SelectQuote (SLQT) Q4 2026 earnings call transcript

It is now my pleasure to introduce Matt Gunter, select quote, investor relations, Mr. Gunter. You may begin the conference. Thank you and good morning everyone. Welcome to select quotes fiscal fourth 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 two, during this call, we will be discussing some non gap financial measures. The most directly comparable gap financial measures and a reconciliation of the differences between the gap and non gap financial measures are available on 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 on our earnings release, annual report on form 10k for the period 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?

Thank you, Matt, and thanks to everyone joining us this morning. Before we begin, I'd like to start with what we believe is the most important takeaway from today's call. The luck was highest priority continues to be driving profitable cash flow and our fiscal 2026 results demonstrate meaningful progress against that objective. As you'll hear throughout our remarks, we're managing the business with a focus on cash generation and leverage reduction, which we believe is the best way to create long term shareholder value. We believe the platform we built is capable of generating substantially more cash flow over time, and we are beginning to see that potential translate into tangible results.

Looking towards the future, we expect the Medicare advantage industry to remain fluid as our carrier partners continue to right size and get closer to their own operating margin targets. As a result in fiscal 27, we will be prudent with our M. A. gross investments, while our primary focus will be to grow and compound our cash flow. Meanwhile, we reached an inflection point in fiscal 2026 with the health care services division becoming the largest revenue contributor, and we anticipate increasing cash flow and earnings power from that business in fiscal 27.

Beyond fiscal 27 firmly believes that as well positioned to grow both our senior and health care services revenues, which will further accelerate cash flow generation. Now moving to our recent performance. So I quote delivered a strong fourth quarter and what has been a highly successful fiscal year for our company. As you know, 2026 was another challenging year for Medicare advantage as carriers shifted policy benefits and had widely buried in origination volumes and health care services. We successfully managed to shift and reimbursement rate from a select RX pair partner and changes in drug pricing from the inflation reduction act. Through it all, we've modestly grew revenue, maintained strong margins and significantly increased operating cash flow.

Looking ahead, our highest priority is to realize value for our shareholders, which, as I mentioned, is best achieved through cash flow. To be blunt, we see a wide disconnect and the value of our shares relative to the real cash flow generation of our platform. I'll end today's prepared remarks with more detail on that point, but I'll reiterate that we see fiscal 2027 as a real inflection point for compounding cash flow growth and the value of our equity.

Turning to slide three, I went to frame fiscal 2026 around the key areas where select what made the most meaningful progress. First, in health care services, select RX continue to prove the earnings power of its scaled membership base, producing approximately 25 million of adjusted EBITDA for the year, while exiting at nearly 50 million annual run rate in the fourth quarter.

This is an important milestone for a business we built essentially from scratch over the past several years. And we believe there's still meaningful room to grow profitably as we continue to drive operating leverage across the platform.

Second, our senior business remain highly profitable despite another dynamic Medicare Advantage environment. The business generated adjusted to EBITDA margins of 26%, which we believe reflects the durability of our model, the strength of our care relationships, and the efficiency of our agent led technology enabled distribution platform. And third, most importantly, we delivered more than $40 million of year over year improvement and operating cash flow. As I mentioned before, that cash flow progress is central to the story we're telling investors today.

We have been very clear that our priority is not simply growth for growth sake, but profitable growth that compounds into stronger cash generation, lower leverage, and ultimately greater equity value for shareholders. To emphasize the point, it is important to remember that there is significant cash flow scale, both in our billion dollar plus commissions receivable balance, which we grew in fiscal 2026, and our scaling healthcare services platform.

As we increase operating efficiency and reduce costs, the equity accretion of compounding cash flow will become increasingly powerful. So, when we look back on fiscal 26, we see a year where the model worked well and our teams executed yet again. We navigated industry complexity, delivered value for customers and partners, and took a meaningful step forward in translating the underlying earnings power of select flow into visible cash flow.

Now, let me turn to slide four, and how select load is driving value in cash flow through our ongoing effort to maximize operating efficiency. As part of our fiscal 2027 planning process, we identified more than $30 million of annualized run rate expense improvement across the business. Importantly, these benefits are the result of a combination of actions, including AI and technology enabled efficiencies, process improvements, organizational right sizing, and prudent cost management.

