SelectQuote (SLQT) 2027 會計年度第一季法說會：EBITDA 改善，重申現金流指引

重點摘要

• 2027 財年第一季營收年減 15% 至 2.8 億美元，反映公司刻意縮減長照 (Senior) 代理人團隊規模，以及《通膨削減法案》(IRA) 對醫療保健服務 (Healthcare Services) 營收帶來的壓力。
• 儘管營收基期較低，調整後 EBITDA 仍年增 1,500 萬美元，虧損改善至 1,700 萬美元。過去 12 個月調整後 EBITDA 成長 30% 至 1.24 億美元。
• 醫療保健服務調整後 EBITDA 成長 56% 至 1,100 萬美元；同時每位 SelectRx 會員的調整後 EBITDA 超過 108 美元，年增逾 60%。
• SelectQuote 維持 2027 財年營業現金流至少 6,000 萬美元的目標。管理層預計在經歷季節性投資高峰的財年第二季過後，下半年的現金流將大幅躍升。
• 管理層表示，年度公開登記期 (AEP) 初期的客戶參與度強勁。針對受保單終止影響的客戶，公司的目標是超越去年 30% 的續約挽留率。
• 科技與 AI 仍是降低成本與擴充產能的核心。SelectQuote 已從其 2027 財年營運計劃中削減了超過 3,000 萬美元的常態性營運成本。

核心財務數據

業務與營運表現

長照業務 (Senior)

在 2027 年 Medicare Advantage 保季中，SelectQuote 將獲利能力與客戶留存率置於保單數量之上。雖然公司招募的新代理人減少，但資深代理人人數與去年同期大致持平。管理層指出，歷史數據顯示資深代理人的生產力大約是新代理人的兩倍。

在登記期開始前或初期，代理人已聯繫超過 50% 受保單終止影響的受益人。管理層報告顯示客戶參與度極高，並表示科技投資提高了代理人的服務能力，有望減緩先前討論的 10% 至 15% Medicare Advantage 核准保單下滑幅度。

公司正在鎖定健康維護組織計劃 (HMO)、特殊需求計劃 (SNP) 以及服務不足地區的商機。管理層亦認為，保險公司經濟效益改善可作為重啟保單成長的潛在基礎。

醫療保健服務與 SelectRx

儘管營收下滑，醫療保健服務的獲利能力仍有所擴展。雖然《通膨削減法案》(IRA) 降低了特定藥品的價格，但管理層表示製造商的補償金已在很大程度上彌補了對 EBITDA 的影響。

位於堪薩斯州歐拉瑟 (Olathe) 的藥房設施，其營運效率比傳統配送據點高出約 30%。目前僅有不到 20% 的處方箋從歐拉瑟出貨，但 SelectQuote 預計隨著新會員透過該設施加入，這一比例將會提高。

全新的藥房管理系統整合了新會員加入、處方驗證、登記、履約與出貨流程。管理層指出，自動化登記速度加快約 20%，並帶來更高的登記完成率。

科技與人工智慧 (AI)

超過三分之一的來電採用 AI 進行篩選與轉接，同時所有代理人的通話皆經過轉錄與分析。在第一財季，一項語音 AI 工具篩選了超過 20 萬通獨立電話，並為代理人節省了超過 60 萬分鐘的通話時間。

SelectQuote 還將語音 AI 用於 Medicare 登記的行政流程。持照代理人繼續負責需求分析並協助受益人選擇計劃，而 AI 工具則輔助正式的登記工作流程。

人壽保險

儘管營收下滑，人壽部門調整後 EBITDA 仍成長 31% 至 700 萬美元。終身費用險 (Final Expense) 受益於效率提升以及來自長照部門的潛在客戶轉介，且無需額外獲客成本。定期壽險 (Term Life) 營收實現小幅年成長，利潤率保持相對穩定。

管理層展望與指引

SelectQuote 重申其 2027 財年營業現金流至少達 6,000 萬美元的目標。管理層提醒，按歷史規律，第二財季為公司投資高峰期，預計下半年現金流將急劇增長。

公司持續聚焦於獲利能力與現金產生，而非追求 Medicare Advantage 保單數量的最大化。不過管理層表示，若保險公司加大保單推廣力度，其代理人與科技平台具備支援額外成長的能力。

