SelectQuote, Inc. (SLQT) on Q3 2021 Results - Earnings Call Transcript

Operator: Welcome to SelectQuote's Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. It is now my pleasure to introduce Matt Gunter, SelectQuote Investor Relations. Mr. Gunter, you may begin the conference. Matt Gunter: Thank you, and good afternoon, everyone. Welcome to SelectQuote's fiscal third 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 this afternoon. After today's call, a replay will also be available on our website. Tim Danker: Thank you, Matt, and thank you to our investors and analysts for joining us again. We thank you for your time especially since we've taken a little more than usual this quarter with our Population Health announcement last week. We will highlight that important and exciting initiative again on this call but for those of you that missed that we'd encourage you to check out our presentation from last week. Population Health and Value-Based Care is a large opportunity for SelectQuote. Lower equally pleased to report that our core business continue to excel in the third quarter. So let's begin with a review of our quarter on Slide 3. SelectQuote generated consolidated revenues of $267 million, up 80% year-over-year and adjusted EBITDA of $65 million, up 48% over last year. Excluding the impact of a positive tail adjustment from fiscal third quarter 2020, consolidated revenue would have grown 91% and adjusted EBITDA would have grown 84% with margins roughly flat year-over-year. As you know, the third quarter includes the open enrollment period and it's the second largest quarter of the year from a contribution standpoint. Similar to last quarter, our Senior business led the way with our results. Let's start with some of our Senior highlights. This quarter we grew Senior revenue of 101% and adjusted EBITDA by 63% over last year. Adjusting for the one-time tail adjustment I just mentioned, revenue would have grown 119% and adjusted EBITDA would have grown 101%. Raff Sadun: Thanks Tim. I'll start on Slide 8 with our consolidated results. For the third quarter, we generated $267 million of revenue and $55 million of adjusted EBITDA. Revenue grew 80% and adjusted EBITDA grew 48%. We'll discuss the performance of the divisions in more detail on the next few slides. With the revenue growth was driven by the growth in policies during OEP and our Senior segment and by our investment in Final Expense policies within our Life segment. Last year, our third quarter results benefited from a one-time $9 million positive tail adjustment associated with recognizing tail revenue from a MedSup carrier whose contract was amended. The amendment last year allowed us to start recognizing variable consideration for estimated renewal commissions upfront like the rest of our business and also required us to recognize a one-time catch-up of future tail revenue remaining that had not yet been recognized. Before the amendment for this carrier, we can only recognize the first-year commission revenue on a policy was initially sold and then recognize renewal commission revenue on a cash basis when the policy renewed in future years. Excluding the impact of this tale adjustment from the fiscal third quarter 2020 consolidated revenue would have grown 91% and adjusted EBITDA would have grown 84%. Turning to Slide 9, and our Senior division. As you can see we had a very strong OEP season generating revenue of $216 million and adjusted EBITDA of $75 million during the third quarter. This represents year-over-year revenue growth of 101% and adjusted EBITDA growth of 63%. It also represents the fifth quarter in a row that we have grown revenue over 100%, as explained earlier, normalizing for the one-time tail adjustment revenue would have grown 119% and adjusted EBITDA would have grown 101% with margins down about 300 basis points. Consistent with our stated strategy of growing faster and producing more absolute revenue and EBITDA at slightly lower, but still highly attractive margins. Moving on to Slide 10, for the third quarter, we had approximately 860 total average productive agents up roughly 75% year-over-year. Average agent productivity was up 17% representing the fourth quarter in a row that we have seen year-over-year improvement in agent productivity. As an aside, we do expect agent productivity to be down year-over-year at our fourth quarter as we don't anticipate having another special election period this fourth quarter like we did last year. This increased agent headcount combined with the increase in average agent productivity drove significant growth during the quarter. Total submitted policies were up 107% and total approved policies 110%. The largest driver of this growth was MA policies where we grew our MA-submitted policies to 110% and approved policies 112%. Moving onto LTVs. For the quarter LTV of an MA policy was down slightly 1% year-over-year, which was in line with our expectations. As in prior quarters, this was driven by lower persistency offset by higher rates. As we discussed last quarter, the percent of our revenue, which is driven by first-year commission and production bonus versus renewal revenue for the cash will come in over time was up again year-over-year. Last year 33% of our third quarter Senior revenue was from year-one cash item. This year 48% of our revenue is from year-one cash items. This improved cash flow and reduces the amount of revenue that is at risk from renewals. From