Today, I'd like to double click on a few of the technology enabled efficiencies we're capturing. As you know, Succo was founded with a clear view that technology and information are critical for operating efficiency and the value we deliver to our customers. Our investments in technology and data increasingly help us improve both efficiency and customer outcomes. Across the business, we are deploying AI enabled enrollment support tools that help us select capacity with demand. This ensures we preserve valuable agent talk time and allow our highly trained live agents to do their most valuable work. We've also streamlined agent workflows through sales assist technology, and will expand the use of AI powered quality assurance tools to review and coach our agents.

We're also automating revenue generation processes and leveraging internally developed technology to increase efficiency within both our senior and pharmacy businesses. These initiatives reduce manual work, improve scalability, and help generate meaningful cost savings while optimizing the high level of service our customers expect. Additionally, as discussed on our 3Q call during fiscal 2026, we built deployed tested and are now leveraging our new custom built pharmacy management system. This system not only enables streamlined day-to-day pharmacy operations, but also provides the technical infrastructure we need to continue to process more scripts through our new state-of-the-art Olathe, Kansas facility. In this facility, we are already recognizing around 30% efficiency gains on shipments relative to our two legacy locations. This is yet another way we are meeting the market given that US healthcare system demands increasing efficiency, and you can see that with the improvement in our Kansas facility.

The challenge for most operators in our industry has been trying to balance speed and efficiency with services that the individual customer and drive value that are some that do one or the other, but in our view only select what succeeds at both. These initiatives build on a long history of incremental operational improvements across the company. While the over $30 million of savings reflects actions are already taken or underway, we believe our technology platform positions us to capture incremental savings over the next several years as automation, data analytics, and workflow optimization become increasingly embedded across our operations.

We are seeing that technology is allowing us to further unlock the value of our core asset. The success you see in both our senior and healthcare services businesses begins and ends with real conversations between real people. We have a long track record of these conversations and earning the trust of America seniors who give us unmatched insights into their needs. We firmly believe our scale and increasingly our technology are exceptionally valuable assets that will continue to broaden our competitive advantage and allow us to meet the needs of America seniors as they navigate the complex healthcare environment.

These factors are not only allowing us to serve them better, but also powerfully contribute ongoing leverage to our cash flows. With that, let me turn the call to our CFO Ron Clement to review our financials. Ryan.

Thanks, Tim. That will begin on slide five with our consolidated financial results for the fourth quarter in fiscal year 2026. As Tim mentioned, our results reflect strong execution across the business and continued progress against our goal of driving profitable cash flow. For the full year, revenue totaled to 1.62 billion of 6% year year and within our guidance range. I just had even I was 109 million finishing well ahead of our guidance range of 90 to 100 million. Most importantly, the business made substantial progress on operating cash flow, which we will touch on later.

For the fourth quarter, revenue was 322 million compared to 345 million in the prior year. I just had even increased to 12 million compared to 3 million last year. That fourth quarter improvement reflects the operating discipline we have emphasized throughout the year, including actions to improve efficiency, manage costs, and focus resources behind the areas of the business with the clearest after durable cash generation.

The key message is that select quote exited fiscal 2026 with a more efficient operating model and a clear path expanding cash flow again at fiscal 2027. We remain focused on profitable growth, not simply top line growth. And we are managing the business with that framework in mind.

Before I detail our segments, let me first call out select quotes improvement in operating cash flow on slide six. As 10 noted, we realized the 44 million dollar year over year improvement, which was driven by progress within each of our divisions. In senior, we delivered strong operating results, despite a challenging market backdrop. Similarly, in fiscal 2026, we generated more operating cash flow for select or X member than we ever have, given by both operating scale from early at the Kansas distribution facility, but also from a maturing member base.

