SelectQuote Posts Near-Record Margins Amid Revenue Headwinds

Date of Call: Feb 5, 2026

Financials Results

• Revenue: $537 million, up 12% year-over-year
• Operating Margin: Senior EBITDA margin of 39%, near record levels

Guidance:

• Revised fiscal 2026 consolidated revenue range to $1.61B to $1.71B.
• Revised adjusted EBITDA range to $90M to $100M.
• Expect operating cash flow of $25M to $35M for fiscal 2026.
• Stand by target of 20% plus EBITDA margins for Senior division.
• Expect Healthcare Services to exit fiscal 2026 at annualized adjusted EBITDA run rate of $40M to $50M.

Business Commentary:

Strong Financial Performance and Profitability:

• SelectQuote reported revenue of $537 million for Q2 2026, reflecting 12% year-over-year growth, with the Senior segment contributing $262 million and the Healthcare Services segment $231 million.
• The Senior segment achieved near-record EBITDA margins of 39%, despite a modest 2% revenue increase, driven by strong agent productivity and marketing efficiency.

Healthcare Services Expansion:

• The Healthcare Services segment experienced a 26% year-over-year revenue increase to $231 million, with membership growth of 17% to 113,000.
• Growth was attributed to the increasing demand for SelectRx services and improved reimbursement visibility from a new PBM agreement.

Impact of External Factors:

• SelectQuote faced a $20 million headwind from a national carrier partner due to reduced marketing budgets and a prior $20 million impact from PBM reimbursement changes.
• These external factors resulted in a revised fiscal 2026 guidance, with consolidated revenue expected to be between $1.61 billion and $1.71 billion.

Operational and Marketing Efficiency:

• The company maintained a marketing cost per approved policy of $326, which was 20% lower compared to Q2 fiscal '24, despite a dynamic market environment.
• This efficiency, alongside high agent retention and productivity, contributed to strong profitability and cash flow generation.

Strategic Financial Flexibility:

• SelectQuote secured a new $415 million credit facility, extending debt maturities to 2031 and improving capital flexibility.
• This strategic move allows the company to capitalize on growth opportunities and optimize its capital structure, supporting future profitable growth.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted "strong quarter," "near-record Senior EBITDA margins of 39%," "very pleased with our results," and "greater conviction in our ability to compound profitability and cash flow." Also noted "significant positive" from new credit facility and "impressed profitability and cash flow" despite headwinds.

Q&A:

• Question from David Windley (Jefferies LLC): Can you give more detail on the PBM deal and whether it reestablished economics back to prior levels?
  Response: The new multiyear PBM agreement provides needed stability and predictability, aligning with expectations and solidifying future visibility.

• Question from David Windley (Jefferies LLC): What is the risk of other carriers following the major carrier's pattern of cutting marketing budgets?
  Response: Management is confident in its ability to navigate, citing a resilient, diversified business and does not anticipate anything of similar materiality from other partners.

• Question from Benjamin Hendrix (RBC Capital Markets): Given the MA advanced rate notice and carrier margin focus, is there an opportunity to stand out and gain more marketing spend share ahead of 2027?
  Response: Yes, SelectQuote's efficient and high-quality model, evidenced by strong margins and retention, positions it well to capitalize on carrier needs for quality and efficiency.

• Question from Benjamin Hendrix (RBC Capital Markets): Does the new PBM contract have cost-plus components, and could that stabilize SelectRx?
  Response: The contract is similar to a cost-plus model with a guaranteed dispensing fee, aligning with market trends and providing stability.

• Question from George Sutton (Craig-Hallum Capital Group): What are the specific levers at your disposal relative to the MA options given the carrier move?
  Response: Levers include geographically deploying marketing dollars, focusing on customer segments where carriers want to grow (e.g., SNPs), and leveraging the diversified SelectRx business.

• Question from George Sutton (Craig-Hallum Capital Group): How does the new loan agreement provide operating flexibility, and could you shift emphasis from MA to Healthcare Services?
  Response: The facility extends debt maturities, providing utility to deploy capital where returns are best, while maintaining focus on growing cash flow and operating leverage.

• Question from Patrick McCann (NOBLE Capital Markets): How did scale affect your negotiating position in the recent PBM discussion?
  Response: Scale provides significant leverage, allowing deeper partnerships and negotiations as SelectRx demonstrates value in reducing hospitalizations and improving compliance.

