progress on that so more to come on that Ben.

Great. Thank you my last question I appreciate the commentary on the <unk> volume mix typically that you see I was just wondering if theres any EBITDA cadence thoughts you could offer at this point in the fiscal year. Thanks.

Right, Yes, I think as we shared on our last earnings call and in the guide we are expecting that the EBITDA cadence.

And overall distribution by quarter for the various business segments will largely follow what we've.

Historically recognized the one deviation from that being the healthcare services business, which.

Yes.

Projecting EBITDA margins in the low single digits, obviously entering.

The year in one slot.

And exited at a materially higher.

Margin rate as we continue to grow and scale that business.

Great. Thanks, a lot guys.

Thank you Ben.

We currently have no further questions.

But Ken Zhang for any closing remarks.

Well. Thank you again for joining us as we enter the busy season for our Medicare advantage and health care services segment.

Again, we have a lot of confidence in our strategy.

Conviction grows with each quarter, that's like what drive strong profitability and cash flow.

Certainly delayed fiscal 'twenty four will be more of the same and with the scale of our healthcare services segment will drive even more operating leverage for the company. So we thank you again and look forward to speaking next quarter, everyone have a good evening.

This concludes today's conference call. Thank you all for joining you may now disconnect your lines.

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