Most companies beat earnings by 10% and call it a good quarter. This Medicare distributor beat by 450% while simultaneously hitting a record 6.7x revenue-to-customer-acquisition-cost ratio.
Read on, and you get the full picture of whether the unit economics make this the small-cap healthcare name worth adding before Q4 closes the year.
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Q3 EPS Came In at $0.11 Against a $0.02 Consensus: A 450% Earnings Surprise
SelectQuote Inc. (NYSE: SLQT) reported Q3 FY2026 EPS of $0.11 against a $0.02 consensus. A 450% earnings surprise. Stock jumped 21.7% in premarket.
Revenue $430.9M, up 5.6%. Adjusted EBITDA $44.6M, up 18.3%. Net income $40.2M vs $26.0M a year ago. Every line moved the right way.
The beat was not a fluke. Senior generated $182.9M with 26% EBITDA margins. Healthcare Services generated $199.4M with 116,616 SelectRx members. Life brought in $47.9M. Three segments, all contributing.
EPS $0.11 vs $0.02 consensus: 450% beat. Stock up 21.7% in premarket.
Revenue $430.9M, up 5.6% year over year: Beat alongside the EPS, not just one or the other.
Adjusted EBITDA $44.6M, up 18.3%: Growing faster than revenue, which is the right direction.
175,557 Medicare Advantage policies approved: Up from 168,001 in Q3 fiscal 2025.
Management reaffirmed full-year guidance.
With $97.2M in EBITDA through three quarters, the company is already at the midpoint of the $90M to $100M full-year EBITDA range with one quarter to go.
Action: Buy SLQT at current levels.
The 450% EPS beat, combined with a guidance reaffirmation when $97.2M in EBITDA is already banked through Q3, tells you Q4 does not need to be extraordinary.
Exit if Q4 comes in with negative EBITDA or guidance is cut below $85 million for the full year.
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The 6.7x Revenue-to-CAC Ratio Is a Company Record, and It Is the Real Story
Revenue per policy hit $2,490 on a rolling 12-month basis. Revenue-to-CAC came in at 6.7x, a company record.
At 6.7x, SelectQuote generates $6.70 in lifetime revenue for every dollar spent acquiring a Medicare customer. That ratio was lower in prior quarters. It is improving.
The 6.7x matters more than the EPS beat for the long-term case. EPS moves around. Revenue-to-CAC tells you whether the Medicare distribution engine is efficient enough to compound.
Improving CAC efficiency alongside growing policy counts means you are getting a cheaper engine that is doing more work.
Revenue-to-CAC at 6.7x: A company record. Not just better than last quarter – better than any quarter.
Revenue per policy $2,490 rolling 12-month: The lifetime value side is holding up.
Marketing expense per policy down 14%: Spending less to get the same or better quality customer.
A 6.7x revenue-to-CAC is legitimately strong in insurance distribution. Competitors at 4x to 5x would trade places immediately.
Action: Track the revenue-to-CAC ratio every quarter. If it drops below 5.5x for two consecutive quarters, the efficiency improvement is reversing, and you reassess.
Above 6.5x sustained means the moat is deepening and you hold.
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SelectRx Membership, and Healthcare Services Is the 2027 Growth Driver
SelectRx is SelectQuote’s prescription drug management platform embedded within its Healthcare Services segment. It had 116,616 members at the end of Q3, up from 105,523 in the same quarter last year, an 11% year-over-year increase.
Healthcare Services generated $199.4 million in revenue this quarter, making it the single largest revenue segment in the company.
The Healthcare Services adjusted EBITDA of $5.3 million is small, but management is explicit that this segment is expected to become a significant driver of profitable cash flow growth in fiscal 2027 and beyond.
SelectRx is an add-on to existing Medicare members. The customer acquisition cost is already paid at the policy level.
SelectRx revenue is incremental without incremental CAC. At 116,616 members, it is still early, which is the point.
116,616 SelectRx members, up 11% year over year: Growing steadily, not spiking.
Healthcare Services revenue $199.4M in Q3: Already the largest revenue segment.
Management flagged FY2027 as when Healthcare Services drives material cash flow: That starts July 2026.
The repricing window is open now, not in 2027. Stock prices forward catalysts 6 to 12 months early.
Action: Watch the SelectRx membership on every quarterly print.
If it crosses 130,000 members by Q4 FY2026, the platform is scaling faster than management guided, and you add 15% to your position before the fiscal 2027 guidance is even issued.
EBITDA Margins With a Medicare Backdrop That Stayed Difficult
The Senior segment generated $182.9M in revenue and $58.6M in adjusted EBITDA at a 26% margin.
That margin held through what management called a mixed Medicare Advantage season – plan design changes, carrier pullbacks, and reimbursement pressure across the industry.
Twenty-six percent margins through all of that is notable.
The $14M favorable commission estimate change in Q3 is real but one-time. Strip it out, and margins are lower.
