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What changed in SelectQuote, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of SelectQuote, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+401 added−417 removedSource: 10-K (2023-09-13) vs 10-K (2022-08-29)

Top changes in SelectQuote, Inc.'s 2023 10-K

401 paragraphs added · 417 removed · 307 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

89 edited+19 added−22 removed107 unchanged
Biggest changeThere are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following: • The ultimate duration and impact of the ongoing COVID-19 pandemic and any other significant public health events; • Our reliance on a limited number of insurance carrier partners and any potential termination of those relationships or failure to develop new relationships; • Existing and future laws and regulations affecting the health insurance market; • Changes in health insurance products offered by our insurance carrier partners and the health insurance market generally; • Insurance carriers offering products and services directly to consumers; • Changes to commissions paid by insurance carriers and underwriting practices; • Competition with brokers, exclusively online brokers and carriers who opt to sell policies directly to consumers; • Competition from government-run health insurance exchanges; • Developments in the U.S. health insurance system; • Our dependence on revenue from carriers in our Senior segment and downturns in the senior health as well as life, automotive and home insurance industries; • Our ability to develop new offerings and penetrate new vertical markets; • Risks from third-party products; • Failure to enroll individuals during the Medicare annual enrollment period; • Our ability to attract, integrate and retain qualified personnel; 18 Table of Contents • Our dependence on lead providers and ability to compete for leads; • Failure to obtain and/or convert sales leads to actual sales of insurance policies; • Access to data from consumers and insurance carriers; • Accuracy of information provided from and to consumers during the insurance shopping process; • Cost-effective advertisement through internet search engines; • Ability to contact consumers and market products by telephone; • Global economic conditions, including inflation; • Disruption to operations as a result of future acquisitions; • Significant estimates and assumptions in the preparation of our financial statements; • Impairment of goodwill; • Potential litigation and other legal proceedings or inquiries; • Our existing and future indebtedness; • Access to additional capital; • Failure to protect our intellectual property and our brand; • Fluctuations in our financial results caused by seasonality; • Accuracy and timeliness of commissions reports from insurance carriers; • Timing of insurance carriers’ approval and payment practices; • Factors that impact our estimate of the constrained lifetime value of commissions per policyholder; • Changes in accounting rules, tax legislation and other legislation; • Disruptions or failures of our technological infrastructure and platform; • Failure to maintain relationships with third-party service providers; • Cybersecurity breaches or other attacks involving our systems or those of our insurance carrier partners or third-party service providers; • Our ability to protect consumer information and other data; • Failure to market and sell Medicare plans effectively or in compliance with laws; • Risks related to our being a public company; and • The other risk factors described under “Risk Factors.” 19 Table of Contents The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Annual Report on Form 10-K.
Biggest changeThere are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following: • Our reliance on a limited number of insurance carrier partners and any potential termination of those relationships or failure to develop new relationships; • Existing and future laws and regulations affecting the health insurance market; • Changes in health insurance products offered by our insurance carrier partners and the health insurance market generally; • Insurance carriers offering products and services directly to consumers; • Changes to commissions paid by insurance carriers and underwriting practices; • Competition from government-run health insurance exchanges and with brokers, exclusively online brokers and carriers who opt to sell policies directly to consumers; • Developments in the U.S. health insurance system; • Our dependence on revenue from carriers in our Senior segment and downturns in the senior health as well as life, automotive and home insurance industries; • Our ability to develop new offerings and penetrate new vertical markets; • Risks from third-party products; • Failure to enroll individuals during the Medicare annual enrollment period; • Our ability to attract, integrate and retain qualified personnel; • Our dependence on lead providers and ability to compete for leads; • Failure to obtain and/or convert sales leads to actual sales of insurance policies; • Access to data from consumers and insurance carriers; 18 Tabl e of Contents • Accuracy of information provided from and to consumers during the insurance shopping process; • Cost-effective advertisement through internet search engines; • Ability to contact consumers and market products by telephone; • Consumer demand for prescription drugs and our ability to meet such demand; • Global economic conditions, including inflation; • Disruption to operations as a result of future acquisitions; • Significant estimates and assumptions in the preparation of our financial statements; • Impairment of goodwill; • Potential litigation and other legal proceedings or inquiries; • Our existing and future indebtedness; • Access to additional capital; • Failure to protect our intellectual property and our brand; • Fluctuations in our financial results caused by seasonality; • Accuracy and timeliness of commissions reports from insurance carriers; • Timing of insurance carriers’ approval and payment practices; • Factors that impact our estimate of the constrained lifetime value of commissions per policyholder; • Changes in accounting rules, tax legislation and other legislation; • Disruptions or failures of our technological infrastructure and platform; • Failure to maintain relationships with third-party service providers; • Cybersecurity breaches or other attacks involving our systems or those of our insurance carrier partners or third-party service providers; • Our ability to protect consumer information and other data; • Failure to market and sell Medicare plans effectively or in compliance with laws; • Risks related to our being a public company; and • The other risk factors described under “Risk Factors.” The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Annual Report on Form 10-K.
Operating within SelectCare are the following purpose-built systems: • SelectBid: Advanced, data-enriched lead scoring and purchasing tool that provides real-time feedback to help us determine which consumers and campaigns are generating the most valuable opportunities, allowing us to optimize marketing spend. • Get A Lead : Customized, purpose-built lead routing and workflow management technology based on lead quality, agent performance and agent availability.
Operating within SelectCare are the following purpose-built systems: • SelectBid: Advanced, data-enriched lead scoring and purchasing tool that provides real-time feedback to help us determine which consumers and campaigns are generating the most valuable opportunities, allowing us to optimize marketing spend. • Get A Lead (“GAL”) : Customized, purpose-built lead routing and workflow management technology based on lead quality, agent performance and agent availability.
Our agents are segmented into multiple levels based on their productivity, with the most productive agents given first access to the highest quality leads. In our Senior segment, level one agents demonstrate higher productivity and close rates and lower attrition than similarly situated Senior agents in levels below them.
Our agents are segmented into multiple levels based on their productivity, with the most productive agents given first access to the highest quality leads. In our Senior segment, level one agents demonstrate higher productivity, close rates, retention rates, and lower attrition than similarly situated Senior agents in levels below them.
ITEM 1. BUSINESS Overview SelectQuote, Inc. (together with its subsidiaries, “SelectQuote”, the “Company”, “we”, “us”) is a leading technology-enabled, direct-to-consumer (“DTC”) distribution platform for insurance products and healthcare services.
ITEM 1. BUSINESS Overview SelectQuote, Inc. (together with its subsidiaries, “SelectQuote”, the “Company”, “we”, “us”) is a leading technology-enabled, direct-to-consumer (“DTC”) distribution and engagement platform for insurance products and healthcare services.
We entered the prescription drug market in 2021 through our acquisition of two boutique pharmaceutical operations, now combined under the brand “SelectRx.” We estimate the total addressable pharmaceutical market in the United States to be over $500 billion.
We entered the prescription drug market in 2021 through our acquisition of two boutique pharmaceutical operations, combined under the brand “SelectRx.” We estimate the total addressable pharmaceutical market in the United States to be over $500 billion.
Within our Auto & Home segment, we have been successful in bundling products (selling multiple products to the same customer), with bundle rates over each of the last three years of 49%, 51%, and 51%, respectively.
Within our Auto & Home segment, we have been successful in bundling products (selling multiple products to the same customer), with bundle rates over each of the last three years of 55%, 49%, and 51%, respectively.
We are subject to various state and federal laws and regulations governing pharmacies and providers of pharmacy care services, including applicable Medicare provider regulations, state and federal anti-kickback laws, and regulations governing the labeling, packaging, advertising, and adulteration of prescription drugs.
Pharmacy and Pharmacy Care Services Regulation. We are subject to various state and federal laws and regulations governing pharmacies and providers of pharmacy care services, including applicable Medicare provider regulations, state and federal anti-kickback laws, and regulations governing the labeling, packaging, advertising, and adulteration of prescription drugs.
For the year ended June 30, 2021, we sold over 625,000 policies for our Senior insurance carrier partners and produced more than $223 million in new premium for our Life and Auto & Home insurance carrier partners.
For the year ended June 30, 2021, we sold more than 625,000 policies for our Senior insurance carrier partners and produced more than $223 million in new premium for our Life and Auto & Home insurance carrier partners.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are also available free of charge on our investor relations website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. 17 Table of Contents CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Unless the context otherwise requires, we use the terms “SelectQuote,” the “Company,” “we,” “us” and “our” in this report to refer to SelectQuote, Inc.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are also available free of charge on our investor relations website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. 17 Tabl e of Contents CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Unless the context otherwise requires, we use the terms “SelectQuote,” the “Company,” “we,” “us” and “our” in this report to refer to SelectQuote, Inc.
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.
We monitor our acquisition costs to dynamically allocate our marketing spend to the most attractive channels, benefiting from over 35 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.