管理層亦對 2027 財年將醫療保健服務利潤率翻倍表示信心，這將受到 SelectRx 會員經濟效益、歐拉瑟設施及藥房管理系統的共同支撐。

風險與關注焦點

• Medicare Advantage 計劃持續終止與福利重組，可能會影響保單數量、客戶留存率以及保險公司的需求。
• 較小規模的長照代理人團隊限制了短期銷售產能，不過管理層預期資深代理人的高生產力與 AI 工具將提供部分彌補。
• 《通膨削減法案》(IRA) 將繼續對醫療保健服務的營收比較帶來壓力。管理層指出，該計劃跨越多年，並將在 2028 年納入另一批受影響藥品。
• 在不同藥房設施之間轉移現有 SelectRx 會員在營運上相當複雜，這意味著歐拉瑟設施帶來的效率提升初期將更依賴新會員的加入。
• SelectQuote 計劃在 11 月 10 日的股東週年大會上尋求股東批准進行反向股票分割（併股），以維持在紐約證券交易所的上市地位。管理層表示該舉措不會籌集資金，亦不會改變股東的基本經濟權益。

分析師問答亮點

• AEP 保單量與留存率：管理層表示，初期客戶參與度與代理人生產力令人鼓舞。SelectQuote 旨在提升針對終止計劃客戶的續約挽留率（超越去年的 30%），這也將有助於支援現金流與新增應收佣金。
• 保單終身價值：LTV 年增 16%。管理層將此改善歸因於保險公司組合優化及 CMS 佣金率提高。
• 保險公司行銷活動：保險公司可在 11 月中下旬前調整目標行銷預算。SelectQuote 表示，若保險公司採取更積極的策略，其廣泛的行銷管道具備充分的因應能力。
• SelectRx 產能：新會員正加速被引導至歐拉瑟設施。由於營運複雜度，現有會員的轉移需要更長時間，而其他據點的科技改造則仍屬於後期計劃。
• 特別股股利：管理層未提供 2028 財年指引，但表示其多年期模型顯示現金流持續成長，並展現以現金支付特別股股利的方向。
• IRA 比較基準：管理層表示，由於藥價調整計劃分多年實施，需要時間才能進行純粹的年度基期對比。管理層強調，對 EBITDA 的影響遠小於對營收的影響。

電話會議完整逐字稿

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完整財報電話會議逐字稿

管理層陳述

Operator

Good morning, and welcome to SelectQuote's First Quarter 2027 Earnings Conference Call. [Operator Instructions]

It is now my pleasure to introduce Matt Gunter, SelectQuote Investor Relations. Mr. Gunter, you may begin the conference.

Matthew Gunter

Thank you, and good morning, everyone. Welcome to SelectQuote's fiscal first 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 in our earnings release and investor presentation on our website.

And 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, Form 10-K for the fiscal year 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.

And with that, I'd like to turn the call over to our Chief Executive Officer, Tim Danker. Tim?

Timothy Danker

Thank you, Matt, and thank you to everyone joining us this morning. I'll begin with an overview of SelectQuote's performance highlights for our first fiscal quarter of 2027. Then I'll discuss planning and expectations for this Medicare Advantage season, which is off to a strong start. Lastly, I'll provide details on SelectQuote's evergreen initiative to leverage technology and AI as part of our North Star goal to maximize profitability and cash flow for shareholders.

So let me start on Slide 3 with an overview of our first quarter. SelectQuote outperformed both our internal forecast and Street estimates for both EBITDA and operating cash flow. Specifically, our adjusted EBITDA loss of $17 million represents more than $15 million of year-over-year improvement. As a reminder, our first quarter is a seasonal low for our business as we invest and prepare for this year's AEP and OEP seasons.

On a trailing 12-month basis, our adjusted EBITDA totaled $124 million, representing a 30% increase from the prior trailing 12-month period. We are proud of this operational execution, especially in light of the revenue headwinds our industry faced in the past year. As previously discussed, the Inflation Reduction Act negatively impacted top line results for our Healthcare Services segment.

Additionally, as we noted last quarter, we took a conservative hiring approach for senior this season, given the dynamic MA environment. As a result, consolidated revenue for fiscal 1Q totaled $280 million or 15% lower than a year ago. More broadly, we believe our payer partners are making significant progress towards their profitability targets. And as the nation's leading direct-to-consumer distributor, we are well positioned to return to growth as payer priorities shift back towards growth in the future.

With that perspective, SelectQuote's strong year-over-year performance in profitability and cash flow becomes that much more impressive and continues to validate our operating strategy and execution.

Before we turn to the season ahead, let me give some quick segment highlights. In Senior, SelectQuote's differentiated outreach capabilities are already driving strong early season results as policyholders navigate another year of planned changes. For fiscal 1Q, our Senior business recognized an adjusted EBITDA loss of $12 million, which is a $9 million improvement compared to a year ago.

Turning to Healthcare Services. We continue to succeed in scaling profitability with adjusted EBITDA improving 56% year-over-year to $11 million for fiscal 1Q. Similar to our consolidated results, the profit improvement is particularly notable given the 16% decline in revenue primarily caused by the Inflation Reduction Act. We believe a significant and increasingly important indicator of success is the profitability for SelectRx member, which increased 60% compared to a year ago.

