8-K
SelectQuote, Inc. (SLQT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
Form 8-K
Current Report
_______________
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 7, 2022
SELECTQUOTE, INC.
(Exact name of registrant as specified in its charter)
_____________
| Delaware | 001-39295 | 94-3339273 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
| 6800 West 115th Street, Suite 2511 | ||
| Overland Park, Kansas 66211 | ||
| (Address of principal executive offices) (Zip code) | ||
| (913) 599-9225 | ||
| (Registrant’s telephone number, including area code) | ||
| No change since last report | ||
| (Former Name or Address, If Changed Since Last Report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.01 par value | SLQT | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On February 7, 2022, the Company reported its financial results for the second quarter ended December 31, 2021. A copy of the related press release and investor presentation are attached hereto as Exhibits 99.1 and 99.2, respectively.
These exhibits are being furnished pursuant to Item 2.02, and the information contained therein shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall either of them be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Description of Exhibit |
|---|---|
| 99.1 | Press Release |
| 99.2 | Investor Presentation |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
SELECTQUOTE, INC.
| Date: February 7, 2022 | By: /s/ Raffaele Sadun |
|---|---|
| Name: Raffaele Sadun | |
| Title: Chief Financial Officer |
Document
Exhibit 99.1
SelectQuote, Inc. Reports Second Quarter of Fiscal Year 2022 Results
Second Quarter of Fiscal Year 2022 - Consolidated Earnings Highlights
•Revenue of $195.0 million
•Net Loss of $137.0 million
•Adjusted EBITDA* of $(163.3) million
•Excluding the $(145) million cohort/tail adjustment, Revenue of $340 million*
•Excluding the $(145) million cohort/tail adjustment, Adjusted EBITDA* of $(18.3) million
•Updating Full-Year Fiscal 2022 Revenue, Net Loss and Adjusted EBITDA Guidance:
◦Revenue expected in a range of $810 million to $850 million
◦Net Loss expected in a range of $255 million to $236 million
◦Adjusted EBITDA* expected in a range of $(260) million to $(235) million
Second Quarter of Fiscal Year 2022 - Segment Highlights
Senior
•Revenue of $158.0 million
•Adjusted EBITDA* of $(148.6) million
•Approved Medicare Advantage policies grew 27% Year-Over-Year
•Excluding the $(145) million cohort/tail adjustment, Revenue of $303.0 million*
•Excluding the $(145) million cohort/tail adjustment, Adjusted EBITDA* of $(3.6) million
Life
•Revenue of $32.8 million
•Final expense premiums grew 82% Year-Over-Year
Auto & Home
•Revenue of $6.1 million
•Total Auto & Home premiums declined 20% Year-Over-Year
OVERLAND PARK, Kan., February 7, 2022--(BUSINESS WIRE)--SelectQuote, Inc. (NYSE: SLQT) reported consolidated revenue for the second quarter of fiscal year 2022 of $195.0 million compared to consolidated revenue for the second quarter of fiscal year 2021 of $357.6 million. Consolidated net loss for the second quarter of fiscal year 2022 was $137.0 million compared to consolidated net income for the second quarter of fiscal year 2021 of $89.9 million. Finally, consolidated Adjusted EBITDA* for the second quarter of fiscal year 2022 was $(163.3) million, compared to consolidated Adjusted EBITDA* for the second quarter of fiscal year 2021 of $128.8 million.
Chief Executive Officer Tim Danker commented, “SelectQuote faced a series of unexpected challenges in our core Senior segment this Medicare Advantage season. Overall parity in Medicare Advantage plan features along with delayed hiring drove considerably lower close rates, which negatively impacted profitability. In addition, we recognized a $145 million downward cohort/tail adjustment based primarily on higher intra-year lapse rates and overall lower persistency from the January 2022 renewals. Based on that data, the potential risk discussed during our fourth quarter earnings call in August 2021 was accelerated.”
Mr. Danker continued, “SelectQuote is committed to our Senior distribution business and the large value opportunity it presents in tandem with our growing Population Health initiative. That said, the disappointing performance year-to-date will result in changes to our strategy, with a focus on driving efficiencies. We aim to reduce earnings volatility and downside risk through a reset of our growth and operating leverage philosophy. Moving forward, growth will be more focused on cash flow and predictability. We are confident in our ability to deliver value to shareholders despite a challenging year and look forward to proving our potential beyond fiscal 2022.”
*See reconciliation from GAAP to non-GAAP measures starting on page 11.
Segment Results
We currently report on three segments: 1) Senior, 2) Life and 3) Auto & Home. The performance measures of the segments include total revenue and Adjusted EBITDA.* Costs of revenue, marketing and advertising, and technical development operating costs and expenses that are directly attributable to a segment are reported within the applicable segment. Indirect costs of revenue, marketing and advertising, and technical development operating costs and expenses are allocated to each segment based on varying metrics such as headcount. Adjusted EBITDA* is calculated as total revenue for the applicable segment less: direct and allocated costs of revenue, marketing and advertising, technical development, and general and administrative operating costs and expenses, excluding depreciation and amortization expense; gain or loss on disposal of property, equipment, and software; share-based compensation expense; restructuring expenses; and non-recurring expenses such as severance payments and transaction costs.
