SelectQuote, Inc. 2026 Q4 Earnings Call

Thank you, and good morning, everyone. Welcome to SelectQuote's fiscal fourth 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 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 on our earnings release and investor presentation on our website. 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 June 30, 2026, and subsequent 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. With that, I'd like to turn the call over to our Chief Executive Officer, Tim Danker.

Tim? Thank you, Matt, and thanks to everyone joining us this morning.

Before we begin, I'd like to start with what we believe is the most important takeaway from today's call. SelectQuote's highest priority continues to be driving profitable cash flow, and our fiscal 2026 results demonstrate meaningful progress against that objective. As you'll hear throughout our remarks, we're managing the business with a focus on cash generation and leverage reduction, which we believe is the best way to create long-term shareholder value. We believe the platform we've built is capable of generating substantially more cash flow over time, and we are beginning to see that potential translate into tangible results. Looking towards the future, we expect the Medicare Advantage industry to remain fluid as our carrier partners continue to rightsize and get closer to their own operating margin targets.

As a result, in fiscal 2027, we will be prudent with our MA growth investments, while our primary focus will be to grow and compound our cash flow. Meanwhile, we reached an inflection point in fiscal 2026 with the Healthcare Services division becoming SelectQuote's largest revenue contributor, and we anticipate increasing cash flow and earnings power from that business in fiscal 2027. Beyond fiscal 2027, we firmly believe SelectQuote is well positioned to grow both our senior and healthcare services revenues, which will further accelerate cash flow generation. Now moving to our recent performance. SelectQuote delivered a strong fourth quarter in what has been a highly successful fiscal year for our company. As you know, 2026 was another challenging year for Medicare Advantage as carriers shifted policy benefits and had widely varying origination volumes.

In healthcare services, we successfully managed a shift in reimbursement rate from a SelectRx payer partner and changes in drug pricing from the Inflation Reduction Act. Through it all, we modestly grew revenue, maintained strong margins, and significantly increased operating cash flow. Looking ahead, our highest priority is to realize value for our shareholders, which as I mentioned, is best achieved through cash flow. To be blunt, we see a wide disconnect in the value of our shares relative to the real cash flow generation of our platform. I'll end today's prepared remarks with more detail on that point, but I'll reiterate that we see fiscal 2027 as a real inflection point for compounding cash flow growth and the value of our equity. Turning to slide three, I want to frame fiscal 2026 around the key areas where SelectQuote made the most meaningful progress.

First, in healthcare services, SelectRx continued to prove the earnings power of its scaled membership base, producing approximately $25 million of Adjusted EBITDA for the year while exiting at nearly $50 million annual run rate in the fourth quarter. This is an important milestone for a business we built essentially from scratch over the past several years, and we believe there is still meaningful room to grow profitably as we continue to drive operating leverage across the platform. Second, our senior business remained highly profitable despite another dynamic Medicare Advantage environment. The business generated Adjusted EBITDA margins of 26%, which we believe reflects the durability of our model, the strength of our carrier relationships, and the efficiency of our agent-led, technology-enabled distribution platform. And third, most importantly, we delivered more than $40 million of year-over-year improvement in operating cash flow.

As I mentioned before, that cash flow progress is central to the story we're telling investors today. We have been very clear that our priority is not simply growth for growth's sake, but profitable growth that compounds into stronger cash generation, lower leverage, and ultimately greater equity value for shareholders. To emphasize the point, it is important to remember that there is significant cash flow scale, both in our billion-dollar-plus commissions receivable balance, which we grew in fiscal 2026, and our scaling healthcare services platform. As we increase operating efficiency and reduce costs, the equity accretion of compounding cash flow will become increasingly powerful. When we look back on fiscal 2026, we see a year where the model worked well and our teams executed yet again.

We navigated industry complexity, delivered value for customers and partners, and took a meaningful step forward in translating the underlying earnings power of SelectQuote into visible cash flow. Now let me turn to slide 4 on how SelectQuote is driving value and cash flow through our ongoing effort to maximize operating efficiency. As part of our fiscal 2027 planning process, we identified more than $30 million of annualized run rate expense improvement across the business. Importantly, these benefits are the result of a combination of actions, including AI and technology-enabled efficiencies, process improvements, organizational right sizing, and prudent cost management. Today, I'd like to double-click on a few of the technology-enabled efficiencies we're capturing. As you know, SelectQuote was founded with a clear view that technology and information are critical for operating efficiency and the value we deliver to our customers.

Our investments in technology and data increasingly help us improve both efficiency and customer outcomes. Across the business, we are deploying AI-enabled enrollment support tools that help us flex capacity with demand. This ensures we preserve valuable agent talk time and allow our highly trained live agents to do their most valuable work. We've also streamlined agent workflows through sales assist technology and will expand the use of AI-powered quality assurance tools to review and coach our agents. We're also automating revenue generation processes and leveraging internally developed technology to increase efficiency within both our senior and pharmacy businesses. These initiatives reduce manual work, improve scalability, and help generate meaningful cost savings while optimizing the high level of service our customers expect. Additionally, as discussed on our 3Q call, during fiscal 2026, we built, deployed, tested, and are now leveraging our new custom-built pharmacy management system.

This system not only enables streamlined day-to-day pharmacy operations, but also provides the technical infrastructure we need to continue to process more scripts through our new state-of-the-art Olathe, Kansas facility. In this facility, we are already recognizing around 30% efficiency gains on shipments relative to our two legacy locations. This is yet another way we are meeting the market, given that U.S. healthcare system demands increasing efficiency, and you can see that with the improvement in our Kansas facility. The challenge for most operators in our industry has been trying to balance speed and efficiency with services that fit the individual customer and drive value. There are some that do one or the other, but in our view, only SelectQuote succeeds at both. These initiatives build on a long history of incremental operational improvements across the company.

While the over $30 million of savings reflects actions already taken or underway, we believe our technology platform positions us to capture incremental savings over the next several years as automation, data analytics, and workflow optimization become increasingly embedded across our operations. We are seeing that technology is allowing us to further unlock the value of our core asset. The success you see in both our senior and healthcare services businesses begins and ends with real conversations between real people. We have a long track record of these conversations and earning the trust of America's seniors who give us unmatched insights into their needs. We firmly believe our scale and increasingly our technology are exceptionally valuable assets that will continue to broaden our competitive advantage and allow us to meet the needs of America's seniors as they navigate the complex healthcare environment.

These factors are not only allowing us to serve them better, but also powerfully contribute ongoing leverage to our cash flows. With that, let me turn the call to our CFO, Ryan Clement, to review our financials.