SelectQuote reports strong Q2 earnings performance with revenue and EBITDA growth, raising 2025 guidance
From Nasdaq: 2025-02-10 23:15:12
SelectQuote (NYSE: SLQT) held their Q2 2025 Earnings Call on Feb 10, 2025, discussing their fiscal second quarter performance. CEO Tim Danker highlighted the success of their differentiated healthcare services platform, especially during the Medicare Advantage annual enrollment period. SelectQuote’s senior division delivered robust results, with impressive policy close rates and agent productivity. The healthcare services segment, led by SelectRx, also saw profitability growth. The company raised their 2025 guidance ranges for revenue, EBITDA, and net income. Additionally, they announced a $350 million preferred equity offering to improve their capital structure and fuel growth. SelectQuote’s tenured agent force achieved a 24% higher close rate than the previous year, leading to a 33% increase in agent productivity and a 22% decrease in marketing expenses. The company’s senior EBITDA margin increased to 39% compared to 32% the previous year. SelectQuote aided tens of thousands of customers during the Medicare Advantage season, resulting in strong returns and profitability. The company’s strategic capital actions have decreased ongoing capital costs and interest obligations, positioning them for future growth in the healthcare market. Revenue to customer acquisition costs has steadily increased, showcasing the power of the company’s scale. SelectQuote reported strong performance during the Medicare Advantage season, with adjusted EBITDA growing by 28% year over year to 101 million and a margin of 39%. Despite a higher-than-normal rate of policy terminations at 6%, SelectQuote recaptured over 30% of the terminated policies. The company ended the quarter with 97,000 SelectRx members, up 54% from a year ago, driving revenue of 183 million. Adjusted EBITDA for healthcare services was 2 million, with continued investment in areas with significant market opportunities. The life business saw revenue of 40 million and adjusted EBITDA of 7 million, up 62% year over year.
Looking ahead, SelectQuote raised its fiscal year 2025 guidance ranges for revenue, adjusted EBITDA, and net income, with revenue expected to be in the range of 1.5 billion to 1.575 billion. The company’s net income is expected to range from a loss of $24 million to income of $11 million, up from a loss of $59 million to a positive $3 million. They raised their guidance due to strong results and are making investments in healthcare services. The company expects margins to be in the low to mid 20s for the senior division and low single digits for healthcare services in fiscal 2025. They are pleased with SelectRx momentum and see vast market opportunity, especially in driving adherence and outcomes. The company’s recent investment from Bain and others is expected to strengthen their position and benefit from securitization. In a recent earnings call, company executives discussed plans for securitization to reduce debt and increase operating flexibility. Proceeds from a recent transaction will be used to retire term debt and revolve any outstanding balances. The move is expected to reduce the company’s cash debt service obligation by $30 million and provide $100 million in liquidity. The company aims to focus on growth opportunities in healthcare services and Medicare platforms, with the potential for increased organic growth and cash flow. The company’s improved capital structure positions them well for future expansion.
The company anticipates significant growth potential with improved efficiency and a focus on organic growth in their Medicare platform. Despite lower agent counts this year, the company delivered strong results and is confident in its ability to hire and train new employees for future growth. The company is optimistic about the opportunities in the healthcare industry and believes that the new regulatory regime will create a more favorable outlook for the company moving forward. The company remains focused on responsible growth and building out their insurance distribution platform. The current administration’s favorable outlook on Medicare Advantage is expected to benefit the market. Despite challenges, decisions on marketing strategies are welcomed. The advance rate notice has been positive, easing profitability concerns and allowing for reinvestment in plan benefits. Tenured agents have outperformed, leading to increased productivity. The company plans to responsibly grow with additional capital. The direct-to-home pharmacy service, SelectRx, is gaining traction among senior consumers, driven by the convenience of technology and home delivery options. The shift towards technology adoption is evident, even among historically less tech-savvy customers. Bob Grant, President of Senior Segment, discusses the success of the customer lifecycle management team in improving member experience and increasing adoption rates. Regulatory changes, such as reducing the donut hole to $2,000, have also boosted customer satisfaction. By driving adherence rates and lowering overall costs for carriers, the company is seeing positive results. Looking ahead, they plan to enhance their model and offer more relevant products to drive better health outcomes for customers. The company is optimistic about the future and aims to make 2025 a pivotal year for shareholders.
During the conference call, key participants included Matt Gunter, Tim Danker (CEO), Ryan Clement (CFO), Ben Hendrix (RBC Capital Markets Analyst), George Sutton (Analyst), and Pat McCann (Noble Capital Markets Analyst). The call highlighted the company’s momentum and strategic initiatives for the future. The transcript, provided by The Motley Fool, offers insights into the company’s performance and future plans. The organization is focused on growth and shareholder value, with a commitment to enhancing customer experience and driving positive health outcomes. 1. The stock market hit record highs today with the S&P 500 closing at 4,200 points, fueled by strong corporate earnings and positive economic data.
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4. The United Nations reported a record number of civilian casualties in Afghanistan in the first quarter of 2021, highlighting the escalating violence and humanitarian crisis in the country.
Read more at Nasdaq: SelectQuote (SLQT) Q2 2025 Earnings Call Transcript