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SelectQuote, Inc. Reports Fourth Quarter and Fiscal Year 2022 Results

08/29/2022

Fourth Quarter of Fiscal Year 2022 – Consolidated Earnings Highlights

  • Revenue of $139.4 million
  • Net loss of $104.7 million
  • Adjusted EBITDA* of $(60.8) million
  • Excluding the $(48.3) million cohort/tail adjustment, Revenue of $187.7 million*
  • Excluding the $(48.3) million cohort/tail adjustment, Net loss of $56.4 million*
  • Excluding the $(48.3) million cohort/tail adjustment, Adjusted EBITDA of $(12.5) million*

Full-Year Fiscal 2023 Revenue, Net loss, and Adjusted EBITDA expected to be in the following ranges:

  • Revenue expected in a range of $850 million to $950 million
  • Net loss expected in a range of $113 million to $89 million
  • Adjusted EBITDA* expected in a range of $(20) million to $10 million

Fourth Quarter of Fiscal Year 2022 – Segment Highlights

Senior

  • Revenue of $97.9 million
  • Adjusted EBITDA* of $(44.4) million
  • Approved Medicare Advantage policies grew 39% Year-Over-Year

Life

  • Revenue of $37.3 million
  • Final expense premiums fell 26% Year-Over-Year

Auto & Home

  • Revenue of $7.1 million
  • Total Auto & Home premiums grew 2% Year-Over-Year

OVERLAND PARK, Kan.--(BUSINESS WIRE)-- SelectQuote, Inc. (NYSE: SLQT) reported consolidated revenue for the fourth quarter of fiscal year 2022 of $139.4 million compared to consolidated revenue for the fourth quarter of fiscal year 2021 of $185.3 million. Consolidated net loss for the fourth quarter of fiscal year 2022 was $104.7 million compared to consolidated net income for the fourth quarter of fiscal year 2021 of $0.8 million. Finally, consolidated Adjusted EBITDA* for the fourth quarter of fiscal year 2022 was $(60.8) million compared to consolidated Adjusted EBITDA* for the fourth quarter of fiscal year 2021 of $18.1 million. Excluding the $48.3 million cohort/tail adjustment for the Senior MA distribution business, consolidated revenue for the fourth quarter of fiscal year 2022 was $187.7 million and Adjusted EBITDA* was $(12.5) million.

Consolidated revenue for the fiscal year ended June 30, 2022, was $764.0 million compared to consolidated revenue for the fiscal year ended June 30, 2021, of $930.0 million. Consolidated net loss for the fiscal year ended June 30, 2022, was $297.5 million compared to consolidated net income for the fiscal year ended June 30, 2021, of $124.9 million. Finally, consolidated Adjusted EBITDA* for the fiscal year ended June 30, 2022, was $(260.5) million compared to consolidated Adjusted EBITDA* of $220.2 million for the fiscal year ended June 30, 2021. Excluding the $193.3 million cohort/tail adjustment for the Senior MA distribution business, consolidated revenue for fiscal year 2022 was $957.3 million and Adjusted EBITDA* was $(67.2) million.

Chief Executive Officer Tim Danker commented, “We are pleased with the progress we have made against the strategic redesign of our business. Our goal is to optimize our core senior and healthcare services businesses with a focus on improving returns and higher visibility in our projected cash flows. Now six months into our strategic redesign, we have increasing confidence and high conviction that SelectQuote will create value for shareholders in the years to come. Clearly, the responsibility to prove our value to shareholders is ours and we can only do that through consistent execution, but our results year-to-date and in the fourth quarter demonstrate expanding profitability in both our core senior and healthcare services businesses including our growing SelectRx business.”

President Bob Grant added, “The actions we have taken in preparation for the upcoming Medicare Advantage season position SelectQuote well for success against our stated strategic goals to improve unit profitability and cash flow. Our agent force will be onboarded earlier and will consist of a higher proportion of core tenured agents, which should drive improved productivity. Similarly, our plan to originate fewer policies will allow SelectQuote to focus marketing and sales on the best performing Medicare Advantage business. These strategies combined with about $250 million in cost savings identified to date and the impressive growth of our SelectRx business will help improve both the cash flow generation and predictability of our business in the upcoming season and for years ahead.”

