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SelectQuote, Inc. Reports Fourth Quarter 2021 and Fiscal Year 2021 Results

Fourth Quarter of Fiscal Year 2021 - Consolidated Earnings Highlights

  • Revenue of $188.4 million, Up 33% Year-Over-Year
  • Net Income of $3.3 million, Down $16.7 million Year-Over-Year
  • Adjusted EBITDA of $21.3 million, Down 47% Year-Over-Year*

Fourth Quarter of Fiscal Year 2021 - Segment Highlights

Senior

  • Revenue of $124.4 million, Up 42% Year-Over-Year
  • Adjusted EBITDA of $24.8 million, Down 26% Year-Over-Year*
  • Approved Medicare Advantage policies grew 54% Year-Over-Year

Life

  • Revenue of $59.9 million, Up 41% Year-Over-Year
  • Final expense premiums grew 79% Year-Over-Year

Auto & Home

  • Revenue of $7.2 million, Down 41% Year-Over-Year
  • Total Auto & Home premiums declined 37% Year-Over-Year

SelectQuote, Inc. (NYSE: SLQT), reported consolidated revenue for the fourth quarter of fiscal year 2021 of $188.4 million, which was a 33% increase year-over-year. Consolidated net income for the fourth quarter of fiscal year 2021 was $3.3 million, which was a $16.7 million decrease year-over-year. Finally, consolidated Adjusted EBITDA for the fourth quarter of fiscal year 2021 was $21.3 million, which was a 47% decrease year-over-year.

Consolidated revenue for the fiscal year ended June 30, 2021, was $937.8 million, a 76% increase over consolidated revenue for the fiscal year ended June 30, 2020, of $531.5 million. Consolidated net income for the fiscal year ended June 30, 2021, was $131.0 million, an increase of $49.9 million over consolidated net income for the fiscal year ended June 30, 2020, of $81.1 million. Finally, consolidated Adjusted EBITDA for the fiscal year ended June 30, 2021, was $228.0 million compared to consolidated Adjusted EBITDA of $154.0 million for the fiscal year ended June 30, 2020, a 48% increase.

Chief Executive Officer Tim Danker commented, “2021 was a landmark year for SelectQuote both in terms of our growth but also in the significant opportunity established through the initiation of our Population Health strategy. For the full year we grew Adjusted EBITDA by $74.0 million or nearly 50% following growth of 46% in 2020. We continue to have high conviction in our differentiated model and our ability to scale quality growth in 2022 and beyond. We believe that SelectQuote’s strong connection with our end customers creates differentiated value and we expect Population Health to strengthen that bond in the years to come.”

Chief Financial Officer Raffaele Sadun added, “Our Senior full-year revenues grew 101% year-over-year, which follows full-year growth of 88% in fiscal 2020. New MA approved policies also grew in excess of 100% at attractive unit economics with a Revenue to CAC of 3.0x. Our MA LTV was down 2% for the year, which includes a full-year true-up in our 4th Quarter results for additional provision due to higher than expected intra-year lapse rates. Despite some persistency pressure compared to original expectations, we expect cohort-level IRRs to remain very attractive.”

*See reconciliation from non-GAAP measure, Adjusted EBITDA, to net income on pages 11-12.

Segment Results

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

Senior

Financial Results

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

(in thousands)

4Q 2021

 

4Q 2020

 

% Change

 

FY 2021

 

FY 2020

 

% Change

Revenue

$

124,391

 

 

$

87,865

 

 

42

%

 

$

728,701

 

 

$

361,673

 

 

101

%

Adjusted EBITDA*

24,830

 

 

33,387

 

 

(26)

%

 

243,777

 

 

145,738

 

 

67

%

Adjusted EBITDA Margin*

20

%

 

38

%

 

 

 

33

%

 

40

%

 

 

Operating Metrics

Submitted Policies

Submitted policies are counted when an individual completes an application with our licensed agent and provides authorization to them to submit it 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, such as providing additional information.

