SelectQuote 10Q 2024 Q3 Quarterly report

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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 March 31, 2024


☐			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 jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6800 West 115th Street	Suite 2511	66211
Overland Park	Kansas	(Zip Code)
(Address of principal executive offices)

(913) 599-9225

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

SLQT

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No ☒

The registrant had outstanding 169,158,740 shares of common stock as of April 30, 2024.

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SELECTQUOTE, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS


	PART I FINANCIAL INFORMATION	PAGE
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of March 31, 202 4 and June 30, 2023	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended March 31, 202 4 and 202 3	3
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended March 31, 202 4 and 202 3	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 202 4 and 202 3	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	50
	PART II OTHER INFORMATION
Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3.	Defaults Upon Senior Securities	51
Item 4.	Mine Safety Disclosures	51
Item 5.	Other Information	51
Item 6.	Exhibits	52
	Signatures	53

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PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SELECTQUOTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)



	March 31, 2024		June 30, 2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	37,808	$	83,156

Accounts receivable, net of allowances of $6.5 million and $2.7 million, respectively	253,083		154,565
Commissions receivable-current	69,165		111,148
Other current assets	24,115		14,355
Total current assets	384,171		363,224
COMMISSIONS RECEIVABLE—Net	763,958		729,350
PROPERTY AND EQUIPMENT—Net	22,536		27,452
SOFTWARE—Net	13,952		14,740
OPERATING LEASE RIGHT-OF-USE ASSETS	19,341		23,563
INTANGIBLE ASSETS—Net	7,926		10,200
GOODWILL	29,136		29,136
OTHER ASSETS	4,119		21,586
TOTAL ASSETS	$	1,245,139	$	1,219,251
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	61,168	$	27,577
Accrued expenses	21,058		16,993
Accrued compensation and benefits	57,483		49,966


Operating lease liabilities—current	4,663		5,175
Current portion of long-term debt	37,717		33,883
Contract liabilities	3,655		1,691
Other current liabilities	4,227		1,972
Total current liabilities	189,971		137,257
LONG-TERM DEBT, NET—less current portion	648,331		664,625

DEFERRED INCOME TAXES	35,057		39,581
OPERATING LEASE LIABILITIES	22,326		27,892
OTHER LIABILITIES	2,649		2,926
Total liabilities	898,334		872,281
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS’ EQUITY:
Common stock, $0.01 par value	1,692		1,669
Additional paid-in capital	577,389		567,266

Accumulated deficit	(238,752)		(235,644)
Accumulated other comprehensive income	6,476		13,679
Total shareholders’ equity	346,805		346,970
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,245,139	$	1,219,251

See accompanying notes to condensed consolidated financial statements.

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SELECTQUOTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands)


	Three Months Ended March 31,				Nine Months Ended March 31,
	2024		2023		2024		2023
REVENUE:
Commission	$	230,763	$	197,258	$	611,744	$	533,627

Pharmacy	120,282		66,948		323,865		159,641
Other	25,355		35,192		78,958		87,802
Total revenue	376,400		299,398		1,014,567		781,070
OPERATING COSTS AND EXPENSES:
Cost of revenue	84,315		79,186		254,250		235,827
Cost of goods sold—pharmacy revenue	106,172		62,302		284,360		154,753
Marketing and advertising	109,276		90,205		288,676		237,724
Selling, general, and administrative	34,971		27,544		97,049		86,662
Technical development	8,604		6,434		24,291		18,860

Total operating costs and expenses	343,338		265,671		948,626		733,826
INCOME FROM OPERATIONS	33,062		33,727		65,941		47,244
INTEREST EXPENSE, NET	(24,330)		(21,105)		(70,141)		(58,885)

OTHER INCOME (EXPENSE,) NET	(12)		(206)		(51)		(118)
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)	8,720		12,416		(4,251)		(11,759)
INCOME TAX EXPENSE (BENEFIT)	169		3,152		(1,143)		(1,053)
NET INCOME (LOSS)	$	8,551	$	9,264	$	(3,108)	$	(10,706)

NET INCOME (LOSS) PER SHARE:
Basic	$	0.05	$	0.06	$	(0.02)	$	(0.06)
Diluted	$	0.05	$	0.06	$	(0.02)	$	(0.06)

WEIGHTED-AVERAGE COMMON STOCK OUTSTANDING USED IN PER SHARE AMOUNTS:
Basic	169,070		166,543		168,291		165,951
Diluted	170,956		167,905		168,291		165,951

OTHER COMPREHENSIVE INCOME (LOSS) NET OF TAX:
Gain (loss) on cash flow hedge	$	(1,771)	$	(2,661)	$	(7,203)	$	1,358
OTHER COMPREHENSIVE INCOME (LOSS)	(1,771)		(2,661)		(7,203)		1,358
COMPREHENSIVE INCOME (LOSS)	$	6,780	$	6,603	$	(10,311)	$	(9,348)

See accompanying notes to the condensed consolidated financial statements.

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SELECTQUOTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)

(In thousands)


Three Months Ended March 31, 2024
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Shareholders' Equity
	Shares	Amount
BALANCES-December 31, 2023	168,974	$	1,690	$	573,883	$	(247,303)	$	8,247	$	336,517
Net income	—	—		—		8,551		—		8,551
Gain on cash flow hedge, net of tax	—	—		—		—		858		858
Amount reclassified into earnings, net tax	—	—		—		—		(2,629)		(2,629)
Exercise of employee stock options, net of shares withheld for cashless exercises and to cover tax withholdings	16	—		8		—		—		8

Vesting of restricted stock unit awards and performance stock unit awards net of shares withheld to cover tax withholdings	169	2		(17)		—		—		(15)
Share-based compensation expense	—	—		3,515		—		—		3,515
BALANCES-March 31, 2024	169,159	$	1,692	$	577,389	$	(238,752)	$	6,476	$	346,805


Three Months Ended March 31, 2023
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Shareholders' Equity
	Shares	Amount
BALANCES-December 31, 2022	166,511	$	1,665	$	561,435	$	(197,070)	$	15,735	$	381,765
Net income	—	—		—		9,264		—		9,264
Loss on cash flow hedge, net of tax	—	—		—		—		(484)		(484)
Amount reclassified into earnings, net of tax	—	—		—		—		(2,177)		(2,177)
Exercise of employee stock options, net of shares withheld for cashless exercises and to cover tax withholdings	23	—		42		—		—		42
Issuance of common stock pursuant to employee stock purchase plan	97	1		63		—		—		64
Vesting of restricted stock unit awards net of shares withheld to cover tax withholdings	26	1		(7)		—		—		(6)
Share-based compensation expense	—	—		2,951		—		—		2,951
BALANCES-March 31, 2023	166,657	$	1,667	$	564,484	$	(187,806)	$	13,074	$	391,419

See accompanying notes to the condensed consolidated financial statements.

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Nine Months Ended March 31, 2024
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Shareholders' Equity
	Shares	Amount
BALANCES-June 30, 2023	166,867	$	1,669	$	567,266	$	(235,644)	$	13,679	$	346,970
Net loss	—	—		—		(3,108)		—		(3,108)
Gain on cash flow hedge, net of tax	—	—		—		—		929		929
Amount reclassified into earnings, net of tax	—	—		—		—		(8,132)		(8,132)
Exercise of employee stock options, net of shares withheld for cashless exercises and to cover tax withholdings	16	—		8		—		—		8

Vesting of restricted stock unit awards and performance stock unit awards net of shares withheld to cover tax withholdings	2,276	23		(397)		—		—		(374)
Share-based compensation expense	—	—		10,512		—		—		10,512
BALANCES-March 31, 2024	169,159	$	1,692	$	577,389	$	(238,752)	$	6,476	$	346,805


Nine Months Ended March 31, 2023
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Shareholders' Equity
	Shares	Amount
BALANCES-June 30, 2022	164,452	$	1,644	$	554,845	$	(177,100)	$	11,716	$	391,105
Net loss	—	—		—		(10,706)		—		(10,706)
Gain on cash flow hedge, net of tax	—	—		—		—		5,895		5,895
Amount reclassified into earnings, net tax	—	—		—		—		(4,537)		(4,537)
Exercise of employee stock options, net of shares withheld for cashless exercises and to cover tax withholdings	1,139	12		627		—		—		639
Issuance of common stock pursuant to employee stock purchase plan	877	9		539		—		—		548
Vesting of restricted stock unit awards net of shares withheld to cover tax withholdings	189	2		(42)		—		—		(40)
Share-based compensation expense	—	—		8,515		—		—		8,515
BALANCES-March 31, 2023	166,657	$	1,667	$	564,484	$	(187,806)	$	13,074	$	391,419

See accompanying notes to the condensed consolidated financial statements.

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SELECTQUOTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Nine Months Ended March 31,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(3,108)	$	(10,706)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
Depreciation and amortization	18,591		21,087

Loss on disposal of property, equipment, and software	13		390

Share-based compensation expense	10,512		8,525
Deferred income taxes	(2,151)		(1,416)
Amortization of debt issuance costs and debt discount	4,863		6,250
Write-off of debt issuance costs	293		710

Accrued interest payable in kind	14,323		8,450
Non-cash lease expense	1,945		3,115
Changes in operating assets and liabilities:
Accounts receivable, net	(98,519)		(62,738)
Commissions receivable	7,375		17,092
Other assets	(2,620)		3,166
Accounts payable and accrued expenses	36,073		6,440
Operating lease liabilities	(3,802)		(4,331)
Other liabilities	11,453		(8,869)
Net cash used in operating activities	(4,759)		(12,835)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(3,114)		(1,056)
Proceeds from sales of property and equipment	253		—
Purchases of software and capitalized software development costs	(6,065)		(5,804)


Net cash used in investing activities	(8,926)		(6,860)
CASH FLOWS FROM FINANCING ACTIVITIES:





Payments on Term Loans	(30,412)		(17,833)

Payments on other debt	(112)		(123)
Proceeds from common stock options exercised and employee stock purchase plan	8		1,187



Payments of tax withholdings related to net share settlement of equity awards	(374)		(40)
Payments of debt issuance costs	(773)		(10,110)




Payment of acquisition holdback	—		(2,335)
Net cash used in financing activities	(31,663)		(29,254)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(45,348)		(48,949)
CASH AND CASH EQUIVALENTS—Beginning of period	83,156		140,997
CASH AND CASH EQUIVALENTS—End of period	$	37,808	$	92,048






SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid, net	$	(50,023)	$	(43,309)
Income taxes paid	(185)		(15)

See accompanying notes to condensed consolidated financial statements.

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SELECTQUOTE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business—SelectQuote, Inc. (together with its subsidiaries, the “Company” or “SelectQuote”) is a leading technology-enabled, direct-to-consumer distribution platform for insurance products and healthcare services. We contract with insurance carriers to sell senior health, life, and auto and home insurance policies by telephone to individuals throughout the United States through the use of multi-channel marketing and advertising campaigns. SelectQuote’s Senior division (“Senior”) sells Medicare Advantage, Medicare Supplement, Medicare Part D, and other ancillary senior health insurance related products. SelectQuote’s Life division (“Life”) sells term life, final expense, and other ancillary products, and SelectQuote’s Auto & Home division (“Auto & Home”) primarily sells non-commercial auto and home, property and casualty insurance products. The Healthcare Services division (“Healthcare Services”) includes SelectRx and Population Health. SelectRx is a Patient-Centered Pharmacy Home™ (“PCPH”) accredited pharmacy, which offers essential prescription medications, OTC medications, customized medication packaging, and medication therapy management, providing long-term pharmacy care that enables patients to optimize medication adherence to drive positive health outcomes while enabling patients to remain at home. Population Health helps members understand the benefits available under their health plans, contracts with insurance carriers to complete health-risk assessments (“HRA”) on members, partners with value-based care (“VBC”) providers for a variety of healthcare-related services, and introduces members to the pharmacy services offered through SelectRx.

Basis of Presentation—The accompanying unaudited condensed consolidated financial statements include the accounts of SelectQuote, Inc. and its wholly owned subsidiaries: SelectQuote Insurance Services, SelectQuote Auto & Home Insurance Services, LLC, ChoiceMark Insurance Services, Inc., Tiburon Insurance Services, InsideResponse, LLC (“InsideResponse”), and SelectQuote Ventures, Inc. The unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and reflect all normal recurring adjustments that are necessary to present fairly the results for the interim periods presented. All intercompany accounts and transactions have been eliminated in consolidation. Certain information and disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in accordance with those rules and regulations and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended June 30, 2023, filed with the Securities and Exchange Commission on September 13, 2023 (the “Annual Report”), and include all adjustments necessary for the fair presentation of our financial position for the periods presented. Our results for the periods presented in our financial statements are not necessarily indicative of the results to be expected for any subsequent period, including for the year ending June 30, 2024, and therefore should not be relied upon as an indicator of future results. The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements for the year ended June 30, 2023.

Use of Estimates—The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, and liabilities and disclosure of contingent assets and liabilities. The Company regularly assesses these estimates; however, actual amounts could differ from those estimates. The most significant items involving management’s estimates include estimates of revenue recognition, accounts receivable, net, commissions receivable, the provision for income taxes, share-based compensation, and valuation of intangible assets and goodwill. The impact of changes in estimates is recorded in the period in which they become known.

Seasonality—Medicare-eligible individuals are permitted to change their Medicare Advantage and Medicare Part D prescription drug coverage for the following year during the Medicare annual enrollment period (“AEP”) in October through December and are allowed to switch plans from an existing plan during the open

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enrollment period (“OEP”) in January through March each year. As a result, the Company’s Senior segment’s commission revenue is highest in the second quarter and to a lesser extent, the third quarter during OEP.

Significant Accounting Policies—There have been no material changes to the Company’s significant accounting policies as described in our Annual Report.

Recent Accounting Pronouncements Adopted—The Company did not adopt any new accounting pronouncements during the nine months ended March 31, 2024.

2.ACQUISITIONS

In accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”), the Company allocates the fair value of purchase consideration to the tangible assets, liabilities, and intangible assets acquired based on fair values. Any excess purchase price over those fair values is recorded as goodwill. The fair value assigned to intangible assets acquired is supported by valuations using estimates and assumptions provided by management. Based on the valuation inputs, the Company has recorded assets acquired and liabilities assumed according to the following fair value hierarchy:


Level 1			Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2			Unadjusted quoted prices in active markets for similar assets or liabilities; or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are observable for the asset or liability.
Level 3			Significant unobservable inputs for the asset or liability

Express Med Pharmaceuticals—On April 30, 2021, the Company acquired 100% of the outstanding shares of Express Med Pharmaceuticals, Inc., which is included in SelectRx, a closed-door, long term care pharmacy provider, for an aggregate purchase price of up to $24.0 million, as set forth in the Stock Purchase Agreement dated April 30, 2021. The aggregate purchase price of up to $24.0 million is comprised of $17.5 million in cash paid at the closing of the transaction, an additional $2.5 million of holdback for indemnification claims, if any, and an earnout of up to $4.0 million, if any. The earnout of up to $4.0 million is comprised of two separate provisions. During the year ended June 30, 2023, the Company paid the first and second earnout provisions of $3.0 million and $1.0 million, respectively, as well as the remaining holdback, net of adjustments, of $2.4 million. At the date of acquisition, the fair value of net tangible assets acquired, excluding property and equipment, approximated their carrying value. The property and equipment was valued primarily using the cost and sales comparison approach to value. For the proprietary software acquired, the replacement cost method under the cost approach was used, estimating the cost to rebuild the software. The non-compete agreement was valued using the income approach, and the customer relationships were valued using the multiple period excess earnings method. As such, all aforementioned intangible assets were valued using Level 3 inputs. Goodwill resulting from the transaction constitutes the excess of the consideration paid over the fair values of the assets acquired and liabilities assumed and primarily represents the additional value of the synergies of combining the SelectRx business with the Company's technology and existing customer base. This acquired goodwill is allocated to the Healthcare Services reporting unit, which is also a reportable segment, and $16.3 million is deductible for tax purposes after adding back acquisition costs and settling the remaining holdback. The Company is amortizing the intangible assets acquired on a straight-line basis over their estimated remaining lives, ranging from one to five years.