On the heels of the strong execution, we're pleased to reiterate our consolidated target of at least $60 million of operating cash flow in fiscal 2027. While we expect another dynamic year for Medicare Advantage, our model is purpose-built to serve customers during times like these. While early, we've seen increased customer engagement during the first few weeks of AEP and remain focused on retention given continued elevated levels of plan disruption.

We've said before the business is positioned to deliver strong margins in a range of selling environments. Our confidence in the strategy is underpinned by both the power of our agents as well as increasing efficiency captured through technology and AI. And as I mentioned, we are well positioned to further expand profitability and cash flow in future seasons when the opportunities to accelerate top line growth become more attractive.

If you turn to Slide 4, I'll discuss our expectations and strategy for this Medicare Advantage season. Similar to recent years, this AEP is marked by continued disruption as carriers further refine plan features and benefits. SelectQuote planned accordingly. We expect our agent-led model will again produce results that benefit policyholders, carrier partners and our investors.

In fact, early results in AEP are encouraging as proactive engagement with customers has been well received. This engagement helps improve our visibility into dynamics like recapture rate and benefit demand patterns for new policyholders.

Specifically, we entered this AEP with a high mix of tenured agents who historically perform about 2x the average productivity of a new agent. Additionally, these agents have already had conversations with over 50% of our beneficiaries experiencing plan terminations this season. This proactive focus on policyholder retention has been foundational to SelectQuote's operational success in recent years.

As I noted before, we have a lot of confidence in the strategy and have a goal to exceed last year's recapture results. As you know, we took a cautious approach to hiring this season given the continued market disruption and our focus on cash flow. However, we believe we are nearing an inflection point for the Medicare Advantage industry.

Carriers have largely rightsized their business, and more importantly, have better aligned benefits to fit their economic objectives. In fact, some carrier partners have publicly commented that they are expecting targeted growth where profitability and long-term viability have been demonstrated. We're encouraged by these signs and continue to hear indications that industry conditions are improving with carriers noting that they are tracking ahead of target profitability for Medicare Advantage plans.

Strategically, SelectQuote remains focused on profitability and cash flow in fiscal 2027. That said, our agent and technology-enabled model remains nimble and can drive incremental growth when attractive opportunities emerge. Our new agent class, while intentionally smaller for this environment, was trained over the summer and is well ramped heading into the season.

Similarly, we've added agent tools designed to support both policyholder retention and new policy growth, especially in areas including HMOs, special needs plans and underserved geographies.

Put plainly, SelectQuote's senior business remains focused on expanding profitability, but we are also primed for growth when our carrier partners accelerate their own policy growth efforts. Before Ryan reviews our financials, let me provide an update on how SelectQuote is leveraging technology and AI to drive value for shareholders on Slide 5.

As you recall from last quarter, we identified and removed over $30 million in permanent run rate costs from our business as part of our fiscal '27 operating plan. SelectQuote's commitment to technology as a core pillar of our model drives the majority of these cost savings.

Here, we wanted to highlight several tangible measurable examples across both our Senior and Healthcare Services businesses. What differentiates SelectQuote is that we are applying AI and technology across the entire value chain from customer acquisition and enrollment to coaching, quality assurance and pharmacy fulfillment.

In Senior, AI is helping us become more efficient while simultaneously improving the beneficiary experience. Today, more than 1/3 of incoming calls are screened and routed using AI. Every agent call is transcribed and analyzed, giving agents real-time support during conversations to help improve the customer experience.

Managers are then provided post-call scorecards they can use to further improve coaching and training. These measures save a significant amount of time, human resources and similarly can flip a bad experience for a customer into a good one. These capabilities are especially valuable for newer agents, helping them ramp faster and perform more consistently during the most important periods of the selling season.

We're also seeing meaningful benefits to agent productivity, driven by our voice AI tools. In Q1, one of our tools screened over 200,000 unique calls, saving over 600,000 minutes of valuable agent talk time. Given these results, we've expanded the strategy across the enterprise and most notably into our Medicare distribution process during the annual enrollment period, increasing productivity and allowing our licensed agents to focus more time and attention on the more complex portion of the calls.

Under this new workflow, our skilled agents will continue to handle the robust needs analysis portion of the call, helping beneficiaries select the optimal plan for their specific needs. From there, our voice AI enrollment agent takes over to guide the beneficiary through the formal enrollment. These tools do not replace our licensed agents.

Instead, AI-supported enrollment handles the administrative lifting so our agents can spend time where it matters most, guiding seniors through increasingly complex Medicare choices. This capability is particularly critical during our peak season, allowing us to efficiently scale when beneficiary demand historically exceeds agent capacity.