Senior
Financial Results
The following table provides the financial results for the Senior segment for the periods presented:
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||||||
| Revenue | $ | 157,967 | $ | 315,510 | (50) | % | $ | 264,287 | $ | 388,709 | (32) | % | ||||
| Adjusted EBITDA* | (148,635) | 134,555 | (210) | % | (181,606) | 143,457 | (227) | % | ||||||||
| Adjusted EBITDA Margin* | (94) | % | 43 | % | (69) | % | 37 | % |
Operating Metrics
Submitted Policies
Submitted policies are counted when an individual completes an application with our licensed agent and provides authorization to the agent to submit the application to the insurance carrier partner. The applicant may have additional actions to take, such as providing additional information, before the application will be reviewed by the insurance carrier.
The following table shows the number of submitted policies for the periods presented:
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | % Change | 2021 | 2020 | % Change | |||
| Medicare Advantage | 340,317 | 246,548 | 38 | % | 436,106 | 294,539 | 48 | % |
| Medicare Supplement | 3,117 | 13,273 | (77) | % | 4,929 | 20,549 | (76) | % |
| Dental, Vision and Hearing | 53,432 | 43,020 | 24 | % | 82,036 | 63,062 | 30 | % |
| Prescription Drug Plan | 4,241 | 6,250 | (32) | % | 5,114 | 8,675 | (41) | % |
| Other | 2,967 | 3,939 | (25) | % | 6,529 | 5,822 | 12 | % |
| Total | 404,074 | 313,030 | 29 | % | 534,714 | 392,647 | 36 | % |
*See reconciliation from GAAP to non-GAAP measures starting on page 11.
Approved Policies
Approved policies represents the number of submitted policies that were approved by our insurance carrier partners for the identified product during the indicated period. Not all approved policies will go in force.
The following table shows the number of approved policies for the periods presented:
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | % Change | 2021 | 2020 | % Change | |||
| Medicare Advantage | 265,538 | 208,714 | 27 | % | 349,654 | 251,187 | 39 | % |
| Medicare Supplement | 2,097 | 10,451 | (80) | % | 3,495 | 16,776 | (79) | % |
| Dental, Vision and Hearing | 44,542 | 33,614 | 33 | % | 66,765 | 49,853 | 34 | % |
| Prescription Drug Plan | 3,352 | 4,815 | (30) | % | 4,220 | 7,447 | (43) | % |
| Other | 2,483 | 3,256 | (24) | % | 5,363 | 5,080 | 6 | % |
| Total | 318,012 | 260,850 | 22 | % | 429,497 | 330,343 | 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:
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (dollars per policy): | 2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||
| Medicare Advantage | $ | 922 | $ | 1,268 | (27) | % | $ | 936 | $ | 1,251 | (25) | % |
| Medicare Supplement | 1,347 | 1,233 | 9 | % | 1,384 | 1,248 | 11 | % | ||||
| Dental, Vision and Hearing | 112 | 138 | (19) | % | 125 | 148 | (16) | % | ||||
| Prescription Drug Plan | 218 | 232 | (6) | % | 237 | 235 | 1 | % | ||||
| Other | 9 | 127 | (93) | % | 64 | 130 | (51) | % |
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 approved 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 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 December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| (dollars per approved policy): | 2021 | 2020 | % Change | |||||
| Medicare Advantage and Medicare Supplement approved policies | 574,682 | 394,032 | 46 | % | ||||
| Medicare Advantage and Medicare Supplement commission per MA/MS policy | $ | 1,067 | $ | 1,276 | (16) | % | ||
| Other commission per MA/MS policy | 33 | 39 | (15) | % | ||||
| Other per MA/MS policy | (49) | 168 | (129) | % | ||||
| Total revenue per MA/MS policy | 1,051 | 1,483 | (29) | % | ||||
| Total operating expenses per MA/MS policy | (1,193) | (916) | 30 | % | ||||
| Adjusted EBITDA per MA/MS policy* | $ | (142) | $ | 567 | (125) | % | ||
| Adjusted EBITDA Margin per MA/MS policy* | (14) | % | 38 | % | (135) | % | ||
| Revenue/CAC multiple | 1.9X | 3.2X |
Life
Financial Results
The following table provides the financial results for the Life segment for the periods presented:
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||||||
| Revenue | $ | 32,780 | $ | 35,666 | (8) | % | $ | 80,211 | $ | 77,094 | 4 | % | ||||
| Adjusted EBITDA* | 1,850 | 5,705 | (68) | % | 4,153 | 14,787 | (72) | % | ||||||||
| Adjusted EBITDA Margin* | 6 | % | 16 | % | 5 | % | 19 | % |
Operating Metrics
Life premium represents the total premium value for all policies that were approved by the relevant insurance carrier partner and for which the policy document was sent to the policyholder and payment information was received by the relevant insurance carrier partner during the indicated period. Because our commissions are earned based on a percentage of total premium, total premium volume for a given period is the key driver of revenue for our Life segment.
*See reconciliation from GAAP to non-GAAP measures starting on page 11.
