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Reports Third Quarter 2024 Results By: SelectQuote, Inc. via Business Wire May 09, 2024 at 07:30 AM EDT Third Quarter of Fiscal Year 2024 – Consolidated Earnings Highlights Revenue of $376.4 million Net income of $8.6 million Adjusted EBITDA* of $46.6 million Raising Fiscal Year 2024 Guidance Ranges: Revenue expected in a range of $1.25 billion to $1.3 billion vs prior range of $1.23 billion to $1.3 billion Net loss expected in a range of $34 million to $21 million vs prior range of $45 million to $22 million Adjusted EBITDA* expected in a range of $100 million to $110 million vs prior range of $90 million to $105 million Third Quarter of Fiscal Year 2024 – Segment Highlights Senior Revenue of $204.3 million Adjusted EBITDA* of $61.5 million Approved Medicare Advantage policies of 185,716 Healthcare Services Revenue of $124.2 million Adjusted EBITDA* of $1.6 million Over 75,000 SelectRx members Life Revenue of $40.7 million Adjusted EBITDA* of $3.1 million Auto & Home Revenue of $9.1 million Adjusted EBITDA* of $3.6 million SelectQuote, Inc. (NYSE: SLQT) reported consolidated revenue for the third quarter of fiscal year 2024 of $376.4 million, compared to consolidated revenue for the third quarter of fiscal year 2023 of $299.4 million. Consolidated net income for the third quarter of fiscal year 2024 was $8.6 million, compared to consolidated net income for the third quarter of fiscal year 2023 of $9.3 million. Finally, consolidated Adjusted EBITDA* for the third quarter of fiscal year 2024 was $46.6 million, compared to consolidated Adjusted EBITDA* for the third quarter of fiscal year 2023 of $44.0 million. Chief Executive Officer Tim Danker commented, “SelectQuote outperformed our own expectations for the 9th consecutive quarter, and the company has never been better positioned to drive shareholder value. We firmly believe SelectQuote can amplify the strong operating results achieved over the past two years since our foundational strategic redesign.” “Our Senior business completed another highly successful Medicare Advantage busy season in the quarter, which produced stable and attractive economics across both policy growth, LTV expansion, and operating efficiency. The segment’s core tenured agents helped over 185,000 Americans find the right Medicare Advantage policy and did so with strong overall cost per policy and efficient close rates, which drove a Senior Adjusted EBITDA margin above 30% in one of our highest open enrollment period (OEP) quarters for revenue in company history. The success in our Senior business also enhanced the continued expansion of our Healthcare Services business, which saw SelectRx grow by over 12,000 members, significantly exceeding our original outlook. Overall, our holistic healthcare platform created new customers at a highly efficient revenue to customer acquisition cost of over 4x, which will drive significant Adjusted EBITDA contribution as Healthcare Services continues to scale.” Mr. Danker concluded, “The teams at SelectQuote and our leadership are energized about the successes experienced year-to-date. We have conviction that 2024 will prove to be an inflection point in our company’s history, and SelectQuote is poised to leverage our unique healthcare platform to drive attractive returns for our shareholders in the quarters and years ahead.” Segment Results We currently report on four segments: 1) Senior, 2) Healthcare Services, 3) Life, and 4) Auto & Home. The performance measures of the segments include total revenue, Adjusted EBITDA,* and Adjusted EBITDA Margin.* Costs of revenue, cost of goods sold-pharmacy revenue, marketing and advertising, selling, general, and administrative, and technical development operating expenses that are directly attributable to a segment are reported within the applicable segment. Indirect costs of revenue, marketing and advertising, selling, general, and administrative, and technical development operating 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, cost of goods sold, marketing and advertising, technical development, and selling, 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; 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) 2024 2023 % Change 2024 2023 % Change Revenue $ 204,259 $ 185,200 10 % $ 541,705 $ 486,541 11 % Adjusted EBITDA* 61,494 59,166 4 % 138,871 138,933 — % Adjusted EBITDA Margin* 30 % 32 % 26 % 29 % 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 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, 2024 2023 % Change 2024 2023 % Change Medicare Advantage 226,692 196,372 15 % 602,936 538,247 12 % Medicare Supplement 650 675 (4 )% 2,334 2,905 (20 )% Dental, Vision and Hearing 16,588 21,175 (22 )% 48,892 59,513 (18 )% Prescription Drug Plan 665 416 60 % 2,696 2,082 29 % Other 774 1,864 (58 )% 3,724 5,402 (31 )% Total 245,369 220,502 11 % 660,582 608,149 9 % *See “Non-GAAP Financial Measures” below. 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, 2024 2023 % Change 2024 2023 % Change Medicare Advantage 185,716 165,530 12 % 517,973 467,540 11 % Medicare Supplement 445 557 (20 )% 1,578 2,184 (28 )% Dental, Vision and Hearing 14,042 16,968 (17 )% 41,474 47,940 (13 )% Prescription Drug Plan 1,114 521 114 % 2,684 1,794 50 % Other 789 1,029 (23 )% 2,834 3,932 (28 )% Total 202,106 184,605 9 % 566,543 523,390 8 % 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): 2024 2023 % Change 2024 2023 % Change Medicare Advantage $ 995 $ 965 3 % $ 923 $ 888 4 % Medicare Supplement 1,271 871 46 % 1,108 994 11 % Dental, Vision and Hearing 101 91 11 % 100 95 5 % Prescription Drug Plan 237 194 22 % 237 211 12 % Other 36 123 (71 )% (3 ) 100 (103 )% Healthcare Services Financial Results The following table provides the financial results for the Healthcare Services segment for the periods presented: Three Months Ended March 31, Nine Months Ended March 31, (in thousands) 2024 2023 % Change 2024 2023 % Change Revenue $ 124,207 $ 70,725 76 % $ 333,284 $ 169,270 97 % Adjusted EBITDA* 1,609 (3,366 ) 148 % 6,911 (24,456 ) 128 % Adjusted EBITDA Margin* 1 % (5 )% 2 % (14 )% *See “Non-GAAP Financial Measures” below. Operating Metrics Total Members The total number of SelectRx members represents the amount of customers to which an order has been shipped, as this is the primary key driver of revenue for Healthcare Services. The following table shows the total number of SelectRx members for the date presented: March 31, 2024 March 31, 2023 Total SelectRx Members 75,074 44,993 Prescriptions Per Day Prescriptions per day represents the total average prescriptions shipped per business day, as this is a primary key driver of revenue for Healthcare Services. The following table shows the prescriptions shipped per day for the periods presented: Three Months Ended March 31, Nine Months Ended March 31, 2024 2023 2024 2023 Prescriptions Per Day 20,216 11,737 17,582 9,753 Combined Senior and Healthcare Services - Consumer Per Unit Economics The opportunity to leverage our existing database and distribution model to improve access to healthcare services for our consumers has created a need for us to review our key metrics related to our per unit economics. As we think about the revenue and expenses for Healthcare Services, we note that they are derived from the marketing acquisition costs associated with the sale of an MA or MS policy, some of which costs are allocated directly to Healthcare Services, and therefore determined that our per unit economics measure should include components from both Senior and Healthcare Services. See details of revenue and expense items included in the calculation below. Combined Senior and Healthcare Services consumer per unit economics represents total MA and MS commissions; other product commissions; other revenues, including revenues from Healthcare Services; and operating expenses associated with Senior and Healthcare Services, each shown per number of approved MA and MS policies over a given time period. Management assesses the business on a per-unit basis to help ensure that 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 MA and MS commission per MA/MS policy represents the LTV for policies sold in the period. Other commission per MA/MS policy represents the LTV for other products sold in the period, including DVH prescription drug plan, and other products, which management views as additional commission revenue on our agents’ core function of MA/MS policy sales. Pharmacy revenue per MA/MS policy represents revenue from SelectRx, and other revenue per MA/MS policy represents revenue from Population Health, production bonuses, marketing development funds, lead generation revenue, and adjustments from the Company’s reassessment of its cohorts’ transaction prices. Total operating expenses per MA/MS policy represents all of the operating expenses within Senior and Healthcare Services. The revenue to customer acquisition cost (“CAC”) multiple represents total revenue as a multiple of total marketing acquisition costs, 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 combined Senior and Healthcare Services consumer per unit economics for the periods presented. Based on the seasonality of Senior 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. Twelve Months Ended March 31, (dollars per approved policy): 2024 2023 Medicare Advantage and Medicare Supplement approved policies 630,013 586,238 Medicare Advantage and Medicare Supplement commission per MA/MS policy $ 907 $ 886 Other commission per MA/MS policy 10 15 Pharmacy revenue per MA/MS policy 641 320 Other revenue per MA/MS policy 126 66 Total revenue per MA/MS policy 1,684 1,287 Total operating expenses per MA/MS policy (1,425 ) (1,167 ) Adjusted EBITDA per MA/MS policy (1) $ 259 $ 120 Adjusted EBITDA Margin per MA/MS policy (1) 15 % 9 % Revenue/CAC multiple 4.2 X 3.5 X (1) These financial measures are not calculated in accordance with GAAP. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” in the Company’s Quarterly Report on Form 10-Q for information regarding our use of these non-GAAP financial measures and a reconciliation of such measures to their nearest comparable financial measures calculated and presented in accordance with GAAP. Total revenue per MA/MS policy increased 31% for the twelve months ended March 31, 2024, compared to the twelve months ended March 31, 2023, primarily due to the increase in pharmacy revenue. Total operating expenses per MA/MS policy increased 22% for the twelve months ended March 31, 2024, compared to the twelve months ended March 31, 2023, primarily driven by increase in cost of goods sold-pharmacy revenue for SelectRx due to the growth of the business. 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) 2024 2023 % Change 2024 2023 % Change Revenue $ 40,686 $ 36,950 10 % $ 115,855 $ 107,780 7 % Adjusted EBITDA* 3,138 5,303 (41 )% 12,945 16,371 (21 )% Adjusted EBITDA Margin* 8 % 14 % 11 % 15 % 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 “Non-GAAP Financial Measures” below. 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) 2024 2023 % Change 2024 2023 % Change Term Premiums $ 16,788 $ 17,512 (4 )% $ 52,376 $ 48,433 8 % Final Expense Premiums 23,724 19,308 23 % 62,811 58,766 7 % Total $ 40,512 $ 36,820 10 % 115,187 107,199 7 % 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) 2024 2023 % Change 2024 2023 % Change Revenue $ 9,134 $ 8,238 11 % $ 28,649 $ 23,128 24 % Adjusted EBITDA* 3,609 2,591 39 % 11,654 7,315 59 % Adjusted EBITDA Margin* 40 % 31 % 41 % 32 % 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): 2024 2023 % Change 2024 2023 % Change Premiums $ 14,180 $ 12,828 11 % $ 42,746 $ 36,456 17 % Amendment to Credit Agreement On May 8, 2024, the Company and its lenders agreed to amend the Company’s credit agreement to extend the maturity date with respect to $683.8 million of extended term loans from February 15, 2025 to May 15, 2025. The amendment also provides for a minimum asset coverage ratio and minimum liquidity requirements for the extension period. Additional information regarding the amendment will be included in the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2024. Earnings Conference Call SelectQuote, Inc. will host a conference call with the investment community today, Thursday, May 9, 2024, beginning at 9:00 a.m. ET. To register for this conference call, please use this link: https://www.netroadshow.com/events/login?show=2a79382d&confId=63927. 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 at least 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. *See “Non-GAAP Financial Measures” below. 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 define Adjusted EBITDA Margin as Adjusted EBITDA divided by revenue. The most directly comparable GAAP measure is net income margin. We monitor and have presented in this release Adjusted EBITDA and Adjusted EBITDA Margin because they are key measures 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 these non-GAAP financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in the calculations of these non-GAAP financial measures. Accordingly, we believe these financial measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects. Reconciliations of the differences between the non-GAAP financial measures included herein and their most directly comparable GAAP financial measures are set forth below beginning on page 12. Forward Looking Statements 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 impacts of the COVID-19 pandemic and any other public health events, 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, including 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, including inflation; 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 other legal proceedings or inquiries; our existing and future indebtedness; our ability to maintain compliance with our debt covenants and meet our scheduled repayment obligations under our debt arrangements; our ability to access additional capital on acceptable terms; 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; failure to market and sell Medicare plans effectively or in compliance with laws; and other factors related to our pharmacy business, including manufacturing or supply chain disruptions, access to and demand for prescription drugs, and regulatory changes or other industry developments that may affect our pharmacy operations. 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 and subsequent periodic reports 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. The company 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 SelectQuote’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. With an ecosystem offering high touchpoints for consumers across insurance, medicare, pharmacy, and value-based care, the company now has four core business lines: SelectQuote Senior, SelectQuote Healthcare Services, SelectQuote Life, and SelectQuote Auto and Home. SelectQuote Senior serves the needs of a demographic that sees around 10,000 people turn 65 each day with a range of Medicare Advantage and Medicare Supplement plans. SelectQuote Healthcare Services is comprised of the SelectRx Pharmacy, a Patient-Centered Pharmacy Home™ (PCPH) accredited pharmacy, and Population Health, which proactively connects consumers with a wide breadth of healthcare services supporting their needs.. SELECTQUOTE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) March 31, 2024 June 30, 2023 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 37,808 $ 83,156 Accounts receivable, net of allowances of $6.5 million and $2.7 million, respectively 253,083 154,565 Commissions receivable-current 69,165 111,148 Other current assets 24,115 14,355 Total current assets 384,171 363,224 COMMISSIONS RECEIVABLE—Net 763,958 729,350 PROPERTY AND EQUIPMENT—Net 22,536 27,452 SOFTWARE—Net 13,952 14,740 OPERATING LEASE RIGHT-OF-USE ASSETS 19,341 23,563 INTANGIBLE ASSETS—Net 7,926 10,200 GOODWILL 29,136 29,136 OTHER ASSETS 4,119 21,586 TOTAL ASSETS $ 1,245,139 $ 1,219,251 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 61,168 $ 27,577 Accrued expenses 21,058 16,993 Accrued compensation and benefits 57,483 49,966 Operating lease liabilities—current 4,663 5,175 Current portion of long-term debt 37,717 33,883 Contract liabilities 3,655 1,691 Other current liabilities 4,227 1,972 Total current liabilities 189,971 137,257 LONG-TERM DEBT, NET—less current portion 648,331 664,625 DEFERRED INCOME TAXES 35,057 39,581 OPERATING LEASE LIABILITIES 22,326 27,892 OTHER LIABILITIES 2,649 2,926 Total liabilities 898,334 872,281 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS’ EQUITY: Common stock, $0.01 par value 1,692 1,669 Additional paid-in capital 577,389 567,266 Accumulated deficit (238,752 ) (235,644 ) Accumulated other comprehensive income 6,476 13,679 Total shareholders’ equity 346,805 346,970 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 1,245,139 $ 1,219,251 SELECTQUOTE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) (In thousands) Three Months Ended March 31, Nine Months Ended March 31, 2024 2023 2024 2023 REVENUE: Commission $ 230,763 $ 197,258 $ 611,744 533,627 Pharmacy 120,282 66,948 323,865 159,641 Other 25,355 35,192 78,958 87,802 Total revenue 376,400 299,398 1,014,567 781,070 OPERATING COSTS AND EXPENSES: Cost of revenue 84,315 79,186 254,250 235,827 Cost of goods sold—pharmacy revenue 106,172 62,302 284,360 154,753 Marketing and advertising 109,276 90,205 288,676 237,724 Selling, general, and administrative 34,971 27,544 97,049 86,662 Technical development 8,604 6,434 24,291 18,860 Total operating costs and expenses 343,338 265,671 948,626 733,826 INCOME FROM OPERATIONS 33,062 33,727 65,941 47,244 INTEREST EXPENSE, NET (24,330 ) (21,105 ) (70,141 ) (58,885 ) OTHER INCOME (EXPENSE,) NET (12 ) (206 ) (51 ) (118 ) INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT) 8,720 12,416 (4,251 ) (11,759 ) INCOME TAX EXPENSE (BENEFIT) 169 3,152 (1,143 ) (1,053 ) NET INCOME (LOSS) $ 8,551 $ 9,264 $ (3,108 ) (10,706 ) NET INCOME (LOSS) PER SHARE: Basic $ 0.05 $ 0.06 $ (0.02 ) $ (0.06 ) Diluted $ 0.05 $ 0.06 $ (0.02 ) $ (0.06 ) WEIGHTED-AVERAGE COMMON STOCK OUTSTANDING USED IN PER SHARE AMOUNTS: Basic 169,070 166,543 168,291 165,951 Diluted 170,956 167,905 168,291 165,951 OTHER COMPREHENSIVE INCOME (LOSS) NET OF TAX: Gain (loss) on cash flow hedge (1,771 ) (2,661 ) (7,203 ) 1,358 OTHER COMPREHENSIVE INCOME (LOSS) (1,771 ) (2,661 ) (7,203 ) 1,358 COMPREHENSIVE INCOME (LOSS) $ 6,780 $ 6,603 $ (10,311 ) $ (9,348 ) SELECTQUOTE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Nine Months Ended March 31, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (3,108 ) $ (10,706 ) Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities: Depreciation and amortization 18,591 21,087 Loss on disposal of property, equipment, and software 13 390 Share-based compensation expense 10,512 8,525 Deferred income taxes (2,151 ) (1,416 ) Amortization of debt issuance costs and debt discount 4,863 6,250 Write-off of debt issuance costs 293 710 Accrued interest payable in kind 14,323 8,450 Non-cash lease expense 1,945 3,115 Changes in operating assets and liabilities: Accounts receivable, net (98,519 ) (62,738 ) Commissions receivable 7,375 17,092 Other assets (2,620 ) 3,166 Accounts payable and accrued expenses 36,073 6,440 Operating lease liabilities (3,802 ) (4,331 ) Other liabilities 11,453 (8,869 ) Net cash used in operating activities (4,759 ) (12,835 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (3,114 ) (1,056 ) Proceeds from sales of property and equipment 253 — Purchases of software and capitalized software development costs (6,065 ) (5,804 ) Net cash used in investing activities (8,926 ) (6,860 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payments on Term Loans (30,412 ) (17,833 ) Payments on other debt (112 ) (123 ) Proceeds from common stock options exercised and employee stock purchase plan 8 1,187 Payments of tax withholdings related to net share settlement of equity awards (374 ) (40 ) Payments of debt issuance costs (773 ) (10,110 ) Payment of acquisition holdback — (2,335 ) Net cash used in financing activities (31,663 ) (29,254 ) NET DECREASE IN CASH AND CASH EQUIVALENTS (45,348 ) (48,949 ) CASH AND CASH EQUIVALENTS—Beginning of period 83,156 140,997 CASH AND CASH EQUIVALENTS—End of period $ 37,808 $ 92,048 SELECTQUOTE, INC. AND SUBSIDIARIES Net Income (Loss) to Adjusted EBITDA Reconciliation (Unaudited) Three Months Ended March 31, 2024 (in thousands) Senior Healthcare Services Life Auto & Home Corp & Elims Consolidated Revenue $ 204,259 $ 124,207 $ 40,686 $ 9,134 $ (1,886 ) $ 376,400 Operating expenses (142,765 ) (122,598 ) (37,548 ) (5,524 ) (21,355 ) (329,790 ) Other income (expense), net — — — (1 ) (11 ) (12 ) Adjusted EBITDA $ 61,494 $ 1,609 $ 3,138 $ 3,609 $ (23,252 ) $ 46,598 Share-based compensation expense (3,515 ) Transaction costs (3,325 ) Depreciation and amortization (6,704 ) Loss on disposal of property, equipment, and software (4 ) Interest expense, net (24,330 ) Income tax expense (169 ) Net income $ 8,551 Three Months Ended March 31, 2023 (in thousands) Senior Healthcare Services Life Auto & Home Corp & Elims Consolidated Revenue $ 185,200 $ 70,725 $ 36,950 $ 8,238 $ (1,715 ) $ 299,398 Operating expenses (126,034 ) (74,091 ) (31,446 ) (5,648 ) (17,947 ) (255,166 ) Other income (expense), net — — (201 ) 1 (6 ) (206 ) Adjusted EBITDA $ 59,166 $ (3,366 ) $ 5,303 $ 2,591 $ (19,668 ) $ 44,026 Share-based compensation expense (2,959 ) Transaction costs (433 ) Depreciation and amortization (7,098 ) Loss on disposal of property, equipment, and software (15 ) Interest expense, net (21,105 ) Income tax expense (3,152 ) Net income $ 9,264 Nine Months Ended March 31, 2024 (in thousands) Senior Healthcare Services Life Auto & Home Corp & Elims Consolidated Revenue $ 541,705 $ 333,284 $ 115,855 $ 28,649 $ (4,926 ) $ 1,014,567 Operating expenses (402,834 ) (326,373 ) (102,910 ) (16,994 ) (62,770 ) (911,881 ) Other income (expense), net — — — (1 ) (50 ) (51 ) Adjusted EBITDA $ 138,871 $ 6,911 $ 12,945 $ 11,654 $ (67,746 ) $ 102,635 Share-based compensation expense (10,512 ) Transaction costs (7,629 ) Depreciation and amortization (18,591 ) Loss on disposal of property, equipment, and software (13 ) Interest expense, net (70,141 ) Income tax benefit 1,143 Net loss $ (3,108 ) Nine Months Ended March 31, 2023 (in thousands) Senior Healthcare Services Life Auto & Home Corp & Elims Consolidated Revenue $ 486,541 $ 169,270 $ 107,780 $ 23,128 $ (5,649 ) $ 781,070 Operating expenses (347,608 ) (193,726 ) (91,409 ) (15,812 ) (52,270 ) (700,825 ) Other income (expense), net — — — (1 ) (117 ) (118 ) Adjusted EBITDA $ 138,933 $ (24,456 ) $ 16,371 $ 7,315 $ (58,036 ) $ 80,127 Share-based compensation expense (8,525 ) Transaction costs (3,003 ) Depreciation and amortization (21,087 ) Loss on disposal of property, equipment, and software (386 ) Interest expense, net (58,885 ) Income tax benefit 1,053 Net loss $ (10,706 ) SELECTQUOTE, INC. AND SUBSIDIARIES Net Loss to Adjusted EBITDA Reconciliation (Unaudited) Guidance net loss to Adjusted EBITDA reconciliation, year ending June 30, 2024: (in thousands) Range Net loss $ (34,000 ) $ (21,000 ) Income tax benefit (12,000 ) (8,000 ) Interest expense, net 96,000 94,000 Depreciation and amortization 26,000 24,000 Share-based compensation expense 14,000 13,000 Non-recurring expenses 10,000 8,000 Adjusted EBITDA $ 100,000 $ 110,000 View source version on businesswire.com: https://www.businesswire.com/news/home/20240509711518/en/Contacts Investor Relations: Sloan Bohlen 877-678-4083 investorrelations@selectquote.com Media: Matt Gunter 913-286-4931 matt.gunter@selectquote.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
SelectQuote, Inc. Reports Third Quarter 2024 Results By: SelectQuote, Inc. via Business Wire May 09, 2024 at 07:30 AM EDT Third Quarter of Fiscal Year 2024 – Consolidated Earnings Highlights Revenue of $376.4 million Net income of $8.6 million Adjusted EBITDA* of $46.6 million Raising Fiscal Year 2024 Guidance Ranges: Revenue expected in a range of $1.25 billion to $1.3 billion vs prior range of $1.23 billion to $1.3 billion Net loss expected in a range of $34 million to $21 million vs prior range of $45 million to $22 million Adjusted EBITDA* expected in a range of $100 million to $110 million vs prior range of $90 million to $105 million Third Quarter of Fiscal Year 2024 – Segment Highlights Senior Revenue of $204.3 million Adjusted EBITDA* of $61.5 million Approved Medicare Advantage policies of 185,716 Healthcare Services Revenue of $124.2 million Adjusted EBITDA* of $1.6 million Over 75,000 SelectRx members Life Revenue of $40.7 million Adjusted EBITDA* of $3.1 million Auto & Home Revenue of $9.1 million Adjusted EBITDA* of $3.6 million SelectQuote, Inc. (NYSE: SLQT) reported consolidated revenue for the third quarter of fiscal year 2024 of $376.4 million, compared to consolidated revenue for the third quarter of fiscal year 2023 of $299.4 million. Consolidated net income for the third quarter of fiscal year 2024 was $8.6 million, compared to consolidated net income for the third quarter of fiscal year 2023 of $9.3 million. Finally, consolidated Adjusted EBITDA* for the third quarter of fiscal year 2024 was $46.6 million, compared to consolidated Adjusted EBITDA* for the third quarter of fiscal year 2023 of $44.0 million. Chief Executive Officer Tim Danker commented, “SelectQuote outperformed our own expectations for the 9th consecutive quarter, and the company has never been better positioned to drive shareholder value. We firmly believe SelectQuote can amplify the strong operating results achieved over the past two years since our foundational strategic redesign.” “Our Senior business completed another highly successful Medicare Advantage busy season in the quarter, which produced stable and attractive economics across both policy growth, LTV expansion, and operating efficiency. The segment’s core tenured agents helped over 185,000 Americans find the right Medicare Advantage policy and did so with strong overall cost per policy and efficient close rates, which drove a Senior Adjusted EBITDA margin above 30% in one of our highest open enrollment period (OEP) quarters for revenue in company history. The success in our Senior business also enhanced the continued expansion of our Healthcare Services business, which saw SelectRx grow by over 12,000 members, significantly exceeding our original outlook. Overall, our holistic healthcare platform created new customers at a highly efficient revenue to customer acquisition cost of over 4x, which will drive significant Adjusted EBITDA contribution as Healthcare Services continues to scale.” Mr. Danker concluded, “The teams at SelectQuote and our leadership are energized about the successes experienced year-to-date. We have conviction that 2024 will prove to be an inflection point in our company’s history, and SelectQuote is poised to leverage our unique healthcare platform to drive attractive returns for our shareholders in the quarters and years ahead.” Segment Results We currently report on four segments: 1) Senior, 2) Healthcare Services, 3) Life, and 4) Auto & Home. The performance measures of the segments include total revenue, Adjusted EBITDA,* and Adjusted EBITDA Margin.