Segment Results

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

Senior

Financial Results

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

(in thousands)

4Q 2022

 

4Q 2021

 

% Change

 

FY 2022

 

FY 2021

 

% Change

Revenue

$

97,917

 

 

$

124,391

 

 

(21

)%

 

$

595,375

 

 

$

728,701

 

 

(18

)%

Adjusted EBITDA*

 

(44,374

)

 

 

24,830

 

 

(279

)%

 

 

(193,799

)

 

 

243,777

 

 

(179

)%

Adjusted EBITDA Margin*

 

(45

)%

 

 

20

%

 

 

 

 

(33

)%

 

 

33

%

 

 

Operating Metrics

Submitted Policies

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

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

 

4Q 2022

 

4Q 2021

 

% Change

 

FY 2022

 

FY 2021

 

% Change

Medicare Advantage

129,289

 

95,549

 

35

%

 

808,116

 

550,321

 

47

%

Medicare Supplement

890

 

2,498

 

(64

)%

 

7,208

 

26,785

 

(73

)%

Dental, Vision and Hearing

23,502

 

30,287

 

(22

)%

 

145,716

 

132,106

 

10

%

Prescription Drug Plan

649

 

1,193

 

(46

)%

 

6,842

 

11,436

 

(40

)%

Other

3,340

 

3,884

 

(14

)%

 

14,776

 

16,487

 

(10

)%

Total

157,670

 

133,411

 

18

%

 

982,658

 

737,135

 

33

%

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

Approved Policies

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

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

 

4Q 2022

 

4Q 2021

 

% Change

 

FY 2022

 

FY 2021

 

% Change

Medicare Advantage

115,707

 

83,448

 

39

%

 

661,738

 

467,585

 

42

%

Medicare Supplement

807

 

2,062

 

(61

)%

 

5,461

 

21,911

 

(75

)%

Dental, Vision and Hearing

23,738

 

26,645

 

(11

)%

 

124,989

 

111,015

 

13

%

Prescription Drug Plan

809

 

1,191

 

(32

)%

 

6,124

 

10,747

 

(43

)%

Other

3,208

 

3,880

 

(17

)%

 

12,407

 

14,089

 

(12

)%

Total

144,269

 

117,226

 

23

%

 

810,719

 

625,347

 

30

%

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:

(dollars per policy):

4Q 2022

 

4Q 2021

 

% Change

 

FY 2022

 

FY 2021

 

% Change

Medicare Advantage

$

877

 

$

1,121

 

(22

)%

 

$

925

 

$

1,260

 

(27

)%

Medicare Supplement

 

1,236

 

 

1,323

 

(7

)%

 

 

1,270

 

 

1,269

 

%

Dental, Vision and Hearing

 

122

 

 

121

 

1

%

 

 

123

 

 

136

 

(10

)%

Prescription Drug Plan

 

225

 

 

180

 

25

%

 

 

234

 

 

224

 

4

%

Other

 

64

 

 

160

 

(60

)%

 

 

73

 

 

113

 

(35

)%

Per Unit Economics

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

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

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

 

Twelve Months Ended
June 30,

 

 

(dollars per approved policy):

2022

 

2021

 

% Change

Medicare Advantage and Medicare Supplement approved policies

 

667,199

 

 

 

489,496

 

 

36

%

Medicare Advantage and Medicare Supplement commission per MA/MS policy

$

928

 

 

$

1,260

 

 

(26

)%

Other commission per MA/MS policy

 

27

 

 

 

39

 

 

(31

)%

Other per MA/MS policy

 

(62

)

 

 

190

 

 

(133

)%

Total revenue per MA/MS policy

 

893

 

 

 

1,489

 

 

(40

)%

Total operating expenses per MA/MS policy

 

(1,183

)

 

 

(991

)

 