Direct distribution is becoming an increasingly important part of the overall distribution strategies of insurance carriers as they drive to lower customer acquisition costs. Internet and mobile devices enable distributors to target and reach consumers directly in a highly controlled and efficient manner.
DTC distribution is becoming an increasingly important part of the overall distribution strategies of insurance carriers as they drive to lower customer acquisition costs. Internet and mobile devices enable distributors to target and reach consumers directly in a highly controlled and efficient manner.
As our value proposition has grown, our insurance carrier partners have come to rely more on our distribution capabilities and have collaborated with us more deeply in product design, helping fuel our growth. We expect this virtuous cycle to continue as we execute on our mission.
As our value proposition has grown, our insurance carrier partners have come to rely more on our distribution capabilities and have partnered with us more deeply in product design, helping fuel our growth. We expect this virtuous cycle to continue as we execute on our mission.
As of June 30, 2022, our dedicated CCA team was comprised of 225 professionals who aim to improve the consumer experience during the post-sale carrier onboarding process, drive improved retention in the out years and improve cross selling opportunities. A number of the CCA team members are former licensed agents already familiar with the business and the consumer journey.
As of June 30, 2023, our dedicated CCA team was comprised of over 225 professionals who aim to improve the consumer experience during the post-sale carrier onboarding process, drive improved retention in the out years and improve cross selling opportunities. A number of the CCA team members are former licensed agents already familiar with the business and the consumer journey.
We believe that our use of proprietary technology to monitor, segment and enhance agent performance, such as through real-time lead routing to the most effective agents, is a key competitive advantage and driver of our business performance.
We believe that our use of proprietary technology to monitor, segment and enhance agent performance, such as through real-time lead routing to the most effective agents, is a key driver of our business performance.
SelectQuote Life (“Life”) is one of the country’s largest and most established DTC insurance distributors for term life insurance, having sold over 2.1 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.
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.
Since then, in addition to introducing a range of other life insurance products, SelectQuote expanded into the fast-growing senior health insurance market (in 2010) and auto & home insurance market (in 2011). Today we provide consumers with access to over 40 insurance products sourced from over 50 carriers.
Since then, in addition to introducing a range of other life insurance products, SelectQuote expanded into the fast-growing senior health insurance market (in 2010) and auto & home insurance market (in 2011). Today we provide consumers with access to over 50 insurance products sourced from approximately 70 carriers.
In each of our three segments, we estimate our market share to be less than 2.5%, and we believe we can benefit from greater market penetration in addition to underlying market growth.
In each of our four segments, we estimate our market share to be less than 2.5%, and we believe we can benefit from greater market penetration in addition to underlying market growth.
We are highly focused on the consumer experience and believe that customer satisfaction is a key vehicle for maximizing cross-sell opportunities and repeat business. We believe there are natural synergies across our portfolio of products, and we are focused on increasing cross-selling across our existing customer base.
Deepen consumer penetration and drive cross-selling opportunities. We are highly focused on the consumer experience and believe that customer satisfaction is a key vehicle for maximizing cross-sell opportunities and repeat business. We believe there are natural synergies across our portfolio of products, and we are focused on increasing cross-selling across our existing customer base.
Our software allows our agents to have more effective interactions with customers, driving agent productivity and sales volumes and providing an attractive distribution alternative for our insurance carrier partners. While traditional insurance distributors use a time-intensive, in-person purchasing process, consumers are increasingly researching insurance policies for their needs online and, ultimately, purchasing through direct channels.
Our software allows our agents to have more effective interactions with customers, driving agent productivity, sales volume, and providing an attractive distribution alternative for our insurance carrier partners. While traditional insurance distributors use a time-intensive, in-person purchasing process, consumers are increasingly researching insurance policies for their needs online and, ultimately, purchasing through DTC channels.
We believe the senior healthcare market also presents a significant opportunity to grow our business by offering additional products and resources through our distribution platform.
Healthcare Services Market We believe the healthcare market also presents a significant opportunity to grow our business by offering additional products and resources through our distribution platform.
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.
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 digital marketing, radio, television, and third-party marketing partners.
During our most recent fiscal years, our primary insurance carrier partners in our Senior segment were carriers owned by Humana, UnitedHealthcare, Aetna, and Wellcare, the primary insurance carrier partners in our Life segment were CUNA, Pacific Life, and carriers owned by Mutual of Omaha, and the primary insurance carrier partners in our Auto & Home segment were Travelers, Safeco, and Allied/Nationwide.
During our most recent fiscal years, our primary insurance carrier partners in our Senior segment were carriers owned by UnitedHealthcare, Humana, WellCare, and Aetna, the primary insurance carrier partners in our Life segment were carriers owned by Mutual of Omaha, CUNA, and Pacific Life, and the primary insurance carrier partners in our Auto & Home segment were Travelers, SafeCo, and Progressive.
In addition to maintaining an effective recruitment function to ensure our ability to hire enough agents to support our business 13 Table of Contents goals, we believe the value of our agent force is maximized when we prioritize the performance and satisfaction of our agents.
In addition to maintaining an effective recruitment function to ensure our ability to hire enough agents to support our business goals, we believe the value of our agent force is maximized when we prioritize the performance and satisfaction of our agents.
Lead Acquisition : We utilize a broad policyholder acquisition funnel strategy, generating new business leads through a wide variety of online and offline marketing channels, such as search engine, television, radio advertising and third-party marketing partners.
Lead Acquisition : We utilize a broad policyholder acquisition funnel strategy, generating new business leads through a wide variety of online and offline marketing channels, such as digital marketing, television, radio advertising and third-party marketing partners.
We believe we are unique for our diverse product range, which provides us with greater stability as demand for certain products and customers’ needs fluctuate. Deep and broad insurance carrier partnerships. We are a key distribution partner for over 50 of the largest and most respected blue-chip insurance carriers.
We believe we are unique for our diverse product range, which provides us with greater stability as demand for certain products and customers’ needs fluctuate. Deep and broad insurance carrier partnerships. We are a key distribution partner for approximately 70 of the largest and most respected blue-chip insurance carriers.
If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Many of the important factors that will determine these results are beyond our ability to control or predict.
If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Many of the important factors that will determine these results are beyond our ability to 19 Tabl e of Contents control or predict.
We have a high degree of visibility into the commission we earn at the time of sale, as well as the renewal commissions we would earn should a policyholder renew his or her policy. Our CCA team’s efforts enhance the policyholder experience and thereby improve policyholder retention and our opportunity to generate renewal commissions.
We have a high degree of visibility into the commission we earn at the time of sale, as well as the renewal commissions we would earn should a policyholder renew his or her policy. Our CCA team’s efforts enhance the policyholder experience and 12 Tabl e of Contents thereby improve policyholder retention and our opportunity to generate renewal commissions.
Accordingly, we can benefit not only from broad growth in Medicare and the increasing penetration of Medicare 9 Table of Contents Advantage plans, but we can also achieve growth through market share gains in the distribution of Medicare Advantage and Medicare Supplement products.
Accordingly, we can benefit not only from broad growth in Medicare and the increasing penetration of Medicare Advantage plans, but we can also achieve growth through market share gains in the distribution of Medicare Advantage and Medicare Supplement products.
Our software continuously monitors the cost of acquiring customers 6 Table of Contents and uses our algorithm to dynamically adjust our bids for specific leads based on our expectation of the lead’s lifetime value.
Our software continuously monitors the cost of acquiring customers and uses our algorithm to dynamically adjust our bids for specific leads based on our expectation of the lead’s lifetime value.
The Telephone Consumer Protection Act prohibits companies from making telemarketing calls to numbers listed in the Federal Do-Not-Call Registry and 16 Table of Contents imposes other obligations and limitations on making phone calls and sending text messages to consumers.
The Telephone Consumer Protection Act prohibits companies from making telemarketing calls to numbers listed in the Federal Do-Not-Call Registry and imposes other obligations and limitations on making phone calls and sending text messages to consumers.
In order to make sure that we are making decisions with the 12 Table of Contents best data possible, we partner with leading external industry consultants to review and validate our historical retention experience and projected performance.
In order to make sure that we are making decisions with the best data possible, we partner with leading external industry consultants to review and validate our historical retention experience and projected performance.
Homeowners and 12-month auto products accounted for 76% of new premium within the Auto & Home segment for the year ended June 30, 2022, with six-month auto, dwelling fire, and other products accounting for a majority of the remainder.
Homeowners and 12-month auto products accounted for 74% of new premium within the Auto & Home segment for the year ended June 30, 2023, with six-month auto, dwelling fire, and other products accounting for a majority of the remainder.
Our agents are also proactive in their outreach throughout the year which creates a deeper relationship with our consumers. Our Technology Technology is the second foundational pillar that supports our business. Our proprietary technology permeates our business process, from lead generation to scoring and routing, product selection and eventually to customer conversion, post-sale management, and cross-selling opportunities.