* Costs of revenue, cost of goods sold-pharmacy revenue, marketing and advertising, selling, general, and administrative, and technical development operating expenses that are directly attributable to a segment are reported within the applicable segment. Indirect costs of revenue, marketing and advertising, selling, general, and administrative, and technical development operating 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, cost of goods sold, marketing and advertising, technical development, and selling, 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; 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) 2024 2023 % Change 2024 2023 % Change Revenue $ 204,259 $ 185,200 10 % $ 541,705 $ 486,541 11 % Adjusted EBITDA* 61,494 59,166 4 % 138,871 138,933 — % Adjusted EBITDA Margin* 30 % 32 % 26 % 29 % 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 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, 2024 2023 % Change 2024 2023 % Change Medicare Advantage 226,692 196,372 15 % 602,936 538,247 12 % Medicare Supplement 650 675 (4 )% 2,334 2,905 (20 )% Dental, Vision and Hearing 16,588 21,175 (22 )% 48,892 59,513 (18 )% Prescription Drug Plan 665 416 60 % 2,696 2,082 29 % Other 774 1,864 (58 )% 3,724 5,402 (31 )% Total 245,369 220,502 11 % 660,582 608,149 9 % *See “Non-GAAP Financial Measures” below. 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, 2024 2023 % Change 2024 2023 % Change Medicare Advantage 185,716 165,530 12 % 517,973 467,540 11 % Medicare Supplement 445 557 (20 )% 1,578 2,184 (28 )% Dental, Vision and Hearing 14,042 16,968 (17 )% 41,474 47,940 (13 )% Prescription Drug Plan 1,114 521 114 % 2,684 1,794 50 % Other 789 1,029 (23 )% 2,834 3,932 (28 )% Total 202,106 184,605 9 % 566,543 523,390 8 % 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): 2024 2023 % Change 2024 2023 % Change Medicare Advantage $ 995 $ 965 3 % $ 923 $ 888 4 % Medicare Supplement 1,271 871 46 % 1,108 994 11 % Dental, Vision and Hearing 101 91 11 % 100 95 5 % Prescription Drug Plan 237 194 22 % 237 211 12 % Other 36 123 (71 )% (3 ) 100 (103 )% Healthcare Services Financial Results The following table provides the financial results for the Healthcare Services segment for the periods presented: Three Months Ended March 31, Nine Months Ended March 31, (in thousands) 2024 2023 % Change 2024 2023 % Change Revenue $ 124,207 $ 70,725 76 % $ 333,284 $ 169,270 97 % Adjusted EBITDA* 1,609 (3,366 ) 148 % 6,911 (24,456 ) 128 % Adjusted EBITDA Margin* 1 % (5 )% 2 % (14 )% *See “Non-GAAP Financial Measures” below. Operating Metrics Total Members The total number of SelectRx members represents the amount of customers to which an order has been shipped, as this is the primary key driver of revenue for Healthcare Services. The following table shows the total number of SelectRx members for the date presented: March 31, 2024 March 31, 2023 Total SelectRx Members 75,074 44,993 Prescriptions Per Day Prescriptions per day represents the total average prescriptions shipped per business day, as this is a primary key driver of revenue for Healthcare Services. The following table shows the prescriptions shipped per day for the periods presented: Three Months Ended March 31, Nine Months Ended March 31, 2024 2023 2024 2023 Prescriptions Per Day 20,216 11,737 17,582 9,753 Combined Senior and Healthcare Services - Consumer Per Unit Economics The opportunity to leverage our existing database and distribution model to improve access to healthcare services for our consumers has created a need for us to review our key metrics related to our per unit economics. As we think about the revenue and expenses for Healthcare Services, we note that they are derived from the marketing acquisition costs associated with the sale of an MA or MS policy, some of which costs are allocated directly to Healthcare Services, and therefore determined that our per unit economics measure should include components from both Senior and Healthcare Services. See details of revenue and expense items included in the calculation below. Combined Senior and Healthcare Services consumer per unit economics represents total MA and MS commissions; other product commissions; other revenues, including revenues from Healthcare Services; and operating expenses associated with Senior and Healthcare Services, each shown per number of approved MA and MS policies over a given time period. Management assesses the business on a per-unit basis to help ensure that 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 MA and MS commission per MA/MS policy represents the LTV for policies sold in the period. Other commission per MA/MS policy represents the LTV for other products sold in the period, including DVH prescription drug plan, and other products, which management views as additional commission revenue on our agents’ core function of MA/MS policy sales. Pharmacy revenue per MA/MS policy represents revenue from SelectRx, and other revenue per MA/MS policy represents revenue from Population Health, production bonuses, marketing development funds, lead generation revenue, and adjustments from the Company’s reassessment of its cohorts’ transaction prices. Total operating expenses per MA/MS policy represents all of the operating expenses within Senior and Healthcare Services. The revenue to customer acquisition cost (“CAC”) multiple represents total revenue as a multiple of total marketing acquisition costs, 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 combined Senior and Healthcare Services consumer per unit economics for the periods presented. Based on the seasonality of Senior 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. Twelve Months Ended March 31, (dollars per approved policy): 2024 2023 Medicare Advantage and Medicare Supplement approved policies 630,013 586,238 Medicare Advantage and Medicare Supplement commission per MA/MS policy $ 907 $ 886 Other commission per MA/MS policy 10 15 Pharmacy revenue per MA/MS policy 641 320 Other revenue per MA/MS policy 126 66 Total revenue per MA/MS policy 1,684 1,287 Total operating expenses per MA/MS policy (1,425 ) (1,167 ) Adjusted EBITDA per MA/MS policy (1) $ 259 $ 120 Adjusted EBITDA Margin per MA/MS policy (1) 15 % 9 % Revenue/CAC multiple 4.2 X 3.5 X (1) These financial measures are not calculated in accordance with GAAP. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” in the Company’s Quarterly Report on Form 10-Q for information regarding our use of these non-GAAP financial measures and a reconciliation of such measures to their nearest comparable financial measures calculated and presented in accordance with GAAP. Total revenue per MA/MS policy increased 31% for the twelve months ended March 31, 2024, compared to the twelve months ended March 31, 2023, primarily due to the increase in pharmacy revenue. Total operating expenses per MA/MS policy increased 22% for the twelve months ended March 31, 2024, compared to the twelve months ended March 31, 2023, primarily driven by increase in cost of goods sold-pharmacy revenue for SelectRx due to the growth of the business. 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) 2024 2023 % Change 2024 2023 % Change Revenue $ 40,686 $ 36,950 10 % $ 115,855 $ 107,780 7 % Adjusted EBITDA* 3,138 5,303 (41 )% 12,945 16,371 (21 )% Adjusted EBITDA Margin* 8 % 14 % 11 % 15 % 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 “Non-GAAP Financial Measures” below. 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) 2024 2023 % Change 2024 2023 % Change Term Premiums $ 16,788 $ 17,512 (4 )% $ 52,376 $ 48,433 8 % Final Expense Premiums 23,724 19,308 23 % 62,811 58,766 7 % Total $ 40,512 $ 36,820 10 % 115,187 107,199 7 % 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) 2024 2023 % Change 2024 2023 % Change Revenue $ 9,134 $ 8,238 11 % $ 28,649 $ 23,128 24 % Adjusted EBITDA* 3,609 2,591 39 % 11,654 7,315 59 % Adjusted EBITDA Margin* 40 % 31 % 41 % 32 % 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): 2024 2023 % Change 2024 2023 % Change Premiums $ 14,180 $ 12,828 11 % $ 42,746 $ 36,456 17 % Amendment to Credit Agreement On May 8, 2024, the Company and its lenders agreed to amend the Company’s credit agreement to extend the maturity date with respect to $683.8 million of extended term loans from February 15, 2025 to May 15, 2025. The amendment also provides for a minimum asset coverage ratio and minimum liquidity requirements for the extension period. Additional information regarding the amendment will be included in the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2024. Earnings Conference Call SelectQuote, Inc. will host a conference call with the investment community today, Thursday, May 9, 2024, beginning at 9:00 a.m. ET. To register for this conference call, please use this link: https://www.netroadshow.com/events/login?show=2a79382d&confId=63927. 