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SelectQuote, Inc. Reports Third Quarter of Fiscal Year 2022 Results

Third Quarter of Fiscal Year 2022 – Consolidated Earnings Highlights

  • Revenue of $275.1 million
  • Net Loss of $6.4 million
  • Adjusted EBITDA* of $13.0 million
  • No update to Full-Year Fiscal 2022 Revenue, Net Loss and Adjusted EBITDA Guidance:
    • Revenue expected in a range of $810 million to $850 million
    • Net Loss expected in a range of $255 million to $236 million
    • Adjusted EBITDA* expected in a range of $(260) million to $(235) million

Third Quarter of Fiscal Year 2022 – Segment Highlights

Senior

  • Revenue of $233.2 million
  • Adjusted EBITDA* of $32.2 million
  • Approved Medicare Advantage policies grew 48% Year-Over-Year

Life

  • Revenue of $39.4 million
  • Final expense premiums grew 15% Year-Over-Year

Auto & Home

  • Revenue of $7.2 million
  • Total Auto & Home premiums grew 4% Year-Over-Year

SelectQuote, Inc. (NYSE: SLQT) reported consolidated revenue for the third quarter of fiscal year 2022 of $275.1 million compared to consolidated revenue for the third quarter of fiscal year 2021 of $265.3 million. Consolidated net loss for the third quarter of fiscal year 2022 was $6.4 million compared to consolidated net income for the third quarter of fiscal year 2021 of $35.2 million. Finally, consolidated Adjusted EBITDA* for the third quarter of fiscal year 2022 was $13.0 million, compared to consolidated Adjusted EBITDA* for the third quarter of fiscal year 2021 of $63.6 million.

Chief Executive Officer Tim Danker commented, “We were pleased with our third quarter results, which finished ahead of our internal expectations. During the quarter, we saw improved sales conversion rates and lower marketing cost per sale, which while early, gives us even more confidence about the steps we are taking to improve our operating and financial results. As we execute on our planned pullback in Medicare policy sales in the near term, we are focused now more than ever on delivering high-value business to our carrier partners and to improving the cash efficiency of our business. We are also thrilled with the continued momentum of the Population Health business, particularly our SelectRx pharmacy business, which ended April with over 23,000 members, a nearly 10-fold increase in less than a year.”

Raff Sadun, Chief Financial Officer, also commented, “As discussed on our second quarter call, a key aspect of our long-term strategy is to reduce the overall operating leverage of our business to deliver attractive returns in a wide range of potential market scenarios. We made major progress on that front during the quarter, identifying over $200 million in expense reduction opportunities, excluding our planned investments in the growth of our cash-efficient SelectRx business. Approximately 20% of those identified savings are fixed cost actions we already executed during the 3rd quarter. While we are not updating our 2022 guidance, so far we see similar trends in the fourth quarter and are more focused on full year 2023.”

*See reconciliation from GAAP to non-GAAP measures starting on page 11.

Segment Results

We currently report on three segments: 1) Senior, 2) Life and 3) Auto & Home. The performance measures of the segments include total revenue and Adjusted EBITDA.* Costs of revenue, marketing and advertising, and technical development operating costs and expenses that are directly attributable to a segment are reported within the applicable segment. Indirect costs of revenue, marketing and advertising, and technical development operating costs and expenses are allocated to each segment based on varying metrics such as headcount. Adjusted EBITDA* is calculated as total revenue for the applicable segment less: direct and allocated costs of revenue, marketing and advertising, technical development, and general and administrative operating costs and expenses, excluding depreciation and amortization expense; gain or loss on disposal of property, equipment, and software; share-based compensation expense; restructuring expenses; and non-recurring expenses such as severance payments and transaction costs.

Senior

Financial Results

The following table provides the financial results for the Senior segment for the periods presented:

 

Three Months Ended

March 31,

 

 

 

Nine Months Ended

March 31,

 

 

(in thousands)

2022

 

2021

 

% Change

 

2022

 

2021

 

% Change

Revenue

$

233,172

 

 

$

215,600

 

 

8

%

 

$

497,459

 

 

$

604,309

 

 

(18

)%

Adjusted EBITDA*

 

32,182

 

 

 

75,489

 

 

(57

)%

 

 

(149,424

)

 

 

218,946

 

 

(168

)%

Adjusted EBITDA Margin*

 

14

%

 

 

35

%

 

 

 

 

(30

)%

 

 

36

%

 

 

Operating Metrics

Submitted Policies

Submitted policies are counted when an individual completes an application with our licensed agent and provides authorization to the agent to submit the application to the insurance carrier partner. The applicant may have additional actions to take, such as providing additional information, before the application will be reviewed by the insurance carrier.