The following table shows term and final expense premiums for the periods presented:
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||
| Term Premiums | $ | 15,548 | $ | 18,888 | (18) | % | $ | 31,057 | $ | 37,742 | (18) | % |
| Final Expense Premiums | 21,134 | 11,631 | 82 | % | 55,186 | 31,450 | 75 | % | ||||
| Total | $ | 36,682 | $ | 30,519 | 20 | % | 86,243 | 69,192 | 25 | % |
Auto & Home
Financial Results
The following table provides the financial results for the Auto & Home segment for the periods presented:
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||||||
| Revenue | $ | 6,135 | $ | 7,241 | (15) | % | $ | 13,604 | $ | 16,779 | (19) | % | ||||
| Adjusted EBITDA* | 1,435 | 2,150 | (33) | % | 2,808 | 5,767 | (51) | % | ||||||||
| Adjusted EBITDA Margin* | 23 | % | 30 | % | 21 | % | 34 | % |
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 December 31, | Six Months Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands): | 2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||
| Premiums | $ | 10,585 | $ | 13,255 | (20) | % | $ | 23,843 | $ | 30,155 | (21) | % |
Revision
The Company discovered that the first year provision for certain final expense policies offered by one of our insurance carrier partners should previously have been accrued based on a higher lapse rate. We identified approximately $2 million of additional provision that should have been accrued in fiscal year 2020, $6.1 million in fiscal year 2021 and $2.4 million in the first quarter of fiscal year 2022. The method of accruing the provision for the particular product has been corrected, and the figures reported in this release reflect the accrual of $1.4 million in the first quarter of fiscal year 2021, $0.7 million in the second quarter of fiscal 2021 and $2.4 million in the first quarter of fiscal year 2022. Management believes the foregoing correction is not material to prior period results. The reconciliation of these corrections will be included in our Form 10-Q for the period ended December 31, 2021.
*See reconciliation from GAAP to non-GAAP measures starting on page 11.
Earnings Conference Call
SelectQuote, Inc. will host a conference call with the investment community today, Monday, February 7, 2022, beginning at 5 p.m. ET. To register for this conference call, please use this link: http://www.directeventreg.com/registration/event/1649099. After registering, a confirmation will be sent via email, including dial-in details and unique conference call codes for entry. Registration is open through the live call, but to ensure you are connected for the full call we suggest registering a day in advance or at minimum 10 minutes before the start of the call. The event will also be webcasted live via our investor relations website https://ir.selectquote.com/investor-home/default.aspx.
Non-GAAP Financial Measures
This release includes certain non-GAAP financial measures intended to supplement, not substitute for, comparable GAAP measures. To supplement our financial statements presented in accordance with GAAP and to provide investors with additional information regarding our GAAP financial results, we have presented in this release Adjusted EBITDA and Adjusted EBITDA Margin, which are non-GAAP financial measures. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly titled measures presented by other companies. We define Adjusted EBITDA as income (loss) before interest expense, income tax expense (benefit), depreciation and amortization, and certain add-backs for non-cash or non-recurring expenses, including restructuring and share-based compensation expenses. The most directly comparable GAAP measure is net income (loss). We monitor and have presented in this release Adjusted EBITDA because it is a key measure used by our management and Board of Directors to understand and evaluate our operating performance, to establish budgets and to develop operational goals for managing our business. In particular, we believe that excluding the impact of these expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core operating performance.
We believe that this non-GAAP financial measure helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in the calculations of this non-GAAP financial measure. Accordingly, we believe that this financial measure provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects.
Forward Looking Statement
This release contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.
There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following: the ultimate duration and impact of the ongoing COVID-19 pandemic, our reliance on a limited number of insurance carrier partners and any potential termination of those relationships or failure to develop new relationships; existing and future laws and regulations affecting the health insurance market; changes in health insurance products offered by our insurance carrier partners and the health insurance market generally; insurance carriers offering products and services directly to consumers; changes to commissions paid by insurance carriers and underwriting practices; competition with brokers, exclusively online brokers and carriers who opt to sell policies directly to consumers; competition from government-run health insurance exchanges; developments in the U.S. health insurance system; our dependence on revenue from carriers in our senior segment and downturns in the senior health as well as life, automotive and home insurance industries; our ability to develop new offerings and penetrate new vertical markets; risks from third-party
products; failure to enroll individuals during the Medicare annual enrollment period; our ability to attract, integrate and retain qualified personnel; our dependence on lead providers and ability to compete for leads; failure to obtain and/or convert sales leads to actual sales of insurance policies; access to data from consumers and insurance carriers; accuracy of information provided from and to consumers during the insurance shopping process; cost-effective advertisement through internet search engines; ability to contact consumers and market products by telephone; global economic conditions; disruption to operations as a result of future acquisitions; significant estimates and assumptions in the preparation of our financial statements; impairment of goodwill; potential litigation and claims, including IP litigation; our existing and future indebtedness; developments with respect to LIBOR; access to additional capital; failure to protect our intellectual property and our brand; fluctuations in our financial results caused by seasonality; accuracy and timeliness of commissions reports from insurance carriers; timing of insurance carriers’ approval and payment practices; factors that impact our estimate of the constrained lifetime value of commissions per policyholder; changes in accounting rules, tax legislation and other legislation; disruptions or failures of our technological infrastructure and platform; failure to maintain relationships with third-party service providers; cybersecurity breaches or other attacks involving our systems or those of our insurance carrier partners or third-party service providers; our ability to protect consumer information and other data; and failure to market and sell Medicare plans effectively or in compliance with laws. For a further discussion of these and other risk factors that could impact our future results and performance, see the section entitled “Risk Factors” in the most recent Annual Report on Form 10-K (the “Annual Report”) filed by us with the Securities and Exchange Commission. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and, except as otherwise required by law, we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
About SelectQuote:
Founded in 1985, SelectQuote (NYSE: SLQT) provides solutions that help consumers protect their most valuable assets: their families, health and property. The company pioneered the direct-to-consumer 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, scores, and routes high-quality sales leads. The company 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 from leading, nationally-recognized carriers, as well as prescription drug plans, dental, vision and hearing plans.