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

 

4Q 2021

 

4Q 2020

 

% Change

 

FY 2021

 

FY 2020

 

% Change

Medicare Advantage

95,549

 

 

59,276

 

 

61

%

 

550,321

 

 

264,546

 

 

108

%

Medicare Supplement

2,498

 

 

7,702

 

 

(68)

%

 

26,785

 

 

24,085

 

 

11

%

Dental, Vision and Hearing

30,287

 

 

17,212

 

 

76

%

 

132,106

 

 

70,018

 

 

89

%

Prescription Drug Plan

1,193

 

 

2,378

 

 

(50)

%

 

11,436

 

 

13,513

 

 

(15)

%

Other

3,884

 

 

2,278

 

 

71

%

 

16,487

 

 

5,890

 

 

180

%

Total

133,411

 

 

88,846

 

 

50

%

 

737,135

 

 

378,052

 

 

95

%

*See reconciliation from non-GAAP measure, Adjusted EBITDA, to net income on pages 11-12.

Approved Policies

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

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

 

4Q 2021

 

4Q 2020

 

% Change

 

FY 2021

 

FY 2020

 

% Change

Medicare Advantage

83,448

 

 

54,305

 

 

54

%

 

467,585

 

 

225,404

 

 

107

%

Medicare Supplement

2,062

 

 

6,362

 

 

(68)

%

 

21,911

 

 

18,102

 

 

21

%

Dental, Vision and Hearing

26,645

 

 

16,564

 

 

61

%

 

111,015

 

 

55,556

 

 

100

%

Prescription Drug Plan

1,191

 

 

2,481

 

 

(52)

%

 

10,747

 

 

13,009

 

 

(17)

%

Other

3,880

 

 

2,058

 

 

89

%

 

14,089

 

 

4,654

 

 

203

%

Total

117,226

 

 

81,770

 

 

43

%

 

625,347

 

 

316,725

 

 

97

%

Lifetime Value of Commissions per Approved Policy

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

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

(dollars per policy):

4Q 2021

 

4Q 2020

 

% Change

 

FY 2021

 

FY 2020

 

% Change

Medicare Advantage

$

1,121

 

 

$

1,256

 

 

(11)

%

 

$

1,260

 

 

$

1,287

 

 

(2)

%

Medicare Supplement

1,323

 

 

1,382

 

 

(4)

%

 

1,269

 

 

1,376

 

 

(8)

%

Dental, Vision and Hearing

121

 

 

125

 

 

(3)

%

 

136

 

 

140

 

 

(3)

%

Prescription Drug Plan

180

 

 

226

 

 

(20)

%

 

224

 

 

229

 

 

(2)

%

Other

160

 

 

(48)

 

 

(436)

%

 

113

 

 

34

 

 

232

%

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 as 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 represent 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 which is included in marketing and advertising expense within the total operating expenses per MA/MS policy.

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

 

Twelve Months Ended

June 30,

 

 

(dollars per approved policy):

2021

 

2020

 

% Change

Medicare Advantage and Medicare Supplement approved policies

489,496

 

 

243,506

 

 

101

%

Medicare Advantage and Medicare Supplement commission per MA / MS policy

$

1,260

 

 

$

1,293

 

 

(3)

%

Other commission per MA/MS policy

39

 

 

45

 

 

(13)

%

Other per MA / MS policy

190

 

 

147

 

 

29

%

Total revenue per MA / MS policy

1,489

 

 

1,485

 

 

0

%

Total operating expenses per MA / MS policy

(991)

 

 

(887)

 

 

12

%

Adjusted EBITDA per MA / MS policy*

$

498

 

 

$

598

 

 

(17)

%

Adjusted EBITDA Margin per MA / MS policy*

33

%

 

40

%

 

(17)

%

Revenue / CAC multiple

3.0X

 

3.5X

 

 

Life

Financial Results

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

(in thousands)

4Q 2021

 

4Q 2020

 

% Change

 

FY 2021

 

FY 2020

 

% Change

Revenue

$

59,905

 

 

$

42,423

 

 

41

%

 

$

185,503

 

 

$

129,967

 

 

43

%

Adjusted EBITDA*

10,310

 

 

12,258

 

 

(16)

%

 

30,376

 

 

27,812

 

 

9

%

Adjusted EBITDA Margin*

17

%

 

29

%

 

 

 

16

%

 

21

%

 

 

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. Core premiums include term life and permanent life insurance policies while ancillary premiums include various smaller products. 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 non-GAAP measure, Adjusted EBITDA, to net income on pages 11-12.