The following table shows the number of submitted policies for the periods presented:

 

Three Months Ended

March 31,

 

 

 

Nine Months Ended

March 31,

 

 

 

2022

 

2021

 

% Change

 

2022

 

2021

 

% Change

Medicare Advantage

242,721

 

160,233

 

51

%

 

678,827

 

454,772

 

49

%

Medicare Supplement

1,389

 

 

3,738

 

 

(63

)%

 

6,318

 

 

24,287

 

 

(74

)%

Dental, Vision and Hearing

40,178

 

 

38,757

 

 

4

%

 

122,214

 

 

101,819

 

 

20

%

Prescription Drug Plan

1,079

 

 

1,568

 

 

(31

)%

 

6,193

 

 

10,243

 

 

(40

)%

Other

4,907

 

 

6,781

 

 

(28

)%

 

11,436

 

 

12,603

 

 

(9

)%

Total

290,274

 

 

211,077

 

 

38

%

 

824,988

 

 

603,724

 

 

37

%

*See reconciliation from GAAP to non-GAAP measures starting on page 11.

Approved Policies

Approved policies represents the number of submitted policies that were approved by our insurance carrier partners for the identified product during the indicated period. Not all approved policies will go in force.

The following table shows the number of approved policies for the periods presented:

 

Three Months Ended

March 31,

 

 

 

Nine Months Ended

March 31,

 

 

 

2022

 

2021

 

% Change

 

2022

 

2021

 

% Change

Medicare Advantage

196,377

 

132,950

 

48

%

 

546,031

 

384,137

 

42

%

Medicare Supplement

1,159

 

 

3,073

 

 

(62

)%

 

4,654

 

 

19,849

 

 

(77

)%

Dental, Vision and Hearing

34,486

 

 

34,517

 

 

%

 

101,251

 

 

84,370

 

 

20

%

Prescription Drug Plan

1,095

 

 

2,109

 

 

(48

)%

 

5,315

 

 

9,556

 

 

(44

)%

Other

3,836

 

 

5,129

 

 

(25

)%

 

9,199

 

 

10,209

 

 

(10

)%

Total

236,953

 

 

177,778

 

 

33

%

 

666,450

 

 

508,121

 

 

31

%

Lifetime Value of Commissions per Approved Policy

Lifetime value of commissions per approved policy represents commissions estimated to be collected over the estimated life of an approved policy based on multiple factors, including but not limited to, contracted commission rates, carrier mix and expected policy persistency with applied constraints. The lifetime value of commissions per approved policy is equal to the sum of the commission revenue due upon the initial sale of a policy, and when applicable, an estimate of future renewal commissions.

The following table shows the lifetime value of commissions per approved policy for the periods presented:

 

Three Months Ended

March 31,

 

 

 

Nine Months Ended

March 31,

 

 

(dollars per policy):

2022

 

2021

 

% Change

 

2022

 

2021

 

% Change

Medicare Advantage

$

933

 

$

1,362

 

(31

)%

 

$

935

 

$

1,290

 

(28

)%

Medicare Supplement

 

949

 

 

 

1,345

 

 

(29

)%

 

 

1,275

 

 

 

1,263

 

 

1

%

Dental, Vision and Hearing

 

120

 

 

 

129

 

 

(7

)%

 

 

123

 

 

 

140

 

 

(12

)%

Prescription Drug Plan

 

229

 

 

 

213

 

 

8

%

 

 

235

 

 

 

230

 

 

2

%

Other

 

95

 

 

 

60

 

 

58

%

 

 

77

 

 

 

95

 

 

(19

)%

Per Unit Economics

Per unit economics represents total Medicare Advantage and Medicare Supplement commissions, other product commissions, other revenues, and costs associated with the Senior segment, each shown per number of approved Medicare Advantage and Medicare Supplement policies over a given time period. Management assesses the business on a per-unit basis to help ensure the revenue opportunity associated with a successful policy sale is attractive relative to the marketing acquisition cost. Because not all acquired leads result in a successful policy sale, all per-policy metrics are based on approved policies, which is the measure that triggers revenue recognition.