Investor Relations:
Sloan Bohlen
877-678-4083
investorrelations@selectquote.com
Media:
Matt Gunter
913-286-4931
matt.gunter@selectquote.com
Kelly Hale
913-653-4375
kelly.hale@selectquote.com
Source: SelectQuote, Inc.
SELECTQUOTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
| December 31, 2021 | June 30, 2021 | |||
|---|---|---|---|---|
| ASSETS | ||||
| CURRENT ASSETS: | ||||
| Cash and cash equivalents | $ | 193,357 | $ | 286,454 |
| Accounts receivable | 149,399 | 105,298 | ||
| Commissions receivable-current | 202,289 | 89,120 | ||
| Other current assets | 10,511 | 4,486 | ||
| Total current assets | 555,556 | 485,358 | ||
| COMMISSIONS RECEIVABLE | 683,516 | 756,777 | ||
| PROPERTY AND EQUIPMENT—Net | 42,676 | 29,510 | ||
| SOFTWARE—Net | 15,009 | 12,611 | ||
| OPERATING LEASE RIGHT-OF-USE ASSETS | 30,571 | 31,414 | ||
| INTANGIBLE ASSETS—Net | 37,727 | 40,670 | ||
| GOODWILL | 73,732 | 68,019 | ||
| OTHER ASSETS | 6,046 | 1,436 | ||
| TOTAL ASSETS | $ | 1,444,833 | $ | 1,425,795 |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||
| CURRENT LIABILITIES: | ||||
| Accounts payable | $ | 47,579 | $ | 34,079 |
| Accrued expenses | 22,904 | 20,676 | ||
| Accrued compensation and benefits | 43,384 | 40,909 | ||
| Operating lease liabilities—current | 5,251 | 5,289 | ||
| Current portion of long-term debt | 7,169 | 2,360 | ||
| Other current liabilities | 9,120 | 5,504 | ||
| Total current liabilities | 135,407 | 108,817 | ||
| LONG-TERM DEBT, NET—less current portion | 700,350 | 459,043 | ||
| DEFERRED INCOME TAXES | 76,942 | 139,241 | ||
| OPERATING LEASE LIABILITIES | 36,951 | 38,392 | ||
| OTHER LIABILITIES | 2,779 | 11,743 | ||
| Total liabilities | 952,429 | 757,236 | ||
| COMMITMENTS AND CONTINGENCIES | ||||
| SHAREHOLDERS’ EQUITY: | ||||
| Common stock, $0.01 par value | 1,640 | 1,635 | ||
| Additional paid-in capital | 551,002 | 544,771 | ||
| Retained earnings (accumulated deficit) | (62,236) | 121,924 | ||
| Accumulated other comprehensive income | 1,998 | 229 | ||
| Total shareholders’ equity | 492,404 | 668,559 | ||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,444,833 | $ | 1,425,795 |
SELECTQUOTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands)
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||
| REVENUE: | ||||||||
| Commission | $ | 140,701 | $ | 320,265 | $ | 272,956 | $ | 425,415 |
| Production bonus and other | 54,280 | 37,300 | 79,552 | 54,924 | ||||
| Total revenue | 194,981 | 357,565 | 352,508 | 480,339 | ||||
| OPERATING COSTS AND EXPENSES: | ||||||||
| Cost of revenue | 148,108 | 84,121 | 240,273 | 135,166 | ||||
| Marketing and advertising | 193,246 | 132,206 | 283,923 | 182,006 | ||||
| General and administrative | 20,147 | 13,043 | 43,539 | 25,245 | ||||
| Technical development | 6,386 | 4,750 | 12,239 | 8,598 | ||||
| Total operating costs and expenses | 367,887 | 234,120 | 579,974 | 351,015 | ||||
| INCOME (LOSS) FROM OPERATIONS | (172,906) | 123,445 | (227,466) | 129,324 | ||||
| INTEREST EXPENSE, NET | (10,587) | (6,782) | (19,122) | (13,543) | ||||
| OTHER EXPENSE, NET | (51) | (416) | (153) | (1,196) | ||||
| INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT) | (183,544) | 116,247 | (246,741) | 114,585 | ||||
| INCOME TAX EXPENSE (BENEFIT) | (46,536) | 26,391 | (62,580) | 24,994 | ||||
| NET INCOME (LOSS) | $ | (137,008) | $ | 89,856 | $ | (184,161) | $ | 89,591 |
| NET INCOME (LOSS) PER SHARE: | ||||||||
| Basic | $ | (0.84) | $ | 0.55 | $ | (1.12) | $ | 0.55 |
| Diluted | $ | (0.84) | $ | 0.54 | $ | (1.12) | $ | 0.54 |
| WEIGHTED-AVERAGE COMMON STOCK OUTSTANDING USED IN PER SHARE AMOUNTS: | ||||||||
| Basic | 163,966 | 162,645 | 163,829 | 162,546 | ||||
| Diluted | 163,966 | 165,563 | 163,829 | 165,377 | ||||
| OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: | ||||||||
| Gain (loss) on cash flow hedge | 1,775 | 116 | 1,769 | (141) | ||||
| OTHER COMPREHENSIVE INCOME (LOSS) | 1,775 | 116 | 1,769 | (141) | ||||
| COMPREHENSIVE INCOME (LOSS) | $ | (135,233) | $ | 89,972 | $ | (182,392) | $ | 89,450 |
SELECTQUOTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| Six Months Ended December 31, | ||||
|---|---|---|---|---|
| 2021 | 2020 | |||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
| Net income (loss) | $ | (184,161) | $ | 89,591 |
| Adjustments to reconcile net income (loss) to net cash, cash equivalents, and restricted cash used in operating activities: | ||||