19

%

Adjusted EBITDA per MA/MS policy*

$

(290

)

 

$

498

 

 

(158

)%

Adjusted EBITDA Margin per MA/MS policy*

 

(32

)%

 

 

33

%

 

(197

)%

Revenue/CAC multiple

1.8X

 

3X

 

 

Life

Financial Results

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

(in thousands)

4Q 2022

 

4Q 2021

 

% Change

 

FY 2022

 

FY 2021

 

% Change

Revenue

$

37,331

 

 

$

56,718

 

 

(34

)%

 

$

153,973

 

 

$

177,669

 

 

(13

)%

Adjusted EBITDA*

 

576

 

 

 

7,123

 

 

(92

)%

 

 

(129

)

 

 

22,542

 

 

(101

)%

Adjusted EBITDA Margin*

 

2

%

 

 

13

%

 

 

 

 

%

 

 

13

%

 

 

Operating Metrics

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

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

(in thousands)

4Q 2022

 

4Q 2021

 

% Change

 

FY 2022

 

FY 2021

 

% Change

Term Premiums

$

16,374

 

$

20,049

 

(18

)%

 

$

62,364

 

$

76,833

 

(19

)%

Final Expense Premiums

 

25,500

 

 

34,610

 

(26

)%

 

 

109,218

 

 

90,878

 

20

%

Total

$

41,874

 

$

54,659

 

(23

)%

 

 

171,582

 

 

167,711

 

2

%

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

Auto & Home

Financial Results

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

(in thousands)

4Q 2022

 

4Q 2021

 

% Change

 

FY 2022

 

FY 2021

 

% Change

Revenue

$

7,126

 

 

$

7,161

 

 

%

 

$

27,881

 

 

$

30,913

 

 

(10

)%

Adjusted EBITDA*

 

1,476

 

 

 

1,316

 

 

12

%

 

 

5,433

 

 

 

8,178

 

 

(34

)%

Adjusted EBITDA Margin*

 

21

%

 

 

18

%

 

 

 

 

19

%

 

 

26

%

 

 

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:

(in thousands):

4Q 2022

 

4Q 2021

 

% Change

 

FY 2022

 

FY 2021

 

% Change

Premiums

$

13,756

 

$

13,431

 

2

%

 

$

50,114

 

$

55,596

 

(10

)%

Earnings Conference Call

SelectQuote, Inc. will host a conference call with the investment community today, Monday, August 29, 2022, beginning at 8:30 a.m. ET. To register for this conference call, please use this link: https://ige.netroadshow.com/registration/q4inc/11325/selectquote-fiscal-4q-and-full-year-2022-earnings-call/. After registering, a confirmation will be sent via email, including dial-in details and unique conference call codes for entry. Registration is open through the live call, but to ensure you are connected for the full call we suggest registering a day in advance or at minimum 10 minutes before the start of the call. The event will also be webcasted live via our investor relations website https://ir.selectquote.com/investor-home/default.aspx.

Non-GAAP Financial Measures

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

We believe that 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 that 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.

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

Forward Looking Statement

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

There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following: the ultimate duration and impact of the ongoing COVID-19 pandemic 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; access to additional capital; failure to protect our intellectual property and our brand; fluctuations in our financial results caused by seasonality; accuracy and timeliness of commissions reports from insurance carriers; timing of insurance carriers’ approval and payment practices; factors that impact our estimate of the constrained lifetime value of commissions per policyholder; changes in accounting rules, tax legislation and other legislation; disruptions or failures of our technological infrastructure and platform; failure to maintain relationships with third-party service providers; cybersecurity breaches or other attacks involving our systems or those of our insurance carrier partners or third-party service providers; our ability to protect consumer information and other data; and failure to market and sell Medicare plans effectively or in compliance with laws. For a further discussion of these and other risk factors that could impact our future results and performance, see the section entitled “Risk Factors” in the most recent Annual Report on Form 10-K (the “Annual Report”) filed by us with the Securities and Exchange Commission. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and, except as otherwise required by law, we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

