Selectquote, inc. reports first quarter of fiscal year 2022 results
Overland park, kan.--(business wire)--selectquote, inc. (nyse: slqt) reported consolidated revenue for the first quarter of fiscal year 2022 of $159.9 million, which was a 29% increase over consolidated revenue for the first quarter of fiscal year 2021 of $124.2 million. consolidated net loss for the first quarter of fiscal year 2022 was $45.4 million, which represents a decrease in consolidated net income of $46.2 million over consolidated net income for the first quarter of fiscal year 2021 of $0.8 million. finally, consolidated adjusted ebitda* for the first quarter of fiscal year 2022 was $(44.0) million, compared to consolidated adjusted ebitda* for the first quarter of fiscal year 2021 of $12.1 million. chief executive officer tim danker commented, “selectquote began 2022 with strong results that were ahead of internal expectations, and our full year guidance remains unchanged. we are particularly pleased with the early progress of our population health business. that progress validates our belief in the significant value creation potential, not only for our patients and carriers, but also for our shareholders. selectrx continues to excel, with daily enrollments now over 7 times higher than the rate of enrollment at the time of our acquisition. in sum, selectquote is very well positioned for another year of strong revenue and ebitda growth.” chief financial officer raffaele sadun added, “subsequent to the quarter, we took advantage of favorable market conditions to secure an additional $200 million of capital through a delayed draw term debt facility. this capital gives us plenty of runway for the next several years based on the guidance we gave last quarter on cash flow progression.” *see reconciliation from non-gaap measure, adjusted ebitda, to net income (loss) 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 september 30, (in thousands) 2021 2020 % change revenue $ 106,320 $ 73,199 45 % adjusted ebitda* (32,971 ) 8,902 (470 )% adjusted ebitda margin* (31 )% 12 % 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. the following table shows the number of submitted policies for the periods presented: three months ended september 30, 2021 2020 % change medicare advantage 95,789 47,991 100 % medicare supplement 1,812 7,276 (75 )% dental, vision and hearing 28,604 20,042 43 % prescription drug plan 873 2,425 (64 )% other 3,562 1,883 89 % total 130,640 79,617 64 % *see reconciliation from non-gaap measure, adjusted ebitda, to net income (loss) 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 september 30, 2021 2020 % change medicare advantage 84,116 42,473 98 % medicare supplement 1,398 6,325 (78 )% dental, vision and hearing 22,223 16,239 37 % prescription drug plan 868 2,632 (67 )% other 2,880 1,824 58 % total 111,485 69,493 60 % 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 september 30, (dollars per policy): 2021 2020 % change medicare advantage $ 978 $ 1,168 (16 )% medicare supplement 1,439 1,274 13 % dental, vision and hearing 152 168 (10 )% prescription drug plan 310 240 29 % other 111 135 (18 )% 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 september 30, (dollars per approved policy): 2021 2020 % change medicare advantage and medicare supplement approved policies 526,212 271,199 94 % medicare advantage and medicare supplement commission per ma/ms policy $ 1,223 $ 1,282 (5 )% other commission per ma/ms policy 37 48 (23 )% other per ma/ms policy 188 171 10 % total revenue per ma/ms policy 1,448 1,501 (4 )% total operating expenses per ma/ms policy (1,064) (924) 15 % adjusted ebitda per ma/ms policy* $ 384 $ 577 (33 )% adjusted ebitda margin per ma/ms policy* 27 % 38 % (31 )% revenue/cac multiple 2.8x 3.5x life financial results the following table provides the financial results for the life segment for the periods presented: three months ended september 30, (in thousands) 2021 2020 % change revenue $ 49,826 $ 42,823 16 % adjusted ebitda* 4,698 10,477 (55 )% adjusted ebitda margin* 9 % 24 % 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 (loss) on page 11. the following table shows term and final expense premiums for the periods presented: three months ended september 30, (in thousands) 2021 2020 % change term premiums $ 15,510 $ 18,855 (18 )% final expense premiums 34,052 19,817 72 % total $ 49,562 $ 38,672 28 % auto & home financial results the following table provides the financial results for the auto & home segment for the periods presented: three months ended september 30, (in thousands) 2021 2020 % change revenue $ 7,469 $ 9,538 (22 )% adjusted ebitda* 1,374 3,616 (62 )% adjusted ebitda margin* 18 % 38 % 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 september 30, (in thousands): 2021 2020 % change premiums $ 13,258 $ 16,900 (22 )% *see reconciliation from non-gaap measure, adjusted ebitda, to net income (loss) on page 11. earnings conference call selectquote, inc. will host a conference call with the investment community today, thursday, november 4, 2021, beginning at 5 p.m. et. to register for this conference call, please use this link: http://www.directeventreg.com/registration/event/4041488. 