Q2 2024 SelectQuote Inc Earnings Call

Operator: Welcome to SelectQuote's second quarter earnings conference call. All lines have been placed on mute to prevent any background noise.

Welcome to select quiet second 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. If you'd like to ask a question. During this time simply press star followed by one on your telephone keypad.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press start followed by one on your telephone keypad. If you would like to withdraw your question, please press start followed by two.

You would like to withdraw your question. Please press star followed by two it is now my pleasure to introduce Gunther select quite Investor Relations. Mr. Gunshot you may now begin the conference.

Operator: It is now my pleasure to introduce Matt Gunter, SelectQuote Investor Relations. Mr. Gunter, you may now begin the conference. Thank you, and good morning, everyone. 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.

Thank you and good morning, everyone and welcome to select quotes fiscal second 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 climate.

Matt Gunter: Joining me from the company are our Chief Executive Officer, Tim Denker, 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.

Following <unk>, Tim and Ryan's comments today, we will have a question and answer session.

As referenced on slide two 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 on our earnings release and Investor presentation on our website.

Matt Gunter: 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, annual report on Form 10-K for the period ended December 31, 2023, 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?

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.

Annual report on Form 10-K for the period ended December 31, 2023, 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 art.

Chief Executive Officer, Tim Danker, Tim.

Tim Denker: Good morning, and thank you all for joining us. Quote produced another very strong quarter in 2-2, which marks our 8th consecutive quarter of performance ahead of expectations across both our core senior and healthcare services business. Before getting to the quarter, I'd like to begin by reiterating our conviction and the value creation strategy we have executed on since 2022. For those that are new to the story, Suqquote seeks to generate stable and attractive EBITDA margins in a range of selling environments with an emphasis on returns on invested capital and growing cash flow to optimize our sales force of tenured agents to focus on the best leads to generate the highest possible unit economics for Medicare Advantage policies. The rapidly growing healthcare service business led by SelectRx has significantly scaled the return on and cash flow generation of our holistic marketing spend, and as a result, our revenue to CAC is now over 4x, more than double what it was two years ago.

Good morning, and thank you all for joining.

Produced another very strong quarter in Q2, which marks our eighth consecutive quarter performance ahead of expectations across both our core senior and healthcare services businesses before getting into the quarter I'd like to begin by reiterating our conviction in the value creation strategy, we have executed against since <unk>.

'twenty two.

Are those that are new to the story, so I quote seeks to generate stable and attractive EBITDA margins in a range of selling environments with an emphasis on returns to invested capital and growing cash flow.

<unk> optimized our sales force a tenured agents to focus on the best leads to generate the highest possible unit economics for Medicare advantage policy.

Our rapidly growing health care service business led by select Rx is significantly scale, the return and cash flow generation of our holistic marketing spend and as a result, our revenue to CAC is now over forex more than double what it was two years ago. Additionally, we delivered a third consecutive quarter of positive profitability.

Tim Denker: 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. Our strategic goal of building a truly unique and diversified platform, information and service-driven insurance distribution, as well as value-added health care services, is increasingly becoming a reality. With this quarter, we have now produced positive operating cash flow in two consecutive quarters on an LTM basis, which is noteworthy given the first half of the fiscal year is our highest seasonal use of cash with the ramp to AEP and OEP for Medicare Advantage. As a result of this progress, we now expect FlexQuote to approach break-even free cash flow for fiscal 2024 and expect cash flow generation to expand as health care services continue to scale. From our vantage point, Blackquote is not just healthier than it was two years ago, but it is thriving, with a strong foundation to realize the significant intrinsic value for shareholders that we see in our unique model.

<unk> and our healthcare services Division, which will accelerate the overall earnings power and cash flow of select book.

Our strategic goal of building a truly unique and diversified platform featuring information and service driven insurance distribution as well as value added health care services is increasingly becoming a reality.

This quarter, we have now produced positive operating cash flow in two consecutive quarters on an LTM basis, which is noteworthy given the first half of the fiscal year.

Highest seasonal use of cash with the ramp to AEP and OUP for Medicare advantage.

As a result of this progress we now expect <unk> to approach breakeven free cash flow for fiscal 2024, and expect cash flow generation to expand as healthcare services continues to scale.

From our vantage point, but <unk> is not just healthier than it was two years ago, but is thriving with a strong foundation to realize the significant intrinsic value for shareholders that we see in our unique model.

Tim Denker: With that confidence, we are pleased to say that we have increased the midpoints for both our revenue and adjusted EBITDA outlooks for fiscal 2024, which we will detail later in the call. Now, let me turn to slide 3 to provide highlights of our 2Q results. Consolidated revenue grew by 27% year-over-year, driven by both policy and LTV growth in our senior division and an increasing contribution from healthcare services, which more than doubled revenue year-over-year at $112 million for the quarter.

With that confidence we are pleased to say that we have increased the midpoint for both our revenue and adjusted EBITDA outlooks for fiscal 2020 for which we will detail later in the call.

Now, let me turn to slide three to provide highlights of <unk> results consolidated revenue grew by 27% year over year, driven by both policy and LTV growth and a senior division and an increasing contribution from health care services, which more than doubled revenue year over year at $112 million for the quarter.

Tim Denker: Our consolidated adjusted EBITDA also beat expectations, growing by 6% compared to a year ago. Recall, our expectation for fiscal 24 was for EBITDA margins to moderate compared to a highly favorable Medicare Advantage season by the industry in fiscal 2023. It is important to call out the significant mixed shift we've experienced given that EBITDA generation lags member growth and our healthcare services business. We'll speak to the drivers of each segment in a moment, but we want to emphasize the embedded EBITDA scale that exists across all of SelectQuote. In our senior segment, we continued to achieve strong efficiency from our tenured agent force in 2Q, even when compared to a very favorable market backdrop in fiscal 2023. As a result, we generated strong EBITDA margins of 32 percent, primarily due to expected marketing cost increases, primarily due to the implementation of new CMS marketing rules, including the 48-hour rule. Lastly, observed persistency remained stable and healthy.

Our consolidated adjusted EBITDA also beat expectations growing by 6% compared to a year ago.

As you will recall, our expectation for fiscal 'twenty four for EBITDA margins to moderate compared to a highly favorable Medicare advantage season experienced by the industry in fiscal 2023.

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.

I'll speak to the drivers of each segment in a moment, but we want to emphasize the embedded EBITDA scale that exists across all of select quote.

And our senior segment, we continued to achieve strong efficiency of our tenured agent force and <unk>, 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 rule lastly, observe persistency remains stable and healthy and total we take great pride in the tailored and unbiased service are highly trained agents provide to seniors every day, many of whom live in areas with limited access in many cases suffered from multiple chronic conditions.