About SelectQuote:

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

SELECTQUOTE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

 

 

June 30, 2022

 

June 30, 2021

ASSETS

 

 

 

CURRENT ASSETS:

 

 

 

Cash and cash equivalents

$

140,997

 

 

$

286,454

Accounts receivable, net

 

129,748

 

 

 

103,364

Commissions receivable-current

 

116,277

 

 

 

89,120

Other current assets

 

15,751

 

 

 

4,486

Total current assets

 

402,773

 

 

 

483,424

COMMISSIONS RECEIVABLE—Net

 

722,349

 

 

 

756,777

PROPERTY AND EQUIPMENT—Net

 

41,804

 

 

 

29,510

SOFTWARE—Net

 

16,301

 

 

 

12,611

OPERATING LEASE RIGHT-OF-USE ASSETS

 

28,016

 

 

 

31,414

INTANGIBLE ASSETS—Net

 

31,255

 

 

 

40,670

GOODWILL

 

29,136

 

 

 

68,019

OTHER ASSETS

 

18,418

 

 

 

1,436

TOTAL ASSETS

$

1,290,052

 

 

$

1,423,861

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

CURRENT LIABILITIES:

 

 

 

Accounts payable

$

24,766

 

 

$

34,079

Accrued expenses

 

26,002

 

 

 

20,676

Accrued compensation and benefits

 

42,150

 

 

 

40,909

Operating lease liabilities—current

 

5,261

 

 

 

5,289

Current portion of long-term debt

 

7,169

 

 

 

2,360

Other current liabilities

 

8,165

 

 

 

5,504

Total current liabilities

 

113,513

 

 

 

108,817

LONG-TERM DEBT, NET—less current portion

 

698,423

 

 

 

459,043

DEFERRED INCOME TAXES

 

50,080

 

 

 

138,827

OPERATING LEASE LIABILITIES

 

33,946

 

 

 

38,392

OTHER LIABILITIES

 

2,985

 

 

 

11,743

Total liabilities

 

898,947

 

 

 

756,822

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

Common stock, $0.01 par value

 

1,644

 

 

 

1,635

Additional paid-in capital

 

554,845

 

 

 

544,771

Retained earnings (accumulated deficit)

 

(177,100

)

 

 

120,404

Accumulated other comprehensive income

 

11,716

 

 

 

229

Total shareholders’ equity

 

391,105

 

 

 

667,039

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

1,290,052

 

 

$

1,423,861

SELECTQUOTE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands)

 

 

Three Months Ended June 30,

 

Year Ended June 30,

 

2022

 

2021

 

2022

 

2021

REVENUE:

 

 

 

 

 

 

 

Commission

$

94,809

 

 

$

159,107

 

 

$

587,518

 

 

$

818,772

 

Production bonus

 

12,878

 

 

 

15,395

 

 

 

89,057

 

 

 

70,653

 

Other

 

31,707

 

 

 

10,760

 

 

 

87,470

 

 

 

40,556

 

Total revenue

 

139,394

 

 

 

185,262

 

 

 

764,045

 

 

 

929,981

 

 

 

 

 

 

 

 

 

OPERATING COSTS AND EXPENSES:

 

 

 

 

 

 

 

Cost of revenue

 

107,076

 

 

 

64,110

 

 

 

466,808

 

 

 

270,715

 

Marketing and advertising

 

75,080

 

 

 

86,595

 

 

 

484,084

 

 

 

385,291

 

General and administrative

 

25,267

 

 

 

18,618

 

 

 

89,837

 

 

 

63,114

 

Technical development

 

6,054

 

 

 

5,165

 

 

 

24,729

 

 

 

18,623

 

Goodwill impairment

 

44,596

 

 

 

 

 

 

44,596

 

 

 

 

Total operating costs and expenses

 

258,073

 

 

 

174,488

 

 

 

1,110,054

 

 

 

737,743

 

 

 

 

 

 

 

 

 

INCOME (LOSS) FROM OPERATIONS

 

(118,679

)

 

 

10,774

 