The Medicare Advantage and Medicare Supplement commission per MA/MS policy represents the lifetime value of commissions for policies sold in the period. Other commission per MA/MS policy represents the lifetime value of commissions for other products sold in the period, including dental, vision and hearing, prescription drug plan, and other products, which management views as additional commission revenue on our agents’ core function of MA/MS policy sales. Other per MA/MS policy represents the production bonuses, lead sales revenue from InsideResponse, and updated estimates of prior period variable consideration based on actual policy renewals in the current period. Total operating expenses per MA/MS policy represents all of the operating expenses within the Senior segment. The Revenue to customer acquisition cost (“CAC”) multiple represents total revenue per MA/MS policy as a multiple of total marketing acquisition cost, which represents the direct costs of acquiring leads. These costs are included in marketing and advertising expense within the total operating expenses per MA/MS policy.

The following table shows per unit economics for the periods presented. Based on the seasonality of the Senior segment and the fluctuations between quarters, we believe that the most relevant view of per unit economics is on a rolling 12-month basis. All per-MA/MS policy metrics below are based on the sum of approved MA/MS policies, as both products have similar commission profiles. These metrics are the basis on which management assesses the business:

 

Twelve Months Ended

March 30,

 

 

(dollars per approved policy):

2022

 

2021

 

% Change

Medicare Advantage and Medicare Supplement approved policies

 

636,195

 

 

 

464,653

 

 

37

%

Medicare Advantage and Medicare Supplement commission per MA/MS policy

$

963

 

 

$

1,286

 

 

(25

)%

Other commission per MA/MS policy

 

29

 

 

 

38

 

 

(24

)%

Other per MA/MS policy

 

(14

)

 

 

166

 

 

(108

)%

Total revenue per MA/MS policy

 

978

 

 

 

1,490

 

 

(34

)%

Total operating expenses per MA/MS policy

 

(1,173

)

 

 

(947

)

 

24

%

Adjusted EBITDA per MA/MS policy*

$

(195

)

 

$

543

 

 

(136

)%

Adjusted EBITDA Margin per MA/MS policy*

 

(20

)%

 

 

36

%

 

(155

)%

Revenue/CAC multiple

1.8

X

 

3.1

X

 

 

Life

Financial Results

The following table provides the financial results for the Life segment for the periods presented:

 

Three Months Ended

March 31,

 

 

 

Nine Months Ended

March 31,

 

 

(in thousands)

2022

 

2021

 

% Change

 

2022

 

2021

 

% Change

Revenue

$

39,400

 

 

$

44,823

 

 

(12

)%

 

$

119,612

 

 

$

121,917

 

 

(2

)%

Adjusted EBITDA*

 

(1,888

)

 

 

1,598

 

 

(218

)%

 

 

2,265

 

 

 

16,385

 

 

(86

)%

Adjusted EBITDA Margin*

 

(5

)%

 

 

4

%

 

 

 

 

2

%

 

 

13

%

 

 

Operating Metrics

Life premium represents the total premium value for all policies that were approved by the relevant insurance carrier partner and for which the policy document was sent to the policyholder and payment information was received by the relevant insurance carrier partner during the indicated period. Because our commissions are earned based on a percentage of total premium, total premium volume for a given period is the key driver of revenue for our Life segment.

*See reconciliation from GAAP to non-GAAP measures starting on page 11.

The following table shows term and final expense premiums for the periods presented:

 

Three Months Ended

March 31,

 

 

 

Nine Months Ended

March 31,

 

 

(in thousands)

2022

 

2021

 

% Change

 

2022

 

2021

 

% Change

Term Premiums

$

14,933

 

$

19,043

 

(22

)%

 

$

45,990

 

$

56,784

 

(19

)%

Final Expense Premiums

 

28,532

 

 

 

24,817

 

 

15

%

 

 

83,718

 

 

 

56,269

 

 

49

%

Total

$

43,465

 

 

$

43,860

 

 

(1

)%

 

 

129,708

 

 

 

113,053

 

 

15

%

Auto & Home

Financial Results

The following table provides the financial results for the Auto & Home segment for the periods presented:

 

Three Months Ended

March 31,

 

 

 

Nine Months Ended

March 31,

 

 

(in thousands)

2022

 