Our agents are also proactive in their outreach throughout the year which creates a deeper relationship with our consumers. Our Technology Our proprietary technology permeates our business process, from lead generation to scoring and routing, product selection and eventually to customer conversion, post-sale management, and cross-selling opportunities.
Increasing household financial obligations, rising healthcare costs, importance of health and well-being, and government and lender mandates for certain insurance coverage drive the need for the insurance products we distribute. These products are underwritten by leading insurance carrier partners that we carefully select across our three segments: SelectQuote Senior, SelectQuote Life and SelectQuote Auto & Home.
Increasing household financial obligations, rising healthcare costs, importance of health and well-being, and government and lender mandates for certain insurance coverage drive the need for the insurance products we distribute. These products are underwritten by our carefully selected insurance carrier partners across our three insurance distribution segments: Senior, Life, and Auto & Home.
Our unique platform then further enabled us to expand our business again in recent years to include Population Health and SelectRx. Our product segments are a natural fit with consumer insurance and healthcare needs across different life stages.
Our unique platform then further enabled us to expand our business again in recent years to include Population Health and SelectRx. Our product segments are a natural fit with consumer insurance and healthcare needs across different life 11 Tabl e of Contents stages.
Federal Privacy, Security, and Data Standards Regulation. We are subject, whether directly or indirectly, to numerous federal laws and regulations related to the privacy and security of health information.
We are subject, whether directly or indirectly, to numerous federal laws and regulations related to the privacy and security of health information.
Civil suits (including qui tam actions) and governmental or internal investigations or reviews of business processes related to these laws and regulations could, if resolved unfavorably, result in substantial monetary damages, negative publicity, and reduced operating flexibility, all of which could increase the Company’s cost of doing business and negatively affect our results of operations. 15 Table of Contents Pharmacy and Pharmacy Care Services Regulation.
Civil suits (including qui tam actions) and governmental or internal investigations or reviews of business processes related to these laws and regulations could, if resolved unfavorably, result in substantial monetary damages, negative publicity, and reduced operating flexibility, all of which could increase the Company’s cost of doing business and negatively affect our results of operations.
Our highly trained licensed agents are subject matter experts in the products they sell, and this, in combination with our purpose-built software and business process, differentiates the service we provide to consumers relative to other insurance distributors or “online only” offerings.
Working in tandem, our agents and technology systems are the foundation of our business. Our highly trained licensed agents are subject matter experts in the products they sell, and this, in combination with our purpose-built software and business process, differentiates the service we provide to consumers relative to other insurance distributors or “online only” offerings.
A large and relatively untapped opportunity is to deepen cross-sell of products to customers across our three segments, and we are currently employing technology and data designed to enable us to better track the customer life journey to allow us to identify and better execute on this opportunity. Grow Healthcare Services.
A large and relatively untapped opportunity is to deepen cross-sell of products to customers across all four of our segments, and we are currently employing technology and data designed to enable us to better track the customer life journey to allow us to identify and better execute on this opportunity.
Federal and state legislators regularly consider new regulations for the industry, including potential new legislation and regulations regarding the receipt or disclosure of rebates and other fees from pharmaceutical companies; the development and use of formularies and other utilization management tools; the use of average wholesale prices or other pricing benchmarks; pricing for specialty pharmaceuticals; limited access to networks; and pharmacy network reimbursement methodologies, any of which could materially affect current industry practices.
Federal and state legislators regularly consider new regulations for the industry, including potential new legislation and regulations regarding the receipt or disclosure of rebates and other fees from pharmaceutical companies; the development and use of formularies and other utilization management tools; the use of average wholesale prices or other pricing benchmarks; pricing for specialty pharmaceuticals; limited access to networks; and pharmacy network reimbursement methodologies, any of which could materially affect current industry practices. 15 Tabl e of Contents Federal Privacy, Security, and Data Standards Regulation.
GAL uses a targeted approach to rapidly assign consumers to a licensed agent. • Automated Rate Calculator (“ARC”)/Automated Quote Engine (“AQE”) : Real-time quoting and underwriting applications integrated directly into carrier systems.
GAL uses a targeted approach to rapidly assign consumers to a licensed agent. 10 Tabl e of Contents • Automated Rate Calculator (“ARC”)/Automated Quote Engine (“AQE”) : Real-time quoting and underwriting applications integrated directly into carrier systems.
Our Partners We maintain long-standing, deeply integrated relationships with over 50 of the nation’s leading insurance carriers, who have some of the industry’s most widely recognizable brands, including approximately 21 insurance carrier partners in our Senior segment, approximately 22 insurance carrier partners in our Life segment, and approximately 22 insurance carrier partners in our Auto & Home segment.
Our Partners We maintain long-standing, deeply integrated relationships with approximately 70 of the nation’s leading insurance carriers, who have some of the industry’s most widely recognizable brands, including approximately 25 insurance carrier partners in our Senior segment, approximately 20 insurance carrier partners in our Life segment, and approximately 25 insurance carrier partners in our Auto & Home segment.
SelectQuote Auto & Home (“Auto & Home”) was founded 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 22 leading, nationally recognized insurance carrier partners.
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.
The success of SelectRx to date not only demonstrates the strong opportunity for the further growth of our pharmacy business in the future but also illustrates the ability of our platform to serve as an effective means of introducing additional products and services to our consumers.
The success of SelectRx to date not only demonstrates the strong demand and opportunity for additional growth within our pharmacy business in the future but also demonstrates the ability of our platform to serve as a distribution vehicle and an effective means for introducing additional products and services to our consumers.
We have an attractive and scalable platform with strong consumer acquisition capabilities, backed by flexible systems that can be leveraged to introduce new product offerings. Our platform has funneled over 20,000 active subscribers to SelectRx since its launch in 2021, and our current production capacity can support another 75,000 subscribers.
We have an attractive and scalable platform with strong consumer acquisition capabilities, backed by flexible systems that can be leveraged to introduce new product offerings. Our platform has funneled more than 49,000 active members to SelectRx since its launch in 2021, and our current production capacity can support approximately 75,000 members.
Our focus on offering high-quality products has resulted in improved retention rates, increasing the value of our distribution model to insurance carrier partners. As discussed above, we believe Population Health will further deepen our relationships with our carrier partners by increasing plan loyalty and policy persistency, thereby reducing carriers’ costs. Deepen consumer penetration and drive cross-selling opportunities.
Our 13 Tabl e of Contents focus on offering high-quality products has resulted in improved retention rates, increasing the value of our distribution model to insurance carrier partners. As discussed above, we believe Population Health will further deepen our relationships with our carrier partners by increasing plan loyalty and policy persistency, thereby reducing carriers’ costs.
We represent approximately 22 leading, nationally-recognized insurance carrier partners, with many of these relationships exceeding 15 years. Term life policies accounted for 36% of new premium within Life for the year ended June 30, 2022, with final expense policies accounting for 64%.
We represent approximately 20 leading, nationally-recognized insurance carrier partners, with many of these relationships exceeding 15 years. Term life policies accounted for 47% of new premium within Life for the year ended June 30, 2023, with final expense policies accounting for 53%.
Our production facilities currently have the capacity to accommodate an additional 75,000 subscribers, offering ample opportunity to increase revenues as SelectRx continues to grow. The Medicare market also offers the opportunity to grow our business by connecting seniors with additional healthcare related products and services, including value-based care providers and resources for addressing social needs.
Our production facilities currently have the capacity to support approximately 75,000 members, offering ample opportunity to increase revenues as SelectRx continues to grow. 9 Tabl e of Contents The Medicare market also offers the opportunity to grow our business by connecting seniors with additional healthcare related products and services, including value-based care providers and resources for addressing social needs.
For the year ended June 30, 2020, we sold more than 315,000 policies for our Senior insurance carrier partners and produced more than $180 million in new premium for our Life and Auto & Home insurance carrier partners.
For the year ended June 30, 2023, we sold over 645,000 policies for our Senior insurance carrier partners and produced more than $195 million in new premium for our Life and Auto & Home insurance carrier partners.
Our insurance distribution business, which has operated continuously for over 35 years, provides consumers with a transparent and convenient venue to shop for complex senior health, life, and automobile and home insurance policies from a curated panel of the nation’s leading insurance carriers.
Our insurance distribution business, which has operated continuously for over 35 years, allows consumers to transparently and conveniently shop for senior health, life, and automobile and home insurance policies from a curated panel of the nation’s leading insurance carriers.
Not only is the population of people age 65 and higher growing, but according to Pew Research Center, internet usage within this group has also risen, with 75% using the internet in 2021 compared to 40% in 2009.
Not only is the population of people age 65 and higher growing, according to the Pew Research Center, internet usage among this group has risen, with 75% using the internet in 2021 compared to 40% in 2009. This group is also transacting more online, with 59% of people over age 65 making online purchases.
The insurance products we sell are often complicated, and each consumer has different needs. We believe the most effective method for matching products with each consumer’s needs requires the attention of highly trained and skilled agents, and we believe this training and expertise differentiates us from the traditional distribution model.