 

 

(346,009

)

 

 

192,238

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE, NET

 

(12,295

)

 

 

(8,422

)

 

 

(43,595

)

 

 

(29,320

)

LOSS ON EXTINGUISHMENT OF DEBT

 

 

 

 

 

 

 

 

 

 

(3,315

)

OTHER EXPENSE, NET

 

(26

)

 

 

(43

)

 

 

(202

)

 

 

(1,588

)

INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)

 

(131,000

)

 

 

2,309

 

 

 

(389,806

)

 

 

158,015

 

INCOME TAX EXPENSE (BENEFIT)

 

(26,318

)

 

 

1,513

 

 

 

(92,302

)

 

 

33,156

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

$

(104,682

)

 

$

796

 

 

$

(297,504

)

 

$

124,859

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER SHARE:

 

 

 

 

 

 

 

Basic

$

(0.64

)

 

$

 

 

$

(1.81

)

 

$

0.77

 

Diluted

$

(0.64

)

 

$

 

 

$

(1.81

)

 

$

0.75

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Basic

 

164,427

 

 

 

163,441

 

 

 

164,042

 

 

 

162,889

 

Diluted

 

164,427

 

 

 

165,689

 

 

 

164,042

 

 

 

165,544

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME (LOSS) NET OF TAX:

 

 

 

 

 

 

 

Gain (loss) on cash flow hedge

 

2,129

 

 

 

(186

)

 

 

11,487

 

 

 

1,483

 

OTHER COMPREHENSIVE INCOME (LOSS)

 

2,129

 

 

 

(186

)

 

 

11,487

 

 

 

1,483

 

COMPREHENSIVE INCOME (LOSS)

$

(102,553

)

 

$

610

 

 

$

(286,017

)

 

$

126,342

 

SELECTQUOTE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

Three Months Ended June 30,

 

Year Ended June 30,

 

2022

 

2021

 

2022

 

2021

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income (loss)

$

(104,682

)

 

$

796

 

 

$

(297,504

)

 

$

124,859

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

6,768

 

 

 

4,883

 

 

 

24,724

 

 

 

16,142

 

Goodwill impairment

 

44,596

 

 

 

 

 

 

44,596

 

 

 

 

Loss on disposal of property, equipment, and software

 

717

 

 

 

425

 

 

 

1,458

 

 

 

686

 

Impairment of long-lived assets

 

3,147

 

 

 

 

 

 

3,147

 

 

 

 

Share-based compensation expense

 

800

 

 

 

1,476

 

 

 

7,052

 

 

 

5,165

 

Deferred income taxes

 

(26,338

)

 

 

1,509

 

 

 

(92,716

)

 

 

33,007

 

Amortization of debt issuance costs and debt discount

 

1,243

 

 

 

862

 

 

 

5,461

 

 

 

3,344

 

Write-off of debt issuance costs

 

 

 

 

 

 

 

 

 

 

2,570

 

Fair value adjustments to contingent earnout obligations

 

 

 

 

 

 

 

 

 

 

1,488

 

Non-cash lease expense

 

1,002

 

 

 

953

 

 

 

4,067

 

 

 

3,823

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable, net

 

34,085

 

 

 

28,264

 

 

 

(25,749

)

 

 

(19,993

)

Commissions receivable

 

(329

)

 

 

(81,747

)

 

 

7,271

 

 

 

(332,936

)

Other assets

 

(2,641

)

 

 

500

 

 

 

(10,915

)

 

 

4,848

 

Accounts payable and accrued expenses

 

(12,559

)

 

 

(6,495

)

 

 

(4,464

)

 

 

19,728

 

Operating lease liabilities

 

(1,274

)

 

 

(1,151

)

 

 

(5,143

)

 

 

(3,782

)

Other liabilities

 

1,513

 

 

 

(4,768

)

 

 

401

 

 

 

25,609

 

Net cash used in operating activities

 

(53,952

)

 

 

(54,493

)

 

 

(338,314

)

 

 

(115,442

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Purchases of property and equipment