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 condensed consolidated balance sheets (unaudited) (in thousands) september 30, 2021 june 30, 2021 assets current assets: cash and cash equivalents $ 183,618 $ 286,454 accounts receivable 96,673 113,375 commissions receivable-current 155,482 89,120 other current assets 7,917 4,486 total current assets 443,690 493,435 commissions receivable 748,190 756,777 property and equipment—net 38,525 29,510 software—net 14,264 12,611 operating lease right-of-use assets 30,547 31,414 intangible assets—net 39,432 40,670 goodwill 73,732 68,019 other assets 1,362 1,436 total assets $ 1,389,742 $ 1,433,872 liabilities and shareholders’ equity current liabilities: accounts payable $ 28,495 $ 34,079 accrued expenses 22,836 20,676 accrued compensation and benefits 43,648 40,909 operating lease liabilities—current 5,355 5,289 current portion of long-term debt 3,540 2,360 other current liabilities 24,618 5,504 total current liabilities 128,492 108,817 long-term debt, less current portion 458,652 459,043 deferred income taxes 125,181 140,988 operating lease liabilities 37,186 38,392 other liabilities 6,446 11,743 total liabilities 755,957 758,983 commitments and contingencies shareholders’ equity: common stock, $0.01 par value 1,639 1,635 additional paid-in capital 549,034 544,771 retained earnings 82,889 128,254 accumulated other comprehensive income 223 229 total shareholders’ equity 633,785 674,889 total liabilities and shareholders’ equity $ 1,389,742 $ 1,433,872 selectquote, inc. and subsidiaries condensed consolidated statements of comprehensive income (loss) (unaudited) (in thousands) three months ended september 30, 2021 2020 revenue: commission $ 134,651 $ 106,545 production bonus and other 25,272 17,624 total revenue 159,923 124,169 operating costs and expenses: cost of revenue 92,165 51,045 marketing and advertising 90,677 49,800 general and administrative 23,392 12,202 technical development 5,853 3,848 total operating costs and expenses 212,087 116,895 income (loss) from operations (52,164 ) 7,274 interest expense, net (8,535 ) (6,761 ) other expense, net (102 ) (780 ) loss before income tax benefit (60,801 ) (267 ) income tax benefit (15,436 ) (1,104 ) net income (loss) $ (45,365 ) $ 837 net income (loss) per share: basic $ (0.28 ) $ 0.01 diluted $ (0.28 ) $ 0.01 weighted-average common stock outstanding used in per share amounts: basic 163,692 162,448 diluted 163,692 165,192 other comprehensive loss, net of tax: loss on cash flow hedge (6 ) (257 ) other comprehensive loss (6 ) (257 ) comprehensive income (loss) $ (45,371 ) $ 580 selectquote, inc. and subsidiaries condensed consolidated statements of cash flows (unaudited) (in thousands) three months ended september 30, 2021 2020 cash flows from operating activities: net income (loss) $ (45,365 ) $ 837 adjustments to reconcile net income (loss) to net cash, cash equivalents, and restricted cash used in operating activities: depreciation and amortization 5,103 3,347 loss on disposal of property, equipment, and software 350 82 share-based compensation expense 2,215 924 deferred income taxes (15,807 ) (1,214 ) amortization of debt issuance costs and debt discount 862 822 fair value adjustments to contingent earnout obligations — 759 non-cash lease expense 994 911 changes in operating assets and liabilities: accounts receivable 17,336 14,361 commissions receivable (57,775 ) (45,942 ) other assets (2,957 ) 1,790 accounts payable and accrued expenses (6,942 ) (8,718 ) operating lease liabilities (1,267 ) (995 ) other liabilities 16,178 23,690 net cash used in operating activities (87,075 ) (9,346 ) cash flows from investing activities: purchases of property and equipment (7,824 ) (2,751 ) purchases of software and capitalized software development costs (3,016 ) (1,585 ) acquisition of business (6,927 ) 121 net cash used in investing activities (17,767 ) (4,215 ) cash flows from financing activities: payments on other debt (46 ) (68 ) proceeds from common stock options exercised and employee stock purchase plan 2,194 309 payments of tax withholdings related to net share settlement of equity awards (142 ) (2,509 ) payments of costs incurred in connection with private placement — (1,771 ) payments of costs incurred in connection with initial public offering — (3,899 ) net cash provided by (used in) financing activities 2,006 (7,938 ) net decrease in cash, cash equivalents, and restricted cash (102,836 ) (21,499 ) cash, cash equivalents, and restricted cash—beginning of period 286,454 368,870 cash, cash equivalents, and restricted cash—end of period $ 183,618 $ 347,371 selectquote, inc. and subsidiaries adjusted ebitda to net income reconciliation (unaudited) three months ended september 30, 2021 (in thousands) senior life auto & home corp & elims consolidated revenue $ 106,320 $ 49,826 $ 7,469 $ (3,692 ) $ 159,923 operating expenses (139,291 ) (45,128 ) (6,095 ) (13,351 ) (203,865 ) other expenses, net — — — (102 ) (102 ) adjusted ebitda (32,971 ) 4,698 1,374 (17,145 ) (44,044 ) share-based compensation expense (2,215 ) non-recurring expenses (554 ) depreciation and amortization (5,103 ) loss on disposal of property, equipment, and software (350 ) interest expense, net (8,535 ) income tax benefit 15,436 net loss $ (45,365 ) three months ended september 30, 2020 (in thousands) senior life auto & home corp & elims consolidated revenue $ 73,199 $ 42,823 $ 9,538 $ (1,391 ) $ 124,169 operating expenses (64,297 ) (32,346 ) (5,922 ) (9,518 ) (112,083 ) other expenses, net — — — (21 ) (21 ) adjusted ebitda 8,902 10,477 3,616 (10,930 ) 12,065 share-based compensation expense (924 ) non-recurring expenses (438 ) fair value adjustments to contingent earnout obligations (759 ) restructuring expenses (21 ) depreciation and amortization (3,347 ) loss on disposal of property, equipment, and software (82 ) interest expense, net (6,761 ) income tax benefit 1,104 net income $ 837