Lastly, our life insurance business, while smaller continues to deliver strong cash flows. Turning to slide seven, our senior business remain highly profitable, despite another dynamic Medicare advantage environment. Senior revenue declined 4% compared to last year, totaling 576 million. In addition to another volatile season for Medicare advantage, part of the reduction in revenue was tied to a change in a key carrier partners strategic marketing investment.

Despite this headwind, we were still able to drive very strong margins. In fact, the senior segment generated a 26% adjusted even a margin for the four year. As 10 noted, we have now recorded four consecutive years with senior margins in the mid 20% range, which demonstrates the durability of the business and the strength of our agent led technology enabled distribution platform.

The Medicare advantage market continues to evolve, and we expect here are strategies and benefit designs to remain important variables. As we said in the past, growth in our senior business is a choice, and the engine we built is ready when the markets support a return to responsible growth. While we started to see green shoots of a turnaround within the market, our expectation is that this upcoming AP will remain dynamic.

Moving to slide eight, the healthcare services segment continues to generate scaled revenue and is making meaningful progress on profitability. As previously forecasted, membership moderated in the fourth quarter to 109,000 as we continue to focus on members that receive the largest benefit from our services while producing the best unit economics.

Looking ahead, we expect members to moderate again in the first quarter leading up to the AP selling season, but the finish 2027 around 2026 levels. To be clear, demand remains very strong, but we continue to focus on driving further improvements and segment profitability. Additionally, it is important to remember that healthcare services membership growth is synergistic with Medicare advantage policyholder onboarding. As Tim noted, improvements in that market should serve as a tailwind for selector X membership growth in future seasons.

While members remain flat year over year in fiscal 2026, total revenue and healthcare services total 845 million, up 14% compared to full year 2025. This growth was achieved despite the impact from the inflation reduction act, which went into effect on January 1st of 2026 and hit third quarter and fourth quarter of this year. I'll touch on the implications for 2027 during my guidance commentary.

Moving to the bottom of the slide, the healthcare services businesses scaling into a more profitable operating model driven increasingly by further utilization of our Kansas distribution facility and our prescription management systems. For the full year, the business delivered 25 million of adjusted EBITDA, effectively all of which converts the cash. You recall that our first quarter and second quarter results were affected by the reimbursement renegotiation with one of our PVM partners, which we have called out here in the chart.

Also, as a reminder, while the inflation reduction act drives the material reduction in revenue, it does not materially impact EBITDA given the geography of reimbursements that selector X on the P&L. The most important takeaway for this slide is that healthcare services exited fiscal 2026 at an annual EBITDA run rate of nearly 50 million. Although we expect even of the moderate in first quarter as we make investments in preparation for the AEP and OEP enrollment season.

We feel this EBITDA performance reflects continued execution across the member base and the early contribution from efficiency initiatives across the pharmacy platform. We are particularly focused on continued efficiency gains in our Kansas Selector X facility. As we increase utilization and continue to advance our pharmacy management system, we believe healthcare services can contribute even more meaningfully to the profitability and cash lower time.

Turning to life on slide nine, the business delivered 186 million of revenue up 8% year over year. The business generated adjusted EBITDA 27 million for the year, which we remind everyone is highly cash efficient. We are pleased with these results, but remain measured in our outlook. While our final expense business continues to perform nicely, the term life insurance market remains competitive and customer acquisition costs are worth monitoring.

As a result, we continue to focus on disciplined execution and profitable growth, rather than assuming the strong trends we've seen recently will continue uninterrupted. Lastly, let me conclude with our financial outlook for fiscal 2027 starting with revenue. We are guiding to consolidated revenue of 1.35 to 1.45 billion in 2027.14% below 2026 levels at the midpoint. This reduction is driven by factors in both senior and healthcare services.

In senior, as we noted, we expect 2027 to be a transition year for Medicare Advantage carriers. As a result, we are being prudent with our investment with a greater focus on senior profitability and cash lower growth. We expect this will result in may approve policies declining 10 to 15% year over year. In healthcare services, we expect revenue to be down 10 to 15% primarily due to the inflation reduction act.

The IRA will create year over year revenue headwinds throughout fiscal 2027, including particularly noisy comparisons in the first half of the year. To reiterate Tim's comment about the platform, select quote is well positioned to grow both businesses in the future, but will purposely remain disciplined in 2027 to drive profit and cash flow.