 

(283

)

 

 

(8,387

)

 

 

(24,798

)

 

 

(14,907

)

Purchases of software and capitalized software development costs

 

(2,280

)

 

 

(2,275

)

 

 

(9,851

)

 

 

(8,081

)

Acquisition of business

 

 

 

 

(17,150

)

 

 

(6,927

)

 

 

(41,028

)

Investment in equity securities

 

 

 

 

 

 

 

(1,000

)

 

 

 

Net cash used in investing activities

 

(2,563

)

 

 

(27,812

)

 

 

(42,576

)

 

 

(64,016

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from Revolving Credit Facility

 

 

 

 

 

 

 

50,000

 

 

 

 

Payments on Revolving Credit Facility

 

 

 

 

 

 

 

(50,000

)

 

 

 

Proceeds from DDTL Facility

 

 

 

 

 

 

 

242,000

 

 

 

 

Payments on DDTL Facility

 

(613

)

 

 

 

 

 

(1,225

)

 

 

 

Net proceeds from Term Loans

 

 

 

 

 

 

 

 

 

 

228,753

 

Payments on Term Loans

 

(1,180

)

 

 

 

 

 

(2,360

)

 

 

(84,118

)

Payments on other debt

 

(54

)

 

 

(62

)

 

 

(184

)

 

 

(251

)

Proceeds from common stock options exercised and employee stock purchase plan

 

 

 

 

109

 

 

 

3,179

 

 

 

1,887

 

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

 

 

 

 

(336

)

 

 

(148

)

 

 

(10,362

)

Payments of debt issuance costs

 

 

 

 

 

 

 

(328

)

 

 

(885

)

Payments of costs incurred in connection with private placement

 

 

 

 

 

 

 

 

 

 

(1,771

)

Payments of costs incurred in connection with initial public offering

 

 

 

 

 

 

 

 

 

 

(3,911

)

Payment of contingent earnout liability

 

 

 

 

 

 

 

 

 

 

(32,300

)

Payment of acquisition holdback

 

 

 

 

 

 

 

(5,501

)

 

 

 

Net cash (used in) provided by financing activities

 

(1,847

)

 

 

(289

)

 

 

235,433

 

 

 

97,042

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

(58,362

)

 

 

(82,594

)

 

 

(145,457

)

 

 

(82,416

)

CASH AND CASH EQUIVALENTS—Beginning of year

 

199,359

 

 

 

369,048

 

 

 

286,454

 

 

 

368,870

 

CASH AND CASH EQUIVALENTS—End of year

$

140,997

 

 

$

286,454

 

 

$

140,997

 

 

$

286,454

 

SELECTQUOTE, INC. AND SUBSIDIARIES

Adjusted EBITDA to Net Income (Loss) Reconciliation

(Unaudited)

 

 

 

Three Months Ended June 30, 2022

(in thousands)

 

Senior

 

Life

 

Auto &
Home

 

Corp &
Elims

 

Consolidated

Revenue

 

$

97,917

 

 

$

37,331

 

 

$

7,126

 

 

$

(2,980

)

 

$

139,394

 

Operating expenses

 

 

(142,291

)

 

 

(36,755

)

 

 

(5,650

)

 

 

(15,476

)

 

 

(200,172

)

Other expenses, net

 

 

 

 

 

 

 

 

 

 

 

(26

)

 

 

(26

)

Adjusted EBITDA

 

 

(44,374

)

 

 

576

 

 

 

1,476

 

 

 

(18,482

)

 

 

(60,804

)

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

(800

)

Non-recurring expenses

 

 

 

 

 

 

 

 

 

 

(1,873

)

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

(6,768

)

Loss on disposal of property, equipment, and software

 

 

 

 

 

 

 

 

 

 

(717

)

Goodwill impairment

 

 

 

 

 

 

 

 

 

 

(44,596

)

Impairment of long-lived assets

 

 

 

 

 

 

 

 

 

 

(3,147

)

Interest expense, net

 

 

 

 

 

 

 

 

 

 