Tim Denker: 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 and, in many cases, suffer from multiple chronic conditions and low national averages for income. Turning to our healthcare services segment, in 2Q, we posted our third consecutive quarter of positive adjusted EBITDA, and we are investing in new member growth that occurs concurrently with AEP. SelectRx now has 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 healthcare services for fiscal 24 while maintaining our expectations for adjusted EBITDA margins as we make investments to capture increased market share at highly attractive economic levels. If we turn to slide four, let me briefly elaborate on what we have observed in our senior segment and in the second quarter and, more broadly, what we saw in AEP this year

<unk> national averages for income.

Turning to our healthcare services segment and <unk>, we posted our third consecutive quarter of positive adjusted EBITDA.

Elevated investment in new member growth that occurs concurrent with AEP.

Select Rx has now nearly 63000 members, which is well ahead of our original expectation for all of fiscal 'twenty four.

And our view of the growth serves as an overwhelming endorsement of the value of our service delivers to customers with a much higher base of members and the continued growth and the operating leverage of the business. We are meaningfully increasing our outlook for revenue within healthcare services for fiscal 'twenty, four while maintaining our expectations for adjusted EBITDA margins as we make it.

Investments to capture increased market share.

Really attractive economics.

If we turn to slide four let me briefly elaborate on what we had observed in our senior segment in the second quarter and more broadly what we saw in AEP this year compared to last.

Tim Denker: First, our refocus strategy has resulted in outsized efficiency gains for our tenured agent sales force. As you can see, our close rates and agent productivity have increased by 54% and 97%, respectively, compared to 2022. 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. We credit this performance to our strategy to overweight tenured agents, as well as the introduction of our latest agent desktop tools, which further enhance efficiency, plan set, and the values of the policyholder and our carrier partners. Now, let me provide our high-level observations of this season's AEP compared to last.

First our refocused strategy has resulted in outsized efficiency gains for our tenured agent sales force as you can see our close rates in agent productivity have increased by 54% and 97% respectively compared to 2022.

More impressive though is the resilience we have seen in these metrics compared to the fiscal 2023 season, which you will recall was very strong industrywide.

We credit this performance to our strategy to overweight tenured agents as well as the introduction of our latest agent desktop tools, which further enhance efficiency plan set and the values of the policyholder and our carrier partners.

Now, let me provide our high level observations that this season to AEP compared to last.

Tim Denker: First, at the industry level, competition from other distribution platforms continued to be much more rational than a few years ago. For our model specifically, we shifted certain processes to incorporate the new TMS marketing roles and are very pleased to have mitigated higher marketing costs for policy with stable agent efficiency. Lastly, the bigger impact to Slicklet Senior Segment was a 7% increase in LTV to $934 per policy. Line will expand on our LTV, but to summarize, we continue to see stable policyholder persistency and the business we write. Turn to slide 5, and let me speak to efficiency from a cost and return perspective.

First at the industry level competition from other distribution platforms continued to be much more rational than a few years ago for.

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.

Lastly, the bigger impact of cyclic senior segment was a 7% increase in LTV to $934 per policy, Brian will expand on our LTV, but to summarize we continue to see stable policyholder persistency in the business we write.

We turn to slide five let me speak to the efficiency from a cost and return perspective.

Tim Denker: We've shown these KPIs in the past, but wanted to highlight the power and operating leverage that has created both from an Asian productivity perspective. First, our overall operating cost for policies for the past year remains highly attractive and is now over 30% lower compared to two years ago. Similarly, we have seen a 38% decrease in our marketing expense per policy compared to two years ago.

We've shown these kpis in the past, but wanted to highlight the power and operating leverage like what has created both from an Asian productivity and scaling perspective.

First our overall operating cost per policy for the past year remains highly attractive.

Now over 30% lower compared to two years ago.

Generally we have seen a 38% decrease in our marketing expense per policy compared to two years ago.

Tim Denker: We'll speak more about marketing costs for this AEP, but the important takeaway here is the interplay between an efficient tenured agent workforce and how a focus on quality leads can drive unit profitability and cash flow. Finally, we would marry that concept with how powerful SelectQuote is as a holistic healthcare information hub for more than just Medicare Advantage customers. As we've noted before, the customer acquisition spend we invest to drive returns and cash flow has synergy across more than just seniors shopping for Medicare Advantage policies. As you can see in the last set of bars, our revenue to CAC has more than doubled from two years ago and is now at $4.2X, which is remarkable from a return on invested capital perspective, especially considering that the timing of these cash flows is becoming increasingly front-loaded as SelectRX continues to grow as a mix of our overall business.

I'll speak more about marketing costs for this AEP, but the important takeaway here is the interplay between an efficient tenured agent workforce and how our focus on quality leads can drive unit profitability and cash flow.

Finally, we would marry that concept with how powerful <unk> has a holistic healthcare information hub for more than just Medicare advantage customers as.

As we've noted before the customer acquisition spend we invest to drive returns and cash flow has synergy across more than just senior shopping for Medicare advantage policies.

As you can see it in the last set of bars are revenue to CAC has more than doubled from two years ago and is now at four two X, which is remarkable from a return on invested capital perspective.

Considering that the timing of these cash flows are becoming increasingly frontloaded at select our X continues to grow as a mix of our overall business.

Tim Denker: To summarize, we're very pleased with the foundation we have built to drive stable unit economics and operating leverage in our senior segment. But more importantly, we're reaping the benefits of our unique ability to scale the same variable costs to create significant revenue streams within other large market needs and the healthcare ecosystem. As we've said before, our infrastructure and approach gives SelectQuote the unique opportunity to be the connective tissue between a very large population of Americans, carriers, and caregivers. As we did with SelectRx, we believe there are a range of ways to capture market share by leveraging our existing expense structure. If we turn to slide six, let's talk in more detail about SelectRx and healthcare services. As I noted up top, our growth in the segment year to date has significantly surpassed expectations. As you will recall, our original full year 2024 outlook anticipated SelectRx membership at the end of this year at just over 60,000 members. At the end of 2Q, we are nearing 63,000.

To summarize we're very pleased with the foundation, we have built to drive stable unit economics, and operating leverage on our senior segment more importantly, we're reaping the benefits of our unique ability to scale. The same variable costs to create significant revenue streams within other large market needs in the healthcare ecosystem.

As we've said before our infrastructure and approach gives select quote the unique opportunity to be the connective tissue.

Large population of Americans carriers, and caregivers first of all as we've done with select Rx. We believe there are a range of ways to capture market share by leveraging our existing expense structure.

If we turn to slide six let's talk in more detail about select Rx and healthcare services as I noted up top our growth in this segment year to date is significantly surpassed expectations. As you will recall our original full year 2024 outlook anticipated select Rx membership at the end of this year at just over 60000 members.

