SelectQuote(US:SLQT)2025-05-12 20:12PART I FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) The unaudited condensed consolidated financial statements for the period ended March 31, 2025, show a significant increase in total assets to $1.30 billion from $1.19 billion at June 30, 2024, primarily driven by an increase in cash and commissions receivable Condensed Consolidated Balance Sheets As of March 31, 2025, total assets were $1.296 billion, an increase from $1.194 billion at June 30, 2024 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash, cash equivalents, and restricted cash | $84,795 | $42,690 | | Commissions Receivable—Net | $839,757 | $761,446 | | Total Assets | $1,295,833 | $1,193,908 | | Liabilities & Equity | | | | Total current liabilities | $193,703 | $174,587 | | Long-term debt, net | $362,493 | $637,480 | | Total liabilities | $738,008 | $877,107 | | Senior Non-Convertible Preferred Stock | $207,613 | $0 | | Total shareholders' equity | $350,212 | $316,801 | Condensed Consolidated Statements of Comprehensive Income (Loss) For the nine months ended March 31, 2025, the company reported a net income of $34.7 million, compared to a net loss of $3.1 million for the same period in 2024 Financial Performance for the Nine Months Ended March 31 (in thousands, except per share data) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenue | $1,181,492 | $1,014,567 | | - Commissions and other services | $663,338 | $690,702 | | - Pharmacy | $518,154 | $323,865 | | Income from Operations | $81,022 | $65,941 | | Change in Fair Value of Warrants | $25,344 | $0 | | Net Income (Loss) | $34,712 | $(3,108) | | Net Income (Loss) Attributable to Common Shareholders | $28,925 | $(3,108) | | Diluted EPS | $0.13 | $(0.02) | Financial Performance for the Three Months Ended March 31 (in thousands, except per share data) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenue | $408,160 | $376,400 | | Income from Operations | $22,059 | $33,062 | | Net Income | $26,022 | $8,551 | | Diluted EPS | $0.03 | $0.05 | Condensed Consolidated Statements of Changes in Shareholders' Equity For the nine months ended March 31, 2025, total shareholders' equity increased from $316.8 million to $350.2 million - Shareholders' equity for the nine months ended March 31, 2025, increased by $33.4 million, primarily due to net income of $34.7 million14 - Share-based compensation expense for the nine months ended March 31, 2025, was $13.5 million, compared to $10.5 million in the prior-year period14 Condensed Consolidated Statements of Cash Flows For the nine months ended March 31, 2025, net cash provided by operating activities was $25.8 million, a significant improvement from the $4.8 million used in the prior-year period Cash Flow Summary for the Nine Months Ended March 31 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $25,816 | $(4,759) | | Net cash used in investing activities | $(8,203) | $(8,926) | | Net cash provided by (used in) financing activities | $25,919 | $(31,663) | | Net Increase (Decrease) in Cash | $43,532 | $(45,348) | | Cash at End of Period | $86,222 | $37,808 | - Significant financing activities in the nine months to March 31, 2025 include proceeds from Senior Non-Convertible Preferred Stock ($337.9M), proceeds from ABS Notes ($99.1M), and payments on Term Loans ($384.6M)16 Notes to Condensed Consolidated Financial Statements The notes detail the company's accounting policies and significant financial events Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 17% year-over-year revenue growth for the nine months ended March 31, 2025, to the successful expansion of the Healthcare Services segment, particularly the SelectRx pharmacy business, which saw revenue increase by 60% - The company operates through three reportable segments: Senior (Medicare products), Healthcare Services (pharmacy and health services), and Life (term life and final expense insurance)153154155 - As of July 1, 2024, the Auto & Home business was reclassified from a reportable segment to the "All Other" category due to not meeting quantitative thresholds135204 - The company's primary performance measure for segments is Adjusted EBITDA, which excludes items like interest, taxes, depreciation, amortization, share-based compensation, and changes in fair value of warrants137207 Key Business and Operating Metrics by Segment In the Senior segment, for the nine months ended March 31, 2025, total approved policies decreased by 2% to 557,846, and the LTV per Medicare Advantage policy fell 3% to $892 Senior Segment - Approved Policies | Period | Medicare Advantage | Total Approved Policies | YoY Change (Total) | | :--- | :--- | :--- | :--- | | Nine Months Ended Mar 31, 2025 | 507,530 | 557,846 | -2% | | Nine Months Ended Mar 31, 2024 | 517,973 | 566,543 | | Senior Segment - LTV per MA Approved Policy | Period | LTV per MA Policy | YoY Change | | :--- | :--- | :--- | | Nine