[Management View]
SelectQuote management reported consolidated revenue of $329 million, representing 13% growth driven by health care services and life insurance businesses. Senior segment revenue declined 37% to $59 million due to new SEP eligibility requirements. Consolidated EBITDA was negative $32 million, missing prior guidance due to SelectRx margin pressures. Management emphasized ongoing contract renegotiations with PBM partners to stabilize long-term economics.

[Outlook]
Updated fiscal 2026 guidance maintains revenue target at $1.65 billion-$1.75 billion and adjusted EBITDA at $120 million-$150 million. Management expects second quarter adjusted EBITDA for health care services to be approximately breakeven due to reimbursement rate changes. Long-term confidence in health care services remains unchanged, with plans to exit the fiscal year at an annualized EBITDA run rate of $40 million to $50 million.

[Financial Performance]
Consolidated revenue grew 13% YoY to $329 million. Senior segment revenue declined 37% YoY to $59 million due to new SEP eligibility requirements. Consolidated EBITDA was negative $32 million, below prior guidance of a $25 million to $30 million loss, primarily due to SelectRx margin pressures.

[Q&A Highlights]
Question 1: On SelectRx, you seem to believe the reimbursement headwinds can be contained in 2025. What gives you comfort that rates will improve next year? And is there a potential that you see a similar reimbursement headwind at the end of next year?
Answer: We had one PBM that adjusted drug reimbursement rates, but the PBM remains profitable and we have a strong relationship. We are updating our agreement and are in constructive discussions to solidify a longer-term rate structure. Despite short-term impacts in Q1 and Q2, long-term economics remain attractive, and we expect enhanced visibility and predictability into the growing business.

Question 2: SelectRx is improving MA member retention. Could this have a potential positive impact on LTV? And how much data would you need to see before building that into the LTV calculation?
Answer: We see an improvement in overall persistency when someone is a member of SelectRx and has a Medicare Advantage plan. However, we do not build this into the life values themselves, so we are not booking that increase, but it is a positive impact.

Question 3: In regards to helping policyholders understand their plans better to focus more on retention, could you talk a little bit more about what that looks like in practice?
Answer: Last season was very disruptive, and we are proud of our team's efforts. Nationwide, about 2 million MA beneficiaries will be impacted by plan terms or exits, and several million will have pullbacks in benefits. We have taken several actions and learnings from last year to protect our back book of business. We use AI, data, and our long data history to be cost-effective in treating and engaging with policyholders.

Question 4: Regarding the recent research on social determinants of health, how is that informing your strategy in terms of potential new offerings in the health care service segment?
Answer: We aim to understand our customer base better, which informs the products we pick. SelectRx was found due to the need for a better solution for adherence. We are looking at products within the SDOH space to help members afford daily needs better. We have over 2.5 million Health Care Select members and use health risk assessments to determine applicable services. We have helped over fifty thousand members with SDOH services and are expanding quickly.

Question 5: On AEP, can you characterize anything you're seeing in the market different relative to last year?
Answer: Early in the AEP season, we are pleased with performance thus far. It is a dynamic season with profit actions taken by carriers to get margins in line. We see high consumer engagement as MA beneficiaries evaluate options. Our new and tenured agents are performing well, and we feel very prepared in the early days. The market is similar to last year, with pullbacks from certain carriers and push forward from others, causing switching and calls for education.

Question 6: On SelectRx, how do you plan to manage growth or the funnel through busier quarters while focusing on profitability?
Answer: We are measured on member growth, focusing on profitability and members that need the service the most. We have closer partnerships with some payers and are expanding the clinical aspect of the business. Our adherence for all program speeds up adherence improvement and is powerful from a SARS perspective. The market is still massive, and we have quality conversations with payers and PBMs. Despite short-term headwinds, we have strong conviction in the go-forward of the business.

[Sentiment Analysis]
Analysts expressed concerns about reimbursement headwinds but acknowledged management's confidence in long-term stability and growth. Management maintained a positive tone, emphasizing strategic priorities and proactive measures to address challenges.

[Quarterly Comparison]
| Metric | Q1 FY2026 | Q1 FY2025 | YoY Change |
|--------|-----------|-----------|------------|
| Revenue | $329 million | $291 million | +13% |
| Senior Segment Revenue | $59 million | $93 million | -37% |
| Consolidated EBITDA | -$32 million | -$25 million | -28% |

[Risks and Concerns]
Management reported a $20 million negative impact on health care services EBITDA due to changes in drug reimbursement rates with the SelectRx PBM partner. Senior segment revenue declined due to new SEP eligibility requirements. Consolidated EBITDA missed prior guidance due to SelectRx margin pressures. Management cautioned that the reimbursement adjustment would crest in Q2 of fiscal 2026.

[Final Takeaway]
SelectQuote navigated significant reimbursement challenges in Q1 FY2026, impacting health care services EBITDA and overall financial performance. Despite these headwinds, management remains confident in long-term growth and stability, emphasizing strategic priorities and proactive measures to address challenges. The company is well-positioned for the upcoming AEP and OEP seasons, leveraging its competitive advantages and data-driven approach to enhance policyholder engagement and retention. Investors should monitor ongoing contract renegotiations with PBM partners and updated guidance following Q2 FY2026 for better visibility into seasonal performance and reimbursement initiatives.