Turning to adjusted even though we are guiding to a range of 90 to 115 million for 2027. While down year over year on a dollar basis, the midpoint reflects consolidated margin expansion of about 60 basis points. We expect senior margins will be strong coming down from 2026 levels, but remain above our 20% target. This will be more than offset by our expectations that healthcare services margins will approximately double in 2027. We expect the efficiency gains to be driven by continuing to scale our pharmacy management system in Kansas as an increasingly higher percentage of our scripts are routed through this facility in 2027.

Finally, we are introducing an operating cash flow guide for the upcoming year. Despite the top line pullback we discussed, we expect select quote to approximately double operating cash flow in fiscal 2027 to 60 million plus. We also believe the business will generate free cash flow over around 50 million, which is aligned with our strategic priority to demonstrate meaningful and compounding value for shareholders.

With that, let me turn the call over to Tim to drill down on that strategy before we take your questions. Tim.

Thanks, Ryan. We wanted to close with additional context on our most important strategic priority cash flow. As I mentioned in my opening, we'll please with the durability of returns we've built into our business. This is evidence by our performance over the past four years. And senior, we have high conviction that our model can execute and a range of Medicare advantage environments and healthcare services. We're excited about the inflection occurring and expect our scale to drive significant profit contribution in 2027 and beyond.

While we're pleased with the business performance, I'll reiterate that we're not satisfied with our valuation and want to be clear about our plan to drive shareholder returns. We know our credit partner see the value of our platform and our current one billion plus commissions receivable balance. That said, we know equity investors want to see expanding cash flow creation and lower leverage.

As we show here, we believe fiscal 2027 will be another strong year following the $44 million improvement made in fiscal 2026. As Ryan mentioned, we expect operating cash flow in 2027 to approximately double compared to fiscal 26. And for the business to generate free cash flow of around 50 million in the year ahead. What isn't shown here is how a growing base of operating and free cash flow can compound.

As you know, we continue to work to optimize our balance sheet and believe we're well positioned to reduce our funding costs more meaningfully in the future. Today, our debt and preferred equity total around 800 million at a cost of approximately 12%. We pay annual cash interest of approximately 45 million in addition to our preferred equity dividend. For illustration, every 100 basis point decreased and that overall funding costs would equate to nearly $8 million of savings that accreats to equity holders.

Similarly, we expect to reduce aggregate leverage in the future, both through debt repayment and expanding EBITDA. The bottom line is we see significant value and select quote and believe there is a real and observable red map to grow our equity and generate attractive returns for shareholders. The north star of our strategy is to grow our equity base through expanding cash flow. We will achieve this through operating efficiency, responsible growth, lower leverage and reduced funding costs.

Best of all, is the more cash flow we create, the more cash efficient, select what it becomes. 2026 was a great year of inflection for our strategy and we believe fiscal 27% and even greater opportunity to demonstrate our value to shareholders.

This is Tim. Thank you for joining. I'll make a few comments and ask Bob Grant to talk to some of your specifics. But again, really pleased with the inflection point in the fourth quarter for our health care services business. You can see how this business is certainly picking up steam as you indicated. There is a very synergistic relationship between our senior platform and our health care services division, and given the small kind of prudent pullback that we're making in the senior division, given the market dynamics that will have some pull through impact to health care. Our current focus is really around driving operational efficiencies and some additional technology that we think will help us prove out the doubling of margins in health care that we mentioned.

And to your point, we're still a small piece of the market and have opportunities outside just the pure play relationship with seniors.

Bob, if you want to comment on what we're doing there and appreciate it. Yeah, absolutely. So Ben, to your point, right now, we have historically been and are still very focused on cross-sell and with the small pullback in Medicare, it's why not as much growth that we would expect in the top line or membership there. However, we are very, very focused in efficiency, replacing a lot of our technology, using AI to help assist and make things much faster and smoother and drop cost. First shipment out the doors so we can increase margins, especially on kind of new membership and kind of get there a lot quicker. You see that really reflected in the guide and what we saw in the fourth quarter where we have nearly a $50 million run rate.

