SelectQuote, Inc. Reports Third Quarter 2024 Results

Rhea-AI Summary

SelectQuote, Inc. reported a strong third quarter of fiscal year 2024 with consolidated revenue of $376.4 million, net income of $8.6 million, and Adjusted EBITDA of $46.6 million. The company raised its Fiscal Year 2024 guidance ranges for revenue, net loss, and Adjusted EBITDA. The Senior segment showed impressive results with revenue of $204.3 million and Adjusted EBITDA of $61.5 million. The Healthcare Services segment saw revenue of $124.2 million and an Adjusted EBITDA of $1.6 million, with significant growth in SelectRx members. Life segment revenue was $40.7 million, while the Auto & Home segment revenue reached $9.1 million. CEO Tim Danker expressed confidence in the company's performance and outlook for shareholder value.

Positive

• Consolidated revenue for the third quarter of fiscal year 2024 increased to $376.4 million from $299.4 million in the third quarter of fiscal year 2023.

• Senior segment revenue of $204.3 million and Adjusted EBITDA of $61.5 million showed strong performance.

• Healthcare Services segment revenue of $124.2 million and Adjusted EBITDA of $1.6 million exhibited significant growth.

• Improved outlook for Fiscal Year 2024 with raised guidance ranges for revenue, net loss, and Adjusted EBITDA.

• Positive sentiment from CEO Tim Danker regarding the company's performance and strategic positioning for growth.

Negative

• Consolidated net income for the third quarter of fiscal year 2024 decreased to $8.6 million from $9.3 million in the third quarter of fiscal year 2023.

• The Life segment saw a decline in Adjusted EBITDA to $3.1 million from $5.3 million, a decrease of 41%.

• Auto & Home segment's Adjusted EBITDA Margin decreased to 40% from 31% compared to the same period last year.

• Increase in total operating expenses per MA/MS policy by 22% for the twelve months ended March 31, 2024, compared to the previous year.

Insights

Financial Analyst

The third-quarter financial report from SelectQuote, Inc. demonstrates an upward trend in revenue, with a reported $376.4 million which is a notable increase from the previous year's $299.4 million. This growth is indicative of an expanding operational scale, especially within the Senior and Healthcare Services segments. Moreover, the improvement in the company’s guidance for the fiscal year 2024 hints at internal confidence in continued growth and operational efficiency.

Raising the adjusted EBITDA guidance to $100 million to $110 million, compared to the prior $90 million to $105 million, showcases management effectiveness in optimizing operations amidst challenging market conditions. However, investors should note the projected net loss range reduction, which reflects a more optimistic yet still cautious outlook on profitability.

An assessment of the Senior segment shows revenue growth by 10% alongside a marginal increase in adjusted EBITDA, suggesting a stable demand for Medicare Advantage policies. This stability is important considering the segment’s significant revenue contribution. The Healthcare Services growth of 76% in revenue is particularly impressive, indicating successful cross-selling and customer acquisition strategies. Nonetheless, the Adjusted EBITDA margin remains low at 1%, which raises questions about the scalability and long-term profitability of this segment.

For the Life and Auto & Home segments, while there is revenue growth, there is a noted decline in the Life segment's adjusted EBITDA by 41%, which could be a concern. On the other hand, the Auto & Home segment's adjusted EBITDA margin improvement to 40% is commendable.

In the context of operational metrics like the number of approved policies and the lifetime value of commissions per approved policy, the increases are indicators of a robust sales pipeline and effective marketing strategies. The consistent rise in approved Medicare Advantage policies and the growth in commission per policy align with industry trends towards higher-value policies. The substantial increase in Medicare Supplement lifetime value of commissions is significant, though it's derived from a relatively small base compared to Medicare Advantage.

Healthcare Industry Analyst

The strategic direction of SelectQuote, particularly in the Senior and Healthcare Services segments, seems aligned with broader industry movements towards integrated healthcare platforms. The company's expansion of the SelectRx membership is noteworthy, as it aligns with the strategic importance of prescription drug plans in Medicare Advantage offerings.

Additionally, the report highlights the revenue per customer acquisition cost at an impressive multiple of over 4x, reflecting strong unit economics and potentially sustainable customer value creation. This is a critical metric for investors, as it provides insight into the return on investment in marketing and customer acquisition.

The amendment to the credit agreement extending the maturity date of term loans may provide some financial flexibility. However, this development also suggests that investors should closely monitor the company's debt levels and liquidity position. The minimum asset coverage ratio and liquidity requirements are measures that could impact operational decisions and should be evaluated for their potential constraints on the company’s growth strategies.

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

OVERLAND PARK, Kan.--(BUSINESS WIRE)-- 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

Source: SelectQuote, Inc.

FAQ

What was SelectQuote, Inc.'s reported revenue for the third quarter of fiscal year 2024?

SelectQuote, Inc. reported consolidated revenue of $376.4 million for the third quarter of fiscal year 2024.

What were SelectQuote, Inc.'s net income and Adjusted EBITDA for the third quarter of fiscal year 2024?

SelectQuote, Inc. reported a net income of $8.6 million and Adjusted EBITDA of $46.6 million for the third quarter of fiscal year 2024.

Which segments showed strong performance in the third quarter of fiscal year 2024?

The Senior segment with revenue of $204.3 million and Healthcare Services segment with revenue of $124.2 million exhibited strong performance in the third quarter of fiscal year 2024.

What was the CEO's outlook for SelectQuote, Inc.'s future performance?

CEO Tim Danker expressed confidence in SelectQuote's performance and outlook for driving shareholder value in the future.

What were the key financial metrics for SelectQuote, Inc. in the third quarter of fiscal year 2024?

SelectQuote, Inc. reported positive growth in consolidated revenue, while net income saw a slight decrease. The company raised its guidance ranges for Fiscal Year 2024, showing optimism for future performance.