The following table shows core, final expense, and ancillary premiums for the periods presented:

(in thousands)

4Q 2021

 

4Q 2020

 

% Change

 

FY 2021

 

FY 2020

 

% Change

Core Premiums

$

19,983

 

 

$

18,965

 

 

5

%

 

$

76,251

 

 

$

75,451

 

 

1

%

Final Expense Premiums

33,700

 

 

18,860

 

 

79

%

 

88,294

 

 

34,839

 

 

153

%

Ancillary Premiums

976

 

 

732

 

 

33

%

 

3,166

 

 

2,507

 

 

26

%

Auto & Home

Financial Results

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

(in thousands)

4Q 2021

 

4Q 2020

 

% Change

 

FY 2021

 

FY 2020

 

% Change

Revenue

$

7,161

 

 

$

12,127

 

 

(41)

%

 

$

30,913

 

 

$

41,189

 

 

(25)

%

Adjusted EBITDA*

1,316

 

 

3,104

 

 

(58)

%

 

8,178

 

 

8,699

 

 

(6)

%

Adjusted EBITDA Margin*

18

%

 

26

%

 

 

 

26

%

 

21

%

 

 

Operating Metrics

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

The following table shows premiums for the periods presented:

(in thousands):

4Q 2021

 

4Q 2020

 

% Change

 

FY 2021

 

FY 2020

 

% Change

Premiums

$

13,431

 

 

$

21,162

 

 

(37)

%

 

$

55,596

 

 

$

70,087

 

 

(21)

%

 

*See reconciliation from non-GAAP measure, Adjusted EBITDA, to net income on pages 11-12.

Earnings Conference Call

SelectQuote, Inc. will host a conference call with the investment community today, Wednesday, August 25, 2021, beginning at 5 p.m. ET. To register for this conference call, please use this link: http://www.directeventreg.com/registration/event/8844709. 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 before interest expense, income tax expense, 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. 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.

SELECTQUOTE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

 

June 30,

 

2021

 

2020

ASSETS

 

 

 

CURRENT ASSETS:

 

 

 

Cash and cash equivalents

$

286,454

 

 

$

321,065

 

Restricted cash

 

 

47,805

 

Accounts receivable

113,375

 

 

83,634

 

Commissions receivable-current

89,120

 

 

51,209

 

Other current assets

4,486

 

 

10,121

 

Total current assets

493,435

 

 

513,834

 

COMMISSIONS RECEIVABLE—Net

756,777

 

 

461,752

 

PROPERTY AND EQUIPMENT—Net

29,510

 

 

22,150

 

SOFTWARE—Net

12,611

 

 

8,399

 

OPERATING LEASE RIGHT-OF-USE ASSETS

31,414

 

 

 

INTANGIBLE ASSETS—Net

40,670

 

 

19,673

 

GOODWILL

68,019

 

 

46,577

 

OTHER ASSETS

1,436

 

 

1,408

 

TOTAL ASSETS

$

1,433,872

 

 

$

1,073,793

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

CURRENT LIABILITIES:

 

 

 

Accounts payable

$

34,079

 

 

$

22,891

 

Accrued expenses

20,676

 

 

14,936

 

Accrued compensation and benefits

40,909

 

 

22,228

 

Earnout liability

 

 

30,812

 

Operating lease liabilities—current

5,289

 

 

 

Other current liabilities

7,864

 

 

4,944

 

Total current liabilities

108,817

 

 

95,811

 

DEBT

459,043

 

 

311,814

 

DEFERRED INCOME TAXES

140,988

 

 

105,844

 

OPERATING LEASE LIABILITIES

38,392

 

 

 

OTHER LIABILITIES

11,743

 

 

14,635

 

Total liabilities

758,983

 

 

528,104

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

Common stock, $.01 par value

1,635

 

 

1,622

 

Additional paid-in capital

544,771

 

 

548,113

 

Retained earnings (accumulated deficit)

128,254

 

 

(2,792)

 

Accumulated other comprehensive income (loss)

229

 

 

(1,254)

 

Total shareholders’ equity

674,889

 

 

545,689

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

1,433,872

 

 

$

1,073,793

 

SELECTQUOTE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

 