a cost perspective, adjusting for the tail revenue last year with the improvement in agent productivity, we saw our sales and fulfillment costs as a percent of revenue become more efficient and decline about 10%. On the same basis, total marketing spend as a percent of revenue was up 15%. However lead-gen marketing costs were up only 2% as a percent of revenue. The increase was driven by an increase in people-related costs of screeners, as part of the Inside Response acquisition. Please people related costs roll up to the total sales and marketing line item. Lastly, during the quarter there was a two-week period where our marketing efficiency and total production were negatively impacted by technology challenge with a third-party service provider that feeds our sales process. This issue was quickly resolved, but it did temporarily cause our conversion rates to go down and increased marketing costs. Our overall results for the quarter would have been higher without this impact. Lastly, I'd like to address an item that did not impact third quarter results, but will impact the fourth quarter results. As we have previously discussed, we've experienced lower second term persistency for the 2019 cohort. We do anticipate having a negative cohort and tail adjustment in the fourth quarter primarily due to this cohort. This was factored into our guidance that we gave in February and that assumption is consistent with our updated guidance today. If we turn to slide 11, our Life division grew revenue 50% to $46 million and adjusted EBITDA declined 9% to $3 million. Third quarter is seasonally the lowest quarter from a margin perspective as there is an uptick in term life activity that we start the sales process on in the third quarter, but it doesn't go effective until the fourth quarter, so the costs are incurred in the third quarter, but some of the revenue comes in during the fourth quarter. Revenue growth was driven by growth in our final expense revenue. As a reminder, we did flex over a significant amount of our LHA agents that sell Final Expense into Senior to sell during AEP and OEP. During the quarter, we hired new LHA agents and some of the flux agents that went to Senior started coming back twice. This allowed us to more than double Final Expense premium sequentially and to grow Final Expense premium 176% year-over-year. The timing of the on-boarding of the new agents did impact margins as we incurred expense to hire and train some of these agents, but didn't fully realize the benefit of revenue within the quarter. Adjusted EBITDA was also impacted by lower profitability on our term life business where we continue to see headwinds due to COVID and a delay in consumers getting their blood work done and completing the process to get their policies in force. We do expect these conversion rates to trend back to normal levels at some point. However, the next several quarters may still be impacted by the lingering effects of COVID. Turning to Auto & Home, on Slide 12. Revenue declined 33% to $7 million and adjusted EBITDA decreased 31% to $1 million. As discussed in prior quarters, the decision to reallocate agents from our Auto & Home business to our Senior division and Final Expense efforts has had an impact on the Auto & Home revenue and adjusted EBITDA. By the way is in the side the Auto and Home business represents a good example of what happens to cash flow as we slow growth down i.e. it increases and prove that growth is a choice that we make and that we can become cash flow positive immediately if we slow growth down. On a year-to-date basis, last year the Auto & Home business used around $4 million of cash EBITDA. This year with lower revenue, we generated $5 million of cash EBITDA, as the first year revenue and renewal revenue from policy sold in prior periods was more than enough to offset the cost of writing new business this year. Turning to Slide 13. We've updated this slides from our February earnings deck that shows how we have been able to grow revenue and adjusted EBITDA faster than our internal expectations since the IPO using significantly less cash. Normally when we grow faster, it requires more capital upfront, but we unable to operate more efficiently than our original expectations, driven by operational efficiencies, agent productivity and growth in our final expense business. For the fourth quarter since our IPO we have generated 27% more revenue and 47% more adjusted EBITDA compared to internal expectations, while using 35% less cash from operations. Turning to Slide 14. For the quarter specifically, we generated $42 million in cash from operations as we started collecting the cash in first year commissions associated with AEP activity. In addition, we used about $3 million in cash for general CapEx $24 million for the purchase of certain assets from a lead distribution company and $32 million for the earn-out of Inside Response. We ended the quarter with $369 million in cash and cash equivalents, $472 million of term loan debt and zero drawn on our $75 million revolver. We also ended the quarter with $902 million of accounts receivable and short and long-term commissions receivable balances. Lastly, as previously announced on February 24th, given the strong performance of our business over the last 18 months, we took advantage of an opportunity to further strengthen our balance sheet while reducing our cost of capital by refinancing our term debt. We secured an additional $292 million in committed capital through an additional $147 million immediately and another $145 million in the committed delayed-draw term loan that we can draw on during the next 12 months. We also lowered our overall interest rate by about 20% to 5.75% and changed some of our covenants to allow more operating flexibility. We believe that having more capital only puts us in a stronger position to execute on the huge market opportunity we see in front of us. Turning to guidance on Slide 15. We are not changing the revenue guidance range, keeping it at $920 million to $940 million. This would imply consolidated revenue growth of between 73% and 77% year-over-year. We are adjusting our adjusted EBITDA guidance for the full fiscal year due to the incremental dollars we are investing in Population Health and SelectRx. As a reminder, during our announcement of Population Health last week, we said we are investing to ramp up our sales of these incremental services and specifically on the SelectRX side, expanding into 50 states versus 11 currently and increase in capacity from 25,000 members to 75,000 to 100,000 members. Based on the illustrative economics we shared last week, it shows the revenue and EBITDA at 100,000 members we believe the ROI on these investments are extremely attractive. We currently expect adjusted EBITDA to be in the range of $225 million to $235 million, which would imply consolidated adjusted EBITDA growth of between 46% and 53% year-over-year. Lastly, we expect net income to be in the range of the $130 million to $138 million. And with that, let me now turn the call back to the operator for your questions. Operator: Your first question comes from the line of Jailendra Singh with Credit Suisse. Jailendra Singh: Yes, it's Jailendra Singh from Credit Suisse. Thanks and hello everyone. I want to follow up on your comments related to the second term persistency trending lower impact in your fiscal Q4 expectations maybe expand a bit more on that. What could be driving it, is it because some of the seniors who signed up during SVP last year they are turning more and also provide update on your persistency on seniors, who signed up last AEP? Tim Danker: Yes. So I think just remind people we do our sort of cohort tail analysis once a year for our PDP products as it is one sort of renewal period in January. So that always happens in the fourth quarter consistent with what we've been saying for the last couple of quarters that specific cohort has been underperforming some of these cohorts have been underperforming and so that's basically what we're seeing play through here, some of those cohorts will probably use the constraints that we have for them and as a result of that, that will result in sort of the probe or tail adjustment in fourth quarter. In terms of what's driving that I think before we sort of said that the introduction of OEP and the ability for seniors to change more frequently that was probably impacting that. I think we have made some changes since then in terms of our technology and our process for a better drug and doctor matching and we're seeing some of that play through in some of the more recent cohorts but that cohort specifically is some of those cohorts are performing. Jailendra Singh: Okay. And then my follow-up. I know you're not giving us formal fiscal '22 guidance at this point, but I was wondering if you could share some high level thoughts that on various puts and takes. We should keep in mind for the next fiscal year and maybe touch upon your thought process with respect to balancing between growing topline and margin trends going forward especially in the Senior segment? Tim Danker: Yes, again, we're not going to provide specific guidance for '22 yet. We'll do that on the next earnings call. I think as we plan for that to be a balance between the growth profile that we're looking at, I mean, I would not expect obviously the growth we've seen this year, which is a 100 plus percent, but we'll be balancing that with the opportunity both within the existing senior business, but also these new initiatives with respect to Population Health and SelectRx that we're looking to scale into next year and then obviously, moving on to the other side LHA is another key driver for next year that we're looking at and those would be some of the big drivers for fiscal '22. Operator: Your next question comes from the line of Elizabeth Anderson with Evercore ISI. Elizabeth Anderson: Can you tell me how your initial plans in terms of preparing for this year's AEP i.e. December 2021 are going and sort of how the hiring and planning process is going so far and any changes to how you're thinking about that? Tim Danker: Bill, do you want to start with kind of the hiring update and turn it over to Bob for other comments. Bill Grant: Yes, absolutely. So we feel good about where we're in. We've started hiring obviously for next AEP, certainly, the market is quite different than it was a year ago. So we have had to make - made some changes, but we are on track and feel really good about sort of the quality of applicants that we're getting, and where we are in that process. So I think all signs are positive on that front and feel good about where we are. Bob? Bob Grant: Yes. Thanks, Bill. So I think you obviously touched on that we feel really good about our recruiting so far and then operationally we are already prepping for the necessary changes that we did make to support