The same philosophy is driving results in Healthcare Services, where our automated enrollment capabilities are completing enrollments roughly 20% faster while also producing higher enrollment rates. The result is a better experience for members, more productive agents, and a more scalable operating model. The link between technology, AI, and our purpose-built facility in Olathe, Kansas, has been an essential part of the ramp we're driving in segment profitability.

As we've noted, the facility itself is running about 30% higher efficiency compared to legacy distribution sites. The improvement in efficiency for those who have visited the site is relatively obvious in the technology hardware we've invested in.

We are increasingly excited about the potential of our new pharmacy management system. We view the PMS as a missing link for Healthcare Services segment and an asset that will drive growth and efficiency in the years ahead.

So what is the PMS system? The PMS serves as a technology backbone of SelectRx, connecting member onboarding, prescription verification, enrollment, fulfillment and shipping into a single integrated workflow. Today, fewer than 20% of our prescriptions are shipped from our hyper-efficient Kansas facility. With our new PMS in place, we expect to enroll and fill many more members through Kansas and end the year at a higher percentage of total scripts shipped through this facility. This is an important dynamic that underpins our confidence in doubling Healthcare Services margins in fiscal 2027.

To conclude my remarks, I'll reiterate how important SelectQuote's commitment to technology has been in the evolution of our company. Efficiency and service gains drive real value for customers and carrier partners in all market environments.

Constant improvement at SelectQuote will always be the foundation for that reason. For shareholders, we are proud of these same gains to have real profitability and cash flow through the challenging industry environment of the past 3 years. We plan to compound those gains and are highly confident in our model and the value we can create in an improving and growing Medicare Advantage industry in the years ahead.

With that, let me turn the call to our CFO, Ryan Clement, to review our financials. Ryan?

Ryan Clement

Thank you, Tim. Let's begin on Slide 6 with our consolidated results for the first fiscal quarter of 2027, which is a seasonal investment quarter for our business across both Medicare Advantage and Healthcare Services.

To echo Tim, the key takeaway is that we meaningfully improved profitability despite our prudent strategy in senior for the current season and the impact to Healthcare Services revenue from the Inflation Reduction Act. Specifically, our Q1 revenue totaled $280 million compared to $329 million in fiscal 2026.

To disaggregate the delta, our deliberate decision to operate with a smaller agent force in senior drove approximately 15% of the year-over-year decline. The remainder was predominantly attributable to the Healthcare Services segment, principally driven by the Inflation Reduction Act.

As a reminder, while the Inflation Reduction Act had a meaningful impact on our Healthcare Services revenue, the impact on EBITDA and profitability was far less significant given our lower drug prices were largely offset by manufacturer reimbursements. Despite the smaller revenue base, adjusted EBITDA improved $15 million year-over-year to a loss of $17 million for the quarter.

There are 2 important highlights we'd like to emphasize for investors. First, the improvement in profitability is the result of intentional strategies to drive efficiency within both Senior and Healthcare Services. As Tim noted, the efficiency gains we've made through technology-enabled process optimizations are meaningful and durable.

Second, while we've driven these efficiency gains in a down cycle for Medicare Advantage, which impacts both of our businesses, I'd like to reiterate Tim's point that we are pleased with the customer engagement we are seeing early in AEP and that SelectQuote is poised for growth when carrier and consumer demand supports it. While we have planned for a mixed year in MA, that statement still applies for the upcoming season.

As you have seen in past years, there's upside capacity in our model on the senior side of our business. Similarly, the scale and automation advantages we are building in Healthcare Services through the pharmacy management system are markedly better than they were in the past few years.

The key point is that while fiscal 2027 is poised to be another dynamic recovery year for Medicare Advantage, SelectQuote has made significant strides both operationally and with our balance sheet to drive increased profitability and cash flow. We expect further improvement in the seasons and quarters ahead.

Lastly, before I turn to our segment results, while not operationally or economically impactful, SelectQuote will seek approval at our November 10th Annual Shareholder Meeting for a reverse stock split later in the month. The decision aligns with our commitment to remain listed on the New York Stock Exchange.

To be clear, the action has no material impact on economic interests, and we are not raising capital. In fact, we have ample capital to operate SelectQuote and believe SelectQuote's stock remains significantly undervalued.

Flipping to Slide 7, let me start with details on our first quarter performance in Senior. As Tim indicated, while we are very pleased with the early results we are seeing in AEP, our stated strategy for this Medicare Advantage season is to approach AEP and OEP with a smaller agent force and a proactive focus on policyholders impacted by plan terminations and significant benefit changes.