Our Agents 5 Tabl e of Contents The insurance products we sell are often complicated, and each consumer’s situation is unique. We believe the most effective method for matching products with each consumer’s needs requires the attention of highly trained and skilled agents, and we believe this training and expertise differentiates us from the traditional distribution model.
The proportion of the population that is age 65 or higher increased from 13% in 2010 to 16% in 2019 and reached 21% in 2030, according to the United States Census Bureau. On average, 11,000 “Baby Boomers” are expected to turn 65 every day, or nearly 4.2 million per year, for the next 10 years.
The proportion of the population that is age 65 or higher increased from 13% in 2010 to 17% in 2020 and is expected to reach 21% in 2030, according to the United States Census Bureau. On average, 11,000 “Baby Boomers” are expected to turn 65 every day, or nearly 4.2 million per year, through the end of the decade.
Despite our scale, we account for only a fraction of the total market for Medicare Advantage and Medicare Supplement plans, with only 0.7 million of the 36 million total enrollment for such plans in 2021, providing ample opportunity for growth. From 2020 to 2021, our Medicare Supplement and Medicare Advantage active policy count grew 43.7%.
Despite our scale, we account for only a fraction of the total market for Medicare Advantage plans, with only 0.8 million of the 28 million total enrollment for such plans in 2022, providing ample opportunity for growth. From 2021 to 2022, our Medicare Advantage active policy count grew 25.1%.
Accordingly, we have been able to improve our lead acquisition efficiency and scoring and workflow processing capabilities, which has enabled us to serve customers more efficiently and has improved the value proposition we offer to our insurance carrier partners.
As we have grown, we have continued to gather valuable data that has allowed us to further enhance our algorithms. Accordingly, we have been able to improve our lead acquisition efficiency and scoring and workflow processing capabilities, which has enabled us to serve customers more efficiently and has improved the value proposition we offer to our insurance carrier partners.
Regulation The sale of insurance products is a heavily regulated industry. Various aspects of our business are, may become, or may be viewed by regulators from time to time as being, subject, directly or indirectly, to U.S. federal, state, and foreign laws and regulations.
Various aspects of our business are, may become, or may be viewed by regulators from time to time as being, subject, directly or indirectly, to U.S. federal, state, and foreign laws and regulations.
This works in tandem with our customized, purpose-built lead routing and workflow management technology, Get A Lead (“GAL”). Based on lead score, agent level, and agent availability, GAL uses a “rapid fire approach” to quickly assign these leads to a licensed agent.
This works in tandem with our customized, purpose-built lead routing and workflow management technology. Based on lead score, agent level, and agent availability, our software quickly assigns these leads to a licensed agent.
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. Our proprietary routing and workflow system is a key competitive advantage and driver of our business performance.
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 believe we can realize additional growth by expanding our product offering through Population Health, and we intend to devote additional time and resources to these efforts in the coming years. Competition The market for distribution of insurance products is highly competitive, fragmented and evolving as consumers increasingly transact online.
We believe we can realize additional growth by expanding our product offerings through Population Health. Competition The market for distribution of insurance products is highly competitive, fragmented, and evolving as consumers increasingly transact online.
We believe what sets us apart from our competitors is our more than 35 years of proprietary data that our data scientists use as part of our bidding strategy for purchased leads, grouping phone and web leads by likelihood to purchase specific products, scoring phone and web leads using historical performance of similar leads based on demographics, tiering leads for routing to the corresponding agent levels, and performing predictive analysis of current customers’ persistency.
We believe what sets us apart from our competitors is our more than 35 years of proprietary data that our data scientists use as part of our bidding strategy for purchased leads, grouping phone and web leads by likelihood to purchase specific products, scoring phone and web leads using historical performance of similar leads based on demographics, tiering leads for routing to the corresponding agent levels, and performing predictive analysis of current customers’ persistency. 6 Tabl e of Contents Lead Management & Routing : Regardless of how a lead is generated, our proprietary software will score the lead in real time based on multiple factors, then route the lead to the most appropriate agent to maximize expected policyholder lifetime value.
Our sophisticated recruitment engine is employed nationally with our remote agent capability and involves personality tests, multiple interviews, and final 11 Table of Contents approval by a senior manager. Historically we have utilized flex agents in our Senior segment for AEP and OEP to capitalize on the heightened activity during these windows.
Our sophisticated recruitment engine is employed nationally with our remote agent capability and involves personality tests, multiple interviews, and final approval by a senior manager. Historically, we have hired additional agents in our Senior segment for our peak selling seasons, the Annual Enrollment Period (“AEP”) and the Open Enrollment Period (“OEP”), to capitalize on the heightened activity during these windows.
Policyholder lifetime value, which represents commissions estimated to be collected over the life of an approved policy, less the cost of acquiring the business is a key component of our overall profitability. Our goal is to maximize policyholder lifetime value, and we do so through strategies designed to maximize the revenue opportunity and minimize our customer acquisition cost.
Our Growth Strategy Maximize policyholder lifetime value. Policyholder lifetime value, which represents commissions estimated to be collected over the life of an approved policy, less the cost of acquiring the business is a key component of our overall profitability.
From 2006 to 2017, Medicare’s share of retail drug spending in the United States increased from 18% to 30%, amounting to more than $100 billion in 2017 alone. SelectRx, our closed-door long term care pharmacy focusing on Medicare patients with more than one chronic health condition, reached more than 25,000 active subscribers in its first year of operation.
From 2006 to 2017, Medicare’s share of retail drug spending in the United States increased from 18% to 30%, amounting to more than $100 billion in 2017 alone. SelectRx, our accredited Patient-Centered Pharmacy Home pharmacy, focusing on Medicare patients with more than one chronic health condition, reached more than 49,000 active members as of June 30, 2023.
Founded over 35 years ago as what we believe was the first DTC term life insurance exchange platform in the United States, our technology-driven, differentiated model allows consumers to easily compare pricing and policy options from over 50 of the nation’s leading insurance carriers. Working in tandem, our agents and technology systems are the foundational pillars of our business.
In addition, because we are not the issuer of the insurance policy to the consumer, we bear no underwriting risks. 4 Tabl e of Contents Founded over 35 years ago as what we believe was the first DTC term life insurance exchange platform in the United States, our technology-driven, differentiated model allows consumers to easily compare pricing and policy options from over 70 of the nation’s leading insurance carriers.
We expect these markets will continue to grow, in part due to a number of highly attractive demographic trends. The products marketed by our Life and Auto & Home segments also address large markets that present additional opportunities for growth, with annual commission revenue opportunities of approximately $105 billion and $47 billion, respectively.
The products marketed by our Life and Auto & Home segments 8 Tabl e of Contents also address large markets that present additional opportunities for growth, with annual commission revenue opportunities of approximately $105 billion and $47 billion, respectively.
We aim to differentiate our products and services on the basis of our agents’ ability, leveraging our technology platform, to match our consumers with insurance products we expect best match their needs. 14 Table of Contents Employees We are united by our mission to provide solutions that help consumers with their overall financial well-being and protect their most valued assets: their families, their health and their property, and our associates are vital to achieving this mission.
Employees We are united by our mission to provide solutions that help consumers with their overall financial well-being and protect their most valued assets: their families, their health and their property, and our associates are vital to achieving this mission.
SelectCare is our core overarching 10 Table of Contents proprietary customer relationship management (“CRM”) and parent system with phone bank, sales enablement/workflow optimization and reporting tools. SelectCare is a customized system that uses various algorithms to score leads, route them to agents and organize each agent’s work day, with the objective of maximizing return on investment.
SelectCare is a customized system that uses various algorithms to score leads, route them to agents and organize each agent’s work day, with the objective of maximizing return on investment.
SelectQuote Senior (“Senior”), our largest segment, 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 21 leading, nationally-recognized insurance carrier partners, including UnitedHealthcare, Wellcare, and Humana.
Additionally, through our Healthcare Services segment, we offer pharmaceutical and other healthcare-related services. 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 believe that our data and our technology are key competitive advantages and drivers of our business performance. We continue to upgrade and optimize our technology as new opportunities are identified by our Information Technology and Analytics teams.
We believe that our data and our technology are key competitive advantages and drivers of our business performance. We continue to upgrade and optimize our technology as new opportunities are identified by our Information Technology and Analytics teams. SelectCare is our core overarching proprietary customer relationship management (“CRM”) and parent system with phone bank, sales enablement/workflow optimization and reporting tools.
We enter into confidentiality and invention assignment agreements with our employees and enter into confidentiality agreements with third parties, including suppliers and other partners. We monitor our intellectual property regularly with the goal of ensuring all applicable registrations are maintained.
We enter into confidentiality and invention assignment agreements with our employees and enter into confidentiality agreements with third parties, including suppliers and other partners.