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 at least 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. *See “Non-GAAP Financial Measures” below. 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 define Adjusted EBITDA Margin as Adjusted EBITDA divided by revenue. The most directly comparable GAAP measure is net income margin. We monitor and have presented in this release Adjusted EBITDA and Adjusted EBITDA Margin because they are key measures 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 these non-GAAP financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in the calculations of these non-GAAP financial measures. Accordingly, we believe these financial measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects. Reconciliations of the differences between the non-GAAP financial measures included herein and their most directly comparable GAAP financial measures are set forth below beginning on page 12. Forward Looking Statements 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 impacts of the COVID-19 pandemic and any other public health events, 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, including 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, including inflation; 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 other legal proceedings or inquiries; our existing and future indebtedness; our ability to maintain compliance with our debt covenants and meet our scheduled repayment obligations under our debt arrangements; our ability to access additional capital on acceptable terms; 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; failure to market and sell Medicare plans effectively or in compliance with laws; and other factors related to our pharmacy business, including manufacturing or supply chain disruptions, access to and demand for prescription drugs, and regulatory changes or other industry developments that may affect our pharmacy operations. 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 and subsequent periodic reports 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. The company 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 SelectQuote’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. With an ecosystem offering high touchpoints for consumers across insurance, medicare, pharmacy, and value-based care, the company now has four core business lines: SelectQuote Senior, SelectQuote Healthcare Services, SelectQuote Life, and SelectQuote Auto and Home. SelectQuote Senior serves the needs of a demographic that sees around 10,000 people turn 65 each day with a range of Medicare Advantage and Medicare Supplement plans. SelectQuote Healthcare Services is comprised of the SelectRx Pharmacy, a Patient-Centered Pharmacy Home™ (PCPH) accredited pharmacy, and Population Health, which proactively connects consumers with a wide breadth of healthcare services supporting their needs.. SELECTQUOTE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) March 31, 2024 June 30, 2023 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 37,808 $ 83,156 Accounts receivable, net of allowances of $6.5 million and $2.7 million, respectively 253,083 154,565 Commissions receivable-current 69,165 111,148 Other current assets 24,115 14,355 Total current assets 384,171 363,224 COMMISSIONS RECEIVABLE—Net 763,958 729,350 PROPERTY AND EQUIPMENT—Net 22,536 27,452 SOFTWARE—Net 13,952 14,740 OPERATING LEASE RIGHT-OF-USE ASSETS 19,341 23,563 INTANGIBLE ASSETS—Net 7,926 10,200 GOODWILL 29,136 29,136 OTHER ASSETS 4,119 21,586 TOTAL ASSETS $ 1,245,139 $ 1,219,251 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 61,168 $ 27,577 Accrued expenses 21,058 16,993 Accrued compensation and benefits 57,483 49,966 Operating lease liabilities—current 4,663 5,175 Current portion of long-term debt 37,717 33,883 Contract liabilities 3,655 1,691 Other current liabilities 4,227 1,972 Total current liabilities 189,971 137,257 LONG-TERM DEBT, NET—less current portion 648,331 664,625 DEFERRED INCOME TAXES 35,057 39,581 OPERATING LEASE LIABILITIES 22,326 27,892 OTHER LIABILITIES 2,649 2,926 Total liabilities 898,334 872,281 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS’ EQUITY: Common stock, $0.01 par value 1,692 1,669 Additional paid-in capital 577,389 567,266 Accumulated deficit (238,752 ) (235,644 ) Accumulated other comprehensive income 6,476 13,679 Total shareholders’ equity 346,805 346,970 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 1,245,139 $ 1,219,251 SELECTQUOTE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) (In thousands) Three Months Ended March 31, Nine Months Ended March 31, 2024 2023 2024 2023 REVENUE: Commission $ 230,763 $ 197,258 $ 611,744 533,627 Pharmacy 120,282 66,948 323,865 159,641 Other 25,355 35,192 78,958 87,802 Total revenue 376,400 299,398 1,014,567 781,070 OPERATING COSTS AND EXPENSES: Cost of revenue 84,315 79,186 254,250 235,827 Cost of goods sold—pharmacy revenue 106,172 62,302 284,360 154,753 Marketing and advertising 109,276 90,205 288,676 237,724 Selling, general, and administrative 34,971 27,544 97,049 86,662 Technical development 8,604 6,434 24,291 18,860 Total operating costs and expenses 343,338 265,671 948,626 733,826 INCOME FROM OPERATIONS 33,062 33,727 65,941 47,244 INTEREST EXPENSE, NET (24,330 ) (21,105 ) (70,141 ) (58,885 ) OTHER INCOME (EXPENSE,) NET (12 ) (206 ) (51 ) (118 ) INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT) 8,720 12,416 (4,251 ) (11,759 ) INCOME TAX EXPENSE (BENEFIT) 169 3,152 (1,143 ) (1,053 ) NET INCOME (LOSS) $ 8,551 $ 9,264 $ (3,108 ) (10,706 ) NET INCOME (LOSS) PER SHARE: Basic $ 0.05 $ 0.06 $ (0.02 ) $ (0.06 ) Diluted $ 0.05 $ 0.06 $ (0.02 ) $ (0.06 ) WEIGHTED-AVERAGE COMMON STOCK OUTSTANDING USED IN PER SHARE AMOUNTS: Basic 169,070 166,543 168,291 165,951 Diluted 170,956 167,905 168,291 165,951 OTHER COMPREHENSIVE INCOME (LOSS) NET OF TAX: Gain (loss) on cash flow hedge (1,771 ) (2,661 ) (7,203 ) 1,358 OTHER COMPREHENSIVE INCOME (LOSS) (1,771 ) (2,661 ) (7,203 ) 1,358 COMPREHENSIVE INCOME (LOSS) $ 6,780 $ 6,603 $ (10,311 ) $ (9,348 ) SELECTQUOTE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Nine Months Ended March 31, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (3,108 ) $ (10,706 ) Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities: Depreciation and amortization 18,591 21,087 Loss on disposal of property, equipment, and software 13 390 Share-based compensation expense 10,512 8,525 Deferred income taxes (2,151 ) (1,416 ) Amortization of debt issuance costs and debt discount 4,863 6,250 Write-off of debt issuance costs 293 710 Accrued interest payable in kind 14,323 8,450 Non-cash lease expense 1,945 3,115 Changes in operating assets and liabilities: Accounts receivable, net (98,519 ) (62,738 ) Commissions receivable 7,375 17,092 Other assets (2,620 ) 3,166 Accounts payable and accrued expenses 36,073 6,440 Operating lease liabilities (3,802 ) (4,331 ) Other liabilities 11,453 (8,869 ) Net cash used in operating activities (4,759 ) (12,835 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (3,114 ) (1,056 ) Proceeds from sales of property and equipment 253 — Purchases of software and capitalized software development costs (6,065 ) (5,804 ) Net cash used in investing activities (8,926 ) (6,860 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payments on Term Loans (30,412 ) (17,833 ) Payments on other debt (112 ) (123 ) Proceeds from common stock options exercised and employee stock purchase plan 8 1,187 Payments of tax withholdings related to net share settlement of equity awards (374 ) (40 ) Payments of debt issuance costs (773 ) (10,110 ) Payment of acquisition holdback — (2,335 ) Net cash used in financing activities (31,663 ) (29,254 ) NET DECREASE IN CASH AND CASH EQUIVALENTS (45,348 ) (48,949 ) CASH AND CASH EQUIVALENTS—Beginning of period 83,156 140,997 CASH AND CASH EQUIVALENTS—End of period $ 37,808 $ 92,048 SELECTQUOTE, INC. AND SUBSIDIARIES Net Income (Loss) to Adjusted EBITDA Reconciliation (Unaudited) Three Months Ended March 31, 2024 (in thousands) Senior Healthcare Services Life Auto & Home Corp & Elims Consolidated Revenue $ 204,259 $ 124,207 $ 40,686 $ 9,134 $ (1,886 ) $ 