I would say with that, this year we'll really, really hone in on that, use this kind of mild pullback in Medicare as an opportunity to really focus on the cash flow and efficiency of that business. And then yes, as we get even more efficient, it allows us to afford some CAC on the RX side of the house and really allows us to start testing and learning on kind of third parties and things like that, because there is a massive market opportunity beyond just what we do as a cross-sell within Medicare, but it does come at a little bit of a cost, right? So as we increase that margin, it allows us again to really lean into that and find those sources and test and vet.

So we're a little bit focused on both, but I would say this year, it's hyper-focused on increasing that margin and cash flow efficiency.

Appreciate that and just a little one more on kind of the integration of operations through the Kansas City facility. Just keep your mind of where that stands in terms of penetration and your total volume, where that could go, really fully integrated.

Yeah, I'll let Ryan actually speak to the margins at the end. As far as integration, it's still a relatively small percentage of our overall volume, because we're very focused on kind of our new technologies and different things within that facility. And then as of this AAP, we would expect a huge percentage of our enrollments and overall members to move to Kansas City, which is, Tim said, is far more efficient and has higher margins than our other sites. We'll then take those learnings and retrofit our other sites to make them more efficient and better.

So all those dollars too, as we decrease that cost per shipment out the door, increase those margins off also the bottom line. So it's a really exciting thing, as we've seen the reality play out of Kansas City, as Tim said, it's about 30% more efficient than our other sites. So we know that there's a path there. Now it's just being, you know, very tactical on how we go and get that. But we are very close.

And again, this AAP, you'll see a massive growth within the Kansas City facility, Ryan. Yeah, and with respect to the margins, obviously, we're an inflection point. We had a really great quarter of a sudden step increase in terms of margin progression. We talked about, you know, this coming year expecting margins to double on a year of your basis. Over the long term, we are still expecting low double digit even a margin, but our long term target for this segment.

Obviously efficiency gains, both in Kansas City and other things that are on the horizon are all part of that story.

George, I appreciate you joining this morning and the other question. Yeah, I think more broadly, we are, we are seeing a, you know, a healing in the M. A. market.

There's been, you know, year over year improvement, but there's still work to do. The payers are signaling to get to their three to four percent operating margin. So there's, there's more work that needs to happen. And we expect to see a lot of discipline in the market. That's been, you know, our conversations with carriers, you know, their M. L. R. s are still elevated relative to historical norms, maybe better than forecast, but higher than historical.

And a byproduct of that will be our continuation of some level of market disruption via planned terminations and benefit pullbacks. And our conversations, it feels like carrier dependent, you know, they're getting towards hopefully the later innings of this recovery. And a re-emergence to what we would call a responsible or targeted growth on planning or 2028, certainly things around special needs plans continue to be a focus for the payers and one that we over index to in our very line too. So our current plan of action, as you heard from our comments is, is to match the market in terms of prudence around M. A. growth.

That's, you know, and continue to focus on cash flow. That was our indication around slightly lower policy volumes. But we will continue to be opportunistic around as we see opportunities were nimble. And I think we've proven that over the past four years, it's been honestly, you know, tough sledding. And we've produced mid 20s, even out margins for four years.

We'll be in position to do that again. We'll be in position to react to the market if there's interesting opportunities, but overall, the message is a resounding enterprise wide focus on cash flow.

What I what I read into that is those who need who have the most prescriptions and therefore more profitable versus those who have limited needs. Can you just walk through how you're managing that relative to the growth of that segment?

Yes, sorry. On the IRA and the impact of that, it's obviously trying to push down costs to the overall consumer. You know, there's some really tough dynamics on that because it puts a lot of pressure on the payers and then puts pressure on the pharmacies from a revenue perspective. But to Ryan's point doesn't put a lot of pressure on the pharmacies from an overall margin perspective.