Three Months Ended June 30,

 

Year Ended June 30,

 

2021

 

2020

 

2021

 

2020

REVENUE:

 

 

 

 

 

 

 

Commission

$

162,294

 

 

$

122,679

 

 

$

826,606

 

 

$

476,606

 

Production bonus and other

26,155

 

 

18,768

 

 

111,209

 

 

54,909

 

Total revenue

188,449

 

 

141,447

 

 

937,815

 

 

531,515

 

 

 

 

 

 

 

 

 

OPERATING COSTS AND EXPENSES:

 

 

 

 

 

 

 

Cost of revenue

64,110

 

 

40,911

 

 

270,715

 

 

167,399

 

Marketing and advertising

86,595

 

 

51,911

 

 

385,291

 

 

184,157

 

General and administrative

18,618

 

 

9,504

 

 

63,114

 

 

35,283

 

Technical development

5,165

 

 

3,259

 

 

18,623

 

 

12,347

 

Total operating costs and expenses

174,488

 

 

105,585

 

 

737,743

 

 

399,186

 

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

13,961

 

 

35,862

 

 

200,072

 

 

132,329

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE, NET

(8,422)

 

 

(8,356)

 

 

(29,320)

 

 

(24,595)

 

LOSS ON EXTINGUISHMENT OF DEBT

 

 

(1,166)

 

 

(3,315)

 

 

(1,166)

 

OTHER EXPENSES, NET

(43)

 

 

(385)

 

 

(1,588)

 

 

(405)

 

INCOME BEFORE INCOME TAX EXPENSE

5,496

 

 

25,955

 

 

165,849

 

 

106,163

 

INCOME TAX EXPENSE

2,184

 

 

5,906

 

 

34,803

 

 

25,016

 

 

 

 

 

 

 

 

 

NET INCOME

$

3,312

 

 

$

20,049

 

 

$

131,046

 

 

$

81,147

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER SHARE:

 

 

 

 

 

 

 

Basic

$

0.02

 

 

$

0.15

 

 

$

0.80

 

 

$

(0.16)

 

Diluted

$

0.02

 

 

$

0.13

 

 

$

0.79

 

 

$

(0.16)

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Basic

163,441

 

 

120,018

 

 

162,889

 

 

97,496

 

Diluted

165,689

 

 

152,404

 

 

165,544

 

 

97,496

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE (LOSS) INCOME NET OF TAX:

 

 

 

 

 

 

 

(Loss) gain on cash flow hedge

(186)

 

 

(1,254)

 

 

1,483

 

 

(1,254)

 

OTHER COMPREHENSIVE (LOSS) INCOME

(186)

 

 

(1,254)

 

 

1,483

 

 

(1,254)

 

COMPREHENSIVE INCOME

$

3,126

 

 

$

18,795

 

 

$

132,529

 

 

$

79,893

 

SELECTQUOTE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

Three Months Ended

June 30,

 

Year Ended June 30,

 

2021

 

2020

 

2021

 

2020

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income

$

3,312

 

 

$

20,049

 

 

$

131,046

 

 

$

81,147

 

Adjustments to reconcile net income to net cash, cash equivalents, and restricted cash used in operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

4,883

 

 

2,720

 

 

16,142

 

 

7,993

 

Loss on disposal of property, equipment, and software

425

 

 

125

 

 

686

 

 

360

 

Share-based compensation expense

1,476

 

 

216

 

 

5,165

 

 

9,498

 

Deferred income taxes

2,180

 

 

5,889

 

 

34,654

 

 

25,007

 

Amortization of debt issuance costs and debt discount

862

 

 

835

 

 

3,344

 

 

2,266

 

Write-off of debt issuance costs

 

 

237

 

 

2,570

 

 

237

 

Fair value adjustments to contingent earnout obligations

 

 

375

 

 

1,488

 

 

375

 

Non-cash lease expense

953

 

 

 

 

3,823

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

25,077

 

 

1,472

 

 

(27,827)

 

 

(15,585)

 

Commissions receivable

(81,747)

 

 

(54,910)

 

 

(332,936)

 

 

(197,364)

 

Other assets

500

 

 

(4,772)

 

 

4,848

 

 

(3,352)

 

Accounts payable and accrued expenses

(6,495)