376,400 Operating expenses (142,765 ) (122,598 ) (37,548 ) (5,524 ) (21,355 ) (329,790 ) Other income (expense), net — — — (1 ) (11 ) (12 ) Adjusted EBITDA $ 61,494 $ 1,609 $ 3,138 $ 3,609 $ (23,252 ) $ 46,598 Share-based compensation expense (3,515 ) Transaction costs (3,325 ) Depreciation and amortization (6,704 ) Loss on disposal of property, equipment, and software (4 ) Interest expense, net (24,330 ) Income tax expense (169 ) Net income $ 8,551 Three Months Ended March 31, 2023 (in thousands) Senior Healthcare Services Life Auto & Home Corp & Elims Consolidated Revenue $ 185,200 $ 70,725 $ 36,950 $ 8,238 $ (1,715 ) $ 299,398 Operating expenses (126,034 ) (74,091 ) (31,446 ) (5,648 ) (17,947 ) (255,166 ) Other income (expense), net — — (201 ) 1 (6 ) (206 ) Adjusted EBITDA $ 59,166 $ (3,366 ) $ 5,303 $ 2,591 $ (19,668 ) $ 44,026 Share-based compensation expense (2,959 ) Transaction costs (433 ) Depreciation and amortization (7,098 ) Loss on disposal of property, equipment, and software (15 ) Interest expense, net (21,105 ) Income tax expense (3,152 ) Net income $ 9,264 Nine Months Ended March 31, 2024 (in thousands) Senior Healthcare Services Life Auto & Home Corp & Elims Consolidated Revenue $ 541,705 $ 333,284 $ 115,855 $ 28,649 $ (4,926 ) $ 1,014,567 Operating expenses (402,834 ) (326,373 ) (102,910 ) (16,994 ) (62,770 ) (911,881 ) Other income (expense), net — — — (1 ) (50 ) (51 ) Adjusted EBITDA $ 138,871 $ 6,911 $ 12,945 $ 11,654 $ (67,746 ) $ 102,635 Share-based compensation expense (10,512 ) Transaction costs (7,629 ) Depreciation and amortization (18,591 ) Loss on disposal of property, equipment, and software (13 ) Interest expense, net (70,141 ) Income tax benefit 1,143 Net loss $ (3,108 ) Nine Months Ended March 31, 2023 (in thousands) Senior Healthcare Services Life Auto & Home Corp & Elims Consolidated Revenue $ 486,541 $ 169,270 $ 107,780 $ 23,128 $ (5,649 ) $ 781,070 Operating expenses (347,608 ) (193,726 ) (91,409 ) (15,812 ) (52,270 ) (700,825 ) Other income (expense), net — — — (1 ) (117 ) (118 ) Adjusted EBITDA $ 138,933 $ (24,456 ) $ 16,371 $ 7,315 $ (58,036 ) $ 80,127 Share-based compensation expense (8,525 ) Transaction costs (3,003 ) Depreciation and amortization (21,087 ) Loss on disposal of property, equipment, and software (386 ) Interest expense, net (58,885 ) Income tax benefit 1,053 Net loss $ (10,706 ) SELECTQUOTE, INC. AND SUBSIDIARIES Net Loss to Adjusted EBITDA Reconciliation (Unaudited) Guidance net loss to Adjusted EBITDA reconciliation, year ending June 30, 2024: (in thousands) Range Net loss $ (34,000 ) $ (21,000 ) Income tax benefit (12,000 ) (8,000 ) Interest expense, net 96,000 94,000 Depreciation and amortization 26,000 24,000 Share-based compensation expense 14,000 13,000 Non-recurring expenses 10,000 8,000 Adjusted EBITDA $ 100,000 $ 110,000 View source version on businesswire.com: https://www.businesswire.com/news/home/20240509711518/en/Contacts Investor Relations: Sloan Bohlen 877-678-4083 investorrelations@selectquote.com Media: Matt Gunter 913-286-4931 matt.gunter@selectquote.com
Third Quarter of Fiscal Year 2024 – Consolidated Earnings Highlights Revenue of $376.4 million Net income of $8.6 million Adjusted EBITDA* of $46.6 million Raising Fiscal Year 2024 Guidance Ranges: Revenue expected in a range of $1.25 billion to $1.3 billion vs prior range of $1.23 billion to $1.3 billion Net loss expected in a range of $34 million to $21 million vs prior range of $45 million to $22 million Adjusted EBITDA* expected in a range of $100 million to $110 million vs prior range of $90 million to $105 million Third Quarter of Fiscal Year 2024 – Segment Highlights Senior Revenue of $204.3 million Adjusted EBITDA* of $61.5 million Approved Medicare Advantage policies of 185,716 Healthcare Services Revenue of $124.2 million Adjusted EBITDA* of $1.6 million Over 75,000 SelectRx members Life Revenue of $40.7 million Adjusted EBITDA* of $3.1 million Auto & Home Revenue of $9.1 million Adjusted EBITDA* of $3.6 million
SelectQuote, Inc. (NYSE: SLQT) reported consolidated revenue for the third quarter of fiscal year 2024 of $376.4 million, compared to consolidated revenue for the third quarter of fiscal year 2023 of $299.4 million. Consolidated net income for the third quarter of fiscal year 2024 was $8.6 million, compared to consolidated net income for the third quarter of fiscal year 2023 of $9.3 million. Finally, consolidated Adjusted EBITDA* for the third quarter of fiscal year 2024 was $46.6 million, compared to consolidated Adjusted EBITDA* for the third quarter of fiscal year 2023 of $44.0 million. Chief Executive Officer Tim Danker commented, “SelectQuote outperformed our own expectations for the 9th consecutive quarter, and the company has never been better positioned to drive shareholder value. We firmly believe SelectQuote can amplify the strong operating results achieved over the past two years since our foundational strategic redesign.” “Our Senior business completed another highly successful Medicare Advantage busy season in the quarter, which produced stable and attractive economics across both policy growth, LTV expansion, and operating efficiency. The segment’s core tenured agents helped over 185,000 Americans find the right Medicare Advantage policy and did so with strong overall cost per policy and efficient close rates, which drove a Senior Adjusted EBITDA margin above 30% in one of our highest open enrollment period (OEP) quarters for revenue in company history. The success in our Senior business also enhanced the continued expansion of our Healthcare Services business, which saw SelectRx grow by over 12,000 members, significantly exceeding our original outlook. Overall, our holistic healthcare platform created new customers at a highly efficient revenue to customer acquisition cost of over 4x, which will drive significant Adjusted EBITDA contribution as Healthcare Services continues to scale.” Mr. Danker concluded, “The teams at SelectQuote and our leadership are energized about the successes experienced year-to-date. We have conviction that 2024 will prove to be an inflection point in our company’s history, and SelectQuote is poised to leverage our unique healthcare platform to drive attractive returns for our shareholders in the quarters and years ahead.” Segment Results We currently report on four segments: 1) Senior, 2) Healthcare Services, 3) Life, and 4) Auto & Home. The performance measures of the segments include total revenue, Adjusted EBITDA,* and Adjusted EBITDA Margin.* Costs of revenue, cost of goods sold-pharmacy revenue, marketing and advertising, selling, general, and administrative, and technical development operating expenses that are directly attributable to a segment are reported within the applicable segment. Indirect costs of revenue, marketing and advertising, selling, general, and administrative, and technical development operating 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, cost of goods sold, marketing and advertising, technical development, and selling, 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; 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) 2024 2023 % Change 2024 2023 % Change Revenue $ 204,259 $ 185,200 10 % $ 541,705 $ 486,541 11 % Adjusted EBITDA* 61,494 59,166 4 % 138,871 138,933 — % Adjusted EBITDA Margin* 30 % 32 % 26 % 29 % 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 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, 2024 2023 % Change 2024 2023 % Change Medicare Advantage 226,692 196,372 15 % 602,936 538,247 12 % Medicare Supplement 650 675 (4 )% 2,334 2,905 (20 )% Dental, Vision and Hearing 16,588 21,175 (22 )% 48,892 59,513 (18 )% Prescription Drug Plan 665 416 60 % 2,696 2,082 29 % Other 774 1,864 (58 )% 3,724 5,402 (31 )% Total 245,369 220,502 11 % 660,582 608,149 9 % *See “Non-GAAP Financial Measures” below. 