At the end of <unk>, we are nearing 63000 members.

Tim Denker: It's worth noting that the growth in members has been nearly all through our Medicare Advantage lead set. As highlighted last quarter, we believe SelectRx's compelling value proposition has the opportunity to be more broadly adopted through targeted marketing outside of our core Medicare Advantage platform. To be very clear, we do not plan to grow members just for the sake of growth but rather see a significant EBITDA opportunity, which is underpinned by what we are seeing and the attractive economics of our in-place membership. In fact, the increase that we are showing in our outlook for the business on the right side of this page now includes growth from selectively targeted as well as through our existing Medicare Advantage funnel. This investment is the primary driver of the stable margin expectations we now forecast for the year.

Worth noting that the growth in members has been nearly all through our Medicare advantage lead set higher.

A highlight of last quarter, we believe select Rx compelling value proposition as the opportunity to be more broadly adopted targeted marketing outside of our core Medicare advantage platform to be very clear, we do not plan to grow members just for the sake of growth, but rather see significant EBITDA opportunity, which is underpinned by what we're seeing.

And the attractive economics of our in place membership in fact, the increase that we are showing in our outlook for the business on the right side of this page now includes both from selectively targeting as well as through our existing Medicare advantage funnel.

This investment is the primary driver of the stable margin expectations, we now forecast for the year.

Tim Denker: We now expect member growth in the range of 40 to 50% compared to our original expectation of 25%. We expect the larger base of maturing members to drive revenue growth of 80-100% year over year, which is nearly double our original expectation. We believe this rapid growth in members clearly demonstrates the significant values Factor X provides to customers. We also remain excited about the embedded EBITDA we expect from these sticky revenue streams. As mentioned previously, SelectRx EBITDA generation lags member growth as members slow through the onboarding process.

We now expect member growth in the range of 40% to 50% compared to our original expectation of 25%.

We expect the larger base of maturing members to drive revenue growth of 80% to 100% year over year, which is nearly double our original expectation.

We believe this rapid growth in members clearly demonstrates the significant value sector X provides to customers.

We also remain excited about the embedded EBITDA, we expect from the sticky revenue streams as mentioned previously <unk> EBITDA generation lags member growth as members slow through the Onboarding process.

Tim Denker: So with such rapid growth, we will be onboarding a large population of new members in 2024, which impacts the pace of our adjusted EBITDA margin progression. Given our strategic decision to lean into member growth, health care services EBITDA margins are now forecasted to exit 4Q and the low single-digit range, but on a much higher base of revenue than previously expected, take a step back. We'll exit 2024 with a business that will have annualized and growing run rate revenues in the 550 to $600 million range.

With such rapid growth, we will be onboarding, a large population of new members in 2024, which impacts the pace of our adjusted EBITDA margin progression.

Given our strategic decision to lean into member growth healthcare services EBITDA margins are now forecasted to exit <unk> in the low single digit range, but on a much higher base of revenue than previously expected.

A step back we will exit 2024 with a business that will have annualized in growing run rate revenues and a $550 to $600 million range with positive EBITDA margins will continue to improve as the business matures to be clear, we arent guiding for 2025 or beyond but we do believe <unk> market.

Ryan Clement: We have positive EBITDA margins that will continue to improve as the business matures. To be clear, we aren't guiding for 2025 or beyond, but we do believe SelectQuote's market valuation fails to recognize the embedded value being scaled in healthcare services and the strong, improved fundamentals exhibited over the past two years in our distribution businesses. As we've said since 2022, only measure us based on what we accomplish, but it's clear we have accomplished quite a bit across the organization, most notably in healthcare services. With that, let me turn the call over to Ryan to detail our financial results and updated outlook for 2024, okay? Thanks, Tim.

<unk> fails to recognize the embedded value being scaled and health care services and the strong improved fundamentals exhibited over the past two years and our distribution businesses as.

As we've said since 2022 only measure it based on what we accomplish but it is clear we have accomplished quite a bit across the organization most notably in health care services with that let me turn the call over to Ryan to detail, our financial results and updated outlook for 2020 for Brian.

Thanks, Tim I'll start with a quick overview of our consolidated financials for the quarter on slide seven.

Ryan Clement: I'll start with a quick overview of our consolidated financials for the quarter on slide seven. Select Quote outperformed internal expectations again with a strong AUP and Senior, coupled with continued outsized growth in SelectRx. Consolidated revenue of $405 million grew 27% year-over-year, and adjusted EBITDA totaled $67 million compared to $64 million a year ago.

Outperformed internal expectations again, with a strong AEP and senior coupled with continued outsized growth in select Rx.

Consolidated revenue of $405 million grew 27% year over year, and adjusted EBITDA totaled $67 million compared to $64 million a year ago.

Ryan Clement: 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 was a higher mix of health care services revenue. Health care services profitability will ramp as we make the initial investment in new member onboarding and those members mature in the quarters ahead. As you will see with our updated outlook, we have a lot to be excited about as profitability scales for Selector X. As you know, SelectRx is cash-generative and enhances SelectQuote's overall return on invested capital and ultimately will drive higher free cash flow and incremental shareholder value.

As Tim noted, our adjusted EBIT 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.

Healthcare services profitability will ramp as we lap the initial investment and new member on boarding and those members mature in the quarters ahead.

As you will see with our updated outlook, we have a lot to be excited about as profitability scale Swiss electorate.

As you know select are cash accretive and enhances <unk> overall return on invested capital and ultimately will drive higher free cash flow and incremental shareholder value.

Ryan Clement: If we flip to slides 8 and 9, let's turn to the senior segment results, which were excellent when compared to the very strong fiscal 2023 AEP. Senior revenue of $248 million grew 11% year-over-year and was principally driven by MA policy growth. LTV also improved to 934, which was 7% higher than a year ago. As you can see on slide nine, our total policy sales beat expectations during the second quarter. This was driven by our continued strategy to match targeted quality leads with tenured agents. As noted in past quarters, our core focus is on Medicare Advantage versus other Medicare plan types, which are represented in orange.

If we flip to slide eight and nine.

Let's turn to the senior segment results, which were excellent when compared to the very strong fiscal 2023.

Senior revenue of $248 million grew 11% year over year and was principally driven by policy growth.

LTV also improved to 934, which was 7% higher than a year ago.

As you can see on slide nine our total policy sales beat expectations. During the second quarter. This was driven by our continued strategy to match targeted quality leads with tenured agents.

As noted in past quarters, our core focus is on Medicare advantage versus other Medicare plan types, which are represented in orange here.