• Question from Patrick McCann (NOBLE Capital Markets): How much incremental volume can the Kansas facility absorb before needing new capital investment?
  Response: The facility has high capacity with efficient machinery and technology initiatives planned to drive further efficiency, enabling significant growth without immediate major capital needs.

Contradiction Point 1

PBM Relationship and Contract Economics

Contradiction on the stability and future outlook of the PBM partnership.

Does the new PBM deal reestablish the relationship's economics to their previous state, and can you provide more details? - David Windley (Jefferies LLC)

2026Q2: The new multiyear PBM agreement provides needed stability and predictability, and results 'absolutely in line with expectations,' solidifying visibility moving forward. - [Timothy Danker](CFO)

What gives confidence that reimbursement rates will improve in 2025, and will a similar headwind occur by year-end? - Michael Murray (RBC Capital Markets, Research Division)

2026Q1: Constructive discussions are underway to solidify a longer-term agreement... The short-term impact is being absorbed in Q1 and Q2, but the long-term economics and growth margin profile remain unchanged and attractive. - [Timothy Danker](CFO)

Contradiction Point 2

Strategic Focus on Membership Growth vs. Profitability

Shift from prioritizing membership growth to focusing on profitability and cash flow.

If a carrier reduces its marketing budget, what is the risk of others following suit? - David Windley (Jefferies LLC)

2026Q2: The company is confident in its ability to navigate this, citing its diversified, agile model. Material actions of this level from other partners are not anticipated. - [Timothy Danker](CEO)

What quarter-over-quarter changes impacted optimism for SelectRx growth? - George Frederick Sutton (Craig-Hallum)

2025Q4: The current focus is on EBITDA growth and margin expansion rather than just membership growth. Membership growth will be healthy but at a lesser pace than before. - [Ryan M. Clement](CFO)

Contradiction Point 3

Strategic Focus and Growth Priorities for Healthcare Services (SelectRx)

Contradiction on whether the focus is on growth or margin consistency.

With softer MA rate notices and carriers prioritizing margins, can we leverage these factors to increase DTC platform marketing spend by 2027? - Benjamin Hendrix (RBC Capital Markets)

2026Q2: SelectQuote's efficient, high-quality model (highlighted by 39% margins and strong retention) positions it well. As the healthcare system faces financial stress, the company believes its unique capabilities and tight carrier relationships present upside opportunities. - [Timothy Danker](CEO)

What are the long-term growth and margin targets for SelectRx Healthcare Services? - Michael Murray (RBC Capital Markets, on for Ben Hendrix)

2025Q3: The focus for Healthcare Services is shifting from rapid growth to driving consistent margins and cash flow. - [Tim Danker](CEO)

Contradiction Point 4

Capital Allocation Priority

Near-term focus shifts from improving balance sheet to strategic growth investments.

How does the new credit facility enable a shift in focus from M&A to Healthcare Services? - George Sutton (Craig-Hallum Capital Group LLC)

2026Q2: The facility extends debt maturities to 2031, providing strategic optionality to invest in growth opportunities (like SelectRx) when market conditions support them. - [Timothy Danker](CEO)

What are your priorities for capital allocation between balance sheet improvement and acquisitions or platform expansion? - Patrick Joseph McCann (NOBLE Capital Markets)

2025Q4: The near-term focus is on execution and driving strong cash flow, which is key to a better balance sheet. This provides optionality for future growth... - [Timothy Robert Danker](CEO)

Contradiction Point 5

Response to Carrier Financial Actions and Model Resilience

Contradiction on the likelihood of other carriers making similar budget cuts and the company's preparedness.

A carrier cut its marketing budget; what risk is there of other carriers doing the same? - David Windley (Jefferies LLC)

2026Q2: The budget cut was a cross-channel decision by the carrier to truncate growth... The company is confident in its ability to navigate this... Material actions of this level from other partners are not anticipated. - [Timothy Danker](CFO)

What differences are you seeing in the market this year compared to last year? - Logan (on behalf of George Sutton, Craig-Hallum Capital Group)

2026Q1: Carriers have pulled back benefits to a degree to focus on profitability, causing some plan switching. This environment is similar to last year and creates opportunities for customer education. - [William Grant](COO)