Within the growing Medicare market, Medicare Advantage plans are gaining prominence, as these private market solutions displace the traditional, government Medicare program. CSG Actuarial estimated that, at the end of 2019, there were approximately 34 million Medicare Advantage enrollees, representing approximately 44% penetration of the Medicare market.
Within the growing Medicare market, Medicare Advantage plans are gaining prominence, as these private market solutions displace the traditional, government Medicare program. According to the Kaiser Family Foundation, in 2022, there were more than 28 million Medicare Advantage enrollees, representing approximately 48% penetration of the Medicare market.
The key members of our management team have over 60 total years of industry experience and several members of our management team have worked together to build our business over the last ten years. Our Growth Strategy Maximize policyholder lifetime value.
Our company culture is promoted by a highly experienced management team with deep industry experience and a track record of industry innovation. The key members of our management team have over 60 total years of industry experience and several members of our management team have worked together to build our business over the last ten years.
We address this seasonal demand by recruiting additional sales agents, who are hired in our first quarter and trained for up to 10 weeks before they start selling during AEP in the second quarter.
The seasonality of the Senior segment’s operations is driven mainly by AEP, which takes place each year from mid-October to early January. We address this seasonal demand by recruiting additional sales agents, who are hired in our fourth quarter and trained for over 12 weeks before they start selling during AEP in the second quarter.
As a result, Medicare enrollment is growing steadily, with the number of Medicare enrollees expected to grow from 63 million in 2021 (up from 59 million in 2018 and 52.5 million in 2013), to approximately 82 million in 2030, according to CSG Actuarial, with 55% of people above 65 and older making online purchases monthly.
As a result, Medicare enrollment is growing steadily, with the number of Medicare enrollees expected to grow from 63 million in 2021 (up from 59 million in 2018) to approximately 75 million in 2030, according to the Centers for Medicare & Medicaid Services in June 2023.
For the years ended June 30, 2021 and 2020, this timeline resulted in 38% and 33%, respectively, of our total revenue being generated during the second quarter, and 43% and 38%, respectively, of Senior’s total revenue being generated during the second quarter.
For the years ended June 30, 2023, 2022, and 2021, this timeline resulted in 32%, 25%, and 38%, respectively, of our total consolidated revenue being generated during the second quarter (second quarter fiscal year 2022 was negatively impacted by a significant revenue cohort tail adjustment).
We are a diverse group of women and men who are united in our mission to provide solutions that help consumers with their overall financial well-being and protect their most valued assets. Through our recruiting processes, we are able to identify people who enjoy being a part of, and are motivated by, a performance-based, meritocratic organization.
Strong company culture developed by an experienced management team. We maintain a unique sales and consumer service-oriented culture. We are a diverse group of women and men who are united in our mission to provide solutions that help consumers with their overall financial well-being and protect their most valued assets.
As of June 30, 2022, we employed a total of 1,857 agents and 2,510 non-agent full-time equivalent employees. During AEP, we typically hire additional full-time employees and hired approximately 3,600 employees for the 2021 AEP (fiscal 2022). None of our employees are represented by any collective bargaining unit or are a party to a collective bargaining agreement.
As of June 30, 2023, we employed a total of 2,035 agents and 2,151 non-agent full-time equivalent employees. During AEP, we typically hire additional full-time employees and hired approximately 1,500 employees 14 Tabl e of Contents for the 2022 AEP (fiscal 2023).
The number of insurance carrier partners with which we have pod relationships can vary quarter to quarter depending on the insurance carrier partner and the segment. As we continue to grow Population Health, we have also formed partnerships with several value-based care providers and providers of social resources that support improved health outcomes.
As we continue to grow Population Health, we have also formed partnerships with several value-based care providers as well as providers of social resources that support improved health outcomes. Example Population Health partners include primary care providers OakStreet, ChenMed, and One Medical, as well as several other providers of various services.
We believe this addressable market, which is the core focus of the products we distribute, presents an annual commission revenue opportunity of approximately $30 billion for our Senior segment, not including Healthcare Services. Further, we estimate the total addressable market for Healthcare Services to be in excess of $1 trillion.
According to the Kaiser Family Foundation, the number of Medicare beneficiaries is projected to grow from 63 million in 2020 to over 93 million in 2060. We believe this addressable market, which is the core focus of the products we distribute, presents an annual commission revenue opportunity of approximately $30 billion for our Senior segment.
Although we have the ability to conduct end-to-end enrollments online, our expertise and value add stems from the coupling of our technology with our skilled agents, which provides greater transparency in pricing terms and choice and an overall better consumer experience.
Our expertise and value add stems from the coupling of our technology with our skilled agents, which provides greater transparency in pricing terms and choice and an overall better consumer experience. When customers are satisfied, their propensity to switch policies decreases, thereby improving retention rates (“persistency”), increasing policyholder lifetime values and, ultimately, optimizing our financial performance.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe may not be able to maintain compliance with all current and potentially applicable U.S. federal and state or foreign laws and regulations, and actions by regulatory authorities or changes in legislation and regulation in the jurisdictions in which we operate could have a material adverse effect on our business.
Biggest changeWe may not be able to maintain compliance with all current and potentially applicable U.S. federal and state or foreign laws and regulations, and actions by regulatory authorities or changes in legislation and regulation in the jurisdictions in which we operate could have a material adverse effect on our business. 38 Tabl e of Contents We are also subject to a variety of laws and regulations that involve matters central to our business, including with respect to user privacy and the collection, processing, storing, sharing, disclosing, using, transfer and protecting of personal information and other data.
Our business is substantially dependent on revenue from our Senior health insurance carrier partners and subject to risks related to Senior health insurance and the larger health insurance industry. Our business may also be adversely affected by downturns in the life, automotive and home insurance industries.
Our business is substantially dependent on revenue from our Senior health insurance carrier partners and is subject to risks related to Senior health insurance and the larger health insurance industry. Our business may also be adversely affected by downturns in the life, automotive and home insurance industries.
Under the Senior Secured Credit Facility, we are required to maintain compliance with certain debt covenants, as discussed further below in Note 10 to the consolidated financial statements.
Further, we are required under the Senior Secured Credit Facility to maintain compliance with certain debt covenants, as discussed further below in Note 10 to the consolidated financial statements.
Our business may be harmed if we lose our relationships with these partners or fail to develop new insurance carrier relationships. • Changes in the health insurance market or in the variety, quality and affordability of the insurance products offered by our carrier partners could harm our business, operating results, financial condition and prospects. • Systemic changes in our carrier partners’ sales strategies or underwriting practices could reduce the number of, or impact the renewal or approval rates of, insurance policies sold through our distribution platform. • Insurance carriers can offer products and services directly to consumers or through our competitors. • Our business is substantially dependent on revenue from our Senior health insurance carrier partners. • If we are unable to develop new offerings, achieve increased consumer adoption of those offerings or penetrate new vertical markets, our business could be materially and adversely affected. • Risks from third-party products could adversely affect our businesses. • If our ability to enroll individuals during AEP and OEP is impeded, our business will be harmed. • Our business is dependent on our obtaining a large quantity of quality insurance sales leads in a cost-effective manner and our ability to convert sales leads to actual sales of insurance policies. 20 Table of Contents • If we are unable to maintain or grow the data provided to us by consumers and insurance carrier partners, or if such data is inaccurate, we may be unable to provide consumers with an insurance shopping experience that is relevant, efficient and effective, which could adversely affect our business. • We depend upon internet search engines to attract a significant portion of the consumers who visit our website, and if we are unable to effectively advertise on search engines on a cost-effective basis our business, operating results, financial condition and prospects could be harmed. • Our existing and any future indebtedness could adversely affect our ability to operate our business. • Operating and growing our business may require additional capital, which may not be available to us. • Seasonality may cause fluctuations in our financial results. • Our operating results will be impacted by factors that affect our estimate of the constrained lifetime value of commissions per policyholder.
Our business may be harmed if we lose our relationships with these partners or fail to develop new insurance carrier relationships. • Changes in the health insurance market or in the variety, quality and affordability of the insurance products offered by our carrier partners could harm our business, operating results, financial condition and prospects. • Systemic changes in our carrier partners’ sales strategies or underwriting practices could reduce the number of, or impact the renewal or approval rates of, insurance policies sold through our distribution platform. • Insurance carriers can offer products and services directly to consumers or through our competitors. • Our business is substantially dependent on revenue from our Senior health insurance carrier partners. • If we are unable to develop new offerings, achieve increased consumer adoption of those offerings or penetrate new vertical markets, our business could be materially and adversely affected. • Risks from third-party products could adversely affect our businesses. • If our ability to enroll individuals during AEP and OEP is impeded, our business will be harmed. • Our business is dependent on our obtaining a large quantity of quality insurance sales leads in a cost-effective manner and our ability to convert sales leads to actual sales of insurance policies. • If we are unable to maintain or grow the data provided to us by consumers and insurance carrier partners, or if such data is inaccurate, we may be unable to provide consumers with an insurance shopping experience that is relevant, efficient and effective, which could adversely affect our business. 20 Tabl e of Contents • We depend upon internet search engines to attract a significant portion of the consumers who visit our website, and if we are unable to effectively advertise on search engines on a cost-effective basis our business, operating results, financial condition and prospects could be harmed. • Our existing and any future indebtedness could adversely affect our ability to operate our business. • Operating and growing our business may require additional capital, which may not be available to us. • Seasonality may cause fluctuations in our financial results. • Our operating results will be impacted by factors that affect our estimate of the constrained lifetime value of commissions per policyholder.