| Depreciation and amortization | 11,278 | 6,937 | ||
| Loss on disposal of property, equipment, and software | 355 | 162 | ||
| Share-based compensation expense | 4,109 | 2,259 | ||
| Deferred income taxes | (62,940) | 24,879 | ||
| Amortization of debt issuance costs and debt discount | 2,974 | 1,644 | ||
| Fair value adjustments to contingent earnout obligations | — | 1,153 | ||
| Non-cash lease expense | 2,040 | 1,887 | ||
| Changes in operating assets and liabilities: | ||||
| Accounts receivable | (43,429) | (61,251) | ||
| Commissions receivable | (39,908) | (219,132) | ||
| Other assets | (5,555) | 1,906 | ||
| Accounts payable and accrued expenses | 15,135 | 15,692 | ||
| Operating lease liabilities | (2,676) | (1,245) | ||
| Other liabilities | (2,963) | 32,370 | ||
| Net cash used in operating activities | (305,741) | (103,148) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||
| Purchases of property and equipment | (17,904) | (5,768) | ||
| Purchases of software and capitalized software development costs | (5,231) | (3,449) | ||
| Acquisition of business | (6,927) | 121 | ||
| Investment in equity securities | (1,000) | — | ||
| Net cash used in investing activities | (31,062) | (9,096) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||
| Proceeds from revolving line of credit | 50,000 | — | ||
| Payments on revolving line of credit | (50,000) | — | ||
| Net proceeds from senior secured delayed draw term loan facility | 242,000 | — | ||
| Payments on other debt | (93) | (108) | ||
| Proceeds from common stock options exercised and employee stock purchase plan | 2,271 | 391 | ||
| Payments of tax withholdings related to net share settlement of equity awards | (144) | (5,320) | ||
| Payments of debt issuance costs | (328) | — | ||
| Payments of costs incurred in connection with private placement | — | (1,771) | ||
| Payments of costs incurred in connection with initial public offering | — | (3,911) | ||
| Net cash provided by (used in) financing activities | 243,706 | (10,719) | ||
| NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | (93,097) | (122,963) | ||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of period | 286,454 | 368,870 | ||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—End of period | $ | 193,357 | $ | 245,907 |
SELECTQUOTE, INC. AND SUBSIDIARIES
Adjusted EBITDA to Net Income (Loss) Reconciliation
(Unaudited)
| Three Months Ended December 31, 2021 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | Senior | Life | Auto & Home | Corp & Elims | Consolidated | |||||
| Revenue | $ | 157,967 | $ | 32,780 | $ | 6,135 | $ | (1,901) | $ | 194,981 |
| Operating expenses | (306,602) | (30,930) | (4,700) | (15,979) | (358,211) | |||||
| Other expenses, net | — | — | — | (51) | (51) | |||||
| Adjusted EBITDA | (148,635) | 1,850 | 1,435 | (17,931) | (163,281) | |||||
| Share-based compensation expense | (1,894) | |||||||||
| Non-recurring expenses | (1,602) | |||||||||
| Depreciation and amortization | (6,175) | |||||||||
| Loss on disposal of property, equipment, and software | (5) | |||||||||
| Interest expense, net | (10,587) | |||||||||
| Income tax benefit | 46,536 | |||||||||
| Net loss | $ | (137,008) | ||||||||
| Three Months Ended December 31, 2020 | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (in thousands) | Senior | Life | Auto & Home | Corp & Elims | Consolidated | |||||
| Revenue | $ | 315,510 | $ | 35,666 | $ | 7,241 | $ | (852) | $ | 357,565 |
| Operating expenses | (180,955) | (29,961) | (5,091) | (12,746) | (228,753) | |||||
| Other expenses, net | — | — | — | (21) | (21) | |||||
| Adjusted EBITDA | 134,555 | 5,705 | 2,150 | (13,619) | 128,791 | |||||
| Share-based compensation expense | (1,336) | |||||||||
| Non-recurring expenses | (362) | |||||||||
| Fair value adjustments to contingent earnout obligations | (395) | |||||||||
| Depreciation and amortization | (3,590) | |||||||||
| Loss on disposal of property, equipment, and software | (79) | |||||||||
| Interest expense, net | (6,782) | |||||||||
| Income tax expense | (26,391) | |||||||||
| Net income | $ | 89,856 |
SELECTQUOTE, INC. AND SUBSIDIARIES
Adjusted EBITDA to Net Income (Loss) Reconciliation
(Unaudited)
| Six Months Ended December 31, 2021 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | Senior | Life | Auto & Home | Corp & Elims | Consolidated | |||||
