SelectQuote Inc (SLQT, Financial) recently reported its fiscal fourth quarter and full-year 2023 earnings, demonstrating a strong quarter and year for the company. The company's strategic redesign has solidified its market-leading position in Medicare Advantage and has built a diversified platform to drive consistent profit and cash flow in the future. The company's SelectRx business has also seen rapid growth, with annual revenue now totaling over $239 million. The fourth-quarter revenue of $222 million and adjusted EBITDA of negative $6 million represents the sixth consecutive quarter of outperformance driven by great execution across each of the company's businesses.
Financial Results Overview
For the fiscal year 2023, SelectQuote generated revenue of just over $1 billion and adjusted EBITDA of $74 million. The company's MA policy production declined 13% year over year, which was ahead of the original expectation for a 35% to 45% decline. The outperformance in volume was driven by improved agent close rates, which carried across to the company's most important financial KPIs, including marketing costs for approved policy. The full-year 2023 adjusted EBITDA margin for senior was 26%, driven by broad-based improvement in policy throughput, more focused and effective policyholder targeting, and a strong AEP and OEP season.
SelectRx Business Growth
SelectRx has grown to nearly 50,000 members in just 10 quarters and nearly doubled its membership over just the past year. The business has hit critical mass, and member onboarding has become increasingly efficient over the past year. The company expects to leverage the platform to drive both top- and bottom-line growth for years to come.
Healthcare Services Strategy
SelectQuote's approach to healthcare services positions it uniquely to capitalize on the market opportunity. The company's agent-led model across each of its businesses, combined with the investments made in technology, afford it the unique ability to be the facilitator and connective tissue between each of these stakeholders. The company plans to provide better solutions and higher value knowing what it knows about the needs of healthcare stakeholders. It does not intend to create markets, but instead, will stick to capitalize on demand and less-efficient markets that already exist.
Improvement in Cash Efficiency and Long-Term Value Creation
SelectQuote's strategic redesign prioritized improvement in cash flow in two main categories. First, each of the company's businesses from core senior to life and auto and home made significant improvements in operating efficiency which, in turn, has improved cash conversion. Second, the company is improving cash flow through the mix of its businesses, as well as the way that it partners with carriers. The company starts fiscal '24 in a strong cash position and feels confident about the season ahead.
Outlook for 2024
For 2024, the company expects consolidated revenue in a range of $1.05 billion to $1.2 billion, which represents year-over-year growth of 12.5% at the midpoint. Adjusted EBITDA is expected to range from $80 million to $105 million, assuming roughly 20% margins in the core senior segment and low single-digit margins in the healthcare services business as it continues to ramp. The company expects core senior MA policy volume to decrease approximately 10% to 15%. The company's goal is to finish the year approaching operating cash flow positive on a consolidated basis.