So the IRA though has introduced some things were because the payers cost for drugs has gone up so much because they're eating a lot of that. There they have changed some of the plan designs. I mean, that's been part of the that's been part of some of the impact of this kind of disruption to where they're introducing co insurance for drugs and things like that. So that's not a pressure I'd say in the front half of the year on the cost of drugs for consumers because of insurance and those things that'll continue to be the case. And again, Ryan will talk about it does put pressure on our revenue, not our margins though, which is why you see margin progression, but the revenue pressure, right?

Yeah, so with respect to, I mean, the way it works.

I mean, the overarching cost to the consumer comes down. But we actually do receive elsewhere in the cost of goods line item, a rebate back for manufacturers. So again, the impact at the top line is more meaningful than it is on the bottom line. As you mentioned, went into effect calendar Q one. And so that's created some pressure and certainly as we look to 2027 where you've got kind of the wraparound impact and having the full year plus 2027.

Area drugs, we expect it to be a headwind to the top line. But again, it's less significant in terms of even a margin where we expect margins actually double year over year. And, you know, really, really pleased with the business as results in the cash generation, both, you know, in 2027, but also what we see beyond 2027.

But I think the one that's probably most prominent, obviously, is the significant progression and operating cash flow. These are key area of focus. 2027, we talked about 60 plus million, you know, we're not specifically guiding to 2028. But we see increasing levels of cash flow in our multi year forecast. And we do expect to be, you know, a cash fair in terms of the fact, but also see a path to be levering and a lower cost the capital via a future refinancing.

George, I would just add, you know, I would just add all those options are on the table. We absolutely want to be really clear that to Ryan's point, we see a clear path in terms of increasing cash flow generation, you know, natural deleveraging a better cost of capital.

All of the above that can lead to enhances and equity value for shareholders.

So the EBITDA down a little under 10 million year over year of operating cash flow, improving 30 million. Is that 40 million delta primarily a function of the slower growth and senior, or are there other factors in play.

Now, the primary drivers of the improved cash flow is continued progressing health care services, as we expect those margins to expand. You know, we've highlighted the significant progress we're seeing from our Kansas pharmacy and we expect that to continue to build upon that as we roll out the pharmacy management system that we built out. Additionally, the AI technology efforts are also ramping nicely, which is a meaningful contributor to pretty significant anticipated cost savings around 30 million dollars. A lot of that's tied to kind of combination of reducing labor intensity through AI, but also, you know, streamline some of our backup functions.

So we have, you know, as you mentioned, like we have, you know, been prudent with our investments, but the vast majority of that that increases actually driven by the health care services. Okay. And then on health care services, I just wanted to clarify, you expect membership by the end of the fiscal year 27 to be roughly flat with the end of fiscal year 26.

And so is that despite, you know, sort of lower approved policies coming out of senior.

That is correct. Yeah, that's correct. That's correct. Even we do expect to be roughly flat at the end of the year. We'll go through our normal, you know, there'll be a little bit of a pullback going into one queue as we come off of, you know, the SCP period before ramping into AEP and OEP. Again, part of this is predicated upon the slight pullback in our senior business. But again, the real focus is what Bob was highlighting around operational efficiencies, the introduction of new technology, the hyper focus on around margin accretion, you know, nailing down the operations, improving the cash flow, and then pushing more into the scaling and business.

Got it.

If you're talking to sales agent conversion, is that that what you're speaking to you or Ryan? Yes, right. Yeah, I'll speak. I talk to rates on the on the actual policies themselves. So as far as sales agent.

Close rates, just as a reminder because SAP has materially changed right we pulled back a little bit which was reflected in the number of policies in that quarter. Year over year due to there not been as many opportunities for a consumer to buy when we do that right our best people.

End up taking those leads and we see higher conversion rates which took down the estimated pressure we had on Q for conversion rates. I would say for the next year as a percentage of our overall policies, core agents, which I think everybody here that means you've been through one AP with us. Have significantly higher conversion rates, so we would anticipate AEP and OEP to have high conversion rates relative to the environment.

And we should see those push, you know, and be similar to last year. Maybe a little bit greater due to a greater percentage of our overall agent base being core agents, even though we're pulling back on policies a little bit. So we do feel really good about where we are there and especially the force of agents that we have.