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, 2024 2023 % Change 2024 2023 % Change Medicare Advantage 185,716 165,530 12 % 517,973 467,540 11 % Medicare Supplement 445 557 (20 )% 1,578 2,184 (28 )% Dental, Vision and Hearing 14,042 16,968 (17 )% 41,474 47,940 (13 )% Prescription Drug Plan 1,114 521 114 % 2,684 1,794 50 % Other 789 1,029 (23 )% 2,834 3,932 (28 )% Total 202,106 184,605 9 % 566,543 523,390 8 % 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): 2024 2023 % Change 2024 2023 % Change Medicare Advantage $ 995 $ 965 3 % $ 923 $ 888 4 % Medicare Supplement 1,271 871 46 % 1,108 994 11 % Dental, Vision and Hearing 101 91 11 % 100 95 5 % Prescription Drug Plan 237 194 22 % 237 211 12 % Other 36 123 (71 )% (3 ) 100 (103 )% Healthcare Services Financial Results The following table provides the financial results for the Healthcare Services segment for the periods presented: Three Months Ended March 31, Nine Months Ended March 31, (in thousands) 2024 2023 % Change 2024 2023 % Change Revenue $ 124,207 $ 70,725 76 % $ 333,284 $ 169,270 97 % Adjusted EBITDA* 1,609 (3,366 ) 148 % 6,911 (24,456 ) 128 % Adjusted EBITDA Margin* 1 % (5 )% 2 % (14 )% *See “Non-GAAP Financial Measures” below. Operating Metrics Total Members The total number of SelectRx members represents the amount of customers to which an order has been shipped, as this is the primary key driver of revenue for Healthcare Services. The following table shows the total number of SelectRx members for the date presented: March 31, 2024 March 31, 2023 Total SelectRx Members 75,074 44,993 Prescriptions Per Day Prescriptions per day represents the total average prescriptions shipped per business day, as this is a primary key driver of revenue for Healthcare Services. The following table shows the prescriptions shipped per day for the periods presented: Three Months Ended March 31, Nine Months Ended March 31, 2024 2023 2024 2023 Prescriptions Per Day 20,216 11,737 17,582 9,753 Combined Senior and Healthcare Services - Consumer Per Unit Economics The opportunity to leverage our existing database and distribution model to improve access to healthcare services for our consumers has created a need for us to review our key metrics related to our per unit economics. As we think about the revenue and expenses for Healthcare Services, we note that they are derived from the marketing acquisition costs associated with the sale of an MA or MS policy, some of which costs are allocated directly to Healthcare Services, and therefore determined that our per unit economics measure should include components from both Senior and Healthcare Services. See details of revenue and expense items included in the calculation below. Combined Senior and Healthcare Services consumer per unit economics represents total MA and MS commissions; other product commissions; other revenues, including revenues from Healthcare Services; and operating expenses associated with Senior and Healthcare Services, each shown per number of approved MA and MS policies over a given time period. Management assesses the business on a per-unit basis to help ensure that 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 MA and MS commission per MA/MS policy represents the LTV for policies sold in the period. Other commission per MA/MS policy represents the LTV for other products sold in the period, including DVH prescription drug plan, and other products, which management views as additional commission revenue on our agents’ core function of MA/MS policy sales. Pharmacy revenue per MA/MS policy represents revenue from SelectRx, and other revenue per MA/MS policy represents revenue from Population Health, production bonuses, marketing development funds, lead generation revenue, and adjustments from the Company’s reassessment of its cohorts’ transaction prices. Total operating expenses per MA/MS policy represents all of the operating expenses within Senior and Healthcare Services. The revenue to customer acquisition cost (“CAC”) multiple represents total revenue as a multiple of total marketing acquisition costs, 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 combined Senior and Healthcare Services consumer per unit economics for the periods presented. Based on the seasonality of Senior 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. Twelve Months Ended March 31, (dollars per approved policy): 2024 2023 Medicare Advantage and Medicare Supplement approved policies 630,013 586,238 Medicare Advantage and Medicare Supplement commission per MA/MS policy $ 907 $ 886 Other commission per MA/MS policy 10 15 Pharmacy revenue per MA/MS policy 641 320 Other revenue per MA/MS policy 126 66 Total revenue per MA/MS policy 1,684 1,287 Total operating expenses per MA/MS policy (1,425 ) (1,167 ) Adjusted EBITDA per MA/MS policy (1) $ 259 $ 120 Adjusted EBITDA Margin per MA/MS policy (1) 15 % 9 % Revenue/CAC multiple 4.2 X 3.5 X (1) These financial measures are not calculated in accordance with GAAP. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” in the Company’s Quarterly Report on Form 10-Q for information regarding our use of these non-GAAP financial measures and a reconciliation of such measures to their nearest comparable financial measures calculated and presented in accordance with GAAP. Total revenue per MA/MS policy increased 31% for the twelve months ended March 31, 2024, compared to the twelve months ended March 31, 2023, primarily due to the increase in pharmacy revenue. Total operating expenses per MA/MS policy increased 22% for the twelve months ended March 31, 2024, compared to the twelve months ended March 31, 2023, primarily driven by increase in cost of goods sold-pharmacy revenue for SelectRx due to the growth of the business. 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) 2024 2023 % Change 2024 2023 % Change Revenue $ 40,686 $ 36,950 10 % $ 115,855 $ 107,780 7 % Adjusted EBITDA* 3,138 5,303 (41 )% 12,945 16,371 (21 )% Adjusted EBITDA Margin* 8 % 14 % 11 % 15 % 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 “Non-GAAP Financial Measures” below. 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) 2024 2023 % Change 2024 2023 % Change Term Premiums $ 16,788 $ 17,512 (4 )% $ 52,376 $ 48,433 8 % Final Expense Premiums 23,724 19,308 23 % 62,811 58,766 7 % Total $ 40,512 $ 36,820 10 % 115,187 107,199 7 % 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) 2024 2023 % Change 2024 2023 % Change Revenue $ 9,134 $ 8,238 11 % $ 28,649 $ 23,128 24 % Adjusted EBITDA* 3,609 2,591 39 % 11,654 7,315 59 % Adjusted EBITDA Margin* 40 % 31 % 41 % 32 % 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): 2024 2023 % Change 2024 2023 % Change Premiums $ 14,180 $ 12,828 11 % $ 42,746 $ 36,456 17 % Amendment to Credit Agreement On May 8, 2024, the Company and its lenders agreed to amend the Company’s credit agreement to extend the maturity date with respect to $683.8 million of extended term loans from February 15, 2025 to May 15, 2025. The amendment also provides for a minimum asset coverage ratio and minimum liquidity requirements for the extension period. Additional information regarding the amendment will be included in the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2024. Earnings Conference Call SelectQuote, Inc. will host a conference call with the investment community today, Thursday, May 9, 2024, beginning at 9:00 a.m. ET. To register for this conference call, please use this link: https://www.netroadshow.com/events/login?show=2a79382d&confId=63927. 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 at least 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. *See “Non-GAAP Financial Measures” below. 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 define Adjusted EBITDA Margin as Adjusted EBITDA divided by revenue. The most directly comparable GAAP measure is net income margin. We monitor and have presented in this release Adjusted EBITDA and Adjusted EBITDA Margin because they are key measures 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 these non-GAAP financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in the calculations of these non-GAAP financial measures. Accordingly, we believe these financial measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects. Reconciliations of the differences between the non-GAAP financial measures included herein and their most directly comparable GAAP financial measures are set forth below beginning on page 12. Forward Looking Statements 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 impacts of the COVID-19 pandemic and any other public health events, 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, including 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, including inflation; 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 other legal proceedings or inquiries; our existing and future indebtedness; our ability to maintain compliance with our debt covenants and meet our scheduled repayment obligations under our debt arrangements; our ability to access additional capital on acceptable terms; 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; failure to market and sell Medicare plans effectively or in compliance with laws; and other factors related to our pharmacy business, including manufacturing or supply chain disruptions, access to and demand for prescription drugs, and regulatory changes or other industry developments that may affect our pharmacy operations. 