Simple Meds—On August 31, 2021, SelectRx acquired 100% of the outstanding equity interests of Simple Meds, a full-service pharmaceutical distributor, for an aggregate purchase price of $7.0 million, as set forth in the Membership Interest Purchase Agreement dated August 31, 2021. The aggregate purchase price of $7.0 million was paid in cash at the closing of the transaction. At the date of acquisition, the fair value of net tangible assets acquired approximated their carrying value. The customer relationships were valued using the multiple period excess earnings method, and as such, were valued using Level 3 inputs. Goodwill resulting from the transaction constitutes the excess of the consideration paid over the fair values of the assets acquired and liabilities assumed and primarily represents the additional value of the synergies of combining the Simple Meds business with the Company's

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technology and existing customer base. This acquired goodwill is allocated to the Healthcare Services reporting unit, which is also a reportable segment, and $5.6 million is deductible for tax purposes after adding back acquisition costs.

3.PROPERTY AND EQUIPMENT—NET

Property and equipment—net consisted of the following:


(in thousands)	March 31, 2024		June 30, 2023
Computer hardware	$	20,012	$	20,970
Machinery and equipment(1)	15,700		14,825
Leasehold improvements	19,033		20,422
Furniture and fixtures	4,669		4,591
Work in progress	3,310		338
Total	62,724		61,146
Less accumulated depreciation	(40,188)		(33,694)
Property and equipment—net	$	22,536	$	27,452

(1) Includes financing lease right-of-use assets.

Work in progress as of March 31, 2024, primarily represents equipment utilized in SelectRx operations, computer equipment held for sale and leasehold improvements not yet put into service and not yet being depreciated. Work in progress as of June 30, 2023, primarily represents leasehold improvements and computer equipment not yet put into service and not yet being depreciated. Depreciation expense for the three months ended March 31, 2024 and 2023, was $3.3 million and $3.7 million, respectively, and $9.4 million and $10.9 million for the nine months ended March 31, 2024 and 2023, respectively.

4.SOFTWARE—NET

Software—net consisted of the following:


(in thousands)	March 31, 2024		June 30, 2023
Software	$	38,601	$	35,945
Work in progress	95		143
Total	38,696		36,088
Less accumulated amortization	(24,744)		(21,348)
Software—net	$	13,952	$	14,740

Work in progress as of March 31, 2024 and June 30, 2023, represents costs incurred for software not yet put into service and not yet being amortized. For the three months ended March 31, 2024 and 2023, the Company capitalized internal-use software and website development costs of $2.2 million and $1.8 million, respectively, and recorded amortization expense of $2.6 million and $2.0 million, respectively. For the nine months ended March 31, 2024 and 2023, the Company capitalized internal-use software and website development costs of $6.1 million and $5.7 million, respectively, and recorded amortization expense of $6.9 million and $5.9 million, respectively.

5.INTANGIBLE ASSETS AND GOODWILL

Intangible assets—The carrying amounts, accumulated amortization, and net carrying value of our definite-lived intangible assets are presented in the table below (dollars in thousands):

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	March 31, 2024				June 30, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Impairment Charges (1)		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	17,492	$	(10,356)	$	7,136	$	17,492	$	—	$	(8,617)	$	8,875
Trade name	2,680		(2,100)		580		2,680		—		(1,697)		983
Proprietary software	1,042		(875)		167		1,042		—		(758)		284
Non-compete agreements	100		(57)		43		1,292		(533)		(701)		58
Vendor relationships	—		—		—		20,400		(15,111)		(5,289)		—
Total intangible assets	$	21,314	$	(13,388)	$	7,926	$	42,906	$	(15,644)	$	(17,062)	$	10,200

(1) During the year ended June 30, 2023, the Company recorded impairment charges for its long-lived intangible assets recognized as part of the acquisition of a lead distribution company. Refer to the consolidated financial statements in our Annual Report on Form 10-K for additional details.

The Company's intangible assets include those long-lived intangible assets which were recognized at their estimated acquisition date fair values. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. There were no impairment triggers identified with respect to the Company’s long-lived assets during the three and nine months ended March 31, 2024 and 2023.

For the three months ended March 31, 2024 and 2023, amortization expense related to intangible assets totaled $0.8 million and $1.4 million, respectively, and $2.3 million and $4.2 million for the nine months ended March 31, 2024 and 2023, respectively, recorded in selling, general, and administrative expense in the condensed consolidated statements of comprehensive income (loss). The weighted-average remaining useful life of intangible assets was 2.9 and 3.6 years as of March 31, 2024 and June 30, 2023, respectively.

As of March 31, 2024, expected amortization expense in future fiscal periods were as follows (in thousands):


	Trade Name		Proprietary Software		Non-Compete Agreements		Customer relationships		Total
Remainder fiscal 2024	$	133	$	39	$	5	$	580	$	757
2025	447		128		20		2,316		2,911
2026	—		—		18		2,313		2,331
2027	—		—		—		1,927		1,927


Total	$	580	$	167	$	43	$	7,136	$	7,926

Goodwill—The Company recorded as goodwill the excess of the purchase price over the estimated fair values of identifiable assets and liabilities acquired as part of the acquisitions discussed in Note 2 to the condensed consolidated financial statements. Goodwill is assigned to reporting units that are expected to benefit from the synergies of the business combination as of the acquisition date and becomes identified with that reporting unit in its entirety. As such, the reporting unit as a whole supports the recovery of its goodwill. As of March 31, 2024, the Company’s goodwill balance of $29.1 million was related to the acquisitions of Express Meds and Simple Meds and is all assigned to the Healthcare Services reporting unit and reportable segment.

The Company performs its annual goodwill impairment testing as of April 1, or more frequently if it believes that indicators of impairment exist. During the three and nine months ended March 31, 2024 and 2023, there were no indicators of impairment.

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6.LEASES

The majority of the Company’s leases are operating leases related to office space for which the Company recognizes lease expense on a straight-line basis over the respective lease term. The Company leases office facilities in the United States in San Diego, California; Centennial, Colorado; Overland Park, Kansas; Oakland, California; Indianapolis, Indiana; and Monaca, Pennsylvania. SelectRx leases the Monaca facility from an Executive Vice President of SelectRx. The Company expects to incur $3.6 million in total rental payments over the initial ten-year term plus an additional five-year extension option that it is reasonably certain to exercise. The Company's operating leases have remaining lease terms from less than one year up to twelve years.

During the nine months ended March 31, 2024, the Company entered into a lease amendment for the Overland Park, Kansas office which extended the lease term for a portion of its office facilities resulting in additional right-of-use assets obtained in exchange for new lease liabilities of $0.6 million. In addition, as part of the amendment, the Company leased additional office facilities with an expected commencement date on or before June 1, 2024, which will result in additional right-of-use assets in exchange for new lease liabilities of $4.5 million, and executed the early termination option for a portion of its office facilities effective on the commencement date of the additional office space, resulting in remeasurement of the operating lease liability and accelerated amortization of the right-of-use asset over the shortened remaining term of the lease.

During the nine months ended March 31, 2023, operating leases commenced in San Diego, California and Indianapolis, Indiana, resulting in new right-of-use assets obtained in exchange for new lease liabilities of $1.6 million. In addition, the Company exercised an early termination option for a portion of its office facilities in Overland Park, Kansas effective July 31, 2023, which resulted in an early termination penalty of $0.9 million, which was recorded as part of the remeasurement of the operating lease liability and resulted in accelerated amortization of the right-of-use asset over the shortened remaining term of the lease.

Lease Costs—The components of lease costs were as follows for the periods presented:


	Three Months Ended March 31,				Nine Months Ended March 31,
(in thousands)	2024		2023		2024		2023
Finance lease costs(1)	$	41	$	43	$	125	$	129
Operating lease costs(2)	1,271		1,953		4,371		5,998
Short-term lease costs	61		74		183		137
Variable lease costs(3)	203		(6)		498		404
Sublease income	(574)		(671)		(1,721)		(1,756)
Total net lease costs	$	1,002	$	1,393	$	3,456	$	4,912

(1) Primarily consists of amortization of finance lease right-of-use assets and an immaterial amount of interest on finance lease liabilities recorded in operating costs and expenses and interest expense, net in the condensed consolidated statements of comprehensive income (loss).

(2) Recorded in operating costs and expenses in the condensed consolidated statements of comprehensive income (loss).

(3) Variable lease costs are not included in the measurement of the lease liability or right-of-use asset as they are not based on an index or rate and primarily represents common area maintenance charges and real estate taxes recorded in operating costs and expenses in the condensed consolidated statements of comprehensive income (loss).

Maturities of Lease Liabilities—As of March 31, 2024, remaining maturities of lease liabilities for each of the next five fiscal years and thereafter are as follows:

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(in thousands)	Operating leases		Finance leases		Total
Remainder fiscal 2024	$	1,915	$	42	$	1,957
2025	7,257		140		7,397
2026	6,708		38		6,746
2027	5,389		32		5,421
2028	4,832		—		4,832
Thereafter	11,025		—		11,025
Total undiscounted lease payments	37,126		252		37,378
Less: interest	10,137		19		10,156
Present value of lease liabilities	$	26,989	$	233	$	27,222

The Company executed noncancelable subleases for portions of its office facilities in Overland Park, Kansas and Centennial, Colorado, which commenced during the fiscal years ended June 30, 2023 and 2022, and run through July 31, 2029 and November 30, 2026, respectively. Sublease income is recorded on a straight-line basis as a reduction of lease expense in the condensed consolidated statements of comprehensive income (loss). The Company may consider entering into additional sublease arrangements in the future.

Sublease Income—As of March 31, 2024, the future minimum fixed sublease receipts under non-cancelable operating lease agreements are as follows:


(in thousands)	Total
Remainder fiscal 2024	$	632
2025	2,548
2026	2,587
2027	2,180
2028	1,931
Thereafter	2,092
Total sublease income	$	11,970

7.DEBT

Debt consisted of the following:


(in thousands)	March 31, 2024		June 30, 2023
Term Loans (effective interest rate 14.8%)	$	691,420	$	707,509

Unamortized debt issuance costs and debt discount	(5,372)		(9,001)

Total debt	686,048		698,508
Less current portion of long-term debt:	(37,717)		(33,883)
Long-term debt	$	648,331	$	664,625

Senior Secured Credit Facility— On November 5, 2019, the Company entered into a $425.0 million credit agreement with UMB Bank N.A. (“UMB”) as a lender and revolving agent and Morgan Stanley Capital Administrators, Inc. as a lender and the administrative agent for a syndicate of lenders party to the agreement (replaced by Wilmington Trust as administrative agent effective February 24, 2022). On February 24, 2021, November 2, 2021, December 23, 2021, August 26, 2022, May 5, 2023, September 11, 2023, November 1, 2023, and February 7, 2024, the Company entered into amendments to the credit agreement (individually, the “First

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Amendment”, “Second Amendment”, “Third Amendment”, “Fourth Amendment”, “Fifth Amendment”, “Sixth Amendment”, “Seventh Amendment”, and “Eighth Amendment”, together with the original credit agreement and any subsequent amendments, the “Senior Secured Credit Facility”) with certain of its existing lenders and new lenders. The First Amendment provided for an additional $231.0 million in term loans (together with the initial $425.0 million, the “Term Loans”) and added a $145.0 million senior secured delayed draw term loan facility (the "DDTL Facility"). The Second Amendment provided for additional commitments of $25.0 million, in addition to the initial $75.0 million, for the secured revolving loan facility (the “Revolving Credit Facility”) and an additional $200.0 million under the DDTL Facility. The Third Amendment provided for additional commitments of $35.0 million under the Revolving Credit Facility. The Fourth Amendment (1) amended the Company’s existing financial covenant to better align with its business plan and added an additional minimum liquidity covenant, (2) terminated certain DDTL commitments and reduced the Revolving Credit Facility from $135.0 million to $100.0 million, (3) introduced a minimum asset coverage ratio for any borrowing on the Revolving Credit Facility that would result in a total revolving exposure of more than $50.0 million, and (4) provided certain lenders with the right to appoint a representative to observe meetings of the Company’s board of directors and certain of its committees. In addition, the Fourth Amendment provided for the Company to pay a revolving credit termination fee of $0.5 million for the ratable account of each revolving lender upon the termination of all revolving loan commitments. Note that pursuant to the Fourth Amendment, upon termination of the outstanding DDTL commitments, when referring to Term Loans, it will now include the outstanding balance of the previously defined Term Loans and also the outstanding balance of the DDTL, and “DDTL” will no longer be referenced. The Fifth Amendment decreased the minimum asset coverage ratio required to be maintained by the Company as of March 31, 2024, and the Sixth Amendment decreased the minimum asset coverage ratio required to be maintained by the Company as of June 30, 2024. The Seventh Amendment amended the Senior Secured Credit Facility to decrease the minimum asset coverage ratio and minimum liquidity covenant required to be maintained by the Company as of September 30, 2024, and December 31, 2023, respectively. The Eighth Amendment (1) established a new $692.0 million class of extended term loans and extended the maturity date applicable thereto to February 15, 2025, (2) reduced the aggregate revolving credit commitment amounts to an aggregate amount of $73.6 million, further reducing to $73.0 million, $72.4 million, and $71.7 million as of March 31, 2024, June 30, 2024, and September 30, 2024, respectively; and terminated an aggregate amount of $25.8 million of the non-extended revolving credit commitments, (3) created a class of non-extended term loans of $9.4 million having a maturity date of November 5, 2024, for certain Term Loan lenders that elected not to extend the maturity date applicable to those loans, (4) established a minimum asset coverage ratio covenant as of December 31, 2024, and (5) revised the minimum liquidity covenants based on the reduced revolving credit commitments. Pursuant to the amendment, the Company paid fees of $0.7 million to its lenders. After giving effect to the amendments, in aggregate, the Senior Secured Credit Facility provides for (1) an aggregate principal amount of up to $73.0 million under the Revolving Credit Facility, of which all was available to borrow as of March 31, 2024 and (2) Term Loans outstanding in an aggregate principal amount of $691.4 million as of March 31, 2024.

The Term Loans bear interest on the outstanding principal amount thereof at a rate per annum equal to either (a) SOFR (subject to a floor of 0.75%) plus 6.00% in cash plus 2.00% payable in kind or (b) a base rate plus 5.00% in cash plus 2.00% payable in kind, at the Company’s option. As of October 1, 2023, the cash and paid in kind interest rate with respect to the Term Loans increased 0.50% and 1.00%, respectively. The Revolving Credit Facility accrues interest on amounts drawn at a rate per annum equal to either (a) SOFR (subject to a floor of 1.0%) plus 5.0% or (b) a base rate plus 4.0%, at the Company’s option.

The Term Loans are mandatorily repayable in equal quarterly installments in an aggregate annual amount equal to 2.5% of the outstanding principal amount of the Term Loans as of the Fourth Amendment effective date, which increased to 4.75% on July 1, 2023, with the remaining balance payable on the maturity date. As of March 31, 2024, the Company has made principal payments of $235.9 million on the Term Loans.