Put in simpler terms, the 2027 season is another good season to prioritize profitability over volume. As Tim noted, we are hearing positive growth indications from a few carriers, but conversely, we know many carriers are still in process on significant benefit restructuring and rightsizing.

As I just noted, our strategy in Senior for 2027 is aligned at the agent and technology level to optimize policyholder retention, both for plans impacted by benefit changes or for plans that have been terminated by carriers. We have high confidence in our ability to replicate or improve upon our successful retention efforts from a year ago.

Additionally, the agent footprint for 2027 is also well-armed to capture quality growth where available this season. Our 4-year track record of strong execution and agent efficiency give us confidence in the upside potential that exists in our model.

So with that backdrop, our Q1 results in Senior are representative of our strategy. Senior revenue of $51 million for the quarter declined $8 million compared to a year ago. The decline primarily reflected our deliberate decision to operate with a smaller agent force.

To be more specific though, our tenured agent force is effectively flat compared to a year ago. Sop while we deliberately hired fewer new agents, our most productive agents are poised to capture upside volume efficiently, as I just noted.

As you know, the majority of our Senior business occurs over the second and third fiscal quarters. That said, the improvement in operating efficiency is evident even in our seasonally slowest quarter.

As is typical of the seasonality in our business, first quarter Senior adjusted EBITDA loss totaled $12 million, which is a $9 million improvement from a year ago, again, on a smaller base of revenues. Looking over the trailing 12 months, our Senior EBITDA has increased 18% to $157 million.

To summarize, we are pleased with the results in our Senior division in first quarter and are pleased with early indicators thus far in AEP. We have confidence in our strategy for the current season, and we are positioned to return to growth as industry conditions improve.

Moving to Slide 8, I will review our strong performance in Healthcare Services. In this segment, our top line result is skewed given the previously mentioned impact of the Inflation Reduction Act on certain drug pricing in our SelectRx business. As noted before, the impact to EBITDA is much less material given the counteracting impact on reimbursement from manufacturers.

Healthcare Services revenue for fiscal Q1 totaled $186 million compared to $221 million a year ago. In contrast, our Q1 adjusted EBITDA this year increased 56% to $11 million compared to $7 million a year ago. As part of our company-wide priority to maximize cash flow and profit growth, the SelectRx membership base continued to mature with less focus on acquiring new members.

Over more than 5 years operating SelectRx, we have continued to optimize where our service best matches the needs of our members. With a greater mix of seasoned SelectRx members utilizing the services, SelectQuote drove EBITDA per member to $108 this quarter, which is over a 60% increase compared to a year ago.

While a more mature membership base contributed to higher margins, we are also seeing increasingly meaningful operating efficiency driven by the pharmacy management system that Tim detailed earlier.

Overall, we are very pleased with the performance in Healthcare Services and believe the segment is well-positioned for growth in the seasons ahead. As a reminder, AEP and OEP are our peak onboarding windows for the Healthcare Services business. We are excited to efficiently onboard new SelectRx members over the current Medicare Advantage season.

Before I turn to our Life business, I would just note that the trend of improving profitability in a period where we have purposely limited growth underscores why we are so excited about the future. In fact, the cash efficiency of our Healthcare Services business is a significant driver in our $60 million plus operating cash flow target this year, but even that achievement is understated compared to what it means for our shareholders.

As Tim noted last quarter, as SelectQuote becomes increasingly cash efficient, the value to our equity holder compounds. We can increasingly use cash to reduce high-cost debt, which drives even greater cash conversion from EBITDA.

On Slide 9, let me outline our quarter for Life Insurance. The segment generated $43 million of revenue, down $4 million compared to a year ago. Final expense delivered strong efficiency and profitability in the quarter, with improved margins year-over-year despite operating with a smaller agent force. The business also benefited from strong transfer rates from Senior, providing a meaningful source of leads at no incremental acquisition cost and demonstrating the synergies across our business lines.

Term Life has also performed well, generating modest revenue growth year-over-year, with margins remaining relatively stable. The favorable mix and improved efficiency across the business drove meaningful margin expansion. Adjusted EBITDA was up 31% year-over-year to $7 million, representing a 17% margin, an improvement of more than 500 basis points compared to last year.

Overall, Life results remain in line with our expectations. We are encouraged by the profitability in final expense and expect demand to remain healthy while continuing to manage Term Life with a focus on attractive returns.

Before we turn to your questions, let me conclude by highlighting a slide we showed last quarter. On Slide 10, you can see the sharp improvement SelectQuote is experiencing in our operating cash flow efficiency. We are maintaining our guidance of $60 million plus of operating cash flow for fiscal 2027. From a calendar perspective, we would remind investors that fiscal 2Q is historically our peak investment quarter before cash flow ramps sharply in the second half.