| Revenue | $ | 264,287 | $ | 80,211 | $ | 13,604 | $ | (5,594) | $ | 352,508 |
| Operating expenses | (445,893) | (76,058) | (10,796) | (29,330) | (562,077) | |||||
| Other expenses, net | — | — | — | (153) | (153) | |||||
| Adjusted EBITDA | (181,606) | 4,153 | 2,808 | (35,077) | (209,722) | |||||
| Share-based compensation expense | (4,109) | |||||||||
| Non-recurring expenses | (2,155) | |||||||||
| Depreciation and amortization | (11,278) | |||||||||
| Loss on disposal of property, equipment, and software | (355) | |||||||||
| Interest expense, net | (19,122) | |||||||||
| Income tax benefit | 62,580 | |||||||||
| Net loss | $ | (184,161) | ||||||||
| Six Months Ended December 31, 2020 | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (in thousands) | Senior | Life | Auto & Home | Corp & Elims | Consolidated | |||||
| Revenue | $ | 388,709 | $ | 77,094 | $ | 16,779 | $ | (2,243) | $ | 480,339 |
| Operating expenses | (245,252) | (62,307) | (11,012) | (22,264) | (340,835) | |||||
| Other expenses, net | — | — | — | (43) | (43) | |||||
| Adjusted EBITDA | 143,457 | 14,787 | 5,767 | (24,550) | 139,461 | |||||
| Share-based compensation expense | (2,259) | |||||||||
| Non-recurring expenses | (822) | |||||||||
| Fair value adjustments to contingent earnout obligations | (1,153) | |||||||||
| Depreciation and amortization | (6,937) | |||||||||
| Loss on disposal of property, equipment, and software | (162) | |||||||||
| Interest expense, net | (13,543) | |||||||||
| Income tax expense | (24,994) | |||||||||
| Net income | $ | 89,591 |
SELECTQUOTE, INC. AND SUBSIDIARIES
Revenue to Adjusted EBITDA - Senior Cohort/Tail Adjustment
(Unaudited)
| Three Months Ended December 31, 2021 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | Senior | Life | Auto & Home | Corp & Elims | Consolidated | |||||
| Revenue | $ | 157,967 | $ | 32,780 | $ | 6,135 | $ | (1,901) | $ | 194,981 |
| Net commission revenue adjustment from change in estimate for Senior cohort/tail adjustment | 145,000 | — | — | — | 145,000 | |||||
| Revenue, excluding net commission revenue adjustment from change in estimate for Senior cohort/tail adjustment | 302,967 | 32,780 | 6,135 | (1,901) | 339,981 | |||||
| Operating expenses | (306,602) | (30,930) | (4,700) | (15,979) | (358,211) | |||||
| Other expenses, net | — | — | — | (51) | (51) | |||||
| Adjusted EBITDA | $ | (3,635) | $ | 1,850 | $ | 1,435 | $ | (17,931) | $ | (18,281) |
SELECTQUOTE, INC. AND SUBSIDIARIES
Net Loss to Adjusted EBITDA Reconciliation
(Unaudited)
Guidance net loss to Adjusted EBITDA reconciliation, year ending June 30, 2022:
| (in thousands) | Range | |||
|---|---|---|---|---|
| Net Loss | $ | (255,000) | $ | (236,000) |
| Income tax benefit | (86,000) | (80,000) | ||
| Interest expense, net | 43,000 | 43,000 | ||
| Depreciation and amortization | 22,000 | 22,000 | ||
| Share-based compensation expense | 11,000 | 11,000 | ||
| Non-recurring expenses | 5,000 | 5,000 | ||
| Adjusted EBITDA | $ | (260,000) | $ | (235,000) |
14
selectquoteincdecember31
| We shop. You save. 2nd Quarter Fiscal 2022 Earnings Conference Call Presentation February 7, 2022
| We shop. You save. Forward-Looking Statements This presentation contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following: the ultimate duration and impact of the ongoing COVID-19 pandemic; our reliance on a limited number of insurance carrier partners and any potential termination of those relationships or failure to develop new relationships; existing and future laws and regulations affecting the health insurance market; changes in health insurance products offered by our insurance carrier partners and the health insurance market generally; insurance carriers offering products and services directly to consumers; changes to commissions paid by insurance carriers and underwriting practices; competition with brokers, exclusively online brokers and carriers who opt to sell policies directly to consumers; competition from government-run health insurance exchanges; developments in the U.S. health insurance system; our dependence on revenue from carriers in our senior segment and downturns in the senior health as well as life, automotive and home insurance industries; our ability to develop new offerings and penetrate new vertical markets; risks from third-party products; failure to enroll individuals during the Medicare annual enrollment