Ryan, you want to talk about approval rates? Yeah, and so in terms of approval, then I think the dynamic that you were speaking to was approved policies exceeded. Submitted policies, which, you know, what actually allows that to happen is not all policies get approved in the first month that they're submitted. And so, yeah, you have the busy OEP season and then you've got a slowing down into SCP, but there's still approvals that trickle in from the OEP season. And so that's really what drove that. But as Bob mentioned, the approval rates have been strong, the conversion rates within our agent workforce has also been strong and, you know, we're pleased with the overall performance.

Can you kind of help me understand how much of the fiscal 27 cash generation is coming from the existing commissions receivable book? And more broadly, can you give us a framework for the cash you expect to generate over the next three to five years?

Yeah. So in terms of operating cash, as you mentioned, strong progress in 2026, expect to build upon that in 2027 with operating cash flow exceeding $60 million. In terms of the commission receivables, obviously, you know, we've sold, you know, policies for years and have a billion dollars in receivables, like you mentioned, and those cash flows trickle in. When you think about kind of where we ended fiscal 26 and where we in 2027, we actually expect that commission receivables balance to be relatively flat.

So we are writing policies and replacing that balance as we are drawing down on or collecting on the prior policy sales. And in terms of future periods, while we're not specifically guiding the 2028, we are absolutely managing the business for to grow operating cash flow over the long term. We have a multi-year plan, and we again have visibility in line of sight to, you know, stronger operating cash when a future that we believe will ultimately lead to every financing and lower cost of capital.

So we are intensely focused on cash generation. And Michael, I might just add to Ryan's comment that I, you know, hopefully we've made it really clear that we have a lot of conviction around the improvement in cash flow. You saw the $44 million year-over-year improvement. We're talking about a doubling this year. We're talking about the doubling of margins in healthcare services.

So while we can't provide, you know, today, we're not here to talk about a three-year outlook. That might be something we talk about in the future. You know, all of our business lines are operating cash flow generative healthcare services. You can see the inflection point in the fourth quarter in our $50 million run rate. The doubling of margins that business is going to continue to grow and kick off cash flow. Our life insurance business, we didn't spend a lot of time talking about it, but it's a very nice contributor to cash flow. And a senior business that has a lot of utility around a billion dollar backbook and what we're choosing to do around, you know, being prudent this year.

So more to come on that front, but we would make a point that we have a high degree of conviction and a growing cash flow base, which will help the company, you know, lead to deleveraging a better cost of capital and a lot of accretion of value to shareholders.

And then, you know, obviously your outlook for a very strong free cash flow. Has that changed to thinking around another receivable securitization?

I don't know that it's changed our position. Obviously, we put a tremendous amount of effort into bringing infrastructure in place in sports curitization. And it's still in place. It's performing. And it is a path that's available to us, given our current capital structure, like there is an immediate need to make a change. It is something that, you know, again, we have out there as an option.

Obviously, you know, one other piece, though, is the Medicare market dynamics, which in the last two years have been somewhat disruptive. And so at this point, I'd say the probability in the short term is relatively low.

Gotcha.

Yes. So we, you know, we are obviously excited about the cash generation, the business and where we're headed. We, in terms of, you know, capital allocation and what we're doing with it, delivering and high R. O. I. investments would be kind of top of list. And when I say high R. O. I. investments, I'm talking one that would, you know, further enhance the cash generation, but ultimately delivering is the key area focus for the business. And that could come in the form of cash pay on the pick. We do intend to cash pay in the future. But again, it could also be other forms of delivering.

So we haven't earmarked the dollars, if you will, but certainly are focused on cash generation and ultimately delivering.

I will now turn the call back to Tim Danker, Chief Executive Officer for closing remarks. I want to thank you all again for your time. We really do appreciate your support. As Rhina and I both noted, the select what model continues to drive consistent and reliable value to our customers and insurance carrier partners. We know the underlying cash flows for our services are real and significant. And we look forward to convincing more and more investors of that value in our equity in the months and years ahead.

Thank you and have a great day. We'll talk to you soon.