| --- | --- | --- | --- | --- | --- | --- | |-------|-------|-------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Disclaimer 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 "ma ...

SelectQuote, Inc. (NYSE:SLQT) Q1 2021 Earnings Conference Call November 5, 2020 5:00 PM ET Company Participants Matt Gunter - Investor Relations Tim Danker - Chief Executive Officer Raff Sadun - Chief Financial Officer Bob Grant - President, Senior Division Conference Call Participants Sarah James - Piper Sandler Jailendra Singh - Credit Suisse Elizabeth Anderson - Evercore Frank Morgan - RBC Capital Jonathan Yong - Barclays Daniel Grosslight - Citi Lauren Schenk - Morgan Stanley Meyer Shields - KBW Operato ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to 001-39295 (Commission File Number) SelectQuote, Inc. (Exact name of registrant as specified in its charter) Delaware 94-3339273 (State or other ...

Part I [Business](index=9&type=section&id=Item%201.%20Business) SelectQuote operates a technology-enabled, direct-to-consumer insurance distribution platform across Senior, Life, and Auto & Home segments, earning commissions without underwriting risk - SelectQuote is a **direct-to-consumer (DTC) distribution platform** for senior health, life, and auto & home insurance, earning commissions without underwriting risk[21](index=21&type=chunk) - The business model relies on a **highly trained, licensed agent force** and a **proprietary technology platform** for lead acquisition and customer engagement[26](index=26&type=chunk)[33](index=33&type=chunk) - On May 1, 2020, the company acquired marketing firm InsideResponse for up to **$65.0 million** to bolster lead generation capabilities[23](index=23&type=chunk) - The company transitioned its entire workforce to a **remote model** due to COVID-19, leveraging technology and remote agent capabilities, potentially accelerating consumer adoption[22](index=22&type=chunk) [Our Business Model and Products](index=10&type=section&id=Item%201.%20Business%23Our%20Business%20Model%20and%20Products) SelectQuote distributes insurance across Senior, Life, and Auto & Home segments, earning commissions from over 50 carriers, with the Senior segment being the largest and fastest-growing - The company operates three segments: **SelectQuote Senior** (launched 2010), **SelectQuote Life** (founded 1985), and **SelectQuote Auto & Home** (founded 2011)[39](index=39&type=chunk) - FY2020 Policy Mix by Segment | Segment | Primary Products | % of Approved Policies/New Premium | |:--- |:--- |:--- | | **Senior** | Medicare Advantage & Supplement | 77% of approved policies | | **Life** | Term & Permanent Life | 67% of new premium | | **Auto & Home** | Homeowners & 12-month Auto | 78% of new premium | - The company maintains relationships with **over 50 insurance carriers**, including major partners like Humana, UnitedHealthcare, and Aetna[43](index=43&type=chunk) [Our Market Opportunity and Growth Strategy](index=13&type=section&id=Item%201.%20Business%23Our%20Market%20Opportunity%20and%20Growth%20Strategy) SelectQuote targets an over $180 billion market, primarily in the Senior segment, with growth strategies focused on maximizing policyholder lifetime value, agent productivity, cross-selling, and new product introductions - Estimated Total Addressable Market (Annual Commission Revenue) | Segment | Annual Commission Opportunity | |:---|:---| | Senior | ~$30 billion | | Life | ~$105 billion | | Auto & Home | ~$47 billion | - The Senior market is expanding due to demographic shifts, with nearly **4 million \"Baby Boomers\" turning 65 each year** for the next decade, driving Medicare enrollment growth[46](index=46&type=chunk) - Key growth strategies include maximizing **policyholder lifetime value**, increasing **agent force size and productivity**, driving **cross-selling**, deepening **carrier partnerships**, and introducing **new financial products**[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) [Competition, Regulation, and Seasonality](index=19&type=section&id=Item%201.%20Business%23Competition%20%2C%20Regulation%2C%20and%20Seasonality) SelectQuote faces competition from various channels, operates in a heavily regulated environment, and experiences significant seasonality driven by the Medicare Annual Enrollment Period - Competitors include direct-selling insurance companies, traditional agents, and online platforms like **eHealth, Inc.