period; our ability to attract, integrate and retain qualified personnel; our dependence on lead providers and ability to compete for leads; failure to obtain and/or convert sales leads to actual sales of insurance policies; access to data from consumers and insurance carriers; accuracy of information provided from and to consumers during the insurance shopping process; cost-effective advertisement through internet search engines; ability to contact consumers and market products by telephone; global economic conditions; disruption to operations as a result of future acquisitions; significant estimates and assumptions in the preparation of our financial statements; impairment of goodwill; potential litigation and claims, including IP litigation; our existing and future indebtedness; developments with respect to LIBOR; access to additional capital; failure to protect our intellectual property and our brand; fluctuations in our financial results caused by seasonality; accuracy and timeliness of commissions reports from insurance carriers; timing of insurance carriers’ approval and payment practices; factors that impact our estimate of the constrained lifetime value of commissions per policyholder; changes in accounting rules, tax legislation and other legislation; disruptions or failures of our technological infrastructure and platform; failure to maintain relationships with third-party service providers; cybersecurity breaches or other attacks involving our systems or those of our insurance carrier partners or third-party service providers; our ability to protect consumer information and other data; and failure to market and sell Medicare plans effectively or in compliance with laws. For a further discussion of these and other risk factors that could impact our future results and performance, see the section entitled “Risk Factors” in the most recent Annual Report on Form 10-K (the “Annual Report”) filed by us with the Securities and Exchange Commission. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and, except as otherwise required by law, we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. Certain information contained in this presentation and statements made orally during this presentation relate to or are based on publications and other data obtained from third-party sources. While we believe these third-party sources to be reliable as of the date of this presentation, we have not independently verified, and make no representation as to the adequacy, fairness, accuracy or completeness of, any information obtained from such third-party sources. No Offer or Solicitation; Further Information This presentation is for informational purposes only and is not an offer to sell with respect to any securities. This presentation should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto included in the Annual Report and subsequent quarterly reports. Non-GAAP Financial Measures This presentation 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 presentation 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 presentation 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. For further discussion regarding this non-GAAP measure, please see today’s press release. Disclaimer 2
| We shop. You save. 2nd Quarter Earnings Summary 3 *See reconciliations from GAAP measure, net income (loss), to non-GAAP measure, Adjusted EBITDA on slides 18 and 19 Actual results have significantly underperformed internal expectations year-to-date, primarily driven by: • Greater parity in plan benefits for the 2022 benefit year suppressing close rates relative to prior year • Hiring and onboarding delays related to the tight labor market • CMS marketing review process that created advertising delays early in AEP • Increased falloff in approved policies post-submission • Persistency and lapse rate pressure continue to create earnings volatility During the quarter, these trends manifested as lower than expected approved policies and higher marketing cost per approved policy. Consolidated revenue totaled $195 million. Consolidated Adjusted EBITDA* was $(163) million. Consolidated net loss totaled $137 million, or $(0.84) loss per diluted share. We expect close rate headwinds to persist throughout the remainder of the 2022 fiscal year. Given the current selling environment, we are focused on expense discipline and efficiency in the near term.