The Senior Secured Credit Facility contains customary affirmative and negative covenants and events of default and financial covenants requiring the Company and certain of its subsidiaries to maintain a minimum asset coverage ratio and minimum liquidity requirements. As of March 31, 2024, the Company was in compliance with all of the required covenants. The obligations of the Company are guaranteed by the Company’s subsidiaries and secured by a security interest in all assets of the Company, subject to certain exceptions.

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The Company has incurred a total of $40.9 million in debt issuance costs and debt discounts related to the Senior Secured Credit Facility, of which $33.8 million was capitalized. The costs associated with the Revolving Credit Facility are being amortized on a straight-line basis over the remaining life of the Senior Secured Credit Facility and the costs associated with the Term Loans are being amortized using the effective interest method over the same term. Total amortization of debt issuance costs was $1.5 million and $2.3 million for the three months ended March 31, 2024 and 2023, respectively, and $4.9 million and $6.3 million for the nine months ended March 31, 2024 and 2023, respectively, which was included in interest expense, net in the Company’s condensed consolidated statements of comprehensive income (loss).

The Company uses derivative financial instruments to hedge against its exposure to fluctuations in interest rates associated with the Term Loans. On September 30, 2022, as a result of the Fourth Amendment, the Company terminated its existing interest rate swap indexed to 1-month LIBOR and executed a new interest rate swap indexed to 1-month SOFR. In accordance with ASC 848, Reference Rate Reform, the Company did not de-designate the interest rate swap when it was amended from LIBOR to SOFR as the Company is permitted to maintain the designation as part of the transitional relief. As of March 31, 2024, the Company’s interest rate swap is a receive-variable, pay-fixed interest rate swap on the notional amount of $325.0 million of the Company’s total outstanding Term Loans balance with a fixed rate of 6.00% plus 0.931% (the “Amended Interest Rate Swap”), which terminates on November 5, 2024. As of March 31, 2024, the Amended Interest Rate Swap had a fair value of $8.3 million and was recorded in other current assets in the condensed consolidated balance sheet. The Company classifies its Amended Interest Rate Swap as a Level 2 on the fair value hierarchy as the majority of the inputs used to value it primarily includes other than quoted prices that are observable and it uses standard calculations and models that use readily observable market data as their basis. The Company estimates that through the maturity date of November 5, 2024, $8.1 million will be reclassified into interest expense.

On May 8, 2024, the Company and certain of its existing lenders, Wilmington Trust, National Association, as Administrative and Collateral Agent, and certain other parties to the Senior Secured Credit Facility named therein, including the guarantors party thereto, entered into the Ninth Amendment to the Senior Secured Credit Facility (the “Ninth Amendment”). Pursuant to the Ninth Amendment, the maturity date was extended to May 15, 2025, on the $683.8 million class of extended term loans, a minimum asset coverage ratio covenant as of March 31, 2025, was added, and minimum liquidity covenants as of February 28, 2025, March 31, 2025, and April 30, 2025, were added. Pursuant to the amendment, the Company paid fees of $0.7 million to its lenders.

8.COMMITMENTS AND CONTINGENCIES

Lease Obligations—Refer to Note 6 to the condensed consolidated financial statements for commitments related to our operating leases.

Legal Contingencies and Obligations—From time to time, the Company is subject to legal proceedings and governmental inquiries in the ordinary course of business. Such matters may include insurance regulatory claims; commercial, tax, employment, or intellectual property disputes; matters relating to competition and sales practices; claims for damages arising out of the use of the Company’s services. The Company may also become subject to lawsuits related to past or future acquisitions, divestitures, or other transactions, including matters related to representations and warranties, indemnities, and assumed or retained liabilities. The Company is not currently aware of any legal proceedings or claims that it believes will have, individually or in the aggregate, a material adverse effect on its business, financial condition, operating results, or cash flows; however, in the event of unexpected developments, it is possible that the ultimate resolution of certain ongoing matters, if unfavorable, could be materially adverse to our business, prospects, financial condition, liquidity, results of operation, cash flows, or capital levels.

Securities Class Actions and Stockholder Derivative Suit

On August 16, 2021, a putative securities class action lawsuit captioned Hartel v. SelectQuote, Inc., et al., Case No. 1:21-cv-06903 (“the Hartel Action”) was filed against the Company and two of its executive officers in

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the U.S. District Court for the Southern District of New York. The complaint asserts securities fraud claims on behalf of a putative class of plaintiffs who purchased or otherwise acquired shares of the Company’s common stock between February 8, 2021 and May 11, 2021 (the "Hartel Relevant Period"). Specifically, the complaint alleges the defendants violated Sections 10(b) and 20(a) and Rule 10b-5 of the Exchange Act by making materially false and misleading statements and failing to disclose material adverse facts about the Company’s business, operations, and prospects, allegedly causing the Company’s common stock to trade at artificially inflated prices during the Hartel Relevant Period. The plaintiffs seek unspecified damages and reimbursement of attorneys’ fees and certain other costs.

On October 7, 2021, a putative securities class action lawsuit captioned West Palm Beach Police Pension Fund v. SelectQuote, Inc., et al., Case No. 1:21-cv-08279 (“the WPBPPF Action”), was filed in the U.S. District Court for the Southern District of New York against the Company, two of its executive officers, and six current or former members of the Company’s Board of Directors, along with the underwriters of the Company’s initial public offering of common stock (the "Offering"). The complaint asserts claims for securities law violations on behalf of a putative class of plaintiffs who purchased shares of the Company’s common stock (i) in or traceable to the Offering or (ii) between May 20, 2020 and August 25, 2021 (the "WPB Relevant Period"). Specifically, the complaint alleges the defendants violated Sections 10(b) and 20(a) and Rule 10b-5 of the Exchange Act by making materially false and misleading statements and failing to disclose material adverse facts about the Company’s financial well-being and prospects, allegedly causing the Company’s common stock to trade at artificially inflated prices during the WPB Relevant Period. The complaint also alleges the defendants violated Sections 11, 12(a)(2), and 15 of the Securities Act by making misstatements and omissions of material facts in connection with the Offering, allegedly causing a decline in the value of the Company’s common stock. The plaintiffs seek unspecified damages, rescission, and reimbursement of attorneys’ fees and certain other costs.

On October 15, 2021, a motion to consolidate the Hartel Action and the WPBPPF Action was filed. On September 2, 2022, the court entered an order consolidating the Hartel and WPBPPF Actions under the caption In re SelectQuote, Inc. Securities Litigation, Case No. 1:21-cv-06903 (the “Securities Class Action”) and appointing the West Palm Beach Police Pension Fund and City of Fort Lauderdale Police & Fire Retirement System as lead plaintiffs. On November 19, 2022, plaintiffs filed an amended complaint asserting similar allegations to those alleged in the Hartel and WPBPPF Actions in addition to new allegations regarding certain defendants’ purported violation of Section 20A of the Exchange Act. The amended complaint also added Brookside Equity Partners LLC, one of the Company’s principal stockholders, as a defendant. On January 27, 2023, the Company filed a motion to dismiss the amended complaint on behalf of itself and certain of its current and former officers and directors. Plaintiffs filed an opposition to the motion to dismiss on April 5, 2023, and the Company filed its reply to plaintiffs’ opposition on May 10, 2023. On March 28, 2024, the court granted the Company’s motion to dismiss, with leave to amend. Plaintiffs’ deadline for filing a second amended complaint is May 31, 2024.

On March 25, 2022, a stockholder derivative action captioned Jadlow v. Danker, et al., Case No. 1:22-cv-00391 (“the Jadlow Action”) was filed in the U.S. District Court for the District of Delaware by an alleged stockholder of the Company, purportedly on the Company’s behalf. The lawsuit was brought against certain of the Company’s current and former directors and officers, and against the Company, as nominal defendant. The complaint alleges that certain of the defendants violated Section 14(a) of the Exchange Act by making materially false and misleading statements and failing to disclose material adverse facts about the Company’s business, operations, and prospects. The complaint also asserts claims against all defendants for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets based on the same general underlying conduct and seeks contribution under Sections 10(b) and 21D of the Exchange Act and Section 11(f) of the Securities Act from the individual defendants named in the Securities Class Actions. The complaint seeks unspecified damages for the Company, restitution, reformation and improvement of its corporate governance and internal procedures regarding compliance with laws, and reimbursement of costs and attorneys’ fees. On July 25, 2022, the Jadlow action was transferred to the U.S. District Court for the Southern District of New York, where it was assigned Case No. 1:22-cv-06290 and referred to Judge Alvin K. Hellerstein as possibly related to the Hartel Action. On August 4, 2022, Judge Hellerstein accepted the Jadlow action as related to the Hartel Action and, on August 10, 2022, granted the parties’ joint stipulation to stay the Jadlow action pending the resolution of the motion to dismiss the Securities Class Action.

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The Company currently believes that these matters will not have a material adverse effect on its operations, financial condition or liquidity; however, depending on how the matters progress, they could be costly to defend and could divert the attention of management and other resources from operations. The Company has not concluded that a loss related to these matters is probable and, therefore, has not accrued a liability related to these matters

9.SHAREHOLDERS' EQUITY

Common Stock—As of March 31, 2024, the Company has reserved the following authorized, but unissued, shares of common stock:


Employee Stock Purchase Plan						159
Stock awards outstanding under 2020 Plan						18,457,999
Stock awards available for grant under 2020 Plan						2,849,703
Options outstanding under 2003 Plan						523,356

Total						21,831,217

Share-Based Compensation Plans

The Company has awards outstanding from two share-based compensation plans: the 2003 Stock Incentive Plan (the “2003 Stock Plan”) and the 2020 Omnibus Incentive Plan (the “2020 Stock Plan” and, collectively with the 2003 Stock Plan, the “Stock Plans”). However, no further awards will be made under the 2003 Stock Plan. The Company's Board of Directors adopted, and shareholders approved, the 2020 Stock Plan in connection with the Company’s IPO, which provides for the grant of incentive stock options (“ISO's”), nonstatutory stock options (“NSO's”), stock appreciation rights, restricted stock awards, restricted stock unit awards (“RSU's”), performance-based restricted stock units (“PSU's”), price-vested restricted stock units (“PVU’s”), and other forms of equity compensation (collectively, “stock awards”). All stock awards (other than ISOs, which may be granted only to current employees of the Company) may be granted to employees, non-employee directors, and consultants of the Company and its subsidiaries and affiliates.

The number of shares of common stock available for issuance as of March 31, 2024, pursuant to future awards under the Company's 2020 Stock Plan is 2,849,703. The number of shares of the Company's common stock reserved under the 2020 Stock Plan is subject to an annual increase on the first day of each fiscal year, beginning on July 1, 2021, equal to 3% of the total outstanding shares of common stock as of the last day of the immediately preceding fiscal year. The maximum number of shares of common stock that may be issued upon the exercise of ISO's will be 4,000,000. The shares of common stock covered by any award that is forfeited, terminated, expired, or lapsed without being exercised or settled for cash will again become available for issuance under the 2020 Stock Plan. With respect to any award, if the exercise price and/or tax withholding obligations are satisfied by delivering shares to the Company (by actual delivery or attestation), or if the exercise price and/or tax withholding obligations are satisfied by withholding shares otherwise issuable pursuant to the award, the share reserve shall nonetheless be reduced by the gross number of shares subject to the award.

The Company accounts for its share-based compensation awards in accordance with ASC 718, Compensation—Stock Compensation (“ASC 718”) which requires all share-based compensation to be recognized in the income statement based on fair value and applies to all awards granted, modified, canceled, or repurchased after the effective date.

Total share-based compensation for stock awards included in selling, general, and administrative expense in the condensed consolidated statements of comprehensive income (loss) was as follows for the periods presented:

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	Three Months Ended March 31,				Nine Months Ended March 31,
(in thousands)	2024		2023		2024		2023
Share-based compensation related to:
Equity classified stock options	$	673	$	799	$	2,109	$	2,495
Equity classified RSU's	1,992		1,563		5,850		4,490
Equity classified PSU's	—		77		33		29
Equity classified PVU's	850		486		2,520		1,384
Total	$	3,515	$	2,925	$	10,512	$	8,398

Stock Options—The stock options outstanding under the 2003 Stock Plan vest as to one-third after the vesting commencement date and as to 1/24 of the remaining shares subject to the stock option monthly thereafter, subject to the award recipient’s continued employment through the applicable vesting date. Upon a termination of employment for any reason other than for “Cause” (as defined in the 2003 Stock Plan), any unvested and outstanding stock options would generally be forfeited for no consideration, and any vested and outstanding stock options would remain exercisable for 90 days following the date of termination (and, in the case of a termination of employment due to death or disability, for 12 months following the date of termination). Stock options expire 10 years from the date of grant. The terms for ISO's and NSO's awarded in the 2020 Stock Plan are the same as in the 2003 Stock Plan with the exception that the options generally shall vest and become exercisable in four equal installments on each of the first four anniversaries of the grant date, subject to the award recipient’s continued employment through the applicable vesting date. Stock options are granted with an exercise price that is no less than 100% of the fair market value of the underlying shares on the date of the grant.

The fair value of each option (for purposes of calculation of share-based compensation expense) is estimated using the Black-Scholes-Merton option pricing model that uses assumptions determined as of the date of the grant. Use of this option pricing model requires the input of subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (“expected term”), the estimated volatility of the Company's common stock price over the expected term (“volatility”), the number of options that will ultimately not complete their vesting requirements (“assumed forfeitures”), the risk-free interest rate that reflects the interest rate at grant date on zero-coupon United States governmental bonds that have a remaining life similar to the expected term (“risk-free interest rate”), and the dividend yield assumption which is based on the Company's dividend payment history and management's expectations of future dividend payments (“dividend yield”). Changes in the subjective assumptions can materially affect the estimate of the fair value of share-based compensation and, consequently, the related amount recognized in the condensed consolidated statements of comprehensive loss.

During the nine months ended March 31, 2024 and 2023, there were no stock options granted. The following table summarizes stock option activity under the Stock Plans for the nine months ended March 31, 2024:


	Number of Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value (in Thousands)
Outstanding—June 30, 2023	3,847,339	$	11.56
Options granted	—	—
Options exercised	(16,000)	0.53
Options forfeited/expired/cancelled	(64,358)	7.38
Outstanding—March 31, 2024	3,766,981	$	11.68	6.70	$	178
Vested and exercisable—March 31, 2024	2,505,019	$	11.77	6.35	$	178

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As of March 31, 2024, there was $2.7 million in unrecognized compensation cost related to unvested stock options granted, which is expected to be recognized over a weighted-average period of 1.34 years.

The Company received less than $0.1 million of cash in connection with stock options exercised in each of the three months ended March 31, 2024 and 2023, and less than $0.1 million and $0.6 million in connection with stock options exercised during the nine months ended March 31, 2024 and 2023, respectively.

Restricted Stock—The Company grants RSU's to eligible employees, non-employee directors, and contractors. These awards generally vest over a period of one to four years. Fair value of the RSU's is determined based on the market price of the Company’s common stock at the grant date and share-based compensation expense is recognized over the requisite service period.

The following table summarizes restricted stock unit activity under the 2020 Stock Plan for the nine months ended March 31, 2024:


	Number of Restricted Stock Units	Weighted-Average Grant Date Fair Value
Unvested as of June 30, 2023	4,911,613	$	2.57
Granted	6,578,688	1.49
Vested	(2,468,847)	2.08
Forfeited	(217,727)	2.12
Unvested as of March 31, 2024	8,803,727	$	1.91

As of March 31, 2024, there was $11.9 million of unrecognized compensation cost related to unvested restricted stock units granted, which is expected to be recognized over a weighted-average period of 1.87 years.