** and **GoHealth, Inc.**[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) - The business is subject to extensive regulation, including **state licensing**, **CMS rules** for Medicare marketing, **HIPAA** for health information privacy, and the **TCPA** for telephone marketing[75](index=75&type=chunk)[77](index=77&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) - The business is seasonal, with **33% of FY2020 revenue** generated in the second quarter, driven by the Medicare Annual Enrollment Period (AEP)[83](index=83&type=chunk) [Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from reliance on key carrier partners, regulatory changes in healthcare, technological vulnerabilities, business seasonality, revenue recognition estimates, and substantial debt obligations - The company is heavily reliant on a few key insurance carrier partners; in FY2020, **UnitedHealthcare (26%)**, **Humana (18%)**, and **Aetna (11%)** accounted for a significant portion of total revenue[95](index=95&type=chunk) - The business is substantially dependent on the Senior segment, which contributed **68% of total revenue** in FY2020, making it vulnerable to changes like \"Medicare-for-All\" proposals[101](index=101&type=chunk)[109](index=109&type=chunk) - Approximately **50% of Medicare policies** are submitted during the Annual Enrollment Period (AEP), making operational performance during this period critical and highly impactful to results[113](index=113&type=chunk) - Revenue recognition under ASC 606 relies on significant estimates of commission lifetime value, particularly **customer lapse rates**, where higher actual rates could adversely affect financial results[151](index=151&type=chunk)[152](index=152&type=chunk) - The company has substantial debt, with **$325.0 million outstanding** under a Term Loan as of June 30, 2020, requiring significant cash flow and subject to restrictive covenants[139](index=139&type=chunk) [Unresolved Staff Comments](index=46&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[211](index=211&type=chunk) [Properties](index=46&type=section&id=Item%202.%20Properties) As of June 30, 2020, SelectQuote leased approximately 369,000 square feet across seven US locations, with its corporate headquarters in Overland Park, Kansas, being the principal property - Principal Leased Properties as of June 30, 2020 | Location | Approx. Occupied Square Footage | Primary Use | |:---|:---:|:---| | Overland Park, KS | 253,612 | Corporate headquarters, operations for all segments | | Centennial, CO | 45,373 | Senior operations | | Des Moines, IA | 24,464 | Senior operations | | San Diego, CA | 21,396 | Life and Auto & Home operations | | Jacksonville, FL | 15,231 | Life operations | [Legal Proceedings](index=46&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently a party to any legal proceedings expected to have a material adverse effect on its business or financial condition - The company is not presently party to any legal proceedings expected to have a **material adverse effect** on its business[213](index=213&type=chunk) [Mine Safety Disclosures](index=46&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[214](index=214&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=47&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) SelectQuote's common stock began trading on the NYSE as \"SLQT\" on May 21, 2020, with the IPO raising $333.1 million in net proceeds, partially used for debt repayment, and no anticipated future dividends - The company's common stock began trading on the New York Stock Exchange under the symbol **\"SLQT\"** on May 21, 2020[216](index=216&type=chunk) - From its IPO, the company raised net proceeds of approximately **$333.1 million**, using **$100.0 million** to pay down the Term Loan and **$29.3 million** to terminate the Receivables Financing Agreement[218](index=218&type=chunk) - The company does not anticipate paying cash dividends on its common stock in the foreseeable future, intending to retain earnings for business operation and expansion[225](index=225&type=chunk) [Selected Financial Data](index=50&type=section&id=Item%206.