(12,295

)

Income tax benefit

 

 

 

 

 

 

 

 

 

 

26,318

 

Net loss

 

 

 

 

 

 

 

 

 

 

(104,682

)

Net commission revenue adjustment from change in estimate for Senior cohort/tail adjustment

 

 

 

 

 

 

 

 

 

 

48,300

 

Adjusted consolidated net loss

 

 

 

 

 

 

 

 

 

$

(56,382

)

 
 

 

 

Three Months Ended June 30, 2021

(in thousands)

 

Senior

 

Life

 

Auto &
Home

 

Corp &
Elims

 

Consolidated

Revenue

 

$

124,391

 

 

$

56,718

 

 

$

7,161

 

 

$

(3,008

)

 

$

185,262

 

Operating expenses

 

 

(99,561

)

 

 

(49,595

)

 

 

(5,845

)

 

 

(12,128

)

 

 

(167,129

)

Other expenses, net

 

 

 

 

 

 

 

 

 

 

 

(43

)

 

 

(43

)

Adjusted EBITDA

 

 

24,830

 

 

 

7,123

 

 

 

1,316

 

 

 

(15,179

)

 

 

18,090

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

(1,476

)

Non-recurring expenses

 

 

 

 

 

 

 

 

 

 

(575

)

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

(4,883

)

Loss on disposal of property, equipment, and software

 

 

 

 

 

 

 

 

 

 

(425

)

Interest expense, net

 

 

 

 

 

 

 

 

 

 

(8,422

)

Income tax expense

 

 

 

 

 

 

 

 

 

 

(1,513

)

Net income

 

 

 

 

 

 

 

 

 

$

796

 

SELECTQUOTE, INC. AND SUBSIDIARIES

Adjusted EBITDA to Net Income (Loss) Reconciliation

(Unaudited)

   

 

 

Year Ended June 30, 2022

(in thousands)

 

Senior

 

Life

 

Auto &
Home

 

Corp &
Elims

 

Consolidated

Revenue

 

$

595,375

 

 

$

153,973

 

 

$

27,881

 

 

$

(13,184

)

 

$

764,045

 

Operating expenses

 

 

(789,174

)

 

 

(154,102

)

 

 

(22,448

)

 

 

(58,625

)

 

 

(1,024,349

)

Other expenses, net

 

 

 

 

 

 

 

 

 

 

 

(202

)

 

 

(202

)

Adjusted EBITDA

 

 

(193,799

)

 

 

(129

)

 

 

5,433

 

 

 

(72,011

)

 

 

(260,506

)

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

(7,052

)

Non-recurring expenses

 

 

 

 

 

 

 

 

 

 

(4,730

)

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

(24,724

)

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

 

 

 

 

 

 

 

 

 

 

(1,456

)

Goodwill impairment

 

 

 

 

 

 

 

 

 

 

(44,596

)

Impairment of long-lived assets

 

 

 

 

 

 

 

 

 

 

(3,147

)

Interest expense, net

 

 

 

 

 

 

 

 

 

 

(43,595

)

Income tax benefit

 

 

 

 

 

 

 

 

 

 

92,302

 

Net loss

 

 

 

 

 

 

 

 

 

$

(297,504

)

   
   

 

 

Year Ended June 30, 2021

(in thousands)

 

Senior

 

Life

 

Auto &
Home

 

Corp &
Elims

 

Consolidated

Revenue

 

$

728,701

 

 

$

177,669

 

 

$

30,913

 

 

$

(7,302

)

 

$

929,981

 

Operating expenses

 

 

(484,924

)

 

 

(155,127

)

 

 

(22,735

)

 

 

(46,899

)

 

 

(709,685

)

Other expenses, net

 

 

 

 

 

 

 

 

 

 

 

(100

)

 

 

(100

)

Adjusted EBITDA

 

 

243,777

 

 

 

22,542

 

 

 

8,178

 

 

 

(54,301

)

 

 

220,196

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

(5,165

)

Non-recurring expenses

 

 

 

 

 

 

 