As Tim and I have repeated often in this call, we are proud of our team's ability to accomplish this through such a challenging and dynamic environment within both Senior and Healthcare Services. We are increasingly confident in our ability to not only maintain these results, but to accelerate and leverage our operating efficiency in the future.

In Senior, we have maintained EBITDA margins through well-informed season-to-season operating strategies. We have strengthened the durability and potential of that operating leverage through continued adoption and advancement of our technology.

In Healthcare Services, we drove over 60% growth in adjusted EBITDA per member year-over-year as we better match our services with customers that benefit most from them. We've also invested in systems and facilities with greater growth capacity, upside margin and cash conversion potential as the business grows.

Overall, in a sideways market, SelectQuote has made significant progress in our earnings power and cash flow generation. We are excited about the season ahead and look forward to updating investors.

With that, let me turn the call over to the operator.

Operator

[Operator Instructions] Your first question comes from Ben Hendrix with RBC Capital Markets.

分析師問答

Michael Murray

This is Michael Murray on for Ben. On AEP, it sounds like payers are behaving as you expected with plan terminations and benefit pullbacks. Are you still expecting MA-approved policies to decline 10% to 15% this year? Or if any of the assumptions underlying this changed?

Timothy Danker

Yes, Michael, this is Tim. Thanks for joining. I'll be happy to address that. As we indicated in our prepared remarks, I mean, we're off to a good start. It's early, but we're off to a good start for AEP. There's a couple different factors there that we're seeing overall in terms of, to your point, a high level of beneficiary engagement, a lot of folks in market given the plan disruption and plan terminations.

While we do have a smaller agent force that will kind of impact what we guided last quarter in terms of overall policy volumes, having a high-tenured agent force is leading to good levels of agent productivity, which is typically a good indicator of output. We also think a lot of investments that we've made in our technology platform are paying off, which is providing some underlying agent efficiency and capacity.

So I do think with respect to what we guided to, all right, we have a smaller agent plan than in prior years that I would say a highly efficient and a highly effective one for what we're seeing early on. And -- while we are the largest direct-to-consumer distributor in MA, we are also very nimble, and we are able to capitalize on opportunities as we see them, and we think there is an environment here where there may be some potential to do that may help kind of maybe potentially curb some of the initial guidance we provided on volumes being down year-over-year.

Michael Murray

That's helpful. And then I wanted to see if you could unpack the LTV strength. It looks like it grew 16% year-over-year. Is this mix-driven carrier repricing or more durable structural shift in how you're selling policies?

Timothy Danker

Ryan?

Ryan Clement

Yes. I'll take that one. I mean LTVs tend to move with carrier mix. And so as you mentioned, that's part of it. I would also say, obviously, there's been a benefit from CMS commission rate increases. So I think, yes, there's a number of factors in play, but pleased with the LTVs we're posting.

Operator

Your next question comes from David Windley with Jefferies. Is David Windley with us from Jefferies? Your next question comes from Logan Lillehaug from Craig-Hallum Capital Group.

Logan W Lillehaug

Logan on for George this morning. I wanted to start on the plan terminations. You talked about trying to get ahead of that early this year. Obviously, last year, we also had a pretty high level of plan terminations. So just curious if you could compare what you've seen this year so far to last year in terms of engagement with beneficiaries. And I also wondered if you could just address how carriers are approaching commissions on some of these plans where they might be trying to retain members.

Timothy Danker

That's a great question, Logan. I'll let Bob...

Robert Grant

Good question.

Timothy Danker

Grant, our President, talk about that. Yes. Go ahead, Bob.

Robert Grant

Yes. As far as plan terms, the environment is fairly similar to last year. A little bit some nuances where they are being very intentional about plans that they want to invest in versus not. I do think there is a lot more healthiness within the market on the plans that are there. And that kind of also, there has been a little bit of a change on D-SNPs with, as you guys know, the plan integration with some of the states did take some folks out of certain states, as far as D-SNPs.

The engagement, though, has been really high. We are really happy with where we are. Again, similar to years past, where we believe that we can recapture a really large percentage of those customers. They are very happy with our service. And as you guys know, we are really good at getting ahold of people.

I do think as far as the commissions go, this so far has been a much more stable environment. I think that will continue due to the fact that there is more healthiness. You see it on the, I will just point to the public earnings calls of the payers. They are healthier. Their MLRs are healthier, and they seem more excited about kind of investing in plans, and they believe their benefits are in the right place to be profitable on a multi-year basis.

So we feel really, really good about that, and then also feel really good about what that means in the future, because it does feel like this disruption is getting towards the tail end, where again, the payers are very excited about the plans that they have sitting out there and the profitability of those plans, especially the larger players, which, as you guys know, is the vast majority of our business.