Ryan Clement: Looking at just-approved MA policies in blue, we grew by more than 7%, which from our observations was broadly in line with industry growth. We are very pleased with the operating results from our senior division, as our strategy continues to deliver stable growth and attractive returns in a range of Medicare-Selling environments, including the changes associated with the new CMS marketing. As Tim noted, the new rule modestly impacted marketing costs for approved policies and dampened the outside strength we had in the Senior Event of Margins in 2020.

Looking at just approved MAA policies in Blue, we grew by more than 7% with tomorrow observations was broadly in line with industry growth.

We're very pleased with the operating results from our senior Division as our strategy continues to deliver stable growth and attractive returns and a range of Medicare selling environment.

Including the changes associated with the new CMS marketing roles.

As Tim noted the new rule modestly impacted marketing costs per approved policy and dampened the outsized strength, we hadn't seen your EBIT margins in 2023.

Ryan Clement: In 2Q24, our EBITDA of $79 million produced an attractive margin of 32%, which, as anticipated, moderated from the 37% produced a year ago. Tim highlighted the efficiency gains we have realized with a higher mix of tenured agents compared to years past, which drove civility and senior profitability. Also worth noting, we continue to see stabilization and policyholder persistency. As you'll recall, our LTV includes a three-year look-back provision and has also incorporated a 15% constraint since 2022, which lowers our booked LTV.

<unk> 24, our EBITDA of $79 million, producing an attractive margin of 32%, which as anticipated moderated from the 37% produced a year ago, Tim highlighted the efficiency gains we have realized with a higher mix continued agents compared to years past, which drove stability and senior profitability also.

Worth, noting we continue to see stabilization in policyholder persistency as Youll recall, our LTV includes a three year look back provision and has also incorporated a 15% constraints in 2022, which lowered our book LTV.

Ryan Clement: We feel really good about the durability of the LPVs we have been recognizing since adopting that 15% constraint and implementing our strategic redesign. I point this out as the vast majority of our receivables include this higher constraint. Additionally, we believe our strategy to focus on the highest quality lead sources and carrier partnerships has built significant resilience into our LTVs. There are multiple factors that drive our LTVs, including carrier mix, but we have made significant progress towards our goal of reducing volatility in our results with more focused growth and lead targeting. We believe the stability we are seeing in persistency indicators creates a solid foundation for more stable and improving LPVs in the long term.

We feel really good about the durability of the Ltvs, we have been recognizing since adopting that 15% constraint in implementing our strategic redesign.

I point this out as the vast majority of our receivables include higher constraint. Additionally, we believe our strategy to focus on the highest quality lead sources and carrier partnerships has built significant resilience into our ltvs. There are multiple factors that drive our LTV, including carrier mix, but we have made significant progress towards our goal of reducing volatility.

Our results with more focused growth in Lee targeting.

We believe the stability, we're seeing in persistency indicators creates a solid foundation for a more stable and improving LTV in the long term.

Ryan Clement: Turning to slide 10, let me give additional context on the standout growth we have driven in our healthcare services segment here today. As Tim noted, we surpassed our original four-year outlook for member growth during the second quarter. This was driven by continued demand from consumers for our convenient and tailored pharmacy service. To be clear, the AEP period is the seasonal peak for SelectRx member growth given the connectivity we have through our Medicare Advantage sales channel.

Turning to slide 10, let me give additional context on the standout growth we've driven in our healthcare services segment year to date.

As Tim noted, we surpassed our original full year outlook for member growth during the second quarter.

Driven by continued demand from consumers for convenience and tailored pharmacy service to be clear. The AEP period is the seasonal peak for select Rx member growth given the connectivity we have through our Medicare advantage sales channel. This is highlighted by the 19% sequential growth in members compared to last quarter for frame of reference that 19.

Ryan Clement: This is highlighted by the 19% sequential growth in members compared to last quarter. For a frame of reference, growth with nearly 10,000 members or more than two times the total membership of the original pharmacy businesses we bought in 2021. This is an impressive statistic and is representative of how powerful this energy is in our overall model.

Percent growth with nearly 10000 members or more than two times. The total membership of the original pharmacy businesses. We bought in 2021. This is an impressive statistic and is representative of how powerful the synergy and our overall model.

This step function in growth for the quarter explains why we have increased our member and revenue outlook for 2024.

Ryan Clement: This step function and growth for the quarter explains why we have increased our member and revenue outlook for 2024. I also call out that the growth and concurrent onboarding muted the splendid margin of 25% for Q2, which we expect to continue in the back half of the year. However, this is a great problem to have given that those margins will scale as new members mature. So while our full-year outlook for healthcare services margins remains in the low single digits, we will be achieving profitability on a base of revenues that is significantly higher than what we anticipated when the fiscal year began. To echo Tim's point, the numbers Select-Rx has produced at a scaled base of members and profitability become very compelling very quickly.

I'll also call out that the growth in concurrent Onboarding muted blended EBITDA margin for Q2, which we expect to continue in the back half of the year.

However, this is a great problem to have given those margins will scale as new members mature so while our full year outlook for health care services margins remains in the low single digits will be achieving profitability on a base of revenues that is significantly higher than what we anticipated when the fiscal year began.

To Echo Tim's point, the number of selected our axis produced at our skill base of members and profitability get very compelling very quickly.

Even more exciting is the positive impact select global experience in cash efficiency, which we believe is durable given the value we provide our members for their critical prescription drug needs month and month out.

Ryan Clement: Even more exciting is the positive impact SelectQuote will 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. Provide additional context on how members mature, and margins for the business progress. We have created the views you see on slide 11. Beginning at left, we highlight the number of prescriptions shipped per day, which eclipsed 17,000 this past quarter.

To provide additional context on how members mature and margins for the business progressed, we've created the views you see on slide 11.

And it left we highlight the number of prescriptions per ship per day, which eclipsed 17000. This past quarter the growth of 76% year over year is largely a function of new member additions. We believe it also highlights the scale, we are creating over the fixed cost of distribution within the business.

Moving to the right we display the average prescription per member typically it takes a new member several months to reach what we call a full box, including all of their various medications you can see that maturation dynamic in the year over year growth rate of 12%. Despite the nearly 10000 new members on boarded this quarter, who are ramping to full box.

Ryan Clement: The growth of 76% year-over-year is largely a function of new member additions, but we believe it also highlights the scale we are creating over the fixed cost of distribution within the business. Moving to the chart at right, we display the average prescription per member. Typically, it takes a new member several months to reach what we call a full box, including all of their various medications.

Yes.

Use of the select Rx unit economics are compelling enough on their own but to Tim's point when combined with the pace of new member growth against the very large addressable market and the cash efficiency, we realized in the model, we see significant unrecognized equity value in select Rx.