Performance Stock—The following table summarizes performance stock unit activity under the 2020 Stock Plan for the nine months ended March 31, 2024:


	Number of Performance Stock Units	Weighted-Average Grant Date Fair Value
Unvested as of June 30, 2023	13,365	$	17.96
Granted	—	—
Vested	(14,477)	17.95
Forfeited	—	—
Performance adjustment(1)	1,112	—
Unvested as of March 31, 2024	—	$	—

(1) Represents adjustments to previously granted PSU’s to reflect changes in estimates of future financial performance against targets.

If certain performance metrics are met, PSU’s vest at the end of a three-year performance period. The fiscal year 2021 tranche vested on September 13, 2023, at 13% of the target and 14,477 shares were issued. The number of shares that could be earned for the fiscal year 2022 tranche is estimated to be at 0% of the target as of March 31, 2024. As such, as of March 31, 2024, there was no unrecognized compensation cost related to unvested performance stock units granted.

Price-Vested Units—The Company grants PVU's to eligible employees for which vesting is subject to the fulfillment of both a service period and the achievement of stock price hurdles during the relevant performance

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period. The awards are divided into four separate tranches, each with a different price hurdle which is measured as the average trading price over 60 calendar days on a rolling daily basis, over a performance period of five years. An employee is eligible to vest in one-third of the awards in each tranche after each year of service, but subject to the achievement of the stock-price hurdle attached to each tranche. As a result, share-based compensation will be recognized on a straight-line basis across twelve tranches over each tranche’s requisite service period, which is the greater of the derived service period and the explicit service period.

The following table summarizes the number of shares, stock price hurdles, service periods, and performance periods for each tranche, for the PVU’s awarded during the nine months ended March 31, 2024:


	Number of Shares per Tranche	Grant Date Fair Value (per Share)		Stock Price Hurdle (per Share)		Performance Period	Requisite Service Period
Tranche 1	559,202	$	1.85	$	2.50	August 1, 2023 - August 1, 2028	1 year - 3 years
Tranche 2	559,175	$	1.69	$	5.00	August 1, 2023 - August 1, 2028	1.41 years - 3 years
Tranche 3	559,213	$	1.55	$	7.50	August 1, 2023 - August 1, 2028	1.96 years - 3 years
Tranche 4	559,185	$	1.45	$	10.00	August 1, 2023 - August 1, 2028	2.27 years - 3 years
Tranche 5	8,439	$	0.98	$	2.50	February 1, 2024 - February 1, 2029	1.29 years - 3 years
Tranche 6	8,437	$	0.84	$	5.00	February 1, 2024 - February 1, 2029	2.20 years - 3 years
Tranche 7	8,441	$	0.75	$	7.50	February 1, 2024 - February 1, 2029	2.64 years - 3 years
Tranche 8	8,438	$	0.67	$	10.00	February 1, 2024 - February 1, 2029	2.90 years - 3 years


	Number of Shares per Tranche	Grant Date Fair Value (per Share)		Stock Price Hurdle (per Share)		Performance Period	Requisite Service Period
Tranche 1	1,055,674	$	1.52	$	4.00	August 1, 2022 - August 1, 2027	1.39 years - 3 years
Tranche 2	1,055,648	$	1.25	$	7.50	August 1, 2022 - August 1, 2027	2.33 years - 3 years
Tranche 3	1,055,674	$	1.11	$	10.00	August 1, 2022 - August 1, 2027	2.66 years - 3 years
Tranche 4	1,055,648	$	1.01	$	12.50	August 1, 2022 - August 1, 2027	2.90 years - 3 years

The fair value of each PVU (for purposes of calculation of share-based compensation expense) is estimated using a Monte Carlo simulation valuation model that uses assumptions determined as of the date of the grant. Use of this model requires the input of subjective assumptions and changes in the subjective assumptions can materially affect the estimate of the fair value of share-based compensation recognized in the consolidated statements of comprehensive loss. These assumptions include estimating the volatility of the Company's common stock price over the expected term, the risk-free interest rate that reflects the interest rate at grant date on zero-coupon United States governmental bonds that have a remaining life similar to the expected term risk-free interest rate, the cost of equity,

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and the dividend yield assumption which is based on the Company's dividend payment history and management's expectations of future dividend payments.

The Company used the following weighted-average assumptions for the PVU’s granted as of the date below:


	Shares Granted February 1, 2024	Shares Granted August 1, 2023	Shares Granted August 1, 2022
Share price as of grant date	$1.11	$1.38	$1.80
Volatility	90.8%	94.3%	79.3%
Risk-free interest rate	3.7%	4.1%	2.6%
Cost of Equity	11.6%	9.2%	10.6%
Dividend yield	—%	—%	—%

The following table summarizes price-vested stock unit activity under the 2020 Stock Plan for the nine months ended March 31, 2024:


	Number of Price-Vested Units	Weighted-Average Grant Date Fair Value
Unvested as of June 30, 2023	4,044,180	$	1.22
Granted	2,270,530	1.62
Vested	—	—
Forfeited	(70,802)	1.36
Unvested as of March 31, 2024	6,243,908	$	1.37

As of March 31, 2024, there was $4.1 million of unrecognized compensation cost related to unvested PVU’s granted, which is expected to be recognized over a weighted-average period of 1.45 years.

ESPP—The purpose of the Company’s employee stock purchase plan (“ESPP”) is to provide the Company's eligible employees with an opportunity to purchase shares on the exercise date at a price equal to 85% of the fair market value of the Company’s common stock as of either the exercise date or the first day of the relevant offering period, whichever is lesser. The ESPP was suspended effective April 1, 2023, and as of March 31, 2024, there are 159 shares reserved for future issuance under the plan. During the nine months ended March 31, 2023, the Company issued 876,933 shares to its employees and recorded share-based compensation expense related to the ESPP of less than $0.1 million for the three months ended March 31, 2023 and $0.1 million for the nine months ended March 31, 2023. The Company received cash of less than $0.1 million in connection with ESPP purchases during the three months ended March 31, 2023, and $0.6 million in connection with ESPP purchases during the nine months ended March 31, 2023.

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10.REVENUES FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue from Contracts with Customers—The disaggregation of revenue by segment and product is depicted for the periods presented below, and is consistent with how the Company evaluates its financial performance:


	Three Months Ended March 31,				Nine Months Ended March 31,
(in thousands)	2024		2023		2024		2023
Senior:
Commission revenue:
Medicare advantage	$	184,740	$	156,014	$	477,081	$	412,850
Medicare supplement	1,027		417		2,965		1,588
Prescription drug plan	324		203		697		481
Dental, vision, and health	845		1,185		2,599		3,203
Other commission revenue	588		726		1,361		2,162
Total commission revenue	187,524		158,545		484,703		420,284

Total other revenue	16,735		26,655		57,002		66,257
Total Senior revenue	204,259		185,200		541,705		486,541
Healthcare Services:
Total pharmacy revenue	120,282		66,948		323,865		159,641
Total other revenue	3,925		3,777		9,419		9,629
Total Healthcare Services revenue	124,207		70,725		333,284		169,270
Life:
Commission revenue:
Term	17,789		17,678		55,016		49,371
Final expense	17,537		13,804		46,139		44,357
Total commission revenue	35,326		31,482		101,155		93,728

Total other revenue	5,360		5,468		14,700		14,052
Total Life revenue	40,686		36,950		115,855		107,780
Auto & Home:
Total commission revenue	8,746		7,895		27,836		21,940

Total other revenue	388		343		813		1,188
Total Auto & Home revenue	9,134		8,238		28,649		23,128
Eliminations:
Total commission revenue	(833)		(664)		(1,950)		(2,325)

Total other revenue	(1,053)		(1,051)		(2,976)		(3,324)
Total Elimination revenue	(1,886)		(1,715)		(4,926)		(5,649)
Total commission revenue	230,763		197,258		611,744		533,627

Total pharmacy revenue	120,282		66,948		323,865		159,641
Total other revenue	25,355		35,192		78,958		87,802
Total revenue	$	376,400	$	299,398	$	1,014,567	$	781,070

Contract Balances—The Company has contract assets related to commissions receivable from its insurance carrier partners, with the movement over time as the policy is renewed between long-term and short-term

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commissions receivable and accounts receivable, net being the main activity, along with commission revenue adjustments from changes in estimates.

A roll forward of commissions receivable (current and long-term) is shown below for the period presented:


(in thousands)
Balance as of June 30, 2023	$	840,498
Commission revenue from revenue recognized	218,136
Net commission revenue adjustment from change in estimate	1,667
Amounts recognized as accounts receivable, net	(227,178)
Balance as of March 31, 2024	$	833,123

For the nine months ended March 31, 2024, the $1.7 million net commission revenue adjustment from change in estimate includes adjustments related to revenue recognized in prior fiscal years, based on the Company’s reassessment of each of its cohorts’ transaction prices. It includes a negative adjustment of $1.8 million for Senior, a positive adjustment of $3.4 million for Auto & Home, and a positive adjustment of $0.1 million for Life.

The Company’s contract liabilities on the condensed consolidated balance sheets represent unamortized upfront payments received as of March 31, 2024, for commission revenue for which the performance obligations have not yet been met and are anticipated to be recognized over the next twelve months.

A roll forward of contract liabilities (current and long-term) is shown below for the period presented:


(in thousands)
Balance as of June 30, 2023	$	1,691
Commission revenue recognized	(27,241)
Other revenue recognized	(515)
Amounts recognized as contract liabilities	29,720
Balance as of March 31, 2024	$	3,655

11.INCOME TAXES

For the three months ended March 31, 2024 and 2023, the Company recognized income tax expense of $0.2 million and $3.2 million, respectively, representing effective tax rates of 1.9% and 25.4%, respectively. The differences from the federal statutory tax rate to the effective tax rates for the three months ended March 31, 2024, were primarily related to state income taxes and the recording of a valuation allowance for federal tax attributes that the Company does not expect to utilize prior to expiration. The differences from our federal statutory tax rate to the effective tax rate for the three months ended March 31, 2023, were primarily related to state income taxes, RSU vestings, and the recording of a valuation allowance for state tax attributes that the Company does not expect to utilize prior to expiration.

For the nine months ended March 31, 2024 and 2023, the Company recognized income tax benefits of $1.1 million and $1.1 million, respectively, representing effective tax rates of 26.9% and 8.9%, respectively. The differences from the federal statutory tax rate to the effective tax rate for the nine months ended March 31, 2024, were primarily related to state income taxes and the recording of a valuation allowance for federal tax attributes that the Company does not expect to utilize prior to expiration. The differences from the federal statutory tax rate to the effective tax rate for the nine months ended March 31, 2023, were primarily related to state income taxes, RSU vestings, and the recording of a valuation allowance for state tax attributes that the Company does not expect to utilize prior to expiration.

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As of March 31, 2024, the Company has a valuation allowance of $3.6 million for deferred tax assets related to certain federal and state specific net operating losses and credits, as it is more likely than not that those assets will not be realized. As the Company is currently in a three-year cumulative loss position, it cannot consider the projections of future income as part of the valuation allowance analysis and have considered the other sources of future taxable income described under ASC 740 when evaluating the need for a valuation allowance. After evaluating these sources of taxable income, and considering the jurisdiction and character of the deferred tax assets, the Company continues to recognize its deferred tax assets as of March 31, 2024, as it believes it is more likely than not that the net deferred tax assets will be realized, outside of the deferred tax asset related to certain federal and state credits noted above where a valuation allowance has been established.

12.NET INCOME (LOSS) PER SHARE

The Company calculates net loss per share as defined by ASC 260, Earnings per Share (“ASC 260”). Basic net loss per share (“Basic EPS”) is computed by dividing net loss attributable to common shareholders by the weighted-average common stock outstanding during the respective period. Diluted net loss per share (“Diluted EPS”) is computed by dividing net loss attributable to common and common equivalent shareholders by the total of the weighted-average common stock outstanding and common equivalent shares outstanding during the respective period. For the purpose of calculating the Company’s Diluted EPS, common equivalent shares outstanding include common shares issuable upon the exercise of outstanding employee stock options, unvested RSU's, PSU’s assuming the performance conditions are satisfied as of the end of the reporting period, PVU’s assuming market conditions are satisfied as of the end of the reporting period, and common shares issuable upon the conclusion of each ESPP offering period. The number of common equivalent shares outstanding has been determined in accordance with the treasury stock method for employee stock options, RSU's, PSU’s, PVU’s, and common stock issuable pursuant to the ESPP to the extent they are dilutive. Under the treasury stock method, the exercise price paid by the option holder and future share-based compensation expense that the Company has not yet recognized are assumed to be used to repurchase shares.

The following table sets forth the computation of net income (loss) per share for the periods presented:


	Three Months Ended March 31,				Nine Months Ended March 31,
(in thousands, except per share amounts)	2024		2023		2024		2023
Basic:
Numerator:
Net income (loss) attributable to common shareholders	$	8,551	$	9,264	$	(3,108)	$	(10,706)



Denominator:
Weighted-average common stock outstanding	169,070		166,543		168,291		165,951
Net income (loss) per share—basic:	$	0.05	$	0.06	$	(0.02)	$	(0.06)
Diluted:
Numerator:
Net income (loss) attributable to common and common equivalent shareholders	$	8,551	$	9,264	$	(3,108)	$	(10,706)





Denominator:
Weighted-average common stock outstanding	169,070		166,543		168,291		165,951


Stock options outstanding to purchase shares of common stock including unvested RSU's and from the ESPP(1)	1,886		1,362		—		—

Total common and common equivalent shares outstanding	170,956		167,905		168,291		165,951
Net income (loss) per share—diluted:	$	0.05	$	0.06	$	(0.02)	$	(0.06)

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(1) Excluded from the computation of net income (loss) per share-diluted for the nine months ended March 31, 2024 and 2023, because the effect would have been anti-dilutive.

The weighted average potential shares of common stock that were excluded from the calculation of net income (loss) per share-diluted because including them would have been anti-dilutive are as follows for the periods presented:


	Three Months Ended March 31,		Nine Months Ended March 31,
(in thousands)	2024	2023	2024	2023



Stock options outstanding to purchase shares of common stock including unvested RSU's and from the ESPP	6,483	4,181	12,145	8,338

The weighted average potential shares of common stock that were excluded from the calculation of net income (loss) per share-diluted because the performance or market conditions associated with these awards were not met are as follows for the periods presented:


	Three Months Ended March 31,		Nine Months Ended March 31,
(in thousands)	2024	2023	2024	2023




Shares subject to outstanding PVU’s	6,244	4,100	6,268	4,158
Shares subject to outstanding PSU's	—	10	—	7
Total	6,244	4,110	6,268	4,165

13.SEGMENT INFORMATION

The Company’s operating and reportable segments have been determined in accordance with ASC 280, Segment Reporting (“ASC 280”). The Company has four reportable segments: i) Senior, ii) Healthcare Services, iii) Life, and iv) Auto & Home. The Company includes non-operating activity, share-based compensation expense, certain intersegment eliminations, and the costs of providing corporate and other administrative services in its administrative division in Corporate & Eliminations. These services and activities are not directly identifiable with the Company’s reportable segments and are shown in the tables below to reconcile the reportable segments to the condensed consolidated financial statements. The Company has not aggregated any operating segments into a reportable segment.

The Company reports segment information based on how its chief operating decision maker ("CODM") regularly reviews its operating results, allocates resources, and makes decisions regarding business operations. The performance measures of the segments include total revenue and Adjusted EBITDA because management believes that such information is the most relevant in evaluating the results of the respective segments relative to other entities that operate in the same industries.