 

 

2,776

 

 

19,728

 

 

15,672

 

Operating lease liabilities

(1,151)

 

 

 

 

(3,782)

 

 

 

Other liabilities

(4,768)

 

 

5,243

 

 

25,609

 

 

11,970

 

Net cash used in operating activities

(54,493)

 

 

(19,745)

 

 

(115,442)

 

 

(61,776)

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Purchases of property and equipment

(8,387)

 

 

(3,260)

 

 

(14,907)

 

 

(9,446)

 

Proceeds from sales of property and equipment

 

 

 

 

 

 

3

 

Purchases of software and capitalized software development costs

(2,275)

 

 

(1,663)

 

 

(8,081)

 

 

(6,106)

 

Acquisition of business

(17,150)

 

 

(35,821)

 

 

(41,028)

 

 

(35,821)

 

Net cash used in investing activities

(27,812)

 

 

(40,744)

 

 

(64,016)

 

 

(51,370)

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from revolving line of credit

 

 

2,014

 

 

 

 

87,989

 

Payments on revolving line of credit

 

 

(2,014)

 

 

 

 

(99,021)

 

Net proceeds from Term Loans

 

 

 

 

228,753

 

 

416,500

 

Payments on Term Loans

 

 

(100,000)

 

 

(84,118)

 

 

(100,000)

 

Proceeds from other debt

 

 

4,450

 

 

 

 

16,575

 

Payments on other debt

(62)

 

 

(29,015)

 

 

(251)

 

 

(31,447)

 

Proceeds from common stock options exercised and employee stock purchase plan

109

 

 

141

 

 

1,887

 

 

5,506

 

Cash dividends paid

 

 

 

 

 

 

(275,000)

 

Issuance of preferred stock

 

 

135,000

 

 

 

 

135,000

 

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

(336)

 

 

 

 

(10,362)

 

 

 

Payments of debt issuance costs

 

 

(160)

 

 

(885)

 

 

(7,854)

 

Payments of costs incurred in connection with private placement

 

 

(3,784)

 

 

(1,771)

 

 

(3,784)

 

Payments of costs incurred in connection with initial public offering

 

 

(1,100)

 

 

(3,911)

 

 

(3,218)

 

Proceeds from initial public offering, net of underwriters’ discounts and commissions

 

 

340,200

 

 

 

 

340,200

 

Payment of contingent earnout liability

 

 

 

 

(32,300)

 

 

 

Net cash (used in) provided by financing activities

(289)

 

 

345,732

 

 

97,042

 

 

481,446

 

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

(82,594)

 

 

285,243

 

 

(82,416)

 

 

368,300

 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of year

369,048

 

 

83,627

 

 

368,870

 

 

570

 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—End of year

$

286,454

 

 

$

368,870

 

 

$

286,454

 

 

$

368,870

 

SELECTQUOTE, INC. AND SUBSIDIARIES

Adjusted EBITDA to Net Income Reconciliation

(Unaudited)

 

4Q 2021

(in thousands)

Senior

 

Life

 

Auto &

Home

 

Corp &

Elims

 

Consolidated

Revenue

$

124,391

 

 

$

59,905

 

 

$

7,161

 

 

$

(3,008)

 

 

$

188,449

 

Operating expenses

(99,561)

 

 

(49,595)

 

 

(5,845)

 

 

(12,128)

 

 

(167,129)

 

Other expenses, net

 

 

 

 

 

 

(43)

 

 

(43)

 

Adjusted EBITDA

24,830

 

 

10,310

 

 

1,316

 

 

(15,179)

 

 

21,277

 

Share-based compensation expense

 

 

 

 

 

 

 

 

(1,476)

 

Non-recurring expenses

 

 

 

 

 

 

 

 

(575)

 

Depreciation and amortization

 

 

 

 

 

 

 

 

(4,883)

 

Loss on disposal of property, equipment, and software

 

 

 

 

 

 

 

 

(425)

 

Interest expense, net

 

 

 

 

 

 

 

 

(8,422)

 

Income tax expense

 

 

 

 

 

 

 

 

(2,184)

 

Net income

 

 

 

 

 

 

 

 

$

3,312

 

 

4Q 2020

(in thousands)

Senior

 

Life

 