2021

 

% Change

 

2022

 

2021

 

% Change

Revenue

$

7,152

 

 

$

6,973

 

 

3

%

 

$

20,755

 

 

$

23,752

 

 

(13

)%

Adjusted EBITDA*

 

1,150

 

 

 

1,096

 

 

5

%

 

 

3,957

 

 

 

6,863

 

 

(42

)%

Adjusted EBITDA Margin*

 

16

%

 

 

16

%

 

 

 

 

19

%

 

 

29

%

 

 

Operating Metrics

Auto & Home premium represents the total premium value of all new policies that were approved by our insurance carrier partners during the indicated period. Because our commissions are earned based on a percentage of total premium, total premium volume for a given period is the key driver of revenue for our Auto & Home segment.

The following table shows premiums for the periods presented:

 

Three Months Ended

March 31,

 

 

 

Nine Months Ended

March 31,

 

 

(in thousands):

2022

 

2021

 

% Change

 

2022

 

2021

 

% Change

Premiums

$

12,516

 

$

12,010

 

4

%

 

$

36,358

 

$

42,165

 

(14

)%

*See reconciliation from GAAP to non-GAAP measures starting on page 11.

Earnings Conference Call

SelectQuote, Inc. will host a conference call with the investment community today, Thursday, May 5, 2022, beginning at 8:30 a.m. ET. To register for this conference call, please use this link: http://www.directeventreg.com/registration/event/1378747. After registering, a confirmation will be sent via email, including dial-in details and unique conference call codes for entry. Registration is open through the live call, but to ensure you are connected for the full call we suggest registering a day in advance or at minimum 10 minutes before the start of the call. The event will also be webcasted live via our investor relations website https://ir.selectquote.com/investor-home/default.aspx.

Non-GAAP Financial Measures

This release includes certain non-GAAP financial measures intended to supplement, not substitute for, comparable GAAP measures. To supplement our financial statements presented in accordance with GAAP and to provide investors with additional information regarding our GAAP financial results, we have presented in this release Adjusted EBITDA and Adjusted EBITDA Margin, which are non-GAAP financial measures. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly titled measures presented by other companies. We define Adjusted EBITDA as income (loss) before interest expense, income tax expense (benefit), depreciation and amortization, and certain add-backs for non-cash or non-recurring expenses, including restructuring and share-based compensation expenses. The most directly comparable GAAP measure is net income (loss). We monitor and have presented in this release Adjusted EBITDA because it is a key measure used by our management and Board of Directors to understand and evaluate our operating performance, to establish budgets and to develop operational goals for managing our business. In particular, we believe that excluding the impact of these expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core operating performance.

We believe that this non-GAAP financial measure helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in the calculations of this non-GAAP financial measure. Accordingly, we believe that this financial measure provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects.

Forward Looking Statement

This release contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following: the ultimate duration and impact of the ongoing COVID-19 pandemic, our reliance on a limited number of insurance carrier partners and any potential termination of those relationships or failure to develop new relationships; existing and future laws and regulations affecting the health insurance market; changes in health insurance products offered by our insurance carrier partners and the health insurance market generally; insurance carriers offering products and services directly to consumers; changes to commissions paid by insurance carriers and underwriting practices; competition with brokers, exclusively online brokers and carriers who opt to sell policies directly to consumers; competition from government-run health insurance exchanges; developments in the U.S. health insurance system; our dependence on revenue from carriers in our senior segment and downturns in the senior health as well as life, automotive and home insurance industries; our ability to develop new offerings and penetrate new vertical markets; risks from third-party products; failure to enroll individuals during the Medicare annual enrollment period; our ability to attract, integrate and retain qualified personnel; our dependence on lead providers and ability to compete for leads; failure to obtain and/or convert sales leads to actual sales of insurance policies; access to data from consumers and insurance carriers; accuracy of information provided from and to consumers during the insurance shopping process; cost-effective advertisement through internet search engines; ability to contact consumers and market products by telephone; global economic conditions; disruption to operations as a result of future acquisitions; significant estimates and assumptions in the preparation of our financial statements; impairment of goodwill; potential litigation and claims, including IP litigation; our existing and future indebtedness; our ability to maintain compliance with or renegotiate or obtain waivers of our debt covenants; developments with respect to LIBOR; access to additional capital; failure to protect our intellectual property and our brand; fluctuations in our financial results caused by seasonality; accuracy and timeliness of commissions reports from insurance carriers; timing of insurance carriers’ approval and payment practices; factors that impact our estimate of the constrained lifetime value of commissions per policyholder; changes in accounting rules, tax legislation and other legislation; disruptions or failures of our technological infrastructure and platform; failure to maintain relationships with third-party service providers; cybersecurity breaches or other attacks involving our systems or those of our insurance carrier partners or third-party service providers; our ability to protect consumer information and other data; and failure to market and sell Medicare plans effectively or in compliance with laws. For a further discussion of these and other risk factors that could impact our future results and performance, see the section entitled “Risk Factors” in the most recent Annual Report on Form 10-K (the “Annual Report”) filed by us with the Securities and Exchange Commission. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and, except as otherwise required by law, we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