Ryan Clement: You can see this maturation dynamic in the year-over-year growth rate of 12% despite the nearly 10,000 new members on board this quarter who are ramping up to full box. These views of the SelectRx unit economics are compelling enough on their own, but to Tim's point, when combined with the pace of new member growth against a very large addressable market and the cash efficiency we realize in the model, we see significant unrecognized equity value in SelectRx. Next, I'll touch on our life and auto and home divisions, which also produced a strong quarter with combined revenue growth of 14% and even growth of 14%. As we mentioned last quarter, the PNC insurance market has been able to recognize increased premiums given replacement cost inflation for homes and cars. This was the primary driver of improved results in that division.

Next I'll touch on our life and auto and home divisions, which also produced a strong quarter with combined revenue growth of 14% and EBITDA growth of 14%.

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.

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 enforce premium as we continue to expand our accelerated underwriting product Swift terms select.

Let me now turn to slide 12 to review, our revised financial guidance for fiscal 2024.

On the strength of both healthcare services and senior we are increasing our revenue and adjusted EBITDA ranges, which now represent growth of 26% and 31% year over year at the respective midpoint.

Ryan Clement: Our term-life business increased revenues by 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. Let me now turn to slide 12 to review our revised financial guidance for fiscal 2024. On the strength of both health care services and senior living, we are increasing our revenue and adjusted EBITDA ranges, which now represent growth of 26% and 31% year-over-year at the respective midpoints. As you can see, the overall model is driving operating leverage given EBITDA growth is projected to outpace revenue growth. Our full-year revenue expectation is now $1.23 billion to $1.3 billion, primarily driven by growth in healthcare services.

As you can see the overall model is driving operating leverage given EBITDA growth is projected to outpace revenue growth for full year revenue expectation is now $1 3 billion to $1 3 billion, primarily driven by growth in health care services.

This compares to our previous range of 105 to $1 2 billion.

Bottom end of our adjusted EBITDA ranges increases from 80 million to $90 million driven by strong EBITDA results and senior.

We are maintaining the top end of the range at $105 million as healthcare services margins continue to scale.

Finally on the balance sheet. Our term loan is granted select short term extension on the current credit agreement, which you will see in our forthcoming 10-Q.

On restructuring after evaluating various refinancing options. We are confident that securitization presents the best opportunity for a more permanent capital structure we.

Ryan Clement: This compares to our previous range of 1.05 to 1.2 billion. The bottom end of our adjusted EBITDA ranges increased from $80 million to $90 million, driven by strong EBITDA results in seniors. We are maintaining the top end of the range at $105 million as healthcare services margins continue to scale. Finally, on the balance sheet, our term lenders granted select customers a short-term extension on the current credit agreement, which you will see in our forthcoming 10Q. On restructuring, after evaluating various refinancing options, we are confident that securitization presents the best opportunity for a more permanent capital structure.

We remain in active negotiations are still working to resolve certain deal point, but we've made tangible progress and are optimistic we are approaching a deal.

It is worth noting that select with underlying business is set to produce roughly $100 million of unlevered operating cash flow in fiscal 2024.

Restructuring and balance sheet are significantly improved our earnings profile and operating flexibility and will drive meaningful additional value to shareholders.

With that let me turn the call back over to the operator to take your questions.

Thank you ladies and gentlemen.

May I ask a question at this time by pressing star followed by one on your telephone keypad can be truly your question. Please press star followed by Kate.

Operator: We remain in active negotiations, are still working to resolve certain deal points, but we've made tangible progress and are optimistic we're approaching a deal. It is worth noting that Selequa's underlying business is set to produce roughly $100 million of unlevered operating cash flow in fiscal 2024. Restructuring the balance sheet would significantly improve our earnings profile and operating flexibility and would drive meaningful additional value to shareholders. With that, I will turn the call back over to the operator to take your questions. Thank you. Ladies and gentlemen, analysts may ask a question at this time by pressing start followed by one on their telephone keypad. To withdraw your question, please press start followed by two.

Our first question today comes from Ben Hendrix from RBC. Your line is now open. Please go ahead.

Great. Thank you and congratulations on the strong quarter guys.

Wanted to follow up on your.

LTV outlook for the year and EMEA growth and that's kind of what's been a very dynamic earning season for MAA.

See diverging expectations and growth.

You can man, United expecting them to come in much lower and Cvs coming in much higher than the market and just wanted to get your thoughts on how that's creating you talked also about carrier mix impacting LTV I wanted to see kind of what gives you confidence in maintaining that persistency as we see so much kind of shift.

Ben Hendricks: Our first question today comes from Ben Hendricks from RBC. Your line is now open, please go ahead. Great, thank you, and congratulations on the strong quarter guys. Wanted to follow up on your, you know, LTV outlook for the year and macro growth, and that's kind of what's been very dynamic. We see divergent expectations and growth with Humana United expecting to come in much lower and CVS coming in much higher than the market. I just wanted to get your thoughts on how that's creating, you talked also about carrier mix impacting LTV. I wanted to see kind of what gives you confidence in maintaining that persistency as we see so much kind of shift in the growth profile of the companies this year. Hey, good morning, Ben.

And the growth profile of the companies this year.

Hey, good morning.

Thanks again for joining I'll make a few comments and then maybe turn it over to <unk>.

Bob <unk>, our president to talk about the carrier dynamics and then Ryan can talk about your questions about LTV, but again, we were really pleased with what we saw this last thing would be we think broadly certainly the MCR delivered overall in the plan design that kind of coupled with our continued focus on.

Highly productive agents very high tenured agent force and a real focus on quality leads helped deliver the 33% margins.

I'll turn it over to Bob to provide kind of the outlook on the carriers moving forward.

Yeah, Ben Thank you for the questions and great question.

When you look at what happened in this AEP is we actually think that's what's going to continue to happen in the future.

Tim Denker: And thanks again for joining us. I'll make a few comments and then maybe turn it over to Bob Grant, our president, to talk about the carrier dynamics. And then Ryan can talk about your questions about LTV.

I think there was an anticipated pullback.

Because of the pressure on MLR.

Look to you and then it kind of dynamic earnings season, but what we're really seeing from the carriers is very specific plan design targeting consumers that really need very robust plan.

Tim Denker: But again, we were really pleased with what we saw in this last AAP. We think broadly, certainly the MCOs delivered the overall plan design that kind of coupled with our continued focus on, you know, highly productive agents, very high tenured agent force, and a real focus on quality leads helped deliver the 32% margins. I'll turn it over to Bob to provide kind of an outlook on the carriers moving forward. Yeah, and I'll Ben, thank you for the question. Great question!

And we're really seeing a big investment in decent apps and while there was a little bit of a pullback in traditional MA plans. There was a big investment in the planned benefits and understanding what.

More complex customers need and want and we really saw that.