%20Selected%20Financial%20Data) Total revenue grew from $233.7 million in FY2018 to $531.5 million in FY2020, with net income increasing to $81.1 million, and total assets expanding to over $1.07 billion - Selected Consolidated Financial Data (in thousands) | | 2020 | 2019 | 2018 | |:---|---:|---:|---:| | **Total revenue** | $531,515 | $337,469 | $233,688 | | **Income from operations** | $132,329 | $96,288 | $43,156 | | **Net income** | $81,147 | $72,579 | $34,899 | | **Total assets** | $1,073,793 | $406,940 | N/A | | **Total liabilities** | $528,104 | $143,688 | N/A | | **Total shareholders' equity** | $545,689 | $262,455 | N/A | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=51&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) FY2020 revenue increased 58% to $531.5 million, driven by Senior segment growth and increased agent count, with Adjusted EBITDA reaching $154.0 million, supported by IPO proceeds and new debt financing [Key Business and Operating Metrics](index=54&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%23Key%20Business%20and%20Operating%20Metrics) FY2020 saw a 91% increase in Senior segment submitted policies, driven by Medicare Advantage growth and agent productivity, with stable MA policy LTV and significant premium growth in Life and Auto & Home - Senior Segment Submitted Policies | Policy Type | 2020 | 2019 | 2018 | |:---|---:|---:|---:| | Medicare Advantage | 264,546 | 119,562 | 57,973 | | Medicare Supplement | 24,085 | 23,593 | 27,059 | | **Total** | **378,052** | **198,211** | **133,917** | - Senior Segment LTV of Commissions per Approved Policy | Policy Type | 2020 | 2019 | 2018 | |:---|:---:|:---:|:---:| | Medicare Advantage | $1,287 | $1,279 | $1,235 | | Medicare Supplement | $1,376 | $1,312 | $1,184 | - Life and Auto & Home Premiums (in thousands) | Segment/Product | 2020 | 2019 | 2018 | |:---|---:|---:|---:| | **Life - Core Premiums** | $75,451 | $75,681 | $71,753 | | **Life - Ancillary Premiums** | $37,346 | $14,286 | $6,601 | | **Auto & Home - Premiums** | $70,087 | $56,719 | $50,460 | [Results of Operations](index=62&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%23Results%20of%20Operations) FY2020 total revenue increased 58% to $531.5 million, driven by Senior segment commission growth, while operating expenses rose 75%, leading to $132.3 million in operating income and $81.1 million in net income despite higher interest expense - Consolidated Results of Operations (in thousands) | | 2020 | 2019 | 2018 | |:---|---:|---:|---:| | **Total revenue** | $531,515 | $337,469 | $233,688 | | **Total operating costs and expenses** | $399,186 | $241,181 | $190,532 | | **Income from operations** | $132,329 | $96,288 | $43,156 | | **Interest expense, net** | $(25,761) | $(1,660) | $(929) | | **Net income** | $81,147 | $72,579 | $34,899 | - Commission revenue increased by **$180.6 million (61%)** in FY2020, with the Senior segment contributing **$157.4 million** of this growth[289](index=289&type=chunk) - Cost of revenue increased by **$63.0 million (60%)** in FY2020, primarily due to a **$51.0 million increase** in compensation expense from a larger agent force[291](index=291&type=chunk) - Marketing and advertising expenses increased by **$73.9 million (67%)** in FY2020, mainly due to a **$56.3 million increase** in the Senior segment for lead generation[293](index=293&type=chunk) [Segment Performance](index=65&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%23Segment%20Performance) In FY2020, Senior segment revenue grew 88% to $361.7 million with 62% Adjusted EBITDA growth, while Life and Auto & Home segments also saw revenue and Adjusted EBITDA increases driven by commission and premium volume - Revenue by Segment (in thousands) | Segment | 2020 | 2019 | 2018 | |:---|---:|---:|---:| | **Senior** | $361,673 | $192,257 | $102,408 | | **Life** | $129,967 | $110,493 | $98,218 | | **Auto & Home** | $41,189 | $35,054 | $33,348 | - Adjusted EBITDA by Segment (in thousands) | Segment | 2020 | 2019 | 2018 | |:---|---:|---:|---:| | **Senior** | $145,738 | $90,174 | $36,688 | | **Life** | $27,812 | $25,821 | $22,969 | | **Auto & Home** | $8,699 | $7,817 | $9,221 | [Liquidity and Capital Resources](index=72&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%23Liquidity%20and%20Capital%20Resources) As of June 30, 