About SelectQuote:

Founded in 1985, SelectQuote (NYSE: SLQT) provides solutions that help consumers protect their most valuable assets: their families, health and property. SelectQuote pioneered the model of providing unbiased comparisons from multiple, highly-rated insurance companies allowing consumers to choose the policy and terms that best meet their unique needs. Two foundational pillars underpin the company’s success: a strong force of highly-trained and skilled agents who provide a consultative needs analysis for every consumer, and proprietary technology that sources and routes high-quality leads. SelectQuote has three core business lines: SelectQuote Senior, SelectQuote Life and SelectQuote Auto and Home. SelectQuote Senior, the largest and fastest-growing business, serves the needs of a demographic that sees 10,000 people turn 65 each day with a range of Medicare Advantage and Medicare Supplement plans. In 2021, SelectQuote expanded its business with the addition of Population Health, a healthcare services company, and SelectRx, a specialty medication management pharmacy.

SELECTQUOTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

 

 

 

March 31, 2022

 

June 30, 2021

ASSETS

 

 

 

 

CURRENT ASSETS:

 

 

 

 

Cash and cash equivalents

 

$

199,359

 

 

$

286,454

Accounts receivable

 

 

168,735

 

 

 

105,298

 

Commissions receivable-current

 

 

77,158

 

 

 

89,120

 

Other current assets

 

 

13,246

 

 

 

4,486

 

Total current assets

 

 

458,498

 

 

 

485,358

 

COMMISSIONS RECEIVABLE

 

 

761,138

 

 

 

756,777

 

PROPERTY AND EQUIPMENT—Net

 

 

45,558

 

 

 

29,510

 

SOFTWARE—Net

 

 

15,558

 

 

 

12,611

 

OPERATING LEASE RIGHT-OF-USE ASSETS

 

 

29,018

 

 

 

31,414

 

INTANGIBLE ASSETS—Net

 

 

36,022

 

 

 

40,670

 

GOODWILL

 

 

73,732

 

 

 

68,019

 

OTHER ASSETS

 

 

15,790

 

 

 

1,436

 

TOTAL ASSETS

 

$

1,435,314

 

 

$

1,425,795

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

Accounts payable

 

$

27,445

 

 

$

34,079

 

Accrued expenses

 

 

35,593

 

 

 

20,676

 

Accrued compensation and benefits

 

 

46,229

 

 

 

40,909

 

Operating lease liabilities—current

 

 

5,181

 

 

 

5,289

 

Current portion of long-term debt

 

 

7,169

 

 

 

2,360

 

Other current liabilities

 

 

2,079

 

 

 

5,504

 

Total current liabilities

 

 

123,696

 

 

 

108,817

 

LONG-TERM DEBT, NET—less current portion

 

 

699,386

 

 

 

459,043

 

DEFERRED INCOME TAXES

 

 

76,806

 

 

 

139,240

 

OPERATING LEASE LIABILITIES

 

 

35,301

 

 

 

38,392

 

OTHER LIABILITIES

 

 

3,533

 

 

 

11,743

 

Total liabilities

 

 

938,722

 

 

 

757,235

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

Common stock, $0.01 par value

 

 

1,644

 

 

 

1,635

 

Additional paid-in capital

 

 

554,045

 

 

 

544,771

 

Retained earnings (accumulated deficit)

 

 

(68,684

)

 

 

121,925

 

Accumulated other comprehensive income

 

 

9,587

 

 

 

229

 

Total shareholders’ equity

 

 

496,592

 

 

 

668,560

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

1,435,314

 