Logan W Lillehaug

Got it. Good to hear.

Ryan Clement

And I think just one item worth calling out is -- the only point I was going to add is, obviously, when we engage with someone where a policy is being terminated, we're able to help them with the new policy and then actually book a new one. So that is obviously incremental commission receivables that we would expect to receive, and it's obviously an opportunity for the business, both with our existing customers, but also other customers that may be shopping in the marketplace.

Logan W Lillehaug

Understood. Maybe switching over to SelectRx. I mean, obviously, it's pretty striking how much more efficient the Olathe facility is. Just wondered if you could give us any frame on like how many scripts you could start moving over to that facility over the next few years? And then is there any timeline you can give us around kind of taking that PMS technology to your other pharmacy sites?

Robert Grant

Yes. That's again, a really good question. And we are stacking a significant amount of volume already in Kansas in that Olathe facility. That will take some time, though, because we are not doing a ton of facility transfers. That's more new members that are going there for now, and then we will get into facility transfers as we go.

As we do that, we are already planning for how we retrofit the technologies in the other facilities in an efficient manner. So I'd say we're a little farther out on the, hey, how do we retrofit and get all of the current members into there because there is a transfer process that's a little bit complicated. But I do think you'll quicker see a big percentage of our scripts come out of Kansas due to how we're enrolling and how we're dealing with our members right now.

Logan W Lillehaug

Okay. And I'll just throw one last one in. Obviously, you've got the $60 million in operating cash flow this year or the target, I should say. It certainly looks like that should keep going higher in the out years. Just wondered if you could -- how you're thinking about the preferred dividend? I mean, is there a point at which you might consider paying that in cash and stopping kind of the liquidation preference increase?

Ryan Clement

Yes. No, that's a great question. We're really pleased with the progress we're making on the operating cash flow front. Obviously, this year, $60 million plus, which is a significant improvement year-over-year. And then when you look at our multi-year model, we see levels of cash flow rising. And so we're encouraged by that. While we're not specifically guiding to fiscal 2028, like we do see on the horizon a path to cash paying the dividend, and that would be our plan.

Operator

Our next question comes from David Windley with Jefferies.

David Windley

Let's try this again. Can you hear me?

Timothy Danker

Yes, we can, Dave. Glad you're here.

David Windley

Okay. Fantastic. Sorry if these have been asked while I've been talking to the operators. The question I had for you, Tim, was if you could double-click in on AEP and give us any perspective on how recapture on plan exits, that part of your focus has gone, if you have early metrics on that retention. And I know new sales volume seems to be not one of your primary priorities for this AEP. But if there's any perspective on that, I'd take it.

Timothy Danker

Yes, Dave, and happy to kind of readdress some of these questions. We will talk about 2 parts of AEP, one being the front-end production part. And as we shared, I think it's early, but we are off to a very good start. Because of the plan disruption and the plan terminations you mentioned, right, it's creating an environment where there is a high level of beneficiary engagement on our marketing. So we are seeing a lot of connectivity there. We have got a very high-tenured agent mix, which typically will translate into good agent productivity and output. We have also made a lot of investments in our technology platform that are freeing up agent capacity. There is a lot of efficiency year-over-year in the model, and we think that can translate to opportunities with respect to volumes. Again, still very early, but that is why we like what we are seeing.

With respect to the back book, Bob commented on, we have learned a lot. We built a lot of muscle over the past 2 years with respect to the disruptive plan environment. We are seeing very high levels of consumer engagement. We are probably seeing our ability to have outreach and talk with customers at a more accelerated rate than we have in years past. A lot of that is investments from our marketing team, our data science team, where we can have better purview into those customers that are affected the most or having changes to their health plan. We do expect, I think we are leading in terms of recapture rate of 30% last year. We are going to try to better that, which has a very positive cash flow impact.

So it's early, but we like what we are seeing. On the plan design front, while not asked, I'd say, we are seeing the national players continue to push into SNP plans, D-SNPs especially, HMO plans. And we think that those are all very well aligned to the strength of our platform, and also really produce a lot of velocity and opportunity for SRx enrollments as we enter into our busier period for SRx, AEP and OEP.

David Windley

Got it. So I caught your 30% and trying to better that. I was hoping to hear some metrics. So thanks for that. On the D-SNP, I was actually going to follow up with that and wondered if, I mean, can you give any numbers relative to, say, engagement or applications relative to SNP plans versus traditional community type applications? Or is it too early for that?