2020, cash increased to $368.9 million due to $481.4 million in financing proceeds from the IPO and new Term Loan, offset by a $275.0 million shareholder distribution and $61.8 million cash used in operations - Summary of Cash Flows (in thousands) | | 2020 | 2019 | 2018 | |:---|---:|---:|---:| | Net cash (used in) provided by operating activities | $(61,776) | $113 | $(4,846) | | Net cash used in investing activities | $(51,370) | $(8,636) | $(6,020) | | Net cash provided by financing activities | $481,446 | $8,135 | $11,482 | - On November 5, 2019, the company entered a new Senior Secured Credit Facility, including a **$425.0 million Term Loan** and a **$75.0 million Revolving Credit Facility**, with **$325.0 million outstanding** under the Term Loan as of June 30, 2020[349](index=349&type=chunk) - On June 8, 2020, the company used IPO proceeds to repay its **$29.3 million obligation** under the Receivables Financing Agreement, terminating the facility[352](index=352&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=78&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are credit risk concentration from reliance on key carrier partners and interest rate risk from variable-rate debt, mitigated by an interest rate swap agreement - The company has significant credit risk concentration, with three insurance carrier partners accounting for **26%, 20%, and 10%** of total receivables as of June 30, 2020[368](index=368&type=chunk) - The company is exposed to **interest rate risk** from its variable-rate debt and has entered into interest rate swap agreements to protect against unfavorable changes[369](index=369&type=chunk) [Financial Statements and Supplementary Data](index=79&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) FY2020 consolidated financial statements show significant growth, with total assets reaching $1.07 billion, revenue at $531.5 million, and net income of $81.1 million, driven by IPO capital and new debt financing [Consolidated Balance Sheets](index=81&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data%23Consolidated%20Balance%20Sheets) As of June 30, 2020, total assets reached $1.07 billion, driven by increased cash and commissions receivable, while total liabilities rose to $528.1 million due to new debt, and shareholders' equity grew to $545.7 million from IPO proceeds - Consolidated Balance Sheet Data (in thousands) | | June 30, 2020 | June 30, 2019 | |:---|---:|---:| | **Total current assets** | $513,834 | $102,957 | | **Commissions receivable - Net** | $461,752 | $279,489 | | **Total assets** | $1,073,793 | $406,940 | | **Total current liabilities** | $95,811 | $33,222 | | **Debt** | $311,814 | $11,032 | | **Total liabilities** | $528,104 | $143,688 | | **Total shareholders' equity** | $545,689 | $262,455 | [Consolidated Statements of Comprehensive Income](index=82&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data%23Consolidated%20Statements%20of%20Comprehensive%20Income) For FY2020, total revenue increased 58% to $531.5 million, with income from operations growing to $132.3 million, resulting in net income of $81.1 million despite higher interest expense, and a net loss per share of ($0.16) - Consolidated Statements of Comprehensive Income (in thousands) | | 2020 | 2019 | 2018 | |:---|---:|---:|---:| | **Total revenue** | $531,515 | $337,469 | $233,688 | | **Income from operations** | $132,329 | $96,288 | $43,156 | | **Net income** | $81,147 | $72,579 | $34,899 | | **Net (loss) income per share - diluted** | $(0.16) | $0.55 | $0.23 | [Notes to Financial Statements](index=85&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data%23Notes%20to%20Financial%20Statements) Notes detail key accounting policies like ASC 606 revenue recognition and significant events including the May 2020 IPO ($333.1 million net proceeds), InsideResponse acquisition, new $425 million Term Loan, and preferred stock conversion - The company recognizes revenue under **ASC 606**, using an expected value approach to estimate variable consideration from future renewal commissions, requiring significant judgment on policy persistency[411](index=411&type=chunk)[414](index=414&type=chunk) - On May 1, 2020, the company acquired InsideResponse for up to **$67.2 million**, including a **$32.7 million cash payment** and a **$30.4 million contingent earnout**, resulting in **$41.2 million of goodwill**[435](index=435&type=chunk)[436](index=436&type=chunk)[439](index=439&type=chunk) - The company entered a new Senior Secured Credit Facility with a **$425 million Term Loan** and a **$75 million Revolving Credit Facility**, with proceeds used for a **$275 million distribution** to shareholders and option holders[464](index=464&type=chunk) - Upon the IPO in May 2020, all outstanding shares of **preferred stock (Series A-E)** were automatically converted into common stock[481](index=481&type=chunk)[482](index=482&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=118&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no disagreements with its accountants on accounting principles, financial disclosure, or auditing scope - None[535](index=535&type=chunk) [Controls and Procedures](index=118&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2020, and as an emerging growth company, no management report on internal control over financial reporting is required - Management concluded that as of June 30, 2020, the company's **disclosure controls and procedures were effective**[536](index=536&type=chunk) - As an emerging growth company, the company is not required to provide a management report on **internal control over financial reporting**[538](index=538&type=chunk) [Other Information](index=118&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[540](index=540&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=119&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the company's 2020 Definitive Proxy Statement - Information is incorporated by reference from the registrant's **2020 Proxy Statement**[543](index=543&type=chunk) [Executive Compensation](index=119&type=section&id=Item%2011.%20Executive%20Compensation) Information concerning executive compensation is incorporated by reference from the company's 2020 Definitive Proxy Statement - Information is incorporated by reference from the registrant's **2020 Proxy Statement**[545](index=545&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=119&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the company's 2020 Definitive Proxy Statement - Information is incorporated by reference from the registrant's **2020 Proxy Statement**[546](index=546&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=119&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the company's 2020 Definitive Proxy Statement - Information is incorporated by reference from the registrant's **2020 Proxy Statement**[547](index=547&type=chunk) [Principal Accountant Fees and Services](index=119&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information detailing fees paid to the principal accountant is incorporated by reference from the company's 2020 Definitive Proxy Statement - Information is incorporated by reference from the registrant's **2020 Proxy Statement**[548](index=548&type=chunk) Part IV [Exhibit and Financial Statement Schedules](index=120&type=section&id=Item%2015.%20Exhibit%20and%20Financial%20Statement%20Schedules) This section lists documents filed as part of the 10-K, including consolidated financial statements in Item 8, with omitted schedules and a list of exhibits such as corporate governance and debt agreements - The **Consolidated Financial Statements** are located in Item 8 of the report[551](index=551&type=chunk) - All financial statement schedules have been omitted as they are not applicable, not material, or the information is included elsewhere in the report[552](index=552&type=chunk) [Form 10-K Summary](index=122&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is noted as 'None', indicating no summary is provided in this section of the report - None[558](index=558&type=chunk)

SelectQuote, Inc. (NYSE:SLQT) Q4 2020 Earnings Conference Call September 9, 2020 5:00 PM ET Company Participants Matt Gunter - Investor Relations Tim Danker - Chief Executive Officer Raffaele Sadun - Chief Financial Officer Bob Grant - Chief Revenue Officer Bill Grant - Chief Operating Officer Conference Call Participants Jailendra Singh - Credit Suisse Frank Morgan - RBC Capital Markets Sarah James - Piper Sandler David Styblo - Jefferies Lauren Cassel - Morgan Stanley Jonathan Young - Barclays Capital Eli ...