Even so, in a difficult Medicare Advantage environment, 26% Senior margins with growing policy counts tell you the model is resilient.
Senior segment EBITDA margin 26%: Held through a mixed Medicare Advantage season.
$58.6M Senior adjusted EBITDA in Q3: Carrying the company’s profitability.
175,557 Medicare Advantage policies approved, up from 168,001: Policy volume still growing year over year.
SelectQuote is a distributor. It benefits from Medicare Advantage enrollment growth regardless of which plan a customer picks, which insulates it from individual carrier decisions.
Action: If the Annual Enrollment Period results for Medicare Advantage season 2027 (reported in early calendar 2027) show policy counts above 180,000, the Senior segment is accelerating and you add at that point.
Below 160,000 would signal share loss and you reduce exposure.
How SLQT Stacks Up: Still Cheap at 0.11x Sales After a 22% Premarket Pop
SLQT trades at approximately 0.11x trailing twelve-month sales. Even after the 22% pop, it looks like a business priced for distress rather than for what Q3 actually showed.
Profitable, growing policies, expanding SelectRx, record unit economics. None of that is in the 0.11x multiple.
Insurance distribution businesses trade at 0.3x to 0.8x sales. SLQT at 0.11x is not near the low end. It is below the range entirely.
Debt and prior losses explain the gap, but $97.2M in year-to-date EBITDA makes the profitability story real, not speculative.
0.11x price-to-sales after a 22% move: Still deeply discounted relative to profitable peers.
$97.2M in adjusted EBITDA through 9 months of FY2026: The profitability is no longer theoretical.
Management expects to exit fiscal 2026 on a very strong footing: Their words, not ours.
The CEO explicitly said they will take all necessary action to maintain the NYSE listing and are confident the stock will stay listed for years.
That language during an earnings call is a real risk you factor into position size, not something you dismiss.
Action: Size the position smaller than a standard conviction bet because of the NYSE listing risk and the 1.62 beta.
If the NYSE listing concern is formally resolved and SLQT confirms it meets listing requirements, you have room to add. Until then, keep it to a quarter of your normal position size.
Trivia: What legendary investment did Benjamin Graham make in 1948 for $712,000 that eventually grew to be worth hundreds of millions?
The Risks Are Specific, and the Biggest One Is the Debt Load and NYSE Listing Status
SelectQuote carries meaningful debt, and the CEO’s comment on the earnings call about NYSE listing maintenance is a real disclosure you need to factor in.
The company said it will take all necessary action to maintain the listing and remains confident it will trade on the NYSE for years to come.
That kind of statement during an earnings call does not happen unless the listing question has come up internally or externally.
You are not buying a clean balance sheet. You are buying a turnaround with real operating momentum and real balance sheet risk.
Medicare Advantage plan design changes affect commissions receivable and the favorable estimate adjustments that helped Q3.
IRA drug pricing dynamics are also a live headwind for Healthcare Services. Management planned for these, but the regulatory environment remains uncertain.
NYSE listing risk explicitly flagged by CEO on earnings call: Not hypothetical, it is a disclosed concern.
Meaningful debt load: The balance sheet is not clean. EBITDA improvement helps, but slowly.
Medicare Advantage plan design changes are ongoing: Commission economics change when plan designs change.
Both risks are disclosed and live. Size accordingly.
Action: Hard stop at 50% below your entry price.
If the NYSE listing risk escalates to a formal notice or SLQT announces a reverse split to meet listing requirements, exit the position entirely on the announcement, regardless of where the stock is trading.
Final Word: Record Unit Economics and Real Profitability in a Tough Medicare Market
450% EPS beat. Record 6.7x revenue-to-CAC. Marketing costs down 14%. SelectRx up 11%. Guidance reaffirmed with $97.2M EBITDA banked. The business is working. The balance sheet and NYSE listing risk are the asterisks.
Buy a small position. Hard stop at 50% below entry. Formal NYSE listing clearance means size up.
Setup Scorecard
Entry Window: Current levels post-earnings pop. The 0.11x sales multiple still leaves room, even after the 22% move.
Catalyst Watch: Q4 FY2026 earnings (August 2026), SelectRx membership toward 130,000, Annual Enrollment Period results for Medicare 2027, and any formal resolution of NYSE listing concern.
Upside Setup: SelectRx crosses 130,000 members, revenue-to-CAC stays above 6.5x, NYSE listing concern resolved, valuation rerates toward 0.25x to 0.3x sales. That is 2x to 3x from current levels.
Downside Cushion: $97.2M EBITDA banked through Q3, guidance reaffirmed, 6.7x unit economics supporting fundamental floor, 26% Senior segment margins.
What Moves It Next: Q4 earnings EBITDA vs the $90M to $100M full-year guide, SelectRx membership update, and any NYSE listing status announcement.
That's our coverage for today; thanks for reading! Reply to this email with feedback or any value names you want me to check out.
Best Regards,
—Noah Zelvis
Undervalued Edge