Costs of revenue, cost of goods sold-pharmacy revenue, marketing and advertising, selling, general, and administrative, and technical development operating expenses that are directly attributable to a segment are reported within the applicable segment. Indirect costs of revenue, marketing and advertising, selling, general, and administrative, and technical development operating 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, cost of goods sold, marketing and advertising, technical development, and selling, 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; and non-recurring expenses such as severance payments and transaction costs. Our CODM does not separately evaluate assets by segment, with the exception of commissions receivable; therefore, assets by segment are not presented.

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The following table presents information about the reportable segments for the three months ended March 31, 2024:


(in thousands)	Senior		Healthcare Services		Life		Auto & Home		Corp & Elims			Consolidated
Revenue	$	204,259	$	124,207	$	40,686	$	9,134	$	(1,886)	(1)	$	376,400
Operating expenses	(142,765)		(122,598)		(37,548)		(5,524)		(21,355)		(2)	(329,790)
Other income (expense), net	—		—		—		(1)		(11)			(12)
Adjusted EBITDA	$	61,494	$	1,609	$	3,138	$	3,609	$	(23,252)		46,598
Share-based compensation expense												(3,515)
Transaction costs(3)												(3,325)


Depreciation and amortization												(6,704)
Loss on disposal of property, equipment, and software												(4)
Interest expense, net												(24,330)

Income tax expense												(169)
Net income												$	8,551

(1) Revenue in the Corp & Elims division represents intercompany revenue eliminated between segments, including for lead generation referrals from InsideResponse (within Senior) and referrals between the other segments.

(2) Operating expenses in the Corp & Elims division primarily include $16.2 million in salaries and benefits for certain general, administrative, and IT related departments and $3.9 million in professional services fees.

(3) These expenses primarily consist of financing transaction costs and non-restructuring severance expenses.

The following table presents information about the reportable segments for the three months ended March 31, 2023:


(in thousands)	Senior		Healthcare Services		Life		Auto & Home		Corp & Elims			Consolidated
Revenue	$	185,200	$	70,725	$	36,950	$	8,238	$	(1,715)	(1)	$	299,398
Operating expenses	(126,034)		(74,091)		(31,446)		(5,648)		(17,947)		(2)	(255,166)
Other income (expense), net	—		—		(201)		1		(6)			(206)
Adjusted EBITDA	$	59,166	$	(3,366)	$	5,303	$	2,591	$	(19,668)		44,026
Share-based compensation expense												(2,959)
Transaction costs (3)												(433)


Depreciation and amortization												(7,098)
Loss on disposal of property, equipment, and software												(15)
Interest expense, net												(21,105)

Income tax expense												(3,152)
Net income												$	9,264

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(2) Operating expenses in the Corp & Elims division primarily include $12.6 million in salaries and benefits for certain general, administrative, and IT related departments and $4.6 million in professional services fees.

(3) These expenses consist of costs related to the Senior Secured Credit Facility and non-restructuring severance expenses.

The following table presents information about the reportable segments for the nine months ended March 31, 2024:


(in thousands)	Senior		Healthcare Services		Life		Auto & Home		Corp & Elims			Consolidated
Revenue	$	541,705	$	333,284	$	115,855	$	28,649	$	(4,926)	(1)	$	1,014,567
Operating expenses	(402,834)		(326,373)		(102,910)		(16,994)		(62,770)		(2)	(911,881)
Other income (expense), net	—		—		—		(1)		(50)			(51)
Adjusted EBITDA	$	138,871	$	6,911	$	12,945	$	11,654	$	(67,746)		102,635
Share-based compensation expense												(10,512)
Transaction costs(3)												(7,629)


Depreciation and amortization												(18,591)
Loss on disposal of property, equipment, and software												(13)
Interest expense, net												(70,141)

Income tax benefit												1,143
Net loss												$	(3,108)

(1) Revenue in the Corp & Elims division represents intercompany revenue eliminated between segments primarily for lead generation referrals from InsideResponse (within Senior) to the other segments.

(2) Operating expenses in the Corp & Elims division primarily include $46.7 million in salaries and benefits for certain general, administrative, and IT related departments and $12.0 million in professional services fees.

(3) These expenses primarily consist of financing transaction costs and non-restructuring severance expenses.

The following table presents information about the reportable segments for the nine months ended March 31, 2023:

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(in thousands)	Senior		Healthcare Services		Life		Auto & Home		Corp & Elims			Consolidated
Revenue	$	486,541	$	169,270	$	107,780	$	23,128	$	(5,649)	(1)	$	781,070
Operating expenses	(347,608)		(193,726)		(91,409)		(15,812)		(52,270)		(2)	(700,825)
Other income (expense), net	—		—		—		(1)		(117)			(118)
Adjusted EBITDA	$	138,933	$	(24,456)	$	16,371	$	7,315	$	(58,036)		80,127
Share-based compensation expense												(8,525)
Transaction costs (3)												(3,003)


Depreciation and amortization												(21,087)
Loss on disposal of property, equipment, and software												(386)
Interest expense, net												(58,885)

Income tax benefit												1,053
Net loss												$	(10,706)

(1) Revenue in the Corp & Elims division represents intercompany revenue eliminated between segments primarily for lead generation referrals from InsideResponse (within Senior) to the other segments.

(2) Operating expenses in the Corp & Elims division primarily include $36.8 million in salaries and benefits for certain general, administrative, and IT related departments and $13.8 million in professional services fees.

(3)These expenses primarily consist of costs related to the Fourth Amendment to the Senior Secured Credit Facility and non-restructuring severance expenses.

Revenues from each of the reportable segments are earned from transactions in the United States and follow the same accounting policies used for the Company’s condensed consolidated financial statements. All of the Company’s long-lived assets are located in the United States. For the three months ended March 31, 2024, three customers accounted for 27% (UHC), 20% (Aetna), and 18% (Humana) of total revenue. For the three months ended March 31, 2023, three customers accounted for 31% (UHC), 24% (Humana), and 8% (Wellcare) of total revenue. For the nine months ended March 31, 2024, three customers accounted for 30% (UHC), 18% (Humana), and 15% (Aetna) of total revenue. For the nine months ended March 31, 2023, three customers accounted for 31% (UHC), 21% (Humana), and 10% (Wellcare) of total revenue. For all periods presented, the revenue was provided by both the Senior and Healthcare Services segments.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and result of operations together with our condensed consolidated financial statements and footnotes included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions, and projections about our industry, business, and future financial results. Please refer to a discussion of the Company’s forward-looking statements and associated risks in “Cautionary Note Regarding Forward-Looking Statements” in our Annual Report. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors” in our Annual Report and in Part II, Item 1A hereof.

Company Overview

We are a leading technology-enabled, direct-to-consumer (“DTC”) distribution platform for insurance products and healthcare services. Our insurance distribution business, which has operated continuously for over 35

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years, provides consumers with a transparent and convenient venue to shop for complex senior health, life, and automobile & home insurance policies from a curated panel of the nation’s leading insurance carriers. As an insurance distributor, we do not insure the consumer, but rather identify consumers looking to acquire insurance products and place these consumers with insurance carrier partners that provide these products. In return, we earn commissions from our insurance carrier partners for the policies we sell on their behalf. Our proprietary technology allows us to take a broad funnel approach to marketing by analyzing and identifying high quality consumer leads sourced from a wide variety of online and offline marketing channels including search engines, radio, television, and third-party marketing partners. We monitor our acquisition costs to dynamically allocate our marketing spend to the most attractive channels, benefiting from over thirty years of data accumulated through our proprietary, purpose-built technologies. Our advanced workflow processing system scores each acquired lead in real time, matching it with a sales agent whom we determine is best suited to meet the consumer’s need. Our platform then captures and utilizes our experience to further build upon the millions of data points that feed our marketing algorithms, further enhancing our ability to deploy subsequent marketing dollars efficiently and target more high-quality consumer leads. We have built our business model to maximize commissions collected over the life of an approved policy less the cost of acquiring the business, a metric we refer to as policyholder lifetime value and which is a key component to our overall profitability.

Our unique platform has enabled us to expand our distribution business in recent years to include additional products beyond insurance policies. In interacting with thousands of consumers over the years, we identified a large opportunity to leverage our existing database and distribution model to improve access to healthcare services for our consumers. In addition to improving consumers’ health outcomes, this service creates deeper relationships with our insurance carrier partners by increasing policy persistency and, in turn, reducing their overall costs. Additionally, we offer pharmacy services through SelectRx, our accredited Patient-Centered Pharmacy Home pharmacy, which offers essential prescription medications, OTC medications, customized medication packaging, medication therapy management, providing long-term pharmacy care that enables patients to optimize medication adherence to drive positive health outcomes while enabling patients to remain at home.

We evaluate our business using the following four segments:

Senior was launched in 2010 and provides unbiased comparison shopping for Medicare Advantage (“MA”) and Medicare Supplement (“MS”) insurance plans as well as prescription drug and dental, vision, and hearing (“DVH”) plans, and critical illness products. We represent approximately 25 leading, nationally-recognized insurance carrier partners, including UnitedHealthcare, (“UHC”), Humana, and Wellcare. MA and MS plans accounted for 92% and 90% of our approved Senior policies for the three months ended March 31, 2024 and 2023, respectively, and 92% and 90% for the nine months ended March 31, 2024, and 2023, respectively, with other ancillary type policies accounting for the remainder.

Healthcare Services, launched in 2021, includes SelectRx and Population Health. Through SelectRx, we provide simple solutions for prescription drug management and support with a personalized approach to streamline the process of managing multiple medications for seniors with chronic conditions. SelectRx has developed a pill pack solution that is customized to the unique needs of each patient, focusing on individual multi-dosages by day and time. SelectRx uses a high-touch, technology-driven approach to provide superior customer service and achieve improved medication adherence. Population Health helps members understand the benefits available under their health plans, contracts with insurance carriers to complete HRA’s on members, partners with VBC providers for a variety of healthcare-related services, and introduces them to the pharmacy services we offer through SelectRx. We believe that offering these services through SelectRx and Population Health to our existing consumers helps drive customer satisfaction and increase policy persistency, which, in turn, reduces costs for our insurance carrier partners.

Life is one of the country’s largest and most established DTC insurance distributors for term life insurance, having sold over 2.2 million policies nationwide since our founding in 1985. Our platform provides unbiased comparison shopping for life insurance products such as term life, final expense, and other ancillary products like critical illness, accidental death, and juvenile insurance. We represent approximately 20 leading, nationally-recognized insurance carrier partners, with many of these relationships exceeding 15 years. Term life policies accounted for 41% and 48% of new premium within Life for the three months ended March 31, 2024 and 2023,

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respectively, with final expense policies accounting for 59% and 52% for the three months ended March 31, 2024 and 2023, respectively. For the nine months ended March 31, 2024 and 2023, term life policies accounted for 45% and 45% of new premium within Life, respectively, with final expense policies accounting for 55% and 55%, respectively.

Auto & Home was launched in 2011 as an unbiased comparison shopping platform for auto, home, and specialty insurance lines. Our platform provides unbiased comparison shopping for insurance products such as homeowners, auto, dwelling fire, and other ancillary insurance products underwritten by approximately 25 leading, nationally-recognized insurance carrier partners. Homeowners and 12-month auto products accounted for 71% and 73% of new premium within Auto & Home for the three months ended March 31, 2024 and 2023, respectively, and 75% and 74% for the nine months ended March 31, 2024 and 2023, respectively, with six-month auto, dwelling fire, and other products accounting for a majority of the remainder.

The three and nine months ended March 31 referenced throughout the commentary below refers to the third quarter and fiscal year-to-date performance of our fiscal years ending on June 30, 2024 and 2023.

Key Business and Operating Metrics by Segment

In addition to traditional financial metrics, we rely upon certain business and operating metrics to estimate and recognize revenue, evaluate our business performance and facilitate our operations. In Senior, our primary product, Medicare Advantage, pays us flat commission rates based on the number of policies we sell on behalf of our insurance carrier partners. Therefore, we have determined that units and unit metrics are the most appropriate measures to evaluate the performance of Senior. For Healthcare Services, our primary source of revenue is pharmacy revenue from SelectRx, so the total number of SelectRx members is the most appropriate measure used to evaluate the performance of Healthcare Services. In Life and Auto & Home, we are typically paid a commission that is a percent of the premium that we generate for our insurance carrier partners. Therefore, we have determined that premium-based metrics are the most relevant measures to evaluate the performance of these segments. Below are the most relevant business and operating metrics for each segment:

Senior

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 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 March 31,		Nine Months Ended March 31,
	2024	2023	2024	2023
Medicare Advantage	226,692	196,372	602,936	538,247
Medicare Supplement	650	675	2,334	2,905
Dental, Vision, and Hearing	16,588	21,175	48,892	59,513
Prescription Drug Plan	665	416	2,696	2,082
Other	774	1,864	3,724	5,402
Total	245,369	220,502	660,582	608,149

Total submitted policies for all products increased 11% for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. This was driven by increases in overall close rates (18%), the number of average productive agents (7%), and productivity per agent (13%).

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Total submitted policies for all products increased 9% for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. This was driven by increases in overall close rates (12%), the number of average productive agents (9%), and productivity per agent (7%).

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 March 31,		Nine Months Ended March 31,
	2024	2023	2024	2023
Medicare Advantage	185,716	165,530	517,973	467,540
Medicare Supplement	445	557	1,578	2,184
Dental, Vision and Hearing	14,042	16,968	41,474	47,940
Prescription Drug Plan	1,114	521	2,684	1,794
Other	789	1,029	2,834	3,932
Total	202,106	184,605	566,543	523,390

In general, the relationship between submitted policies and approved policies has been steady over time. Therefore, factors impacting the number of submitted policies also impact the number of approved policies.

Total approved policies for all products increased 9% for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. Fluctuations in approved policies are normally in direct correlation to submitted policies; however, primarily due to carrier mix, we experienced a 2% decrease in the submitted-to-approved conversion rates for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

Total approved policies for all products increased 8% for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. Fluctuations in approved policies are normally in direct correlation to submitted policies; however, primarily due to carrier mix, we experienced a slight decrease in the submitted-to-approved conversion rates for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023.

Lifetime Value of Commissions per Approved Policy

The lifetime value of commissions (the “LTV”) 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 LTV 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 estimate of the future renewal commissions is determined using contracted renewal commission rates constrained by a persistency-adjusted 10-year renewal period based on a combination of our historical experience and available insurance carrier historical experience to estimate renewal revenue only to the extent probable that a significant reversal in revenue would not be expected to occur. These factors may result in varying values from period to period. The LTV per approved policy represents commissions only from policies sold during the period; it does not include any updated estimates of prior period variable consideration based on actual policy renewals in the current period.

The following table shows the LTV per approved policy for the periods presented:

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	Three Months Ended March 31,				Nine Months Ended March 31,
	2024		2023		2024		2023
Medicare Advantage	$	995	$	965	$	923	$	888
Medicare Supplement	1,271		871		1,108		994
Dental, Vision and Hearing	101		91		100		95
Prescription Drug Plan	237		194		237		211
Other	36		123		(3)		100

The LTV per MA approved policy increased 3% for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, primarily due to carrier mix.

The LTV per MA approved policy increased 4% for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023, primarily due to carrier mix.

Healthcare Services

Total Members

The total number of SelectRx members represents the amount of active customers to which an order has been shipped, as this is a primary key driver of revenue for Healthcare Services.

The following table shows the total number of SelectRx members as of the date presented:



	March 31, 2024	March 31, 2023
Total SelectRx Members	75,074	44,993

The total number of SelectRx members increased 67% as of March 31, 2024, compared to March 31, 2023, due to our operating strategy to grow SelectRx.