the growth that we want to put out there and we feel really good about that as well. We're actually fairly significantly ahead of schedule on a lot of things and initiatives that we saw from last AEP to prep for next AEP and we continue to enhance SelectQuote University. We talked about the results of that came out of that last year and we have made continued tweaks as we brought on more core classes throughout this year, which is really helped us kind of refine even more of that training experience in some of our quoting experience and we feel really strong about some of the things that we'll be able to do there. Elizabeth Anderson: And as a follow-up, anything to keep in mind as we think about the LTV is either sequentially or year-over-year in the fourth quarter? Tim Danker: I think generally speaking LTV should be roughly flat, which is sort of what we've been saying historically sequentially it usually declines from our third quarter and so I would sort of expect that, but year-over-year, roughly flat. Operator: Your next question comes from the line of Frank Morgan with RBC Capital Markets. Frank Morgan: I guess my first question is a clarification. I know last quarter you mentioned, when you talked about datas that there was an impact for some Population Health spend in that amount. So I'm just curious, the $5 million sort of at the midpoint change in guidance is that all exclusively related to Population Health just incrementally or is there anything else that has changed? Tim Danker: Yes, I think, this is incremental spend with respect to Population Health and SelectRx and the guidance adjustment is really 100% driven by those incremental investments. As a reminder, based on what we discussed last week, we're investing sort of mid to high single-digit incrementally have with respect to those initiatives and the fourth quarter is seasonally our second softest quarter. So there's not a lot of time or dollars to sort of offset items that come up later on the year and those investments, we think are going to have great ROI attached to them going forward. As a reminder, we're expanding SelectRx in the 50 states, we are increasing the capacity as the SelectRx facility to be able to handle 25,000 members up to 75,000 members to 100,000 members. And so those are just investments that we think is going to have great long-term actually medium-term benefits but the investments happening now. So that we can take advantage of the opportunity next year and certainly the opportunity sort of coming off of AEP next year. I think that's a big opportunity in terms of the expansion of some of those services. Frank Morgan: And then my second is you called out the productivity improvement of 17%, but that had been tracking like in the '30s over the plus 30 range over the last couple of quarters. So was that just a function of bringing agents on this quarter or is sort of leave that result, and if so, is there a way to parse out kind of a but there is such a thing same-store productivity just kind of in aggregate and I'll hop back in the queue. Tim Danker: Yes just initial comments, Frank, and then maybe have Bob comment. I mean I think we're very pleased with the overall growth and agent productivity 17% while increasing our agent force by 75% and that's just really a function of our end-to-end model and the work that the operations team has done to really improve sales process efficiency or technology, the investments and training and hiring that Bob mentioned. Bob additional color. Bob Grant: Yes, I think, the other thing, Frank, that we'd comment on is we have more understanding of OEP now. So we did keep more seasonal agents around four OEP this year, which would inherently drive down just a little bit our productivity because we kept around some less tenured folks. Also to the point that Tim made earlier week or Raff I'm sorry. We had a small third-party technology hiccup that cost and pressure on close rates. So would have been up a little bit more than that. Had that been avoided again we got it fixed relatively quickly. But it is that really heightened kind of period of time just like AEP, so any little production issue that you have can hurt those numbers. Operator: Your next question comes from the line of Jeff Garro with Piper Sandler. Jeff Garro: Yes, good afternoon, and thanks for taking the question. I want to ask more about the investments in Population Health and SelectRx and maybe more specifically the timing around those investments. I would imagine some of the investment is upfront for things like expanding capacity on SelectRx. But if you could dive it in a little more detail on the level of upfront investment versus the amount that might be more run rate in nature as we look forward? Tim Danker: Yes, I think a lot of these investments are a trunk. I think it's sort of breakdown of the couple of three categories, right. One is and preparing for Population Health and SelectRx, we have been hiring sort of incremental tech development resources to build out the capabilities there. I think Bob mentioned on our call last week that we were able to ramp that up really quickly. So obviously there is incremental investments there. There is incremental investments with respect to getting the licensing done in various states and it's incremental investments in terms of increasing the capacity of the facility and that's both the actual facility build out, but also individuals to be able to