Months Ended Mar 31, 2025 | $892 | -3% | | Nine Months Ended Mar 31, 2024 | $923 | | Healthcare Services & Life Segment Metrics | Metric | As of/For Nine Months Ended Mar 31, 2025 | YoY Change | | :--- | :--- | :--- | | Total SelectRx Members | 105,523 | +41% | | Life - Total Premiums (in thousands) | $125,751 | +9% | Results of Operations For the nine months ended March 31, 2025, total revenue grew 17% to $1.18 billion, driven by a 60% increase in Pharmacy revenue Results of Operations for the Nine Months Ended March 31 (in thousands) | Line Item | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $1,181,492 | $1,014,567 | 17% | | - Pharmacy Revenue | $518,154 | $323,865 | 60% | | Total Operating Costs | $1,100,470 | $948,626 | 16% | | - Cost of goods sold—pharmacy | $448,029 | $284,360 | 58% | | - Marketing and advertising | $254,222 | $288,676 | -12% | | - Selling, general, and administrative | $122,850 | $97,049 | 27% | | Income from Operations | $81,022 | $65,941 | 23% | - Interest expense for the nine months ended March 31, 2025 decreased by 4% to $67.2 million, resulting from a lower cost of capital following debt restructuring200201 Segment Information Analysis For the nine months ended March 31, 2025, the Senior segment's revenue decreased 4% to $517.9 million, but its Adjusted EBITDA increased 11% to $153.9 million due to cost efficiencies Segment Revenue and Adjusted EBITDA for the Nine Months Ended March 31 (in millions) | Segment | Revenue 2025 | Revenue 2024 | Adj. EBITDA 2025 | Adj. EBITDA 2024 | | :--- | :--- | :--- | :--- | :--- | | Senior | $517.9 | $541.7 | $153.9 | $138.9 | | Healthcare Services | $528.7 | $333.3 | $13.5 | $6.9 | | Life | $125.0 | $115.9 | $19.7 | $12.9 | - Senior segment's Adjusted EBITDA increased despite lower revenue, driven by a $38.9 million decrease in operating costs, including a $25.1 million reduction in sales and marketing228 - Healthcare Services' growth was fueled by a $195.4 million revenue increase, partially offset by a $188.8 million rise in operating costs to support the expansion229 Liquidity and Capital Resources As of March 31, 2025, the company had $86.2 million in cash, cash equivalents, and restricted cash - On February 10, 2025, the company completed a $350.0 million Senior Non-Convertible Preferred Stock transaction, receiving net proceeds of $337.9 million233 - During the nine months ended March 31, 2025, the company repaid $384.6 million of its outstanding term loans236 Cash Flow Summary for the Nine Months Ended March 31 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $25,816 | $(4,759) | | Net cash used in investing activities | $(8,203) | $(8,926) | | Net cash provided by (used in) financing activities | $25,919 | $(31,663) | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is to unfavorable movements in interest rates - The company is primarily exposed to market risk from unfavorable movements in interest rates253 Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025 - Management concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective254 - No material changes to internal control over financial reporting occurred during the first quarter of fiscal 2025256 PART II OTHER INFORMATION Item 1. Legal Proceedings The company is subject to various legal proceedings - The company is involved in a securities class action lawsuit, which was dismissed on April 3, 2025, but the plaintiffs filed a notice of appeal on May 5, 202597 - On May 1, 2025, the company became aware of a qui tam action in which the U.S. Attorney's Office has partially intervened, alleging violations of the Federal False Claims Act. The company denies the allegations100 Item 1A. Risk Factors There have been no material changes to the risk factors disclosed in the Annual Report, except for an update highlighting the risks associated with legal proceedings - The company highlights the risk from various legal proceedings, specifically mentioning a subpoena received in August 2022 and a qui tam action where the U.S. Attorney's Office partially intervened on May 1, 2025260 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Except for what was previously disclosed on Form 8-K reports, the company did not sell any unregistered securities during the period covered by this Form 10-Q - No unregistered sales of equity securities occurred during the period, other than those previously reported on Form 8-K261 Item 5. Other Information On November 21, 2024, Sarah Anderson, Executive Vice President of Pharmacy, adopted a Rule 10b5-1 trading plan for the potential sale of up to 50,000 shares of common stock - Sarah Anderson, EVP of Pharmacy, adopted a Rule 10b5-1 trading arrangement on November 21, 2024, for the sale of up to 50,000 shares265 Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including CEO and CFO certifications pursuant to the Sarbanes-Oxley Act and XBRL data files