| We shop. You save. Tight labor market Increased falloff from offer acceptance to start date Delayed hiring of some flex agents Condensed training and ramping time CMS mandated review of marketing material leading into AEP Process resulted in some advertising delays early in AEP Advertising headwinds masked close rate pressures Greater parity in MA plan design than in prior years More nuanced sales approach required Lower-than- forecasted close rates Elevated falloff from policy submission to approval HIRING DELAYS CMS MARKETING REVIEW PLAN PARITY SUBMITTED–TO– APPROVED FALLOFF Deeper Dive Into AEP 4
| We shop. You save. 2Q Consolidated EBITDA* Bridge $ M ill io ns $150 $(145) $(135) $(60) $(16) $43 $(163) Internal Forecast Cohort Tail Adjustment Senior Close Rate Senior LTV Other Revenue Expense 2Q Actual $(250) $(200) $(150) $(100) $(50) $— $50 $100 $150 $200 5 *See reconciliations from GAAP measure, net income (loss), to non-GAAP measure, Adjusted EBITDA on slides 18 and 19
| We shop. You save. Growth Focused on Cash Flow and Predictability Reduced Operational Risk Rapid MA Membership Growth Significant Operating Leverage Evolving Business Model Reset LTV Expectations Insurance Distribution Coupled with Comprehensive Healthcare Services Business Insurance Distribution 6 Declining Persistency Environment
| We shop. You save. Go Forward Strategic Approach Reset LTV Expectations Reset MA Growth Philosophy Mitigate Operational Risk Factors Grow Healthcare Services Earnings & Cash Flow Visibility 7
| We shop. You save. SelectQuote as a Comprehensive Healthcare Services Platform 1985 2022 & Beyond Medicare and Auto & Home Final Expense • Pharmacy - SelectRx • Home-based Care and Services • Evidence-based Care Enablement • Primary Care • Cognitive Care • Social Care Term Life Distribution 8
| We shop. You save. Population Health Evolution 9
| We shop. You save.| . . Medicare distribution hiring plan SelectRx membership and revenue growth Growth philosophy guided by cash flow and lower volatility Population Health platform evolution Progress Readouts in Coming Quarters 10
| We shop. You save. REVENUE $MM Adj. EBITDA* $MM $358 $195 2Q 2021 2Q 2022 $129 $(163) 2Q 2021 2Q 2022 11 Consolidated Financial Summary *See reconciliations from GAAP measure, net income (loss), to non-GAAP measure, Adjusted EBITDA on slides 18 and 19
| We shop. You save. SelectQuote Senior KPI’s TOTAL POLICIES APPROVED 000s MA LTV 261 318 209 266 10 242 50 MA MS Other 2Q 2021 2Q 2022 12 $1,268 $922 2Q 2021 2Q 2022
| We shop. You save. Incremental Cohort/Tail Adjustment Driven by FY21 Cohorts $ M ill io ns Estimated FY22 Tail Adjustment Impact* Original Estimate FY18 and Earlier FY19 FY20 FY21 Current Forecast $— $25 $50 $75 $100 $125 $150 $175 13 *The figures in this chart are estimates derived from currently available data and are subject to change
| We shop. You save. SelectRx Progress *Represents gross initial customer enrollments. The total number of paying members will be lower than initial customer enrollments. 14 Cumulative Enrollments* May June July Aug Sept Oct Nov Dec Jan — 10,000 20,000 30,000 40,000 50,000 Paying Members May June July Aug Sept Oct Nov Dec Jan — 2,000 4,000 6,000 8,000 10,000 12,000
| We shop. You save. Health Choice VBC & MCO ARIZONA Capitalization Summary • As of December 31, 2021: ◦ Net debt position of $524 million ▪ $193 million of cash and cash equivalents ▪ $717 million of term debt ◦ Accounts receivable, short and long term commissions receivable balances of $1 billion • Access to additional capital: ◦ Increased revolver commitment to $135 million, currently zero drawn on revolver ◦ $100 million undrawn on delayed draw term facility 15
| We shop. You save. SelectQuote – FY2022 Consolidated Guidance ($'s in millions) Range Revenue $810 - $850 Net Loss $(255) - $(236) Adjusted EBITDA* $(260) - $(235) 16 *See reconciliations from GAAP measure, net income (loss), to non-GAAP measure, Adjusted EBITDA on slides 18 and 19
| We shop. You save. Supplemental Information 17
| We shop. You save. Net Income (Loss) to Adjusted EBITDA Reconciliation 2Q FY 2022 (in thousands) Senior Life Auto & Home Corp & Elims Consolidated Revenue $ 157,967 $ 32,780 $ 6,135 $ (1,901) $ 194,981 Operating expenses (306,602) (30,930) (4,700) (15,979) (358,211) Other expenses, net — — — (51) (51) Adjusted EBITDA (148,635) 1,850 1,435 (17,931) (163,281) Share-based compensation expense (1,894) Non-recurring expenses (1,602) Depreciation and amortization (6,175) Loss on disposal of property, equipment, and software (5) Interest expense, net (10,587) Income tax benefit 46,536 Net loss $ (137,008) 18 2Q FY 2021 (in thousands) Senior Life Auto & Home Corp & Elims Consolidated Revenue $ 315,510 $ 35,666 $ 7,241 $ (852) $ 357,565 Operating expenses (180,955) (29,961) (5,091) (12,746) (228,753) Other expenses, net — — — (21) (21) Adjusted EBITDA 134,555 5,705 2,150 (13,619) 128,791 Share-based compensation expense (1,336) Non-recurring expenses (362) Fair value adjustments to contingent earnout obligations (395) Depreciation and amortization (3,590) Loss on disposal of property, equipment, and software (79) Interest expense, net (6,782) Income tax expense (26,391) Net income $ 89,856
| We shop. You save. FY22 Guidance Net Loss to Adjusted EBITDA Reconciliation 19 (in thousands) Range Net Loss $ (255,000) $ (236,000) Income tax benefit (86,000) (80,000) Interest expense, net 43,000 43,000 Depreciation and amortization 22,000 22,000 Share-based compensation expense 11,000 11,000 Non-recurring expenses 5,000 5,000 Adjusted EBITDA $ (260,000) $ (235,000)
| We shop. You save. 20 SelectQuote Inc. 6800 West 115th Street Suite 2511 Overland Park, Kansas 66211 Phone: (913) 599-9225 Investor Relations investorrelations@selectquote.com