 

$

1,425,795

 

SELECTQUOTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

March 31,

 

Nine Months Ended

March 31,

 

 

2022

 

2021

 

2022

 

2021

REVENUE:

 

 

 

 

 

 

 

 

Commission

 

$

222,538

 

 

$

235,216

 

 

$

495,494

 

 

$

660,631

 

Production bonus and other

 

 

52,575

 

 

 

30,130

 

 

 

132,127

 

 

 

85,054

 

Total revenue

 

 

275,113

 

 

 

265,346

 

 

 

627,621

 

 

 

745,685

 

 

 

 

 

 

 

 

 

 

OPERATING COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

Cost of revenue

 

 

119,459

 

 

 

71,439

 

 

 

359,732

 

 

 

206,605

 

Marketing and advertising

 

 

125,082

 

 

 

116,690

 

 

 

409,005

 

 

 

298,696

 

General and administrative

 

 

21,031

 

 

 

19,251

 

 

 

64,570

 

 

 

44,496

 

Technical development

 

 

6,436

 

 

 

4,860

 

 

 

18,675

 

 

 

13,458

 

Total operating costs and expenses

 

 

272,008

 

 

 

212,240

 

 

 

851,982

 

 

 

563,255

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) FROM OPERATIONS

 

 

3,105

 

 

 

53,106

 

 

 

(224,361

)

 

 

182,430

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE, NET

 

 

(12,179

)

 

 

(7,355

)

 

 

(31,300

)

 

 

(20,898

)

LOSS ON EXTINGUISHMENT OF DEBT

 

 

 

 

 

(3,315

)

 

 

 

 

 

(3,315

)

OTHER EXPENSE, NET

 

 

(23

)

 

 

(349

)

 

 

(177

)

 

 

(1,545

)

INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)

 

 

(9,097

)

 

 

42,087

 

 

 

(255,838

)

 

 

156,672

 

INCOME TAX EXPENSE (BENEFIT)

 

 

(2,649

)

 

 

6,852

 

 

 

(65,229

)

 

 

31,846

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

(6,448

)

 

$

35,235

 

 

$

(190,609

)

 

$

124,826

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER SHARE:

 

 

 

 

 

 

 

 

Basic

 

$

(0.04

)

 

$

0.21

 

 

$

(1.16

)

 

$

0.77

 

Diluted

 

$

(0.04

)

 

$

0.21

 

 

$

(1.16

)

 

$

0.75

 

 

 

 

 

 

 

 

 

 

WEIGHTED-AVERAGE COMMON STOCK OUTSTANDING USED IN PER SHARE AMOUNTS:

 

 

 

 

 

 

 

 

Basic

 

 

164,083

 

 

 

163,023

 

 

 

163,914

 

 

 

162,705

 

Diluted

 

 

164,083

 

 

 

165,731

 

 

 

163,914

 

 

 

165,495

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME, NET OF TAX:

 

 

 

 

 

 

 

 

Gain on cash flow hedge

 

 

7,589

 

 

 

1,810

 

 

 

9,358

 

 

 

1,669

 

OTHER COMPREHENSIVE INCOME

 

 

7,589

 

 

 

1,810

 

 

 

9,358

 

 

 

1,669

 

COMPREHENSIVE INCOME (LOSS)

 

$

1,141

 

 

$

37,045

 

 

$

(181,251

)

 

$

126,495

 

SELECTQUOTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

Nine Months Ended March 31,

 

 

2022

 

2021

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

Net income (loss)

 

$

(190,609

)

 

$

124,826

 

Adjustments to reconcile net income (loss) to net cash and cash equivalents used in operating activities:

 

 

 

 

Depreciation and amortization

 

 

17,957

 

 

 

11,260

 

Loss on disposal of property, equipment, and software

 

 

741

 

 

 

261

 

Share-based compensation expense

 

 

6,252

 

 

 

3,689

 

Deferred income taxes

 

 

(65,623

)

 

 

31,702

 

Amortization of debt issuance costs and debt discount

 

 

4,217

 

 

 

2,482

 

Write-off of debt issuance costs

 

 

 

 

 

2,570

 

Fair value adjustments to contingent earnout obligations

 

 

 

 

 

1,487

 

Non-cash lease expense

 

 

3,065

 

 

 

2,869

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

 

(62,803

)

 

 