Risks Related to Laws and Regulation • Laws and regulations regulating insurance activities are complex and could have a material and adverse effect on our business and may reduce our profitability or limit our growth. • Our Senior segment is subject to a complex legal and regulatory framework, and non-compliance with or changes in laws and regulations governing the marketing and sale of Medicare plans could harm our business, operating results, financial condition and prospects. • Our businesses providing pharmacy care services face additional regulatory and operational risks. • Our business may be harmed by competition from government-run health insurance exchanges. • Changes and developments in the regulation of the healthcare industry and the health insurance system and markets could adversely affect our business.
Risks Related to Laws and Regulation • Laws and regulations regulating insurance activities are complex and could have a material and adverse effect on our business and may reduce our profitability or limit our growth. • Our Senior segment is subject to a complex legal and regulatory framework, and non-compliance with or changes in laws and regulations governing the marketing and sale of Medicare plans could harm our business, operating results, financial condition and prospects. • Our pharmacy and healthcare services businesses face additional regulatory and operational risks. • Our business may be harmed by competition from government-run health insurance exchanges. • Changes and developments in the regulation of the healthcare industry and the health insurance system and markets could adversely affect our business.
In addition, our indebtedness under the Senior Secured Credit Facilities bears interest at a variable rate, making us vulnerable to increases in the market rate of interest. If the market rate of interest increases substantially, we will have to pay additional interest on this indebtedness, which would reduce cash available for our other business needs.
In addition, our indebtedness under the Senior Secured Credit Facility bears interest at a variable rate, making us vulnerable to increases in the market rate of interest. If the market rate of interest increases substantially, we will have to pay additional interest on this indebtedness, which would reduce cash available for our other business needs.
In addition, the quality, accuracy and timeliness of this information may suffer, which may lead to a negative insurance shopping experience for consumers using our platform and could materially and adversely affect our business, operating results, financial condition and prospects. 26 Table of Contents We have made substantial investments into our technology systems that support our business with the goal of enabling us to provide efficient, needs-based services to consumers using data analytics.
In addition, the quality, accuracy and timeliness of this information may suffer, which may lead to a negative insurance shopping experience for consumers using our platform and could materially and adversely affect our business, operating results, financial condition and prospects. 26 Tabl e of Contents We have made substantial investments into our technology systems that support our business with the goal of enabling us to provide efficient, needs-based services to consumers using data analytics.
If our ability to enroll individuals during AEP and OEP is impeded, our business will be harmed. In general, approximately 50% of our Medicare Advantage and Medicare Supplement policies are submitted during AEP. Our agents, systems and processes must handle an increased volume of transactions that occur during AEP and OEP.
If our ability to enroll individuals during AEP and OEP is impeded, our business will be harmed. In general, approximately 40% of our Medicare Advantage and Medicare Supplement policies are submitted during AEP. Our agents, systems and processes must handle an increased volume of transactions that occur during AEP and OEP.
If agent turnover increases, leading to a decline in the average tenure of our agents, conversion rates may be adversely affected. If we are unable to recruit, train and retain talented agents, our ability to successfully convert sales leads may be adversely impacted.
Our conversion rates are also affected by agent tenure. If agent turnover increases, leading to a decline in the average tenure of our agents, conversion rates may be adversely affected. If we are unable to recruit, train and retain talented agents, our ability to successfully convert sales leads may be adversely impacted.
Changes to laws, regulations, CMS guidance or the enforcement or interpretation of CMS guidance applicable to our Senior segment could cause insurance carriers or state departments of insurance to object to or not to approve aspects of our marketing materials and processes.
In addition, changes to laws, regulations, CMS guidance or the enforcement or interpretation of CMS guidance applicable to our Senior segment could cause insurance carriers or state departments of insurance to object to or not to approve aspects of our marketing materials and processes.
Any such determinations could delay or halt the operation of our Senior segment, which would harm our business, 36 Table of Contents operating results, financial condition and prospects, particularly if such delay or halt occurred during the Medicare annual or open enrollment periods. Our business may be harmed by competition from government-run health insurance exchanges.
Any such determinations could delay or halt the operation of our Senior segment, which would harm our business, operating results, financial condition and prospects, particularly if such delay or halt occurred during the Medicare annual or open enrollment periods. Our business may be harmed by competition from government-run health insurance exchanges.
General Risk Factors 21 Table of Contents • Our quarterly and annual operating results or other operating metrics may fluctuate significantly and may not meet expectations of analysts, which could cause the trading price of our common stock to decline. • We are required to make significant estimates and assumptions in the preparation of our financial statements.
General Risk Factors • Our quarterly and annual operating results or other operating metrics may fluctuate significantly and may not meet expectations of analysts, which could cause the trading price of our common stock to decline. • We are required to make significant estimates and assumptions in the preparation of our financial statements.
The declaration and amount of any future dividends to holders of our common stock will be at the discretion of our Board of Directors in accordance with applicable law and after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, cash flows, impact on our effective tax rate, indebtedness, contractual obligations, legal requirements and other factors that our Board of Directors deems relevant.
The declaration and amount of any future dividends to holders of our common stock will be at the discretion of our Board of Directors in accordance with applicable law and after taking into account various factors, 40 Tabl e of Contents including our financial condition, operating results, current and anticipated cash needs, cash flows, impact on our effective tax rate, indebtedness, contractual obligations, legal requirements and other factors that our Board of Directors deems relevant.
If paid search advertising costs increase or become cost prohibitive, whether as a result of competition, algorithm changes or otherwise, our 27 Table of Contents advertising expenses could materially increase or we could reduce or discontinue our paid search advertisements, either of which would harm our business, operating results, financial condition and prospects.
If paid search advertising costs increase or become cost prohibitive, whether as a result of competition, algorithm changes or otherwise, our 27 Tabl e of Contents advertising expenses could materially increase or we could reduce or discontinue our paid search advertisements, either of which would harm our business, operating results, financial condition and prospects.
Any of these results would harm our business, operating results, financial condition and prospects. 33 Table of Contents Our business depends on our ability to maintain and improve the technological infrastructure that supports our distribution platform, and any significant disruption in service on our platform could result in a loss of consumers, which could harm our business, brand, operating results, financial condition and prospects.
Any of these results would harm our business, operating results, financial condition and prospects. Our business depends on our ability to maintain and improve the technological infrastructure that supports our distribution platform, and any significant disruption in service on our platform could result in a loss of consumers, which could harm our business, brand, operating results, financial condition and prospects.
Our business may be harmed if our website and marketing materials are not timely approved or do not comply with legal requirements. 37 Table of Contents Our insurance carrier partners whose Medicare plans we sell approve our website, much of our marketing material and our call scripts for our Senior segment.
Our business may be harmed if our website and marketing materials are not timely approved or do not comply with legal requirements. Our insurance carrier partners whose Medicare plans we sell approve our website, much of our marketing material and our call scripts for our Senior segment.
Many of these laws and regulations are subject to change and uncertain interpretation. 38 Table of Contents New York’s cybersecurity regulation for financial services companies, including insurance entities under its jurisdiction, requires entities to establish and maintain a cybersecurity program designed to protect private consumer data.
Many of these laws and regulations are subject to change and uncertain interpretation. New York’s cybersecurity regulation for financial services companies, including insurance entities under its jurisdiction, requires entities to establish and maintain a cybersecurity program designed to protect private consumer data.
This approach utilizes a number of assumptions, which include, but are not limited to, legal and enforceable rights to renewal commissions upon contract termination when determining variable consideration, renewal commission rates, historical lapse data, and 31 Table of Contents premium increase data.
This approach utilizes a number of assumptions, which include, but are not limited to, legal and enforceable rights to renewal commissions upon contract termination when determining variable consideration, renewal commission rates, historical lapse data, and premium increase data.
Such claims could subject us to significant liability for damages and could result in our having to stop using technology found to be in violation of a third party’s rights. Further, we might be required to seek a license for third-party intellectual property, which may not be available on reasonable royalty or other terms.
Such claims could subject us to significant liability for damages and could result in our having to stop using technology found to be in violation of a third party’s rights. Further, we 33 Tabl e of Contents might be required to seek a license for third-party intellectual property, which may not be available on reasonable royalty or other terms.
For the years ended June 30, 2022, 2021, and 2020, our top three insurance carrier partners by total revenue were from the Senior segment.