Play out and then ultimately that changed the carrier mix a bit to your point, where Cvs made some really really strong investments in that space and we saw that play out really really well. So we anticipate that tended to be the future as well, we think that the carriers will continue to really.

Bob Grant: When you look at what happened this AEP, and we actually kind of think that's what's going to continue to happen in the future, you know, I think there was an anticipated pullback because of the pressure on MLRs, as you spoke to, and the kind of dynamic earnings season. But what we're really seeing from the carriers is very specific plan design targeting, you know, consumers that really need very robust plans. And we're really seeing a big investment in D-SNPs, and while there was a little bit of a pullback in traditional MA plans, there was a big investment in the plan benefits and understanding what more complex customers need and want. And we really saw that, you know, play out.

Try to understand how they can work better within little higher revenue customers that really need this rich benefits, which actually.

Go back to our comments before it really meets our bottle better than anybody else right.

Because of the savings, we kind of advertise towards and who we are able to assess thus far is reach rural areas.

Bob Grant: And then ultimately, that changed the carrier mix a bit, to your point, where CVS made some really, really strong investments in that space, and we saw that play out really, really well. So we anticipate that kind of future as well, trying to understand how they can work better within, you know, a little higher revenue customers that really need, you know, those rich benefits, which actually, if you, you know, go back to our comments before, really meet our needs better than anybody else's, right? We, because of the savings we can advertise for and who we are able to assist as far as we reach, you know, rural areas, folks that don't leave their houses quite as much.

Folks that don't leave their houses quite as much.

The new kind of strategy from the carriers plays out really really well for us because those are the customers that we serve so we feel really good about the future of that as well.

And then with respect to the lifetime values.

Consistent with our initial expectations, you'll recall when we set our guidance beginning of the year wed expect it to be up year over year.

Arent seeing stabilization more broadly and certainly policy mix with additive, but ultimately we think the stabilization. We're seeing is a strong platform for.

Continued.

Growth and stability over the longer term.

Thank you.

It seems like with.

Bob Grant: The new kind of strategy from the carriers plays out really, really well for us because those are the customers that we serve. So we feel really good about the future of that. And then with respect to lifetime value, what I say is really consistent with our initial expectations. You'll recall when we set our guide at the beginning of the year; we'd expect it to be up year over year. We are seeing stabilization more broadly and certainly policy mixing with additives, but ultimately, we think the stabilization we're seeing is a strong platform for continued growth and stability over the longer term. Uh, thank you.

With Cvs is strong growth.

It seems like the market is becoming more and more price sensitive.

And.

Price elasticity.

Overall in the market seems to be kind of shifting.

Towards more sensitivity is this longer term how do we think about this in terms of the persistency landscape.

The longer term.

Yes, as far as what that does for persistency, we feel really good about where we are and are targeting and our results were very consistent year over year, while we did see a little bit of increased shopping meaning.

Bob Grant: And, you know, just it seems like with CVS, there is strong growth, and with, you know, it seems like the market is becoming more and more price elasticity of the overall EMA market seems to be kind of shifting towards more sensitivity. Is this, you know, longer term? How should we think about this in terms of the persistency landscape, you know, for the longer term? Yeah, as far as what that does for persistency, we feel really good about where we are and our targeting, and our results were very consistent year over year. While we did see a little bit of increased shopping, meaning that the folks that had a plan already with us, we saw a little bit of an increase in them, but we didn't see an increase in them switching, which I do think, you know, as folks advertise for different plan benefits and things like that, you'll see some shopping, but that doesn't ultimately mean that they'll make that decision to switch.

Meaning that the folks that had plan already with US we saw a little bit of an increase in that but we didn't see an increase in them switching which I do think as folks.

<unk> towards different plan benefit things like that you'll see some shopping but that doesn't ultimately mean that they'll make that decision.

To switch so.

Relative to our.

Overall persistency in the strategy that we have we feel really really good about where we are and again are seeing stabilization as Tim but I think that has a lot to do with our model to then as you go through the year round business that we have now with very few what we would call flex agents in pretty much all core agents to understand the products in and out.

And can really work and assist our consumers even better than we could before I think that's also causing a lot of that stabilization, which we anticipate to play out into the future.

Bob Grant: So, you know, relative to our overall persistency and the strategy that we have, we feel really, really good about where we are and, again, are seeing, you know, stabilization, as Tim put it. I think that has a lot to do with our model too, Ben, as you go through the year-round business that we have now with very few, what we would call flex agents, and pretty much all core agents who understand the products in and out and can really work and assist our consumers even better than we could before. I think that's also causing a lot of that stabilization, which we anticipate to play out. Ryan said,

Brian.

Yes, I mean, I think what I would add there is obviously on the back book just in general while it's early we definitely feel like it's trending slightly better.

In years past, so very pleased and then with respect to newer policy business again, we continue to remain positive.

We are seeing improvements in business quality and lead indicators.

Great guys.

Right now thank you very much great quarter.

Thank you Ben.

Just before we go to our next question I'll remind that if you would like to ask a question. Please press star followed by one on your telephone keypad. If you change your mind. Please press star followed by <unk>.

Bob Grant: Yeah, I think what I would add there is obviously on the back book, just in general, while it's early, we definitely feel like it's trending slightly better than years past. So we're very pleased. And then with respect to newer policy business, we continue to remain positive. We are seeing improvements in business quality and the leading indicators. Great, guys. That's all I have right now.

Our next question today comes from Mccann from Naval Capital market. Your line is now open. Please go ahead.

Hey, Thanks for taking my questions and congrats on the quarter.

First question has to do with the pharmacy business.

Could you comment on the on the prospects for continued synergies between that business and the senior segment and I guess, what I'm thinking is if we look at the the nearly 63000 members of select Rx.

Ben Hendricks: Thank you very much. Great quarter. Thank you, Ben. Just before we go to our next question, a reminder, if you would like to ask a question, please press start followed by one on your telephone keypad. If you change your mind, please press start followed by two.

Can we look at that as sort of a level of adoption by the Medicare advantage customer base that you have.

Operator: Our next question today comes from Pat McCann from Noble Capital Markets. Your line is now open, please go ahead. Hey, thanks for taking my questions and congrats on the quarter. My first question has to do with the pharmacy business. You know, could you comment on the prospects for continued synergies between that business and the senior segment? And I guess what I'm thinking is, you know, if we look at the nearly sixty-three thousand members of Select Rx. Can we look at that as sort of a level of adoption by the Medicare Advantage customer base that you have? And if so, how do you view the unrealized opportunity that's still out there? Front coming from your, you know, your customer generation in the senior segment. Yeah, yeah. Thank you so much.

And if so how do you view the.

Unrealized opportunity that's still out there.

Coming from your.

Your customer generation on the on the senior segment.