Prescriptions Per Day

Prescriptions per day represents the total average prescriptions shipped per business day, as this is a primary key driver of revenue for Healthcare Services.

The following table shows the prescriptions shipped per day for the periods presented:


	Three Months Ended March 31,		Nine Months Ended March 31,
	2024	2023	2024	2023
Prescriptions Per Day	20,216	11,737	17,582	9,753

Combined Senior and Healthcare Services - Consumer Per Unit Economics

The opportunity to leverage our existing database and distribution model to improve access to healthcare services for our consumers has created a need for us to review our key metrics related to our per unit economics. As we think about the revenue and expenses for Healthcare Services, we note that they are derived from the marketing acquisition costs associated with the sale of an MA or MS policy, some of which costs are allocated directly to Healthcare Services, and therefore determined that our per unit economics measure should include components from both Senior and Healthcare Services.

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Combined Senior and Healthcare Services consumer per unit economics represents total MA and MS commissions; other product commissions; other revenues, including revenues from Healthcare Services; and operating expenses associated with Senior and Healthcare Services, each shown per number of approved MA and MS 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 MA and MS commission per MA/MS policy represents the LTV for policies sold in the period. Other commission per MA/MS policy represents the LTV for other products sold in the period, including DVH prescription drug plan, and other products, which management views as additional commission revenue on our agents’ core function of MA/MS policy sales. Pharmacy revenue per MA/MS policy represents revenue from SelectRx, and other revenue per MA/MS policy represents revenue from Population Health, production bonuses, marketing development funds, lead generation revenue, and adjustments from the Company’s reassessment of its cohorts’ transaction prices. Total operating expenses per MA/MS policy represents all of the operating expenses within Senior and Healthcare Services. The revenue to customer acquisition cost (“CAC”) multiple represents total revenue as a multiple of total marketing acquisition costs, 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 combined Senior and Healthcare Services consumer per unit economics for the periods presented. Based on the seasonality of Senior 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.


	Twelve Months Ended March 31,
(dollars per approved policy):	2024			2023
Medicare Advantage and Medicare Supplement approved policies	630,013			586,238
Medicare Advantage and Medicare Supplement commission per MA/MS policy	$	907		$	886
Other commission per MA/MS policy	10			15
Pharmacy revenue per MA/MS policy	641			320
Other revenue per MA/MS policy	126			66
Total revenue per MA/MS policy	1,684			1,287
Total operating expenses per MA/MS policy	(1,425)			(1,167)
Adjusted EBITDA per MA/MS policy (1)	$	259		$	120
Adjusted EBITDA Margin per MA/MS policy (1)	15		%	9		%
Revenue/CAC multiple	4.2X			3.5X

(1) These financial measures are not calculated in accordance with GAAP. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for information regarding our use of these non-GAAP financial measures and a reconciliation of such measures to their nearest comparable financial measures calculated and presented in accordance with GAAP.

Total revenue per MA/MS policy increased 31% for the twelve months ended March 31, 2024, compared to the twelve months ended March 31, 2023, primarily due to the increase in pharmacy revenue. Total operating expenses per MA/MS policy increased 22% for the twelve months ended March 31, 2024, compared to the twelve months ended March 31, 2023, primarily driven by increase in cost of goods sold-pharmacy revenue for SelectRx due to the growth of the business.

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Life

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. 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 Life.

The following table shows term and final expense premiums for the periods presented:


	Three Months Ended March 31,				Nine Months Ended March 31,
(in thousands):	2024		2023		2024		2023
Term Premiums	$	16,788	$	17,512	$	52,376	$	48,433
Final Expense Premiums	23,724		19,308		62,811		58,766
Total	$	40,512	$	36,820	$	115,187	$	107,199

Total term premiums decreased 4% for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, due to an 11% decrease in the number of policies sold offset by an 8% increase in the average premium per policy sold. Final expense premiums increased 23% for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, due to a 4% increase in the average premium per policy sold and a 18% increase in the number of policies sold.

Total term premiums increased 8% for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023, due to a 5% increase in the average premium per policy sold and a 3% increase in the number of policies sold. Final expense premiums increased 7% for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023 due to a 4% increase in the average premium per policy sold and a 3% increase in the number of policies sold.

Auto & Home

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 Auto & Home.

The following table shows premiums for the periods presented:


	Three Months Ended March 31,				Nine Months Ended March 31,
(in thousands):	2024		2023		2024		2023
Premiums	$	14,180	$	12,828	$	42,746	$	36,456

Total premiums increased 11% for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, due to a 18% increase in the average premium per policy sold offset by a 6% decrease in the number of policies sold.

Total premiums increased 17% for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023, due to a 15% increase in the average premium per policy sold and a 2% increase in the number of policies sold.

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Non-GAAP Financial 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 Quarterly Report on Form 10-Q 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.

Adjusted EBITDA. We define Adjusted EBITDA as net income (loss) before interest expense, income tax expense (benefit), depreciation and amortization, and certain add-backs for non-cash or non-recurring expenses, including restructuring, share-based compensation expenses, and any impairment charges. The most directly comparable GAAP measure is net income (loss). We monitor and have presented in this Quarterly Report on Form 10-Q 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.

Adjusted EBITDA is not prepared in accordance with GAAP and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of this non-GAAP financial measure rather than net income (loss). These limitations include the fact that Adjusted EBITDA excludes interest expense, depreciation and amortization expense, share-based compensation expense, income tax expense (benefit), and other non-recurring expenses that are one-time in nature. In addition, other companies may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.

The following tables reconcile Adjusted EBITDA and net income (loss) for the periods presented:

Three Months Ended March 31, 2024:


(in thousands)	Senior		Healthcare Services		Life		Auto & Home		Corp & Elims		Consolidated
Net income											$	8,551
Share-based compensation expense											3,515
Transaction costs (1)											3,325


Depreciation and amortization											6,704
Loss on disposal of property, equipment, and software											4
Interest expense, net											24,330

Income tax expense											169
Adjusted EBITDA	$	61,494	$	1,609	$	3,138	$	3,609	$	(23,252)	$	46,598

(1) These expenses primarily consist of financing transaction costs and non-restructuring severance expenses.

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Three Months Ended March 31, 2023:


(in thousands)	Senior		Healthcare Services		Life		Auto & Home		Corp & Elims		Consolidated
Net income											$	9,264
Share-based compensation expense											2,959
Non-recurring expenses (1)											433


Depreciation and amortization											7,098
Loss on disposal of property, equipment, and software											15
Interest expense, net											21,105

Income tax expense											3,152
Adjusted EBITDA	$	59,166	$	(3,366)	$	5,303	$	2,591	$	(19,668)	$	44,026

(1) These expenses primarily consist of costs related to the Senior Secured Credit Facility and non-restructuring severance expenses.

Nine Months Ended March 31, 2024:


(in thousands)	Senior		Healthcare Services		Life		Auto & Home		Corp & Elims		Consolidated
Net loss											$	(3,108)
Share-based compensation expense											10,512
Transaction costs (1)											7,629


Depreciation and amortization											18,591
Loss on disposal of property, equipment, and software											13
Interest expense, net											70,141

Income tax benefit											(1,143)
Adjusted EBITDA	$	138,871	$	6,911	$	12,945	$	11,654	$	(67,746)	$	102,635

(1)These expenses primarily consist of financing transaction costs and non-restructuring severance expenses.

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Nine Months Ended March 31, 2023:


(in thousands)	Senior		Healthcare Services		Life		Auto & Home		Corp & Elims		Consolidated
Net loss											$	(10,706)
Share-based compensation expense											8,525
Transaction costs (1)											3,003


Depreciation and amortization											21,087
Loss on disposal of property, equipment, and software											386
Interest expense, net											58,885

Income tax benefit											(1,053)
Adjusted EBITDA	$	138,933	$	(24,456)	$	16,371	$	7,315	$	(58,036)	$	80,127

(1) These expenses primarily consist of costs related to the Fourth Amendment to the Senior Secured Credit Facility and non-restructuring severance expenses.

Key Components of our Results of Operations

The following table sets forth our operating results and related percentage of total revenues for the periods presented:


	Three Months Ended March 31,								Nine Months Ended March 31,
(in thousands)	2024				2023				2024				2023
Revenue
Commission	$	230,763	61	%	$	197,258	66	%	$	611,744	60	%	$	533,627	68	%

Pharmacy	120,282		32	%	66,948		22	%	323,865		32	%	159,641		20	%
Other	25,355		7	%	35,192		12	%	78,958		8	%	87,802		12	%
Total revenue	376,400		100	%	299,398		100	%	1,014,567		100	%	781,070		100	%
Operating costs and expenses
Cost of revenue	84,315		22	%	79,186		26	%	254,250		25	%	235,827		30	%
Cost of goods sold—pharmacy revenue	106,172		28	%	62,302		21	%	284,360		28	%	154,753		20	%
Marketing and advertising	109,276		30	%	90,205		31	%	288,676		29	%	237,724		31	%
Selling, general, and administrative	34,971		9	%	27,544		9	%	97,049		10	%	86,662		11	%
Technical development	8,604		2	%	6,434		2	%	24,291		2	%	18,860		2	%

Total operating costs and expenses	343,338		91	%	265,671		89	%	948,626		94	%	733,826		94	%
Income from operations	33,062		9	%	33,727		11	%	65,941		6	%	47,244		6	%
Interest expense, net	(24,330)		(7)	%	(21,105)		(7)	%	(70,141)		(6)	%	(58,885)		(7)	%

Other income (expense), net	(12)		—	%	(206)		—	%	(51)		—	%	(118)		—	%
Income (loss) before income tax expense (benefit)	8,720		2	%	12,416		4	%	(4,251)		—	%	(11,759)		(1)	%
Income tax expense (benefit)	169		—	%	3,152		1	%	(1,143)		—	%	(1,053)		—	%
Net income (loss)	$	8,551	2	%	$	9,264	3	%	$	(3,108)	—	%	$	(10,706)	(1)	%

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Revenue

We earn revenue in the form of commission payments from our insurance carrier customers, for the initial year the policy is in effect (“first year”) and, where applicable, for each subsequent year the policy renews (“renewal year”), as presented in our condensed consolidated statements of comprehensive income (loss) as commission revenue. After an insurance policy is sold, we have no material additional or recurring obligations to the policyholder or the insurance carrier partner. Therefore, we do not incur any additional expense related to our receipt of future renewal commissions. All of the costs associated with the sale of an individual policy are incurred prior to or at the time of the initial sale of an individual policy.

We also receive certain volume-based bonuses from some carriers on first year policies sold based on attaining various predetermined target sales levels or other agreed upon objectives. These bonuses are referred to as “production bonuses” or “marketing development funds” and are included in other revenue in the condensed consolidated statements of comprehensive income (loss). Pharmacy revenue includes revenue from the sale of prescription and OTC medications from SelectRx. Other revenue includes production bonuses and marketing development funds, revenue from Population Health (excluding SelectRx pharmacy revenue), and external lead generation revenue from InsideResponse.

Revenue is recognized at different milestones for Senior, Life, and Auto & Home and is based on the contractual enforceable rights, our historical experience, and established customer business practices. Lead generation revenue is recognized when the generated lead is accepted by our customers, which is the point of sale, and we have no performance obligation after the delivery. Revenues generated from SelectRx are recognized upon shipment. At the time of shipment, we have performed substantially all of our performance obligations and control has been transferred to the customer. There are no future revenue streams associated as patients have the option to cancel their service at any time with no further payments due. Revenue from Population Health is recognized when the HRA has been performed or the agreed-upon task has been completed for a VBC partner, the transaction price is known based on volume and contractual prices, and we have no further performance obligation.

The following table presents our revenue for the periods presented and the percentage changes from the prior year:


	Three Months Ended March 31,				Percent Change	Nine Months Ended March 31,				Percent Change
(dollars in thousands)	2024		2023		2024 vs. 2023	2024		2023		2024 vs. 2023
Commission	$	230,763	$	197,258	17%	$	611,744	$	533,627	15%

Pharmacy	120,282		66,948		80%	323,865		159,641		103%
Other	25,355		35,192		(28)%	78,958		87,802		(10)%
Total revenue	$	376,400	$	299,398	26%	$	1,014,567	$	781,070	30%

Three Months Ended March 31, 2024 and 2023–Commission revenue increased $33.5 million, or 17%, for the three months ended March 31, 2024, and included increases in Senior, Life, and Auto & Home commission revenue of $29.0 million, $3.8 million, and $0.9 million respectively. For Senior, this was driven by a 9% increase in approved policies and a 5% increase in LTV’s. Life’s revenue increase was driven by a $0.1 million increase in term revenue and a $3.7 million increase in final expense revenue. The $53.3 million increase in pharmacy revenue was due to the increase in members due to the expansion of the SelectRx business. The $9.8 million decrease in other revenue was driven by a $9.0 million decrease in production bonus revenue.

Nine Months Ended March 31, 2024 and 2023–Commission revenue increased $78.1 million, or 15%, for the nine months ended March 31, 2024, and included increases in Senior, Life, and Auto & Home commission revenue of $64.4 million, $7.4 million, and $5.9 million respectively. For Senior, this was driven by an 8% increase in approved policies and a 6% increase in LTV’s. Life’s revenue increase was driven by a $5.6 million increase in term revenue and a $1.8 million increase in final expense revenue. The $164.2 million increase in pharmacy revenue

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was due to the increase in members due to the expansion of the SelectRx business. The $8.8 million decrease in other revenue was driven by a $6.5 million decrease in production bonus revenue and a $2.0 million decrease in lead sales revenue.

Operating Costs and Expenses

Cost of Revenue

Cost of revenue represents the direct costs associated with fulfilling our obligations to our customers in the Senior, Life, Auto & Home, and Population Health divisions, primarily compensation, benefits, and licensing for sales agents, customer success agents, fulfillment specialists, and others directly engaged in serving customers. It also includes allocations for facilities, telecommunications, and software maintenance costs, which are all based on headcount. Facilities costs include rent and utilities expenses and other costs to maintain our office locations. Telecommunications and software maintenance costs includes costs related to the internal phone systems and various software applications that our agents use to make sales. These costs directly correlate to the number of agents we have as we are primarily charged based on per person usage for the phone systems and software applications.

The following table presents our cost of revenue for the periods presented and the percentage change from the prior year:


	Three Months Ended March 31,				Percent Change	Nine Months Ended March 31,				Percent Change
(dollars in thousands)	2024		2023		2024 vs. 2023	2024		2023		2024 vs. 2023
Cost of revenue	$	84,315	$	79,186	6%	$	254,250	$	235,827	8%

Three Months Ended March 31, 2024 and 2023–Cost of revenue increased $5.1 million, or 6%, for the three months ended March 31, 2024, primarily due to a $5.0 million increase in compensation costs mostly from our Senior segment.

Nine Months Ended March 31, 2024 and 2023–Cost of revenue increased $18.4 million, or 8%, for the nine months ended March 31, 2024, primarily due to a $18.0 million increase in compensation costs mostly from our Senior segment.

Cost of Goods Sold-Pharmacy Revenue

Cost of goods sold-pharmacy revenue represents the direct costs associated with fulfilling pharmacy patient orders for SelectRx. Such costs primarily consist of medication costs and compensation and related benefit costs for licensed pharmacists, pharmacy technicians, and other employees directly associated with fulfilling orders such as packaging and shipping clerks. It also includes shipping, supplies, other order fulfillment costs including part of the one-time customer onboarding costs, and certain facilities overhead costs such as rent, maintenance, and depreciation related to the pharmacy production process.