(49,224

)

Commissions receivable

 

 

7,601

 

 

 

(251,188

)

Other assets

 

 

(8,275

)

 

 

4,349

 

Accounts payable and accrued expenses

 

 

8,096

 

 

 

26,223

 

Operating lease liabilities

 

 

(3,868

)

 

 

(2,631

)

Other liabilities

 

 

(1,113

)

 

 

30,378

 

Net cash used in operating activities

 

 

(284,362

)

 

 

(60,947

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

Purchases of property and equipment

 

 

(24,515

)

 

 

(6,520

)

Purchases of software and capitalized software development costs

 

 

(7,570

)

 

 

(5,807

)

Acquisition of business

 

 

(6,927

)

 

 

(23,879

)

Investment in equity securities

 

 

(1,000

)

 

 

 

Net cash used in investing activities

 

 

(40,012

)

 

 

(36,206

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

Proceeds from Revolving Credit Facility

 

 

50,000

 

 

 

 

Payments on Revolving Credit Facility

 

 

(50,000

)

 

 

 

Proceeds from DDTL Facility

 

 

242,000

 

 

 

 

Payments on DDTL Facility

 

 

(613

)

 

 

 

Net proceeds from Term Loans

 

 

 

 

 

228,753

 

Payments on Term Loans

 

 

(1,180

)

 

 

(84,118

)

Payments on other debt

 

 

(130

)

 

 

(189

)

Proceeds from common stock options exercised and employee stock purchase plan

 

 

3,179

 

 

 

1,778

 

Payments of tax withholdings related to net share settlement of equity awards

 

 

(148

)

 

 

(10,026

)

Payments of debt issuance costs

 

 

(328

)

 

 

(885

)

Payments of costs incurred in connection with private placement

 

 

 

 

 

(1,771

)

Payments of costs incurred in connection with initial public offering

 

 

 

 

 

(3,911

)

Payment of contingent earnout liability

 

 

 

 

 

(32,300

)

Payment of acquisition holdback

 

 

(5,501

)

 

 

 

Net cash provided by financing activities

 

 

237,279

 

 

 

97,331

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

(87,095

)

 

 

178

 

CASH AND CASH EQUIVALENTS—Beginning of period

 

 

286,454

 

 

 

368,870

 

CASH AND CASH EQUIVALENTS—End of period

 

$

199,359

 

 

$

369,048

 

SELECTQUOTE, INC. AND SUBSIDIARIES

Adjusted EBITDA to Net Income (Loss) Reconciliation

(Unaudited)

 

 

 

Three Months Ended March 31, 2022

(in thousands)

 

Senior

 

Life

 

Auto &

Home

 

Corp &

Elims

 

Consolidated

Revenue

 

$

233,172

 

 

$

39,400

 

 

$

7,152

 

 

$

(4,611

)

 

$

275,113

 

Operating expenses

 

 

(200,990

)

 

 

(41,288

)

 

 

(6,002

)

 

 

(13,819

)

 

 

(262,099

)

Other expenses, net

 

 

 

 

 

 

 

 

 

 

 

(23

)

 

 

(23

)

Adjusted EBITDA

 

 

32,182

 

 

 

(1,888

)

 

 

1,150

 

 

 

(18,453

)

 

 

12,991

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

(2,143

)

Non-recurring expenses

 

 

 

 

 

 

 

 

 

 

(703

)

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

(6,679

)

Loss on disposal of property, equipment, and software, net

 

 

 

 

 

 

 

 

 

 

(384

)

Interest expense, net

 

 

 

 

 

 

 

 

 

 

(12,179

)

Income tax benefit

 

 

 

 

 

 

 

 

 

 

2,649

 

Net loss

 

 

 

 

 

 

 

 

 

$

(6,448

)

   

 

 

Three Months Ended March 31, 2021

(in thousands)

 

Senior

 

Life

 

Auto &

Home

 

Corp &

Elims

 

Consolidated

Revenue

 

$

215,600

 

 

$

44,823

 

 

$

6,973

 

 

$

(2,050

)

 

$

265,346

 

Operating expenses

 

 

(140,111

)

 

 

(43,225

)

 

 

(5,877

)

 

 

(12,507

)

 

 

(201,720

)

Other expenses, net

 

 

 

 

 

 

 

 

 

 

 

(15

)

 

 

(15

)