Auto &

Home

 

Corp &

Elims

 

Consolidated

Revenue

$

87,865

 

 

$

42,423

 

 

$

12,127

 

 

$

(968)

 

 

$

141,447

 

Operating expenses

(54,478)

 

 

(30,165)

 

 

(9,023)

 

 

(7,633)

 

 

(101,299)

 

Other expenses, net

 

 

 

 

 

 

(10)

 

 

(10)

 

Adjusted EBITDA

33,387

 

 

12,258

 

 

3,104

 

 

(8,611)

 

 

40,138

 

Share-based compensation expense

 

 

 

 

 

 

 

 

(216)

 

Non-recurring expenses

 

 

 

 

 

 

 

 

(1,053)

 

Depreciation and amortization

 

 

 

 

 

 

 

 

(2,720)

 

Loss on disposal of property, equipment, and software

 

 

 

 

 

 

 

 

(125)

 

Contingent consideration

 

 

 

 

 

 

 

 

(375)

 

Restructuring expenses

 

 

 

 

 

 

 

 

(172)

 

Interest expense, net

 

 

 

 

 

 

 

 

(8,356)

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

(1,166)

 

Income tax expense

 

 

 

 

 

 

 

 

(5,906)

 

Net income

 

 

 

 

 

 

 

 

$

20,049

 

SELECTQUOTE, INC. AND SUBSIDIARIES

Adjusted EBITDA to Net Income Reconciliation

(Unaudited)

 

FY 2021

(in thousands)

Senior

 

Life

 

Auto &

Home

 

Corp &

Elims

 

Consolidated

Revenue

$

728,701

 

 

$

185,503

 

 

$

30,913

 

 

$

(7,302)

 

 

$

937,815

 

Operating expenses

(484,924)

 

 

(155,127)

 

 

(22,735)

 

 

(46,899)

 

 

(709,685)

 

Other expenses, net

 

 

 

 

 

 

(100)

 

 

(100)

 

Adjusted EBITDA

243,777

 

 

30,376

 

 

8,178

 

 

(54,301)

 

 

228,030

 

Share-based compensation expense

 

 

 

 

 

 

 

 

(5,165)

 

Non-recurring expenses

 

 

 

 

 

 

 

 

(6,065)

 

Fair value adjustments to contingent earnout obligations

 

 

 

 

 

 

 

 

(1,488)

 

Depreciation and amortization

 

 

 

 

 

 

 

 

(16,142)

 

Loss on disposal of property, equipment, and software

 

 

 

 

 

 

 

 

(686)

 

Interest expense, net

 

 

 

 

 

 

 

 

(29,320)

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

(3,315)

 

Income tax expense

 

 

 

 

 

 

 

 

(34,803)

 

Net income

 

 

 

 

 

 

 

 

$

131,046

 

 

FY 2020

(in thousands)

Senior

 

Life

 

Auto &

Home

 

Corp &

Elims

 

Consolidated

Revenue

$

361,673

 

 

$

129,967

 

 

$

41,189

 

 

$

(1,314)

 

 

$

531,515

 

Operating expenses

(215,935)

 

 

(102,155)

 

 

(32,490)

 

 

(26,881)

 

(1)

(377,461)

 

Other expenses, net

 

 

 

 

 

 

(30)

 

 

(30)

 

Adjusted EBITDA

$

145,738

 

 

$

27,812

 

 

$

8,699

 

 

$

(28,225)

 

 

154,024

 

Share-based compensation expense

 

 

 

 

 

 

 

 

(9,498)

 

Non-recurring expenses

 

 

 

 

 

 

 

 

(3,721)

 

Depreciation and amortization

 

 

 

 

 

 

 

 

(7,993)

 

Loss on disposal of property, equipment, and software

 

 

 

 

 

 

 

 

(360)

 

Fair value adjustments to contingent earnout obligations

 

 

 

 

 

 

 

 

(375)

 

Restructuring expenses

 

 

 

 

 

 

 

 

(153)

 

Interest expense, net

 

 

 

 

 

 

 

 

(24,595)

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

(1,166)

 

Income tax expense

 

 

 

 

 

 

 

 

(25,016)

 

Net income

 

 

 

 

 

 

 

 

$

81,147

 

 

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