The following table presents our cost of goods sold-pharmacy revenue for the periods presented and the percentage change from the prior year:


	Three Months Ended March 31,				Percent Change	Nine Months Ended March 31,				Percent Change
(dollars in thousands)	2024		2023		2024 vs. 2023	2024		2023		2024 vs. 2023
Cost of goods sold—pharmacy revenue	$	106,172	$	62,302	70%	$	284,360	$	154,753	84%

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Three Months Ended March 31, 2024 and 2023–Cost of goods sold-pharmacy revenue increased $43.9 million, or 70%, for the three months ended March 31, 2024, primarily due to a $37.0 million increase in medication costs as the number of SelectRx members increased 67% over the prior year.

Nine Months Ended March 31, 2024 and 2023–Cost of goods sold-pharmacy revenue increased $129.6 million, or 84%, for the nine months ended March 31, 2024, primarily due to an $117.7 million increase in medication costs as the number of SelectRx members increased 67% over the prior year.

Marketing and Advertising

Marketing and advertising expenses consist primarily of the direct costs associated with marketing and advertising of our services, such as television and radio commercials and online advertising. These direct costs generally represent the vast majority of our marketing and advertising expenses. Other costs consist of compensation and other expenses related to marketing, business development, partner management, public relations, carrier relations personnel who support our offerings, and allocations for facilities, telecommunications, and software maintenance costs. Our marketing and advertising costs increase during AEP and OEP to generate more leads during these high-volume periods.

The following table presents our marketing and advertising expenses for the periods presented and the percentage change from the prior year:


	Three Months Ended March 31,				Percent Change	Nine Months Ended March 31,				Percent Change
(dollars in thousands)	2024		2023		2024 vs. 2023	2024		2023		2024 vs. 2023
Marketing and advertising	$	109,276	$	90,205	21%	$	288,676	$	237,724	21%

Three Months Ended March 31, 2024 and 2023–Marketing and advertising expenses increased $19.1 million, or 21%, for the three months ended March 31, 2024, primarily due to a $17.2 million increase in lead costs. This increase can be attributed to the increase in MA submitted policies and an increase in customer acquisition costs on a per policy basis.

Nine Months Ended March 31, 2024 and 2023–Marketing and advertising expenses increased $51.0 million, or 21%, for the nine months ended March 31, 2024, primarily due to a $45.6 million increase in lead costs. This increase can be attributed to the increase in MA submitted policies and an increase in customer acquisition costs on a per policy basis.

Selling, General, and Administrative

Selling, general, and administrative expenses include compensation and benefits costs for staff working in our executive, finance, accounting, recruiting, human resources, administrative, business intelligence, data science, and part of the SelectRx customer onboarding departments. These expenses also include fees paid for outside professional services, including audit, tax and legal fees and allocations for facilities, telecommunications, and software maintenance costs.

The following table presents our selling, general, and administrative expenses for the periods presented and the percentage change from the prior year:

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	Three Months Ended March 31,				Percent Change	Nine Months Ended March 31,				Percent Change
(dollars in thousands)	2024		2023		2024 vs. 2023	2024		2023		2024 vs. 2023
Selling, general, and administrative	$	34,971	$	27,544	27%	$	97,049	$	86,662	12%

Three Months Ended March 31, 2024 and 2023–Selling, general, and administrative expenses increased $7.4 million, or 27%, for the three months ended March 31, 2024, primarily due to increases in compensation costs of $5.0 million and corporate development costs of $2.7 million.

Nine Months Ended March 31, 2024 and 2023–Selling, general, and administrative expenses increased $10.4 million, or 12%, for the nine months ended March 31, 2024, primarily due to an increase in compensation costs of $8.1 million.

Technical Development

Technical development expenses consist primarily of compensation and benefits costs for internal and external personnel associated with developing, maintaining and enhancing our applications, infrastructure and other IT-related functions as well as allocations for facilities, telecommunications and software maintenance costs.

The following table presents our technical development expenses for the periods presented and the percentage change from the prior year:


	Three Months Ended March 31,				Percent Change	Nine Months Ended March 31,				Percent Change
(dollars in thousands)	2024		2023		2024 vs. 2023	2024		2023		2024 vs. 2023
Technical development	$	8,604	$	6,434	34%	$	24,291	$	18,860	29%

Three Months Ended March 31, 2024 and 2023–Technical development expenses increased $2.2 million, or 34%, for the three months ended March 31, 2024, primarily due to a $2.1 million increase in compensation costs.

Nine Months Ended March 31, 2024 and 2023–Technical development expenses increased $5.4 million, or 29%, for the nine months ended March 31, 2024, primarily due to a $5.3 million increase in compensation costs.

Interest Expense, Net

The following table presents our interest expense, net for the periods presented and the percentage changes from the prior year:


	Three Months Ended March 31,				Percent Change	Nine Months Ended March 31,				Percent Change
(dollars in thousands)	2024		2023		2024 vs. 2023	2024		2023		2024 vs. 2023
Interest expense, net	$	(24,330)	$	(21,105)	15%	$	(70,141)	$	(58,885)	19%

Three Months Ended March 31, 2024 and 2023–Interest expense increased $3.2 million, or 15%, as a result of higher interest rates during the period. The increase was partially offset by interest income received from the interest rate swap.

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Nine Months Ended March 31, 2024 and 2023–Interest expense increased $11.3 million, or 19%, as a result of higher interest rates during the period. The increase was partially offset by interest income received from the interest rate swap and our money market account.

Income Taxes

The following table presents our provision for income taxes for the periods presented and the percentage change from the prior year:


	Three Months Ended March 31,						Percent Change	Nine Months Ended March 31,						Percent Change
(dollars in thousands)	2024			2023			2024 vs. 2023	2024			2023			2024 vs. 2023
Income tax expense (benefit)	$	169		$	3,152		(95)%	$	(1,143)		$	(1,053)		9%
Effective tax rate	1.9		%	25.4		%		26.9		%	8.9		%

Three Months Ended March 31, 2024 and 2023–For the three months ended March 31, 2024 and 2023, we recognized income tax expense of $0.2 million and $3.2 million, respectively, representing effective tax rates of 1.9% and 25.4%, respectively. The differences from the federal statutory tax rate to the effective tax rates for the three months ended March 31, 2024, were primarily related to state income taxes and the recording of a valuation allowance for federal tax attributes that the Company does not expect to utilize prior to expiration. The differences from our federal statutory tax rate to the effective tax rate for the three months ended March 31, 2023, were primarily related to state income taxes, RSU vestings, and the recording of a valuation allowance for state tax attributes that the Company does not expect to utilize prior to expiration.

Nine Months Ended March 31, 2024 and 2023–For the nine months ended March 31, 2024 and 2023, we recognized income tax benefit of $1.1 million and $1.1 million, respectively, representing effective tax rates of 26.9% and 8.9%, respectively. The differences from the federal statutory tax rate to the effective tax rate for the nine months ended March 31, 2024, were primarily related to state income taxes and the recording of a valuation allowance for federal tax attributes that the Company does not expect to utilize prior to expiration. The differences from the federal statutory tax rate to the effective tax rate for the nine months ended March 31, 2023, were primarily related to state income taxes, RSU vestings, and the recording of a valuation allowance for state tax attributes that the Company does not expect to utilize prior to expiration.

Segment Information

The Company’s operating and reportable segments have been determined in accordance with ASC 280, Segment Reporting (“ASC 280”) and include four reportable segments: i) Senior, ii) Healthcare Services, iii) Life, and iv) Auto & Home. The Company includes non-operating activity, share-based compensation expense, certain intersegment eliminations, and the costs of providing corporate and other administrative services in its administrative division in Corporate & Eliminations. These services and activities are not directly identifiable with the Company’s reportable segments and are shown in the tables below to reconcile the reportable segments to the condensed consolidated financial statements. The Company has not aggregated any operating segments into a reportable segment.

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The following tables present information about the reportable segments for the periods presented:

Three Months Ended March 31, 2024:


(in thousands)	Senior		Healthcare Services		Life		Auto & Home		Corp & Elims			Consolidated
Revenue	$	204,259	$	124,207	$	40,686	$	9,134	$	(1,886)	(1)	$	376,400
Operating expenses	(142,765)		(122,598)		(37,548)		(5,524)		(21,355)		(2)	(329,790)
Other income (expense), net	—		—		—		(1)		(11)			(12)
Adjusted EBITDA	$	61,494	$	1,609	$	3,138	$	3,609	$	(23,252)		$	46,598
Share-based compensation expense												(3,515)
Transaction costs(3)												(3,325)


Depreciation and amortization												(6,704)
Loss on disposal of property, equipment, and software												(4)
Interest expense, net												(24,330)

Income tax expense												(169)
Net income												$	8,551

(1) Revenue in the Corp & Elims division represents intercompany revenue eliminated between segments primarily for lead generation referrals from InsideResponse (within Senior) to the other segments.

(3) These expenses primarily consist of financing transaction costs and non-restructuring severance expenses.

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Three Months Ended March 31, 2023:


(in thousands)	Senior		Healthcare Services		Life		Auto & Home		Corp & Elims			Consolidated
Revenue	$	185,200	$	70,725	$	36,950	$	8,238	$	(1,715)	(1)	$	299,398
Operating expenses	(126,034)		(74,091)		(31,446)		(5,648)		(17,947)		(2)	(255,166)
Other income (expense), net	—		—		(201)		1		(6)			(206)
Adjusted EBITDA	$	59,166	$	(3,366)	$	5,303	$	2,591	$	(19,668)		$	44,026
Share-based compensation expense												(2,959)
Transaction costs (3)												(433)


Depreciation and amortization												(7,098)
Loss on disposal of property, equipment, and software												(15)
Interest expense, net												(21,105)

Income tax expense												(3,152)
Net income												$	9,264

(1) Revenue in the Corp & Elims division represents intercompany revenue eliminated between segments primarily for lead generation referrals from InsideResponse (within Senior) to the other segments.

(3) These expenses primarily consist of costs related to the Senior Secured Credit Facility and non-restructuring severance expenses.

Nine Months Ended March 31, 2024:


(in thousands)	Senior		Healthcare Services		Life		Auto & Home		Corp & Elims			Consolidated
Revenue	$	541,705	$	333,284	$	115,855	$	28,649	$	(4,926)	(1)	$	1,014,567
Operating expenses	(402,834)		(326,373)		(102,910)		(16,994)		(62,770)		(2)	(911,881)
Other income (expense), net	—		—		—		(1)		(50)			(51)
Adjusted EBITDA	$	138,871	$	6,911	$	12,945	$	11,654	$	(67,746)		$	102,635
Share-based compensation expense												(10,512)
Transaction costs(3)												(7,629)


Depreciation and amortization												(18,591)
Loss on disposal of property, equipment, and software												(13)
Interest expense, net												(70,141)

Income tax benefit												1,143
Net loss												$	(3,108)

(1) Revenue in the Corp & Elims division represents intercompany revenue eliminated between segments primarily for lead generation referrals from InsideResponse (within Senior) to the other segments.

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(3) These expenses primarily consist of financing transaction costs and non-restructuring severance expenses.

Nine Months Ended March 31, 2023:


(in thousands)	Senior		Healthcare Services		Life		Auto & Home		Corp & Elims			Consolidated
Revenue	$	486,541	$	169,270	$	107,780	$	23,128	$	(5,649)	(1)	$	781,070
Operating expenses	(347,608)		(193,726)		(91,409)		(15,812)		(52,270)		(2)	(700,825)
Other income (expense), net	—		—		—		(1)		(117)			(118)
Adjusted EBITDA	$	138,933	$	(24,456)	$	16,371	$	7,315	$	(58,036)		$	80,127
Share-based compensation expense												(8,525)
Transaction costs (3)												(3,003)


Depreciation and amortization												(21,087)
Loss on disposal of property, equipment, and software												(386)
Interest expense, net												(58,885)

Income tax benefit												1,053
Net loss												$	(10,706)

(1) Revenue in the Corp & Elims division represents intercompany revenue eliminated between segments primarily for lead generation referrals from InsideResponse (within Senior) to the other segments.

(3)These expenses primarily consist of costs related to the Fourth Amendment to the Senior Secured Credit Facility and non-restructuring severance expenses.

The following table depicts the disaggregation of revenue by segment and product for the periods presented:

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	Three Months Ended March 31,								Nine Months Ended March 31,
(dollars in thousands)	2024		2023		$		%		2024		2023		$		%
Senior:
Commission revenue:
Medicare advantage	$	184,740	$	156,014	$	28,726	18	%	$	477,081	$	412,850	$	64,231	16	%
Medicare supplement	1,027		417		610		146	%	2,965		1,588		1,377		87	%
Prescription drug plan	324		203		121		60	%	697		481		216		45	%
Dental, vision, and health	845		1,185		(340)		(29)	%	2,599		3,203		(604)		(19)	%
Other commission revenue	588		726		(138)		(19)	%	1,361		2,162		(801)		(37)	%
Total commission revenue	187,524		158,545		28,979		18	%	484,703		420,284		64,419		15	%

Total other revenue	16,735		26,655		(9,920)		(37)	%	57,002		66,257		(9,255)		(14)	%
Total Senior revenue	204,259		185,200		19,059		10	%	541,705		486,541		55,164		11	%
Healthcare Services:
Total pharmacy revenue	120,282		66,948		53,334		80	%	323,865		159,641		164,224		103	%
Total other revenue	3,925		3,777		148		4	%	9,419		9,629		(210)		(2)	%
Total Healthcare Services revenue	124,207		70,725		53,482		76	%	333,284		169,270		164,014		97	%
Life:
Commission revenue:
Term	17,789		17,678		111		1	%	55,016		49,371		5,645		11	%
Final expense	17,537		13,804		3,733		27	%	46,139		44,357		1,782		4	%
Total commission revenue	35,326		31,482		3,844		12	%	101,155		93,728		7,427		8	%

Total other revenue	5,360		5,468		(108)		(2)	%	14,700		14,052		648		5	%
Total Life revenue	40,686		36,950		3,736		10	%	115,855		107,780		8,075		7	%
Auto & Home:
Total commission revenue	8,746		7,895		851		11	%	27,836		21,940		5,896		27	%

Total other revenue	388		343		45		13	%	813		1,188		(375)		(32)	%
Total Auto & Home revenue	9,134		8,238		896		11	%	28,649		23,128		5,521		24	%
Eliminations:
Total commission revenue	(833)		(664)		(169)		25	%	(1,950)		(2,325)		375		(16)	%

Total other revenue	(1,053)		(1,051)		(2)		—	%	(2,976)		(3,324)		348		(10)	%
Total Elimination revenue	(1,886)		(1,715)		(171)		10	%	(4,926)		(5,649)		723		(13)	%
Total commission revenue	230,763		197,258		33,505		17	%	611,744		533,627		78,117		15	%

Total pharmacy revenue	120,282		66,948		53,334		80	%	323,865		159,641		164,224		103	%
Total other revenue	25,355		35,192		(9,837)		(28)	%	78,958		87,802		(8,844)		(10)	%
Total revenue	$	376,400	$	299,398	$	77,002	26	%	$	1,014,567	$	781,070	$	233,497	30	%

Revenue by Segment

Three Months Ended March 31, 2024 and 2023–Revenue from Senior was $204.3 million for the three months ended March 31, 2024, a $19.1 million, or 10%, increase compared to revenue of $185.2 million for the three months ended March 31, 2023. The increase was primarily due to a $29.0 million, or 18%, increase in commission revenue offset by a $9.0 million decrease in production bonus revenue.

Revenue from Healthcare Services was $124.2 million for the three months ended March 31, 2024, a $53.5 million, or 76%, increase compared to revenue of $70.7 million for the three months ended March 31, 2023, primarily due to a $53.3 million increase in SelectRx pharmacy revenue.