Adjusted EBITDA

 

 

75,489

 

 

 

1,598

 

 

 

1,096

 

 

 

(14,572

)

 

 

63,611

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

(1,429

)

Non-recurring expenses

 

 

 

 

 

 

 

 

 

 

(4,667

)

Fair value adjustments to contingent earnout obligations

 

 

 

 

 

 

 

 

 

 

(334

)

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

(4,323

)

Loss on disposal of property, equipment, and software

 

 

 

 

 

 

 

 

 

 

(101

)

Interest expense, net

 

 

 

 

 

 

 

 

 

 

(7,355

)

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

(3,315

)

Income tax expense

 

 

 

 

 

 

 

 

 

 

(6,852

)

Net income

 

 

 

 

 

 

 

 

 

$

35,235

 

SELECTQUOTE, INC. AND SUBSIDIARIES

Adjusted EBITDA to Net Income (Loss) Reconciliation

(Unaudited)

 

 

 

Nine Months Ended March 31, 2022

(in thousands)

 

Senior

 

Life

 

Auto &

Home

 

Corp &

Elims

 

Consolidated

Revenue

 

$

497,459

 

 

$

119,612

 

 

$

20,755

 

 

$

(10,205

)

 

$

627,621

 

Operating expenses

 

 

(646,883

)

 

 

(117,347

)

 

 

(16,798

)

 

 

(43,149

)

 

 

(824,177

)

Other expenses, net

 

 

 

 

 

 

 

 

 

 

 

(177

)

 

 

(177

)

Adjusted EBITDA

 

 

(149,424

)

 

 

2,265

 

 

 

3,957

 

 

 

(53,531

)

 

 

(196,733

)

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

(6,252

)

Non-recurring expenses

 

 

 

 

 

 

 

 

 

 

(2,857

)

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

(17,957

)

Loss on disposal of property, equipment, and software, net

 

 

 

 

 

 

 

 

 

 

(739

)

Interest expense, net

 

 

 

 

 

 

 

 

 

 

(31,300

)

Income tax benefit

 

 

 

 

 

 

 

 

 

 

65,229

 

Net loss

 

 

 

 

 

 

 

 

 

$

(190,609

)

   

 

 

Nine Months Ended March 31, 2021

(in thousands)

 

Senior

 

Life

 

Auto &

Home

 

Corp &

Elims

 

Consolidated

Revenue

 

$

604,309

 

 

$

121,917

 

 

$

23,752

 

 

$

(4,293

)

 

$

745,685

 

Operating expenses

 

 

(385,363

)

 

 

(105,532

)

 

 

(16,889

)

 

 

(34,771

)

 

 

(542,555

)

Other expenses, net

 

 

 

 

 

 

 

 

 

 

 

(58

)

 

 

(58

)

Adjusted EBITDA

 

 

218,946

 

 

 

16,385

 

 

 

6,863

 

 

 

(39,122

)

 

 

203,072

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

(3,689

)

Non-recurring expenses

 

 

 

 

 

 

 

 

 

 

(5,490

)

Fair value adjustments to contingent earnout obligations

 

 

 

 

 

 

 

 

 

 

(1,487

)

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

(11,260

)

Loss on disposal of property, equipment, and software

 

 

 

 

 

 

 

 

 

 

(261

)

Interest expense, net

 

 

 

 

 

 

 

 

 

 

(20,898

)

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

(3,315

)

Income tax expense

 

 

 

 

 

 

 

 

 

 

(31,846

)

Net income

 

 

 

 

 

 

 

 

 

$

124,826

 

SELECTQUOTE, INC. AND SUBSIDIARIES

Net Loss to Adjusted EBITDA Reconciliation

(Unaudited)

 

Guidance net loss to Adjusted EBITDA reconciliation, year ending June 30, 2022:

 

(in thousands)

 

Range

Net Loss

 

$

(255,000

)

 

$

(236,000

)

Income tax benefit

 

 

(86,000

)

 

 

(80,000

)

Interest expense, net

 

 

43,000

 

 

 

43,000

 

Depreciation and amortization

 

 

22,000

 

 

 

22,000

 

Share-based compensation expense

 

 

11,000

 

 

 

11,000

 

Non-recurring expenses

 

 

5,000

 

 

 

5,000

 

Adjusted EBITDA

 

$

(260,000

)

 

$

(235,000

)

 

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