support that type of facility. Bob, what would you add to that. Bob Grant: Yes I think the operational parts that I would add to that is we want to take advantage of the AEP period of time and right after and that puts a heightened sense of investment into this period of time, which kind of gets even looked at or enhanced more because this is not our biggest revenue quarter obviously. So, we are spending money today that should allow us to take full advantage of the opportunity in Q2 and Q3 for us, which we see as a bigger opportunity than we originally had have anticipated. And especially in regards to SelectRx, if you remember the last time we talked about at the initial investments we are making didn't have those investments contemplated because we hadn't bought that business yet. After we purchased it and we've been working with our members and partners on demand for that product, we feel pretty strong about it. So we are working hard to get it ready for kind of our busy season. Jeff Garro: That's very helpful. I'll follow up with maybe a bigger picture question on Population Health recognizing that you guys work with many well capitalized and strategic taking carriers that really much of their business that's proprietary, but was hoping that you could elaborate on the value that those carriers see in partnering with SelectQuote to improve outcomes and retention for your mutual members and customers? Bob Grant: Yes, so they do spend a lot of time and money on who provides the best results and who to best align with such as Oak Street in ChenMed other solutions that provide better adherence rates in kind of future savings on health care by being more proactive. We are working with them to enable consumers to be better educated there and to get ahead of those things when we sign someone up, but we get kind of 30 days to on board that consumer prior to them going effective with the carrier. We are working with folks to help educate on how to best utilize it benefits and the carriers have been extremely supportive of that so far. Because it's more working in concert with what they do not trying to go against what they do at all. So we worked closely with the carriers to find our partners and who they would prefer and that's different a little bit carrier by carrier, right, But the one thing we want to do there is provide choice because we don't feel like today there is a ton of choice within the healthcare market on the education side, it's a little bit different than some of the healthcare marketplace we can, we believe we can create, Tim. Tim Danker: Yes, I would just add. Well, said Bob I just add I mean this is just the natural evolution for us in terms of adding value to our carrier partners and to consumers. That's how we got here really was Bob and his team and Bill working hand-in-hand with our carriers to try to be even more than a distributor, but a true strategic partner. And so this is really the effort in Population Health and certainly our ear to the ground with consumers to really understand their needs and we really think again here, big picture that we can really be an important enabler to these more proactive forms of healthcare and we certainly I just want to underscore Bob and Raff's comments. We think this investment was 100% the right decision. We think it will have benefits that you'll be able to see when we provide guidance and fiscal 2020 and beyond and we're very confident we made the right decision around this investment. Operator: Your next question comes from the line of Daniel Grosslight with Citi. Daniel Grosslight: Thanks for taking the question. We're a few months out from the 2020 AEP class coming on board. Can you talk about the persistency you've seen in the 2020 class vis-à-vis the 2018 AEP class realizing that 2019 was a bit anomalous. And then given your 36 months LTV weighting, when can we expect that persistency to flow through to MA LTV? Tim Danker: Yes, so I think it's - you really asked my sort of first-term persistency on that AEP from sort of a year plus ago yes. So basically it consistent with what we've said historically and the last couple of quarters. I think as of the end of March that first-term persistency was higher than last year. Second term was down and then third terming out with sort of flat to up. Now we do have an auto lapses that we do at the end of March to reconcile some policies that we still haven't gotten paid off. So historically we end up around the same place at the end of March, but that does take some backup for the carriers, but those trying to basically been consistent with what we've talked about before in terms of was there a second part to that question, sorry. Daniel Grosslight: Yes, so, given the weighting and the flow when will that appearing LTV for MA? Tim Danker: Yes, so basically some of those trends start getting into the LTV as of the first quarter of fiscal '22, but again it was based on the weighting of the 36 month weighted average you won't see that immediately, it will take several quarters to sort of feed in there. So that's kind of how it's going to come in. Daniel Grosslight: Okay, got it. And then my follow-up just on SelectRx you mentioned basically quadrupling the capacity there. Do you expect the high end, do you expect that to be complete in '20 fiscal year '22 or is that going to also be in '23? Tim Danker: Well, I think, the capacity will be available in fiscal '22 whether we are at that