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Revenue from Life was $40.7 million for the three months ended March 31, 2024, a $3.7 million, or 10%, increase compared to revenue of $37.0 million for the three months ended March 31, 2023, primarily due to a $3.8 million increase in commission revenue.

Revenue from Auto & Home was $9.1 million for the three months ended March 31, 2024, a $0.9 million, or 11%, increase compared to revenue of $8.2 million for the three months ended March 31, 2023, primarily due to a $0.9 million increase in commission revenue.

Nine Months Ended March 31, 2024 and 2023–Revenue from Senior was $541.7 million for the nine months ended March 31, 2024, a $55.2 million, or 11%, increase compared to revenue of $486.5 million for the nine months ended March 31, 2023. The increase was due to a $64.4 million, or 15%, increase in commission revenue offset by a $6.8 million decrease in production bonus revenue.

Revenue from Healthcare Services was $333.3 million for the nine months ended March 31, 2024, a $164.0 million, or 97%, increase compared to revenue of $169.3 million for the nine months ended March 31, 2023, primarily due to a $164.2 million increase in SelectRx pharmacy revenue.

Revenue from Life was $115.9 million for the nine months ended March 31, 2024, a $8.1 million, or 7%, increase compared to revenue of $107.8 million for the nine months ended March 31, 2023, due to $0.6 million increase in production bonus revenue and a $7.4 million increase in commission revenue.

Revenue from Auto & Home was $28.6 million for the nine months ended March 31, 2024, a $5.5 million, or 24%, increase compared to revenue of $23.1 million for the nine months ended March 31, 2023, primarily due to a $5.9 million increase in commission revenue.

Adjusted EBITDA by Segment

Three Months Ended March 31, 2024 and 2023–Adjusted EBITDA from Senior was $61.5 million for the three months ended March 31, 2024, a $2.3 million increase compared to Adjusted EBITDA of $59.2 million for the three months ended March 31, 2023. The increase in Adjusted EBITDA was due to a $19.1 million increase in revenue as discussed above offset by a $16.7 million increase in operating costs and expenses primarily due to a $13.3 million increase in marketing and advertising costs and a $3.2 million increase in compensation costs.

Adjusted EBITDA from Healthcare Services was $1.6 million for the three months ended March 31, 2024, a $5.0 million increase compared to Adjusted EBITDA of $(3.4) million for the three months ended March 31, 2023. The increase in Adjusted EBITDA was due to a $53.5 million increase in revenue as discussed above, offset a $48.5 million increase in operating costs and expenses primarily as a result of a $37.0 million increase in medication costs and a $7.9 million increase in compensation costs in support of the growth of SelectRx.

Adjusted EBITDA from Life was $3.1 million for the three months ended March 31, 2024, a $2.2 million decrease compared to Adjusted EBITDA of $5.3 million for the three months ended March 31, 2023. The decrease in Adjusted EBITDA was due to a $6.1 million increase in operating costs and expenses primarily due to a $2.2 million increase in compensation costs and a $3.8 million increase in marketing and advertising costs, offset by a $3.7 million increase in revenue as discussed above.

Adjusted EBITDA from Auto & Home was $3.6 million for the three months ended March 31, 2024, a $1.0 million, or 39%, increase compared to Adjusted EBITDA of $2.6 million for the three months ended March 31, 2023. The increase in Adjusted EBITDA was due to a $0.9 million increase in revenue as discussed above and a $0.1 million decrease in operating costs and expenses primarily due to decreases in marketing and advertising costs ($0.2 million) and fulfillment costs ($0.1 million) offset by an increase in compensation costs ($0.3 million).

Nine Months Ended March 31, 2024 and 2023–Adjusted EBITDA from Senior was $138.9 million for the nine months ended March 31, 2024, and remained flat compared to the nine months ended March 31, 2023. Operating costs and expenses increased $55.2 million, primarily due to a $39.1 million increase in marketing and

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advertising costs and a $15.6 million increase in compensation costs. This was offset by a $55.2 million increase in revenue as discussed above.

Adjusted EBITDA from Healthcare Services was $6.9 million for the nine months ended March 31, 2024, a $31.4 million increase compared to Adjusted EBITDA of $(24.5) million for the nine months ended March 31, 2023. The increase in Adjusted EBITDA was due to a $164.0 million increase in revenue as discussed above, offset by a $132.6 million increase in operating costs and expenses primarily as a result of a $117.7 million increase in medication costs and a $5.5 million increase in fulfillment costs in support of the growth of SelectRx.

Adjusted EBITDA from Life was $12.9 million for the nine months ended March 31, 2024, a $3.4 million decrease compared to Adjusted EBITDA of $16.4 million for the nine months ended March 31, 2023. The decrease in Adjusted EBITDA was due to a $11.5 million increase in operating costs and expenses primarily due to a $5.3 million increase in compensation costs and a $5.7 million increase in marketing and advertising costs offset by a $8.1 million increase in revenue as discussed above.

Adjusted EBITDA from Auto & Home was $11.7 million for the nine months ended March 31, 2024, a $4.3 million, or 59%, increase compared to Adjusted EBITDA of $7.3 million for the nine months ended March 31, 2023. The increase in Adjusted EBITDA was due to a $5.5 million increase in revenue as discussed above, offset by a $1.2 million increase in operating costs and expenses due to a $1.4 million increase in compensation costs.

Liquidity and Capital Resources

Our liquidity needs primarily include working capital and debt service requirements. We believe that the cash available under the Senior Secured Credit Facility will be sufficient to meet our projected operating and debt service requirements for at least the next 12 months. Additionally, we are required under the Senior Secured Credit Facility to maintain compliance with certain debt covenants, as discussed further in Note 7 to the condensed consolidated financial statements. Based on our financial projections, we believe we will remain in compliance with the debt covenants through the 12 months following the date of issuance of our condensed consolidated financial statements.

We do not expect to generate sufficient cash flows from operations to enable us to repay all outstanding amounts under the Senior Secured Credit Facility at the time of its maturity on May 15, 2025. If we are unable to secure additional financing from outside sources or otherwise refinance the Senior Secured Credit Facility, we will need to obtain additional capital through other means, including by selling one or more material assets or substantially reducing the scope of certain of our operations. If we are unable to satisfy our repayment obligations under the Senior Secured Credit Facility or maintain compliance with the covenants therein, we may be in default, which would significantly affect our liquidity.

As of March 31, 2024 and June 30, 2023, our cash and cash equivalents totaled $37.8 million and $83.2 million, respectively. Additionally, the following table presents a summary of our cash flows for the periods presented below:


	Nine Months Ended March 31,
(in thousands)	2024		2023
Net cash used in operating activities	$	(4,759)	$	(12,835)
Net cash used in investing activities	$	(8,926)	$	(6,860)
Net cash used in financing activities	$	(31,663)	$	(29,254)

Operating Activities

Net cash used in operating activities primarily consists of net income, adjusted for certain non-cash items including depreciation; amortization of intangible assets and internally developed software; deferred income taxes;

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share-based compensation expense; impairment charges; and the effect of changes in working capital and other activities.

Collection of commissions receivable depends upon the timing of our receipt of commission payments and associated commission statements from our insurance carrier partners. If we were to experience a delay in receiving a commission payment from an insurance carrier partner within a quarter, our operating cash flows for that quarter could be adversely impacted.

A significant portion of our marketing and advertising expenses is driven by the number of leads required to generate the insurance applications we submit to our insurance carrier partners. Our marketing and advertising costs are expensed and generally paid as incurred and since commission revenue is recognized upon approval of a policy but commission payments are paid to us over time, there are working capital requirements to fund the upfront cost of acquiring new policies. During AEP, we experience an increase in the number of submitted Senior insurance applications and marketing and advertising expenses compared to periods outside of AEP. The timing of AEP affects the positive or negative impacts of our cash flows during each quarter.

Nine Months Ended March 31, 2024—Net cash used in operating activities was $4.8 million, consisting of a net loss of $3.1 million, adjustments for non-cash items of $48.4 million, and cash used in operating assets and liabilities of $50.0 million. Adjustments for non-cash items primarily consisted of $18.6 million of depreciation and amortization, $10.5 million of share-based compensation expense, $14.3 million of accrued interest payable in kind, $4.9 million of amortization of debt issuance costs and debt discount, and $1.9 million of non-cash lease expense, offset by $2.2 million in deferred income taxes. The cash decrease resulting from changes in net operating assets and liabilities primarily consisted of a $98.5 million increase in accounts receivable, net, offset by a $36.1 million increase in accounts payable and accrued expenses, an $11.5 million increase in other liabilities due to an increase in accrued compensation, and a $7.4 million decrease in commissions receivables.

Nine Months Ended March 31, 2023—Net cash used in operating activities was $12.8 million, consisting of net loss of $10.7 million, adjustments for non-cash items of $47.1 million, and cash used in operating assets and liabilities of $49.2 million. Adjustments for non-cash items primarily consisted of $21.1 million of depreciation and amortization, $8.5 million of share-based compensation expense, $8.5 million of accrued interest payable in kind on the Term Loans, $6.3 million of amortization of debt issuance costs and debt discount as a result of amendments to the Senior Secured Credit Facility, and $3.1 million of non-cash lease expense, offset by $1.4 million in deferred income taxes. The cash decrease resulting from changes in net operating assets and liabilities primarily consisted of an increase of $62.7 million in accounts receivable, net and a decrease of $8.9 million in other liabilities, partially offset by a decrease of $17.1 million in commissions receivable and an increase of $6.4 million in accounts payable and accrued expenses.

Investing Activities

Our investing activities primarily consist of purchases of property, equipment, and software and capitalized salaries related to the development of internal-use software.

Nine Months Ended March 31, 2024—Net cash used in investing activities of $8.9 million was due to $6.1 million in purchases of software and capitalized internal-use software development costs and $3.1 million of purchases of property and equipment, primarily equipment utilized in SelectRx operations, leasehold improvements, and computer equipment.

Nine Months Ended March 31, 2023—Net cash used in investing activities of $6.9 million was due to $1.1 million of purchases of property and equipment, primarily to support the growth of SelectRx infrastructure, and $5.8 million in purchases of software and capitalized internal-use software development costs.

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Financing Activities

Our financing activities primarily consist of payments of debt and related issuance costs and proceeds and payments related to share-based compensation.

Nine Months Ended March 31, 2024—Net cash used in financing activities of $31.7 million was primarily due to $30.4 million of principal payments on the Term Loans.

Nine Months Ended March 31, 2023—Net cash used in financing activities of $29.3 million was primarily due to $10.1 million of debt issuance costs related to the Fourth Amendment to the Senior Secured Credit Facility, $17.8 million of principal payments on the Term Loans, and $2.3 million of holdback remitted as part of the Express Med acquisition, partially offset by $1.2 million in proceeds from common stock options exercised and the employee stock purchase plan.

Senior Secured Credit Facility

We entered into the Senior Secured Credit Facility to provide access to cash, in a variety of methods, when necessary to fund the operations of the business. There were no amounts outstanding under the Revolving Credit Facility as of March 31, 2024. As of March 31, 2024, there was $691.4 million outstanding under the Term Loans. Refer to Note 7 to the condensed consolidated financial statements for further details.

Our risk management strategy includes entering into interest rate swap agreements to protect against unfavorable interest rate changes relating to forecasted debt transactions. The Company's Amended Interest Rate Swap is designated as a cash flow hedge of the interest payments on $325.0 million in principal of the Term Loans. Refer to Note 7 to the condensed consolidated financial statements for further details.

On May 8, 2024, the Company and certain of its existing lenders, Wilmington Trust, National Association, as Administrative and Collateral Agent, and certain other parties to the Senior Secured Credit Facility named therein, including the guarantors party thereto, entered into the Ninth Amendment to the Senior Secured Credit Facility (the “Ninth Amendment”). Pursuant to the Ninth Amendment, the maturity date was extended to May 15, 2025 on the $683.8 million class of extended term loans, a minimum asset coverage ratio covenant as of March 31, 2025 was added, and minimum liquidity covenants as of February 28, 2025, March 31, 2025, and April 30, 2025 were added. Pursuant to the amendment, the Company paid fees of $0.7 million to its lenders.

Contractual Obligations

Other than the discussions in Note 8 and Note 10 to the condensed consolidated financial statements, as of March 31, 2024, there have been no material changes to our contractual obligations as previously described in our Annual Report.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements during the period covered by this report.

Recent Accounting Pronouncements

For a discussion of new accounting pronouncements recently adopted and not yet adopted, see the notes to our condensed consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

We are primarily exposed to the market risk associated with unfavorable movements in interest rates. The risk inherent in our market risk-sensitive instruments and positions is the potential loss or increased expense arising

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from adverse changes in those factors. There have been no material changes to our market risk policies or our market risk-sensitive instruments and positions as described in our Annual Report.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Our Disclosure Controls and Procedures

As of March 31, 2024, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) was carried out by our management, with the participation of our chief executive officer (principal executive officer) and our chief financial officer (principal financial and accounting officer). Based upon our management's evaluation, our chief executive officer and our chief financial officer have concluded that as of the end of the period covered by this report, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only a reasonable level of assurance of achieving their desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the third quarter of fiscal 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

A discussion of legal proceedings to which the Company is a party is included in Part I, Item 1 hereof under “Note 8, Commitments and Contingencies – Legal Contingencies and Obligations,” which is incorporated herein by reference.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors set forth in our Annual Report. Before investing in our securities, we recommend that investors carefully consider the risks described in our Annual Report, including those under the heading “Risk Factors.” Realization of any of these risks and any additional risks and uncertainties not currently known to us or that we have deemed to be immaterial could have a material adverse effect on our business, financial condition, or results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

During the fiscal quarter ended March 31, 2024, none of our officers or directors adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (each as defined in Item 408 of Regulation S-K).

Ninth Amendment to Senior Secured Credit Facility

On May 8, 2024, the Company and certain of its existing lenders, Wilmington Trust, National Association, as Administrative and Collateral Agent, and certain other parties to the Senior Secured Credit Facility named therein, including the guarantors party thereto, entered into the Ninth Amendment to the Senior Secured Credit Facility (the “Ninth Amendment”). Pursuant to the Ninth Amendment, the maturity date was extended to May 15, 2025 on the $683.8 million class of extended term loans, a minimum asset coverage ratio covenant as of March 31, 2025 was added, and minimum liquidity covenants as of February 28, 2025, March 31, 2025, and April 30, 2025 were added. Pursuant to the amendment, the Company paid fees of $0.7 million to its lenders.

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ITEM 6. EXHIBITS

The following documents listed below are incorporated by reference or are filed or furnished, as applicable, with this Quarterly Report on Form 10-Q.


Exhibit Number						Exhibit Description
10.1						Ninth Amendment to Credit Agreement, dated as of May 8, 2024, by and among SelectQuote, Inc., the lenders and other parties thereto, and Wilmington Trust, National Association, as administrative agent
31.1						Certification of Chief Executive Officer of SelectQuote, Inc. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2						Certification of Chief Financial Officer of SelectQuote, Inc. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1†						Certification of Chief Executive Officer of SelectQuote, Inc. Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2†						Certification of Chief Financial Officer of SelectQuote, Inc. Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS						XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

† The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q, are not deemed filed with the SEC and are not to be incorporated by reference into any filing of SelectQuote, Inc. under the Securities Act or the Exchange Act, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			SELECTQUOTE, INC.
May 9, 2024			By: /s/ Tim Danker
			Name: Tim Danker
			Title: Chief Executive Officer

			By: /s/ Ryan Clement
			Name: Ryan Clement
			Title: Chief Financial Officer

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SelectQuote (SLQT) 10-Q2024 Q3 Quarterly report

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