Yes.

So much I'm sorry got it.

Yes, Bob I was just real quick like Todd I want to thank you for joining in and again for hand, it off to Bob We're really thrilled with the growth I think Bob will walk through it a lot of this has been off the backs of our Medicare advantage platform. There is indeed, a lot of synergy there we also see.

Potential beyond that.

With that I'll go ahead and hand, it off to Bob Bob.

Bob Grant: Oh, yeah, Bob, I was just real quick like that. I want to thank you for joining. And again, for handing off to Bob. We're really thrilled with the growth. Bob will walk you through it.

No I appreciate that.

Really good question and something that you think that gets missed by the market. A lot of this is just our first proof point into that synergy between.

The two businesses.

Bob Grant: A lot of this has been off the back of our Medicare Advantage platform. There is indeed a lot of synergy there. But we also see potential beyond that. And with that, I'll go ahead and hand it off to Bob.

And how much we can help clients that really need help beyond just Medicare advantage right.

The 65000 members, it's an adoption from folks that buy from us and I think we've also talked about for quite a bit. It's also an adoption from folks that need help that are on the most.

Bob Grant: And something I think that gets missed by the market a lot is this is just our first proof point of that synergy between the two businesses. And, you know, how much we can help clients that really need help beyond just Medicare Advantage, right? And the 65,000 members, you know, it's an adoption from folks that buy from us. And I think we've also talked about that before quite a bit. It's also an adoption from folks that need help that is the most, affordable, and kind of best planned today.

Affordable and kind of best planned today.

Meaning that a lot of our folks come that didn't actually buy.

Policies from select quote the shops, we found out that they are the most the plan with the best benefits and then ultimately put them and help them on their pharmacy side, which is one of the top complaints on.

The trickiness of navigating the Medicare system. There is a lot of other adjacent services, whether that's within the pharmacy space or other things that we feel really strong about and we've talked about before that we will start to get into and start to help our consumers with other complaints and other issues that they have we deal with are really complex group.

Bob Grant: Meaning that a lot of our folks come that didn't actually buy a policy from select quote, right? They shop we found out that they're on the most the plan with the best benefits and then ultimately put them in and help Them on their pharmacy side, which is one of the top complaints on you know, the trickiness of navigating the Medicare system There's a lot of other adjacent services You know whether that's within the pharmacy space or other things that we feel really strong About and we've talked about before that we will you know Start to get into and start to help our consumers with other complaints and other issues that they have we deal with a really complex group As evidenced by you know, the 63,000 members we have within a very complex Pharmacy space and we think that's just the tip of the iceberg as far as what we can do to help those consumers especially the ones that really have no access to great, you know care the rural folks that You know just don't have quality care near them Value-based care really isn't an option for them in the current kind of system And we feel really strongly that we can help them You know whether that's introduced to best-in-class services or whether we can actually be that best-in-class service like select, God, if I can, one more thing I want to acknowledge. Oh, sure. Okay, just real quick.

As evidenced by the 63000 members we have within a very complex pharmacy space and we think that's just the tip of the iceberg as far as what we can do to help those consumers, especially the ones that really have no access to great care in the rural folks that.

Just don't have quality care and near than value based care really isn't an option for them in the current kind of system.

We feel really strongly that we can help them, whether thats introduced to best in class services or whether we can actually be that best in class service like select Rx.

And if I can one more thing on why don't you just to state on.

Oh sure.

Oh, Yes, just real quick I mean, again kudos to Bob and he was really architect and driven the strategy.

Other synergies, we're seeing to state the obvious right. We mentioned are for two <unk> right.

Leveraging this existing marketing spend on our MA platform to create no meaningful revenue streams.

Tim Denker: I mean, again, kudos to Bob who has really architected and driven the strategy. You know, other synergies we're seeing, to state the obvious, right, we mentioned our 4.2 rev the cat, right, we're leveraging this existing marketing spend on our ma platform to create new meaningful revenue streams, which is obviously highly synergistic. And then from a persistency standpoint, we've been tracking this, right? I mean, we've always thought, hey, how can we extend more value beyond the Medicare Advantage policy? That's very important, but there's more that we can do here to select our acts.

Which is obviously highly synergistic and then.

From a persistency standpoint, we've been tracking this right I mean, we've always thought hey, how can we extend more value.

On the Medicare advantage policy Thats very important but theres more that we can do here.

<unk> select Rx and we've been tracking persistency on what we call like for like customers and we are seeing.

Underlying left in terms of retention on those MA customers, who enroll in our select Rx program. So.

Tim Denker: And we've been tracking persistency on what we'd call like for like customers, and we are seeing, you know, underlying left in terms of retention on those customers who enroll in a selector X program. So, again, it's not just about the kind of growth metrics we're sharing. We actually think it helps the underlying platform, given the increased value we're providing. Right. And then can I, if I could just stay on that topic for a second here?

Again, it's not just about the kind of the growth metrics for sharing we actually think.

It helps the underlying platform given the increased value will providing consumers.

Right and then can I, if I could just stay on that topic for a second here.

You mentioned that.

The high single digit EBIT margins in for select Rx or.

We're kind of due to I guess, it could be higher but they are due to the.

Pat McCann: You mentioned that the high single-digit EBITDA margins in, you know, for SelectRx are kind of due to, you know, I guess they could be higher, but they're due to your leaning into the growth there. So to me, that kind of spurs the question of, you know, what are the expenses, the expense levers, or growth investment levers that you can pull or back off on that are specific to the pharmacy business? you know, that are resulting in those margins. Yes, I think I'll get some clarification on that point.

You're leaning into the growth there so.

To me that kind of Spurs the question of what.

What are the expenses the expense levers of growth investment levers that you can pull or backup back off on that are specific to.

The pharmacy business.

Yeah.

That are resulting in those in those margins.

Yes, so I think yes.

Yes.

Clarity on that point, so obviously on the quarter low single digits really really pleased with the strong performance the growth.

Ryan Clement: So obviously, in the quarter, low single digits, really, really pleased with the strong performance, and the growth. In all of that, we are onboarding customers. It does take our customer base several months to reach what we call full boxes, which is where boxes are going out that have all of their drugs.

All of that right, we are onboarding customers. It does take our customer base.

Several months to reach.

What we call full boxes, which is where boxes are going out.

Ryan Clement: And that's really whenever you reach maximum margin. With respect to the broader margin profile, our drug margins are in the mid-20 range. There is a cost of getting drugs outside.

So kind of all of their drugs and Thats really whenever you reach maximum margin.

With respect to the broader margin profile.

Our drug margins are in the mid 20 range. There is a cost of getting drug outdoor if you look at the variable margins on a per customer basis.

