SelectQuote plunges after slashing EBITDA guidance 33%
Healthcare Services segment hit by PBM reimbursement changes as broker cuts full-year outlook
SelectQuote shares tumbled in Wednesday trading after the insurance broker slashed its full-year EBITDA guidance by more than a third, overshadowing a quarterly revenue beat and exposing deepening challenges in its Healthcare Services segment.
The Overland Park, Kansas-based company cut its fiscal 2026 adjusted EBITDA guidance to $90 million to $100 million, down sharply from a previous outlook of $120 million to $150 million, according to regulatory filings. The 25 to 33 percent reduction reflects what management described as "partner headwinds" that have emerged faster than anticipated.
For the second quarter ending December 31, SelectQuote reported adjusted earnings per share of $0.26, missing analyst expectations of $0.28. Revenue of $537.1 million exceeded the consensus estimate of $530.7 million, but the top-line beat provided little comfort to investors focused on deteriorating profitability metrics.
The most alarming aspect of the earnings report was the collapse in Healthcare Services EBITDA, which plunged 62 percent year-over-year. The segment's struggles stem primarily from adverse changes in drug reimbursement rates with a pharmacy benefit management partner at SelectRx, a unit the company has been counting on for diversification beyond its core Medicare insurance brokerage business.
"The negative impact on Healthcare Services EBITDA for Q2 FY2026 was attributed to a change in drug reimbursement rates with a SelectRx PBM partner," according to company disclosures. Management indicated the impact would be "most acute" in the second quarter, with approximately $20 million of negative EBITDA impact affecting the first half of fiscal 2026.
The company's Senior segment performed more strongly, maintaining robust 39 percent margins. However, even within that business, management noted a decrease in marketing expense per policy, suggesting the company may be pulling back on customer acquisition spending to preserve profitability in the face of broader operational pressures.
Analysts had been growing increasingly skeptical of SelectQuote ahead of the report. As of late January, the stock carried a consensus "Hold" rating with a price target of $3.88—more than double Wednesday's trading price near $1.45, according to MarketBeat data. One analyst firm downgraded the shares to a "sell" rating on February 1, citing concerns over anticipated Medicare Advantage reimbursement shocks that could pressure insurer and broker margins across the sector.
The guidance cut represents a significant reversal for a company that had been positioning itself for improved profitability following a multi-year restructuring effort. SelectQuote, founded in 1985, operates as a technology-driven insurance distribution platform, leveraging partnerships with diverse insurers to enhance the efficiency of the insurance purchasing process for consumers.
With a market capitalization now around $248 million and shares trading 79 percent below their 52-week high of $6.86, SelectQuote faces mounting pressure to demonstrate that the Healthcare Services headwinds are indeed temporary. The company's operating margin remains deeply negative at negative 12.4 percent over the trailing twelve months, while quarterly earnings growth has declined 31 percent year-over-year, according to market data.
Management provided little specific guidance on when the PBM reimbursement issues might normalize or whether additional partnership renegotiations could create further volatility. The sharp guidance reduction has raised questions about the reliability of the company's forecasting at a time when investors are increasingly demanding visibility amid a challenging interest rate environment that has compressed valuations across the insurance technology sector.
As the company works through its Healthcare Services challenges, investors will be watching whether Senior segment margins can remain resilient and whether management can find new revenue streams to offset the ongoing SelectRX pressures. The company has 175.9 million shares outstanding, with institutional investors holding approximately 53 percent of the float, limiting the potential for activist investors to force strategic changes without significant shareholder support.