For the years ended June 30, 2023, 2022, and 2021, our top three insurance carrier partners by total revenue were from the Senior segment.
Our success in recruiting highly skilled and qualified personnel can depend on factors outside of our control, including the strength of the general economy and local employment markets and the availability of alternative forms of employment. Furthermore, the ongoing effects of COVID-19 may materially and adversely affect our ability to recruit and retain personnel.
Our success in recruiting highly skilled and 25 Tabl e of Contents qualified personnel can depend on factors outside of our control, including the strength of the general economy and local employment markets and the availability of alternative forms of employment. Furthermore, the ongoing effects of COVID-19 may materially and adversely affect our ability to recruit and retain personnel.
Furthermore, complaints or 30 Table of Contents negative publicity about our business practices, legal compliance, marketing and advertising campaigns, data privacy and security issues and other aspects of our business, whether valid or not, could damage our reputation and brand.
Furthermore, complaints or negative publicity about our business practices, legal compliance, marketing and advertising campaigns, data privacy and security issues and other aspects of our business, whether valid or not, could damage our reputation and brand.
We believe our insurance carrier partners view our method of acquiring customers as scalable and efficient and, 24 Table of Contents ultimately, as cost advantageous compared to their own direct distribution or proprietary agent models.
We believe our insurance carrier partners view our method of acquiring customers as scalable and efficient and, ultimately, as cost advantageous compared to their own direct distribution or proprietary agent models.
Changes to the laws, regulations and guidelines relating to Medicare plans, their interpretation or the manner in which they are enforced could harm our business, operating results, financial condition and prospects.
These and any other changes to the laws, regulations and guidelines relating to Medicare plans, their interpretation or the manner in which they are enforced could harm our business, operating results, financial condition and prospects.
As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. 40 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None .
As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. ITEM 1B. UNRESOLVED STAFF COMMENTS None .
However, in the event that our insurance carrier partners choose to make systemic changes in the manner in which their policies are distributed, including by focusing on direct distribution themselves or on distribution channels other than ours, such changes could materially and adversely affect our business, operating results, financial condition and prospects.
However, in the event that our insurance carrier partners choose to make systemic changes in the manner in which their policies 24 Tabl e of Contents are distributed, including by focusing on direct distribution themselves or on distribution channels other than ours, such changes could materially and adversely affect our business, operating results, financial condition and prospects.
Regulatory agencies or business partners may institute more stringent data protection requirements or certifications than those which we are currently subject to and, if we cannot comply with those standards in a timely manner, we may lose the ability to sell a carrier’s products or process transactions containing payment information.
Regulatory agencies or business partners may institute more stringent data protection requirements or certifications 35 Tabl e of Contents than those which we are currently subject to and, if we cannot comply with those standards in a timely manner, we may lose the ability to sell a carrier’s products or process transactions containing payment information.
You Save.” We rely on a combination of copyright, trademark, and trade secret laws and contractual agreements, as well as our internal system access security protocols, to establish, maintain and protect our intellectual property rights and technology.
You Save.” We rely on 32 Tabl e of Contents a combination of copyright, trademark, and trade secret laws and contractual agreements, as well as our internal system access security protocols, to establish, maintain and protect our intellectual property rights and technology.
We may not realize the anticipated benefits 28 Table of Contents of any acquisitions and we may not be successful in overcoming these risks or any other problems encountered in connection with potential acquisitions.
We may not realize the anticipated benefits of any acquisitions and we may not be successful in overcoming these risks or any other problems encountered in connection with potential acquisitions.
The Telephone Consumer Protection Act (the “TCPA”) prohibits companies from making telemarketing calls to numbers 39 Table of Contents listed in the Federal Do-Not-Call Registry and imposes other obligations and limitations on making phone calls and sending text messages to consumers.
The Telephone Consumer Protection Act (the “TCPA”) prohibits companies from making telemarketing calls to numbers listed in the Federal Do-Not-Call Registry and imposes other obligations and limitations on making phone calls and sending text messages to consumers.
In addition, our operations are dependent upon our ability to protect the computer systems and network infrastructure utilized by us against damage from cybersecurity attacks by sophisticated third parties with substantial computing resources and capabilities and other disruptive problems caused by the internet or other users.
In addition, our operations are dependent upon our 34 Tabl e of Contents ability to protect the computer systems and network infrastructure utilized by us against damage from cybersecurity attacks by sophisticated third parties with substantial computing resources and capabilities and other disruptive problems caused by the internet or other users.
We are unable to predict the full impact of healthcare reform initiatives on our operations in light of the uncertainty regarding the terms and timing of any provisions enacted and the impact of any of those provisions on various healthcare and insurance industry participants.
We are unable to predict the full impact of healthcare reform initiatives on our operations in light of the uncertainty regarding the terms and timing of any provisions enacted and the impact of any of those provisions on various 37 Tabl e of Contents healthcare and insurance industry participants.
In addition, the application and interpretation of these laws and regulations are often uncertain. Because we store, process and use data, some of which contain personal information, we are subject to complex and evolving federal, state and local laws and regulations regarding privacy, data protection and other matters.
These laws and regulations constantly evolve and remain subject to significant change. In addition, the application and interpretation of these laws and regulations are often uncertain. Because we store, process and use data, some of which contain personal information, we are subject to complex and evolving federal, state and local laws and regulations regarding privacy, data protection and other matters.
These estimates and assumptions may not be accurate and are subject to change. Risks Related to Our Business and Industry Our business may be harmed if we lose our relationships with our insurance carrier partners or fail to develop new insurance carrier relationships.
These estimates and assumptions may not be accurate and are subject to change. 21 Tabl e of Contents Risks Related to Our Business and Industry Our business may be harmed if we lose our relationships with our insurance carrier partners or fail to develop new insurance carrier relationships.
Our Board of Directors intends to retain future earnings to finance the operation and expansion of our business. In addition, our Senior Secured Credit Facility contains restrictions on our ability to pay dividends, subject to certain exceptions. Accordingly, we do not expect to pay dividends in the foreseeable future.
Our Board of Directors intends to retain future earnings to finance the operation and expansion of our business. In addition, our Senior Secured Credit Facility contains restrictions on our ability to pay dividends to the holders of our common stock. Accordingly, we do not expect to pay dividends in the foreseeable future.
Should we become more dependent on even fewer insurance carrier relationships (whether as a result of the termination of insurance carrier relationships, insurance carrier consolidation or otherwise), we may become more vulnerable to adverse changes in our relationships with insurance carriers, particularly in states where we distribute insurance 22 Table of Contents from a relatively smaller number of insurance carrier partners or where a small number of insurance carriers dominates the market, and our business, operating results, financial condition and prospects could be harmed.
Should we become more dependent on even fewer insurance carrier relationships (whether as a result of the termination of insurance carrier relationships, insurance carrier consolidation or otherwise), we may become more vulnerable to adverse changes in our relationships with insurance carriers, particularly in states where we distribute insurance from a relatively smaller number of insurance carrier partners or where a small number of insurance carriers dominates the market, and our business, operating results, financial condition and prospects could be harmed. 22 Tabl e of Contents Changes in the health insurance market or in the variety, quality and affordability of the insurance products offered by our insurance carrier partners could harm our business, operating results, financial condition and prospects.
Our communications with potential and existing customers are subject to laws regulating telephone and email marketing practices. We make telephone calls and send emails and text messages to potential and existing customers.
Our communications with potential and existing customers are subject to laws regulating telephone and email marketing practices. 39 Tabl e of Contents We make telephone calls and send emails and text messages to potential and existing customers.
During the year ended June 30, 2022, we recorded impairment charges of $3.1 million and $44.6 million related to our intangible assets and goodwill, respectively. If actual results differ from the assumptions and estimates used in our goodwill and intangible asset calculations, we could incur future impairment or amortization charges.
During the year ended June 30, 2023, we recorded impairment charges of $15.6 million related to our intangible assets. No goodwill impairment charges were recorded during the year ended June 30, 2023. If actual results differ from the assumptions and estimates used in our goodwill and intangible asset calculations, we could incur future impairment or amortization charges.
If the relevant state authorities or our insurance carrier partners experience shutdowns or continued business disruptions due to the COVID-19 pandemic, we may be unable to secure these required licenses, appointments and certifications for our agents in a timely manner, or at all.
If the relevant state authorities or our insurance carrier partners experience shutdowns or business disruptions due to the COVID-19 pandemic or other public health crises, global economic conditions, or any other reason, we may be unable to secure these required licenses, appointments and certifications for our agents in a timely manner, or at all.
We derive a significant portion of our website traffic from consumers who search for health insurance through internet search engines, such as Google, Yahoo! and Bing. A critical factor in attracting consumers to our website is whether we are prominently displayed in response to certain internet searches.
We derive a significant portion of our website traffic from consumers who search for insurance through internet search engines, such as Google, Yahoo! and Bing. A critical factor in attracting consumers to our website is whether we are prominently displayed in response to certain internet searches. Search engines typically provide two types of search results, algorithmic listings and paid advertisements.