Robert Grant

It's a little bit too early for that on how that works. I would say, though, typically, we engage a SNP member at a similar level to non-SNP. That's something we've always been very proud that we are good at getting a hold of people that are typically, I think, in the market harder to get a hold of. So -- but don't have exact numbers to share yet.

Timothy Danker

But I would say it's a continuation of trends we're seeing, Dave. Yes, go ahead, Dave.

David Windley

Okay. Sorry. On the marketing spend, the -- so we've gotten most of the -- maybe all of the third quarter reports, calendar third quarter reports from the carriers. Margins are actually progressing for them, I think, broadly better than they expected. And so perhaps contrary to what the thoughts might have been earlier, they might be in a position to want to push marketing a little harder. So I wondered if that could still happen, like how far into AEP could they still make budget changes around marketing spend?

Timothy Danker

Bill, do you want to address kind of the broader kind of marketing environment, what you're seeing from carriers, how that may affect us?

William Grant

Yes, absolutely. I think, though, I mean, as it relates to the carriers, they'd probably be -- you're talking about broader marketing in general. But as it relates to the carriers, Bob probably should take that.

Robert Grant

Yes. And then I'll come back to Bill on the broader market and how well it is going. Carrier-wise, they can make decisions up until mid, you know, November and even late November as far as if they want to push and have us kind of specifically target, which we have said in the past costs us a little bit more money. We never would be biased towards any carrier or anything. All we can really impact is that actual targeting of specific areas where specific carriers are winning, which drives our cost up a little bit, but they all kind of can target that way.

Bill, do you want to speak to kind of how we do that if they did come late and then ultimately what the environment looks like?

William Grant

Yes, absolutely. So if they did come do that, we feel good about our marketing. We've always talked about kind of our wide funnel and ability to flex up. And we still feel like we're working from a position of strength. So we feel like our opportunities would be pretty ample if we were in a position where the carriers wanted to be more aggressive with how they approached AEP.

Operator

Your next question comes from George Proost with NOBLE Capital Markets.

George Proost

Filling in for Michael Kupinski this morning. My first question is with -- in regards to the IRA pressure on the SRx. So it's been facing pressure for several quarters now. Could you tell us which quarter do you expect will be a first clean year-over-year comparison without the IRA impact? And once you're past it, what's the underlying organic growth rate for it?

Timothy Danker

Yes. Why don't I start and then I'll let...

Ryan Clement

Great question.

Timothy Danker

Yes. Why don't Ryan you go ahead and address the IRA, and I'll talk more broadly.

Ryan Clement

Yes. It's a great question. The IRA program is actually a multi-year program. So there were some drugs that were introduced in 2026. There were some drugs that were introduced in 2027. And it does lead to higher, or -- sorry, lower top line revenue as, drugs are priced lower. That said, we actually receive reimbursements. And so the EBITDA impact is far less significant. With respect to clean compare, though, because it is a multi-year program, it's going to take a little while for things to work through. There's actually a group of IRA drugs for 2028.

I think the really important thing here is that while it does create some pressure at the top line, it really doesn't materially impact the bottom line. And we're really encouraged by the margin progression we're seeing and the ability to drive growth in EBITDA and cash flow from our Healthcare Services business. Tim?

Timothy Danker

Yes. I might just double down on that. And great question, George. I mean, our focus is to continue to expand healthcare margins and cash flow, really almost independent of what's going on in the broader Medicare environment. And I think this fiscal year is a good example, right? We've -- as we stated last quarter, a slight pullback in terms of our investment in MA, just given the market environment and prudence. But we still expect our Healthcare Services segment to grow margins, aggregate EBITDA, cash flow, given our operational improvements and the recurring nature of our subscription SelectRx model. You're seeing that play out over the last few quarters.

To be clear that there's plenty of demand for SelectRx. And I think we're seeing, and there were good questions on the call today, right, you know, brighter days ahead to Medicare Advantage and kind of reemergence into responsible growth. And when that happens, right, we'll incrementally lean in on our MA platform. That'll naturally be an accelerant to our SRx platform. And that also doesn't stop us as we can continue to get more operationally efficient to pursue leads outside of just those that we get from our MA platform. So plenty of growth, plenty of demand. The current focus is on margin cash flow and we think we've had kind of good back-to-back quarters that demonstrate the strength of that particular asset.

Operator

We've reached the end of the Q&A session. I'll now hand the call back to Tim Danker, Chief Executive Officer, for closing remarks.

Timothy Danker

I want to thank you all again for the time. We appreciate your support. As Ryan and I and the team have noted, the SelectQuote model continues to drive consistent and reliable value to our customers and insurance carrier partners.

We know that the underlying cash flows for our services are real and significant, and we look forward to convincing more and more investors of that value and our equity in the months and years ahead. We appreciate it. Have a great day. Thanks again.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.