SelectQuote(SLQT) - 2023 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This section presents unaudited condensed consolidated financial statements and detailed notes for periods ended December 31, 2022 and 2021 Condensed Consolidated Balance Sheets These balance sheets present the company's financial position as of December 31, 2022, compared to June 30, 2022 Condensed Consolidated Balance Sheets (in millions) | Metric | December 31, 2022 | June 30, 2022 | | :----------------------------- | :---------------- | :-------------- | | Cash and cash equivalents | $36.097 | $140.997 | | Total current assets | $404.383 | $402.773 | | Total assets | $1,297.913 | $1,290.052 | | Total current liabilities | $164.155 | $113.513 | | Total liabilities | $916.148 | $898.947 | | Total shareholders' equity | $381.765 | $391.105 | - Cash and cash equivalents decreased significantly from $140.997 million to $36.097 million between June 30, 2022, and December 31, 2022[9] - Total current liabilities increased from $113.513 million to $164.155 million, primarily driven by a substantial increase in contract liabilities from $3.404 million to $38.752 million[9] Condensed Consolidated Statements of Comprehensive Income (Loss) These statements detail financial performance for periods ended December 31, 2022, showing revenue growth and net income improvement Condensed Consolidated Statements of Comprehensive Income (Loss) (in millions) | Metric | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Total revenue | $319.188 | $194.237 | $481.672 | $350.316 | | Income (Loss) from Operations | $53.033 | $(173.650) | $13.517 | $(229.658) | | Net Income (Loss) | $22.514 | $(137.563) | $(19.970) | $(185.795) | | Basic EPS | $0.14 | $(0.84) | $(0.12) | $(1.13) | | Diluted EPS | $0.14 | $(0.84) | $(0.12) | $(1.13) | - Total revenue increased by 64% for the three months ended December 31, 2022, compared to the prior year, and by 38% for the six months ended December 31, 2022[11] - The company reported a net income of $22.514 million for the three months ended December 31, 2022, a significant improvement from a net loss of $(137.563) million in the same period last year[11] Condensed Consolidated Statements of Changes in Shareholders' Equity These statements illustrate movements in equity components for periods ended December 31, 2022 and 2021, reflecting net income/loss and share-based compensation Condensed Consolidated Statements of Changes in Shareholders' Equity (in millions) | Metric | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net income (loss) | $22.514 | $(137.563) | $(19.970) | $(185.795) | | Share-based compensation expense | $2.936 | $1.894 | $5.566 | $4.109 | | Total Shareholders' Equity (End of Period) | $381.765 | $489.249 | $381.765 | $489.249 | - Share-based compensation expense increased for both the three-month ($2.936 million vs $1.894 million) and six-month ($5.566 million vs $4.109 million) periods ended December 31, 2022, compared to 2021[13][15] - Total shareholders' equity decreased from $391.105 million at June 30, 2022, to $381.765 million at December 31, 2022, primarily due to the net loss for the six-month period[15] Condensed Consolidated Statements of Cash Flows These statements provide an overview of cash movements from operating, investing, and financing activities for the six months ended December 31, 2022, showing reduced cash used in operating activities Condensed Consolidated Statements of Cash Flows (in millions) | Metric | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :-------------------- | :---------------------------- | :---------------------------- | | Net cash used in operating activities | $(75.574) | $(305.741) | | Net cash used in investing activities | $(4.468) | $(31.062) | | Net cash (used in) provided by financing activities | $(24.858) | $243.706 | | Net decrease in cash and cash equivalents | $(104.900) | $(93.097) | | Cash and cash equivalents—End of period | $36.097 | $193.357 | - Net cash used in operating activities significantly decreased from $(305.741) million in 2021 to $(75.574) million in 2022, primarily due to a lower net loss and favorable changes in working capital[18][242][243] - Net cash used in investing activities decreased from $(31.062) million in 2021 to $(4.468) million in 2022, mainly due to reduced purchases of property, equipment, and software, and no business acquisitions in 2022[18][245][246] - Financing activities shifted from providing $243.706 million in 2021 to using $(24.858) million in 2022, driven by debt payments and issuance costs in 2022 compared to proceeds from term loans in 2021[18][248][249] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering business operations, accounting policies, recent acquisitions, asset valuations, lease obligations, debt structure, legal contingencies, shareholder equity, revenue recognition, income taxes, and segment reporting 1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES This note outlines SelectQuote's business as a technology-enabled insurance and healthcare services distribution platform, detailing its four segments and covering accounting policies and a prior period correction - SelectQuote operates as a direct-to-consumer distribution platform for insurance products (Senior Health, Life, Auto & Home) and healthcare services (SelectRx, Population Health)[20] - The company's Senior segment's commission revenue is highest in the second and third quarters due to the Medicare annual enrollment period (AEP) and open enrollment period (OEP)[23] - The company early adopted ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, during the six months ended December 31, 2022[26] Immaterial Correction of Prior Period Financial Statements (Three Months Ended December 31, 2021) (in thousands) | Metric | As Previously Reported | Adjustment | As Corrected | | :-------------------- | :--------------------- | :--------- | :----------- | | Commission revenue | $140,701 | $(744) | $139,957 | | Net loss | $(137,008