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 and subsequent periodic reports 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. The company 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 SelectQuote’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. With an ecosystem offering high touchpoints for consumers across insurance, medicare, pharmacy, and value-based care, the company now has four core business lines: SelectQuote Senior, SelectQuote Healthcare Services, SelectQuote Life, and SelectQuote Auto and Home. SelectQuote Senior serves the needs of a demographic that sees around 10,000 people turn 65 each day with a range of Medicare Advantage and Medicare Supplement plans. SelectQuote Healthcare Services is comprised of the SelectRx Pharmacy, a Patient-Centered Pharmacy Home™ (PCPH) accredited pharmacy, and Population Health, which proactively connects consumers with a wide breadth of healthcare services supporting their needs.. SELECTQUOTE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) March 31, 2024 June 30, 2023 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 37,808 $ 83,156 Accounts receivable, net of allowances of $6.5 million and $2.7 million, respectively 253,083 154,565 Commissions receivable-current 69,165 111,148 Other current assets 24,115 14,355 Total current assets 384,171 363,224 COMMISSIONS RECEIVABLE—Net 763,958 729,350 PROPERTY AND EQUIPMENT—Net 22,536 27,452 SOFTWARE—Net 13,952 14,740 OPERATING LEASE RIGHT-OF-USE ASSETS 19,341 23,563 INTANGIBLE ASSETS—Net 7,926 10,200 GOODWILL 29,136 29,136 OTHER ASSETS 4,119 21,586 TOTAL ASSETS $ 1,245,139 $ 1,219,251 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 61,168 $ 27,577 Accrued expenses 21,058 16,993 Accrued compensation and benefits 57,483 49,966 Operating lease liabilities—current 4,663 5,175 Current portion of long-term debt 37,717 33,883 Contract liabilities 3,655 1,691 Other current liabilities 4,227 1,972 Total current liabilities 189,971 137,257 LONG-TERM DEBT, NET—less current portion 648,331 664,625 DEFERRED INCOME TAXES 35,057 39,581 OPERATING LEASE LIABILITIES 22,326 27,892 OTHER LIABILITIES 2,649 2,926 Total liabilities 898,334 872,281 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS’ EQUITY: Common stock, $0.01 par value 1,692 1,669 Additional paid-in capital 577,389 567,266 Accumulated deficit (238,752 ) (235,644 ) Accumulated other comprehensive income 6,476 13,679 Total shareholders’ equity 346,805 346,970 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 1,245,139 $ 1,219,251 SELECTQUOTE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) (In thousands) Three Months Ended March 31, Nine Months Ended March 31, 2024 2023 2024 2023 REVENUE: Commission $ 230,763 $ 197,258 $ 611,744 533,627 Pharmacy 120,282 66,948 323,865 159,641 Other 25,355 35,192 78,958 87,802 Total revenue 376,400 299,398 1,014,567 781,070 OPERATING COSTS AND EXPENSES: Cost of revenue 84,315 79,186 254,250 235,827 Cost of goods sold—pharmacy revenue 106,172 62,302 284,360 154,753 Marketing and advertising 109,276 90,205 288,676 237,724 Selling, general, and administrative 34,971 27,544 97,049 86,662 Technical development 8,604 6,434 24,291 18,860 Total operating costs and expenses 343,338 265,671 948,626 733,826 INCOME FROM OPERATIONS 33,062 33,727 65,941 47,244 INTEREST EXPENSE, NET (24,330 ) (21,105 ) (70,141 ) (58,885 ) OTHER INCOME (EXPENSE,) NET (12 ) (206 ) (51 ) (118 ) INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT) 8,720 12,416 (4,251 ) (11,759 ) INCOME TAX EXPENSE (BENEFIT) 169 3,152 (1,143 ) (1,053 ) NET INCOME (LOSS) $ 8,551 $ 9,264 $ (3,108 ) (10,706 ) NET INCOME (LOSS) PER SHARE: Basic $ 0.05 $ 0.06 $ (0.02 ) $ (0.06 ) Diluted $ 0.05 $ 0.06 $ (0.02 ) $ (0.06 ) WEIGHTED-AVERAGE COMMON STOCK OUTSTANDING USED IN PER SHARE AMOUNTS: Basic 169,070 166,543 168,291 165,951 Diluted 170,956 167,905 168,291 165,951 OTHER COMPREHENSIVE INCOME (LOSS) NET OF TAX: Gain (loss) on cash flow hedge (1,771 ) (2,661 ) (7,203 ) 1,358 OTHER COMPREHENSIVE INCOME (LOSS) (1,771 ) (2,661 ) (7,203 ) 1,358 COMPREHENSIVE INCOME (LOSS) $ 6,780 $ 6,603 $ (10,311 ) $ (9,348 ) SELECTQUOTE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Nine Months Ended March 31, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (3,108 ) $ (10,706 ) Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities: Depreciation and amortization 18,591 21,087 Loss on disposal of property, equipment, and software 13 390 Share-based compensation expense 10,512 8,525 Deferred income taxes (2,151 ) (1,416 ) Amortization of debt issuance costs and debt discount 4,863 6,250 Write-off of debt issuance costs 293 710 Accrued interest payable in kind 14,323 8,450 Non-cash lease expense 1,945 3,115 Changes in operating assets and liabilities: Accounts receivable, net (98,519 ) (62,738 ) Commissions receivable 7,375 17,092 Other assets (2,620 ) 3,166 Accounts payable and accrued expenses 36,073 6,440 Operating lease liabilities (3,802 ) (4,331 ) Other liabilities 11,453 (8,869 ) Net cash used in operating activities (4,759 ) (12,835 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (3,114 ) (1,056 ) Proceeds from sales of property and equipment 253 — Purchases of software and capitalized software development costs (6,065 ) (5,804 ) Net cash used in investing activities (8,926 ) (6,860 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payments on Term Loans (30,412 ) (17,833 ) Payments on other debt (112 ) (123 ) Proceeds from common stock options exercised and employee stock purchase plan 8 1,187 Payments of tax withholdings related to net share settlement of equity awards (374 ) (40 ) Payments of debt issuance costs (773 ) (10,110 ) Payment of acquisition holdback — (2,335 ) Net cash used in financing activities (31,663 ) (29,254 ) NET DECREASE IN CASH AND CASH EQUIVALENTS (45,348 ) (48,949 ) CASH AND CASH EQUIVALENTS—Beginning of period 83,156 140,997 CASH AND CASH EQUIVALENTS—End of period $ 37,808 $ 92,048 SELECTQUOTE, INC. AND SUBSIDIARIES Net Income (Loss) to Adjusted EBITDA Reconciliation (Unaudited) Three Months Ended March 31, 2024 (in thousands) Senior Healthcare Services Life Auto & Home Corp & Elims Consolidated Revenue $ 204,259 $ 124,207 $ 40,686 $ 9,134 $ (1,886 ) $ 376,400 Operating expenses (142,765 ) (122,598 ) (37,548 ) (5,524 ) (21,355 ) (329,790 ) Other income (expense), net — — — (1 ) (11 ) (12 ) Adjusted EBITDA $ 61,494 $ 1,609 $ 3,138 $ 3,609 $ (23,252 ) $ 46,598 Share-based compensation expense (3,515 ) Transaction costs (3,325 ) Depreciation and amortization (6,704 ) Loss on disposal of property, equipment, and software (4 ) Interest expense, net (24,330 ) Income tax expense (169 ) Net income $ 8,551 Three Months Ended March 31, 2023 (in thousands) Senior Healthcare Services Life Auto & Home Corp & Elims Consolidated Revenue $ 185,200 $ 70,725 $ 36,950 $ 8,238 $ (1,715 ) $ 299,398 Operating expenses (126,034 ) (74,091 ) (31,446 ) (5,648 ) (17,947 ) (255,166 ) Other income (expense), net — — (201 ) 1 (6 ) (206 ) Adjusted EBITDA $ 59,166 $ (3,366 ) $ 5,303 $ 2,591 $ (19,668 ) $ 44,026 Share-based compensation expense (2,959 ) Transaction costs (433 ) Depreciation and amortization (7,098 ) Loss on disposal of property, equipment, and software (15 ) Interest expense, net (21,105 ) Income tax expense (3,152 ) Net income $ 9,264 Nine Months Ended March 31, 2024 (in thousands) Senior Healthcare Services Life Auto & Home Corp & Elims Consolidated Revenue $ 541,705 $ 333,284 $ 115,855 $ 28,649 $ (4,926 ) $ 1,014,567 Operating expenses (402,834 ) (326,373 ) (102,910 ) (16,994 ) (62,770 ) (911,881 ) Other income (expense), net — — — (1 ) (50 ) (51 ) Adjusted EBITDA $ 138,871 $ 6,911 $ 12,945 $ 11,654 $ (67,746 ) $ 102,635 Share-based compensation expense (10,512 ) Transaction costs (7,629 ) Depreciation and amortization (18,591 ) Loss on disposal of property, equipment, and software (13 ) Interest expense, net (70,141 ) Income tax benefit 1,143 Net loss $ (3,108 ) Nine Months Ended March 31, 2023 (in thousands) Senior Healthcare Services Life Auto & Home Corp & Elims Consolidated Revenue $ 486,541 $ 169,270 $ 107,780 $ 23,128 $ (5,649 ) $ 781,070 Operating expenses (347,608 ) (193,726 ) (91,409 ) (15,812 ) (52,270 ) (700,825 ) Other income (expense), net — — — (1 ) (117 ) (118 ) Adjusted EBITDA $ 138,933 $ (24,456 ) $ 16,371 $ 7,315 $ (58,036 ) $ 80,127 Share-based compensation expense (8,525 ) Transaction costs (3,003 ) Depreciation and amortization (21,087 ) Loss on disposal of property, equipment, and software (386 ) Interest expense, net (58,885 ) Income tax benefit 1,053 Net loss $ (10,706 ) SELECTQUOTE, INC. AND SUBSIDIARIES Net Loss to Adjusted EBITDA Reconciliation (Unaudited) Guidance net loss to Adjusted EBITDA reconciliation, year ending June 30, 2024: (in thousands) Range Net loss $ (34,000 ) $ (21,000 ) Income tax benefit (12,000 ) (8,000 ) Interest expense, net 96,000 94,000 Depreciation and amortization 26,000 24,000 Share-based compensation expense 14,000 13,000 Non-recurring expenses 10,000 8,000 Adjusted EBITDA $ 100,000 $ 110,000 View source version on businesswire.com: https://www.businesswire.com/news/home/20240509711518/en/
Investor Relations: Sloan Bohlen 877-678-4083 investorrelations@selectquote.com Media: Matt Gunter 913-286-4931 matt.gunter@selectquote.com