capacity or not I think we'll wait for the next couple of quarters to update you on. Operator: Your next question comes from the line of Jonathan Yong with Barclays. Jonathan Yong: Thanks. Just on the enrollment trends one of your peers talked about more new to medicare enrollment, just curious if you saw similar trends in your enrollment this past quarter. And then along those lines, are you looking to take a more targeted approach towards that particular segment on the market particularly as we think of the education aspect of Pop Health you've talked about it? Thanks. Tim Danker: Sorry I'm not sure I heard the first part of the question. Jonathan Yong: Yes, just on the enrollment trends one of your peers talked about more new MA enrollment similar trends, yes. Raff Sadun: I think our switchers has been increasing over the last several years. And so we're not necessarily seeing an increase in new per se. I think what we're seeing is probably similar to what the overall market is. I think as we get bigger that probably is going to be the trends. So yes I think that's basically what we've seen. Bob anything you would add to that or? Bob Grant: No, I think, that's consistent Raff, and I think a lot of it has to do with just general growth rates and trying to satisfy all members needs and naturally as medicare gets bigger, there is going to be more switchers and if you choose to not grow as fast, you may be able to target a lot of the more new to medicare people, but we want to be able to satisfy everyone and give everybody the opportunity if they're dissatisfied with something to participate in the exchange and then ultimately participate in Population Health as well. Tim Danker: Yes, I think, our strategy is going to - because it's kind of our approach of how we can take marketing from all different channels and make those work and still have part of the economics. We're going to trend more with the broader market. We still do have active then obviously target new customers, but I think we're going to trend a little bit of more globally. We're also really excited about what Population Health can do to those switchers in some of those things, because the more value we can add to those consumers. One we think that we can have a bigger effect kind of all on those consumers healthcare outcomes, which ultimately leads to just a better experience on that plan. So I think overall. Sure. We have different channels, the target those again I think we're going to trend more towards the broader market just because of kind of our omni-channel approach and the fact that we can make channels work that a lot of others can't. And I think that we're even more excited about some of those channels and what we can do with Population Health and how we treat those customers. Jonathan Yong: And just curious if you could give us an update on the recapture rate. How does the trend in the quarter. Any color there? Thanks. Raff Sadun: Yes. So our recapture rate is up year-over-year. It's currently around 27% or so last year was around 25% so that continues to increase and really I think it's a function of the strong CCA organization that we've built and the conversations to that group is happening. So that could continue to go up. Operator: And your last question comes from the line of Meyer Shields with KBW. Meyer Shields: Good evening. Raff, is there anyway have maybe ballparking the impact of what's called the tech hiccup and whether any of that revenue will show up in the current quarter? Raff Sadun: So it was probably mid single-digit is our estimate and that was really would have been sort of revenue and EBITDA and so that would stockpile straight to the bottom line. There is no catch-up sort of impacted certain certainly during the third quarter and some of the opportunity has gone right based on not being able to close during those during that period as there is no, there's no catching up on that. Meyer Shields: Okay, thanks. I assume it's all Senior. Raff Sadun: Yes. Meyer Shields: Okay. And then maybe a trivial question but the tax rate came in lower than expected, is there anything unusual in there? Raff Sadun: No, I don't think so. This quarter we had, yes, incremental interest expense with the incremental term loan, but there is nothing that we're sort of out of the ordinary that impacted the quarter. Operator: And there are no further questions at this time. I will now turn the call back over to Tim Danker. Tim Danker: Thank you again, everyone for your support and interest in SelectQuote. We'll briefly close by re-emphasizing how excited we are to present these results as we described earlier each quarter since our IPO has really reinforce our belief that SelectQuote is built to capitalize on the long tailed opportunity across our core insurance markets. As you've heard today, we couldn't be more excited about population Health as well as SelectRx. It's really our unique combination of our high customer touch and technology that will allow us really to add value across even larger markets and most importantly improve outcomes for our customers. So with that we want to thank you all again. We look forward to sharing with you more soon. Have a great evening. Operator: This concludes today's conference call. Thank you for participating and you may now disconnect.
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SelectQuote, Inc. (NYSE:SLQT) Faces Negative Growth Potential Amid Insurance Market Challenges