Ryan Clement: If you look at the variable margins on a per customer basis, they're in the mid to upper teens. So there is a lot of margin once you've got customers to full scale and full boxes, and you're shipping those out month in and month out. However, in this period where we're onboarding such a large number of new customers that aren't at maturity, there are certainly costs associated with ramping. And so we're building a lot of embedded value that you may not be seeing in the current quarter's financial results but will be recognized in future quarters. Certainly, if the business wanted to pull back and slow its growth, margin rates would improve.

<unk> is in the mid to upper teens. So there is a lot of margin once you've got customers too full.

Full scale and full boxes, and you're shipping those out month in month out. However, in this period, where we're onboarding such a large number of new customers that arent maturity theres certainly costs associated with Ram.

Ramping and so we're building a lot of embedded value that you may not be seen in the current quarter's financial results, but will be recognized in future quarters.

If the business wanted to pull back and slow the growth margin rates would improve but again. This is cash accretive business that generates revenue month in month out not as highly synergistic with our existing senior distribution business and right now AEP in OSB are those peak seasons.

Ryan Clement: But again, this is a cash-accretive business that generates revenue month in and month out. It's highly synergistic with our existing senior distribution business. And right now, AEP and OEP are those peak seasons.

Ryan Clement: So it's an investment worth making, and we're really pleased with the growth. Yeah, and as far as the, uh, okay. Yeah, that's that's very helpful. Perfect. Again, as far as to the future of that, we're not guiding to 25, to Ryan's point. We are hyper-focused on how we can better automate and better improve our system architecture, given how fast we've grown, ultimately to get that cost to get the scripts out the door down.

It's investment worth, making and we're really pleased with the growth.

Yes as far as the.

Okay.

For clarification for me.

And as far as to the future of that.

Our biggest investments will be in automation and improving our facilities and things like that while we're not guiding to 25% to Ryan's point.

We're hyper focused on how we can be.

Automate and better improve our system architecture.

Even.

How fast we've grown.

Ultimately to get that cost to get the strips out the door down. So we think it can be simultaneous while we're still growing we can really focus on the efficiency of that engine beyond just full boxes and things like that to really improve our overall.

Bob Grant: So we think it can be simultaneous; while we're still growing, we can really focus on the efficiency of that engine, beyond just full boxes and things like that, to really improve our overall variable margin, I would say. So we're really bullish on that as well, so we're really, really excited about what we can do with that business over time. Thank you.

Variable margin I would say so.

Really bullish on that as well so we're really really excited on what we can do with that business over time.

Thank you most helpful. There and then my final question I just wanted to touch on the balance sheet really quickly.

Pat McCann: And then my final question, I just wanted to touch on the balance sheet really quickly. You mentioned moving towards free cash flow generation, and I just wanted to check in on how you view your debt levels as you progress towards free cash flow generation and possibly paying some of that down in the next fiscal year and so forth. Just wanted to get your take on that.

You mentioned moving towards free cash flow generation and I, just wanted to kind of check.

Check in on how you view.

Your debt levels as you.

Progress towards free cash flow generation, and possibly paying some of that down in the next fiscal year and so forth I just wanted to get your take on that.

Ryan Clement: Absolutely. It's absolutely a priority. We recognize that we've got a meaningful debt balance. There is maturity.

Absolutely.

Clearly a priority we recognize that we've got meaningful debt balance there is a maturity we sure that we've got a short term extension.

Ryan Clement: We've shared that we've got a short-term extension, but we are actively working on the broader long-term solution, and we're making meaningful progress. We highlighted two quarters ago in our 10-K that we were exploring options, not limited to, including securitization. As time has lapsed, we've been exploring that further, and it's clear that securitization is an attractive financing structure for SelectQuote and for the industry more broadly.

We're actively working on the broader long term solution and we're making meaningful progress we highlighted.

Two quarters ago in our 10-K that we were exploring options not limited to but including securitization as time has lapsed we've been exploring that further it's clear that securitization is an attractive financing structure for select quote for the industry more broadly we are in active negotiations and still working to resolve.

Ryan Clement: We are in active negotiations and still working to resolve certain deal points, but we have made tangible progress. We're optimistic we're approaching a workable deal, and that structure, once implemented, does allow us to de-lever over the long term. We're really pleased with the progress and the path forward. Obviously, with respect to more recent results, we did highlight that this past quarter, on a trailing 12-month basis, and the prior quarter, for that matter, we have been operating cash flow positive. We do expect to be operating cash flow positive for fiscal year 2024. We do have adequate liquidity to execute on our plans for calendar year 2024 and beyond, but we are very focused on the broader capital structure and setting ourselves up for long-term success and operating flexibility, and we're making good progress on that front. Great, thank you so much. That's all I have.

Certain deal points.

But we have made tangible progress we're optimistic we're approaching workable deal and that structure. Once implemented does allow us to delever over the long term. So we're really pleased with the progress.

And the path forward, obviously with respect to more recent results.

I'd highlight that this past quarter on a trailing 12 month basis in the prior quarter for that matter.

We have been operating cash flow positive, we do expect to be.

Operating cash flow positive on for full fiscal year 2024, we do have adequate liquidity to execute on our plans for calendar year 2024, and beyond 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.

Great. Thank you so much that's all I have.

Tim Denker: That concludes the Q&A portion of today's call. I will now hand over to Tim Danker for closing remarks. Thank you. I'll conclude by thanking all of you for joining us. We appreciate it. As I said earlier in my remarks, but I'll say it again, SelectQuote is thriving. We believe the value of our current businesses and our ability to leverage our unique information and connectivity advantages in healthcare provide us with a range of ways to drive repeatable profit and cash flow growth. As we've shown in our distribution business, and as we're increasingly scaling in healthcare services, we see a lot of unrecognized shareholder value that we're going to continue to work diligently to capture. So, thank you again. We look forward to speaking with you next quarter. Have a good day. That concludes today's SelectQuotes Fiscal Second Quarter 2024 Earnings Conference Call. You may now disconnect your line; www.microsoft.com.au Microsoft Mechanics www.microsoft.com.au

That concludes the Q&A portion of today's call I will now hand back over to Tim Duncan for closing remarks.

Yes. Thank you I'll conclude by thanking all of you for joining US we appreciate it.

As I said earlier in my remarks, but I'll say it again like what is driving we believe the value of our current businesses and our ability to leverage our unique information and connectivity advantages in healthcare provide us with a range of ways to drive repeatable profit and cash flow growth.

As we've shown in our distribution business and as we're increasingly scaling in health care services, we see a lot of unrecognized shareholder value that we're going to continue to work diligently to capture so thank you again and we look forward to speaking with you next quarter have.

Have a good day.

That concludes today's select.

Second <unk> 24 earnings Conference call you May now disconnect your lines.

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