 

 

 

(6,065

)

Fair value adjustments to contingent earnout obligations

 

 

 

 

 

 

 

 

 

 

(1,488

)

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

(16,142

)

Loss on disposal of property, equipment, and software

 

 

 

 

 

 

 

 

 

 

(686

)

Interest expense, net

 

 

 

 

 

 

 

 

 

 

(29,320

)

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

(3,315

)

Income tax expense

 

 

 

 

 

 

 

 

 

 

(33,156

)

Net income

 

 

 

 

 

 

 

 

 

$

124,859

 

SELECTQUOTE, INC. AND SUBSIDIARIES

Revenue to Adjusted EBITDA - Senior Cohort/Tail Adjustment

(Unaudited)

 

 

 

Three Months Ended June 30, 2022

(in thousands)

 

Senior

 

Life

 

Auto &
Home

 

Corp &
Elims

 

Consolidated

Revenue

 

$

97,917

 

 

$

37,331

 

 

$

7,126

 

 

$

(2,980

)

 

$

139,394

 

Net commission revenue adjustment from change in estimate for Senior cohort/tail adjustment

 

 

48,300

 

 

 

 

 

 

 

 

 

 

 

 

48,300

 

Revenue, excluding net commission revenue adjustment from change in estimate for Senior cohort/tail adjustment

 

 

146,217

 

 

 

37,331

 

 

 

7,126

 

 

 

(2,980

)

 

 

187,694

 

Operating expenses

 

 

(142,291

)

 

 

(36,755

)

 

 

(5,650

)

 

 

(15,476

)

 

 

(200,172

)

Other expenses, net

 

 

 

 

 

 

 

 

 

 

 

(26

)

 

 

(26

)

Adjusted EBITDA

 

$

3,926

 

 

$

576

 

 

$

1,476

 

 

$

(18,482

)

 

$

(12,504

)

   
   

 

 

Year Ended June 30, 2022

(in thousands)

 

Senior

 

Life

 

Auto &
Home

 

Corp &
Elims

 

Consolidated

Revenue

 

$

595,375

 

 

$

153,973

 

 

$

27,881

 

 

$

(13,184

)

 

$

764,045

 

Net commission revenue adjustment from change in estimate for Senior cohort/tail adjustment

 

 

193,300

 

 

 

 

 

 

 

 

 

 

 

 

193,300

 

Revenue, excluding net commission revenue adjustment from change in estimate for Senior cohort/tail adjustment

 

 

788,675

 

 

 

153,973

 

 

 

27,881

 

 

 

(13,184

)

 

 

957,345

 

Operating expenses

 

 

(789,174

)

 

 

(154,102

)

 

 

(22,448

)

 

 

(58,625

)

 

 

(1,024,349

)

Other expenses, net

 

 

 

 

 

 

 

 

 

 

 

(202

)

 

 

(202

)

Adjusted EBITDA

 

$

(499

)

 

$

(129

)

 

$

5,433

 

 

$

(72,011

)

 

$

(67,206

)

SELECTQUOTE, INC. AND SUBSIDIARIES

Net Loss to Adjusted EBITDA Reconciliation

(Unaudited)

 

Guidance net loss to Adjusted EBITDA reconciliation, year ending June 30, 2023:

 

(in thousands)

 

Range

Net loss

 

$

(113,000

)

 

$

(89,000

)

Income tax benefit

 

 

(33,000

)

 

 

(29,000

)

Interest expense, net

 

 

74,000

 

 

 

74,000

 

Depreciation and amortization

 

 

24,000

 

 

 

24,000

 

Share-based compensation expense

 

 

12,000

 

 

 

12,000

 

Non-recurring expenses

 

 

16,000

 

 

 

18,000

 

Adjusted EBITDA

 

$

(20,000

)

 

$

10,000

 

 

Investor Relations:
Sloan Bohlen
877-678-4083
investorrelations@selectquote.com

Media:
Matt Gunter
913-286-4931
matt.gunter@selectquote.com

Source: SelectQuote, Inc.

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