  • SelectQuote, Inc.'s (NYSE:SLQT) stock price is significantly higher than its target price, indicating a negative growth potential of -36.29%.
  • Comparatively, Erie Indemnity Company (ERIE) and eHealth, Inc. (EHTH) also face negative growth potentials, with ERIE showing a more substantial decline.
  • Huize Holding Limited (HUIZ) presents a positive growth potential of 8.46%, contrasting with the negative outlooks of its peers.

SelectQuote, Inc. (NYSE:SLQT) is a prominent player in the insurance solutions sector, focusing on life, auto, and home insurance. Despite its efforts to make a mark in the insurance market, SLQT's current stock price of $4.38 overshadows its target price of $2.79, suggesting a negative growth potential of -36.29%. This significant discrepancy has led to a pessimistic outlook from investment analysts, resulting in the stock being excluded from coverage.

When comparing SLQT to its peers, Erie Indemnity Company (ERIE) exhibits a more pronounced negative growth potential of -49.41%, with a stock price of $404.88 and a target price of $204.84. Despite this, ERIE maintains a robust market cap of $18.70 billion and a PE ratio of 34.68, indicating a relatively stable financial position compared to SLQT.

eHealth, Inc. (EHTH) also encounters a negative growth potential of -32.88%, with a stock price of $9.53 and a target price of $6.40. EHTH's market cap is significantly lower at $282.41 million, and it has a negative PE ratio of -8.66, which may reflect financial challenges similar to those faced by SLQT.

Arthur J. Gallagher & Co. (AJG) and Brown & Brown, Inc. (BRO) both face negative growth potentials of -38.52% and -3.86%, respectively. AJG's high PE ratio of 49.85 and BRO's PE ratio of 28.97 suggest that these companies are valued more optimistically by the market compared to SLQT, despite their negative growth outlooks.

Among SLQT's peers, Huize Holding Limited (HUIZ) stands out with a positive growth potential of 8.46%, with a stock price of $3.23 and a target price of $3.50. HUIZ's low PE ratio of 1.14 and small market cap of $1.49 million indicate a different market perception, potentially offering a more favorable investment opportunity compared to SLQT.

SelectQuote Reports Better Than Expected Q3 Earnings

SelectQuote, Inc. (NYSE:SLQT) reported its Q3 earnings results last week, which came in well above the Street estimates driven by improved operating efficiency from management’s strategic redesign.

Revenue came in at $299.4 million, beating the Street estimate of $260.7 million, driven by better-than-expected volume with approved MA policies of 165,000. Improved close rates from longer-tenured agents using higher quality, targeted leads led to a 17% improvement in marketing expense per approved policy.

The company continues to gain solid adoption with SelectRx, with membership growing 14.5% sequentially to around 45,000.

SelectQuote Reports Better Than Expected Q3 Earnings

SelectQuote, Inc. (NYSE:SLQT) reported its Q3 earnings results last week, which came in well above the Street estimates driven by improved operating efficiency from management’s strategic redesign.

Revenue came in at $299.4 million, beating the Street estimate of $260.7 million, driven by better-than-expected volume with approved MA policies of 165,000. Improved close rates from longer-tenured agents using higher quality, targeted leads led to a 17% improvement in marketing expense per approved policy.

The company continues to gain solid adoption with SelectRx, with membership growing 14.5% sequentially to around 45,000.

SelectQuote Shares Crash Following Disappointing Q2 Results

SelectQuote, Inc. (NYSE:SLQT) shares were trading more than 9% lower Wednesday morning followed by a 10% drop yesterday, driven by the company’s Q2 earnings miss.

Q2 EPS came in at ($0.64), worse than the Street estimate of ($0.17). Revenue was $139.4 million, missing the Street estimate of $200.55 million.

While the full 2023-year guidance fell short of expectations, analysts at RBC Capital noted that the preemptive Q4 tail adjustment and conservative loan-to-value (LTV) assumption should de-risk the outlook.

The analysts were encouraged that lower marketing spend industry-wide may be rationalizing shopping behavior and fostering higher persistency. Furthermore, reduced turnover and higher agent tenure bode well for AEP productivity. The analysts lowered their price target on the company to $2 from $3, while reiterating their sector perform rating.