The insurance industry in the United States is heavily regulated. The insurance regulatory framework addresses, among other things: granting licenses to companies and agents to transact particular business activities; and regulating trade, marketing, compensation and claims practices.
The insurance regulatory framework addresses, among other things: granting licenses to companies and agents to transact particular business activities; and regulating trade, marketing, compensation and claims practices.
For example, carriers owned by UnitedHealthcare, Wellcare, and Humana accounted for 18%, 17%, and 12%, respectively, of our total revenue for the year ended June 30, 2022, carriers owned by UnitedHealthcare, Humana, and Wellcare accounted for 24%, 19%, and 15%, respectively, of our total revenue for the year ended June 30, 2021; and carriers owned by UnitedHealthcare, Humana, and Aetna acc ounted for 26%, 18%, and 11%, respectively, of our total revenue for the year ended June 30, 2020.
For example, carriers owned by UHC and Humana accounted for 33% and 20%, respectively, of our total revenue for the year ended June 30, 2023, carriers owned by UHC, Wellcare, and Humana accounted for 18%, 17%, and 12%, respectively, of our total revenue for the year ended June 30, 2022; and carriers owned by UHC, Humana, and Wellcare acc ounted for 24%, 19%, and 15%, respectively, of our total revenue for the year ended June 30, 2021.
Our indebtedness could have important consequences, including: • requiring us to dedicate a substantial portion of our cash flow to payments on our indebtedness, which would reduce the amount of cash flow available to fund working capital, capital expenditures or other corporate purposes; • increasing our vulnerability to general adverse economic, industry and market conditions; • subjecting us to restrictive covenants, including restrictions on our ability to pay dividends and requiring the pledge of substantially all of our assets as collateral under our Senior Secured Credit Facilities, that may reduce our ability to take certain corporate actions or obtain further debt or equity financing; • limiting our ability to plan for and respond to business opportunities or changes in our business or industry; and 29 Table of Contents • placing us at a competitive disadvantage compared to our competitors that have less debt or better debt servicing options.
Our indebtedness could have important consequences, including: • requiring us to dedicate a substantial portion of our cash flow to payments on our indebtedness, which would reduce the amount of cash flow available to fund working capital, capital expenditures or other corporate purposes; • increasing our vulnerability to general adverse economic, industry and market conditions; • restricting or reducing our ability to take certain corporate actions or obtain further debt or equity financing; • limiting our ability to plan for and respond to business opportunities or changes in our business or industry; and • placing us at a competitive disadvantage compared to our competitors that have less debt or better debt servicing options.
For each of the years ended June 30, 2022 and 2021, 78% of our total revenue was derived from our Senior segment. For the year ended June 30, 2020, 68% of our total revenue was derived from our Senior segment.
For the year ended June 30, 2023, 59% of our total revenue was derived from our Senior segment. For the years ended June 30, 2022 and 2021, 69% and 78%, respectively, of our total revenue was derived from our Senior segment.
If our conversion rate does not meet expectations, our business may be adversely affected. Obtaining quality insurance sales leads is important to our business, but our ability to convert our leads to policy sales is also a key to our success. Many factors impact our conversion rate, including the quality of our leads, agents and our proprietary workflow technology.
If our conversion rate does not meet expectations, our business may be adversely affected. Obtaining quality insurance sales leads is important to our business, but our ability to convert our leads to policy sales and sales of other offerings, including our pharmacy services, is also a key to our success.
For example, monitoring and protecting our intellectual property rights can be challenging and costly, and we may not be effective in policing or prosecuting such unauthorized use or disclosure. 32 Table of Contents We also may fail to maintain or be unable to obtain adequate protections for certain of our intellectual property in the U.S. or certain foreign countries, and our intellectual property rights may not receive the same degree of protection in foreign countries as they would in the U.S. because of the differences in foreign trademark, copyright, and other laws concerning proprietary rights.
We also may fail to maintain or be unable to obtain adequate protections for certain of our intellectual property in the U.S. or certain foreign countries, and our intellectual property rights may not receive the same degree of protection in foreign countries as they would in the U.S. because of the differences in foreign trademark, copyright, and other laws concerning proprietary rights.
Search engines typically provide two types of search results, algorithmic listings and paid advertisements. We rely on both to attract consumers to our websites. Algorithmic search result listings are determined and displayed in accordance with a set of formulas or algorithms developed by the particular internet search engine.
We rely on both to attract consumers to our websites. Algorithmic search result listings are determined and displayed in accordance with a set of formulas or algorithms developed by the particular internet search engine. Once a search is initiated by a consumer, the algorithms determine the hierarchy of results.
Once a search is initiated by a consumer, the algorithms determine the hierarchy of results. Search engines may revise these algorithms from time to time, which could cause our website to be listed less prominently in algorithmic search results and lead to decreased traffic to our website.
Search engines may revise these algorithms from time to time, which could cause our website to be listed less prominently in algorithmic search results and lead to decreased traffic to our website.
Our ability to expand our business depends on our being able to hire, train and retain sufficient numbers of employees to staff our in-house sales centers, as well 25 Table of Contents as other personnel.
Our ability to expand our business depends on our being able to hire, train and retain sufficient numbers of employees to staff our in-house sales centers, as well as other personnel. In addition, the success of our pharmacy business is dependent on our ability to attract, hire, and retain qualified licensed pharmacists and other pharmacy personnel.
Our businesses providing pharmacy care services face regulatory and operational risks and uncertainties that differ from the risks of our other businesses. We provide pharmacy care services through Population Health and SelectRx.
Our healthcare services operations, including our pharmacy business, face regulatory and operational risks and uncertainties that differ from the risks of our other businesses. In addition to the pharmacy services provided through SelectRx, we also provide various healthcare services through Population Health.
Our insurance carrier partners typically pay us a specified percentage of the premium amount collected by the carrier or a flat rate per policy during the period that a customer maintains coverage under a policy. We rely on carriers to report the amount of commissions we earn accurately and on time.
We rely on our insurance carrier partners to prepare accurate commission reports and send them to us in a timely manner. 31 Tabl e of Contents Our insurance carrier partners typically pay us a specified percentage of the premium amount collected by the carrier or a flat rate per policy during the period that a customer maintains coverage under a policy.
We use carriers’ commission reports to calculate our revenue, prepare our financial reports, projections and budgets and direct our marketing and other operating efforts.
We rely on carriers to report the amount of commissions we earn accurately and on time. We use carriers’ commission reports to calculate our revenue, prepare our financial reports, projections and budgets and direct our marketing and other operating efforts.
Future acquisitions also could result in dilutive issuances of our equity securities and the incurrence of debt, which could harm our financial condition. Impairment of the carrying value of our goodwill or other intangible assets could adversely affect our financial condition and results of operations.
Future acquisitions also could result in dilutive issuances of our equity securities and the incurrence of debt, which could harm our financial condition.
The fair value assigned to intangible assets acquired is supported by valuations using significant estimates and assumptions provided by management. We test goodwill for impairment annually as of April 1, and we test goodwill and intangible assets for impairment at other times if events have occurred or circumstances exist that indicate the carrying value may no longer be recoverable.
We test goodwill for impairment annually as of April 1, and we test goodwill and intangible assets for impairment at other times if events have occurred or circumstances exist that indicate the carrying value may no longer be recoverable. A significant amount of judgment is involved in determining if an indication of impairment exists.
The loss of one or more of these lead suppliers, or our failure to otherwise compete to secure quality insurance sales leads, could significantly limit our ability to access our target market for selling policies.
In addition, our pharmacy business is substantially dependent on Senior health insurance sales leads to access and acquire additional pharmacy customers. The loss of one or more of our lead suppliers, or our failure to otherwise compete to secure quality insurance sales leads, could significantly limit our ability to access our target market for selling policies and other products.
If lead quality diminishes, our conversion rates will be adversely affected. Competition in the marketplace and lead quality affect conversion rates. If competition for customers increases, our conversion rates may decline, even absent a degradation in lead quality. Our conversion rates are also affected by agent tenure.
Many factors impact our conversion rate, including the quality of our leads, agents and our proprietary workflow technology. If lead quality diminishes, our conversion rates will be adversely affected. Competition in the marketplace and lead quality affect conversion rates. If competition for customers increases, our conversion rates may decline, even absent a degradation in lead quality.
Moreover, if third parties that we work with violate applicable laws or our policies, such violations also may put consumer or insurance carrier partner information at risk and could in turn harm our reputation, business, operating results, financial condition and prospects. 35 Table of Contents Risks Related to Laws and Regulation Laws and regulations regulating insurance activities are complex and could have a material and adverse effect on our business, reduce our profitability, and potentially limit our growth.
Moreover, if third parties that we work with violate applicable laws or our policies, such violations also may put consumer or insurance carrier partner information at risk and could in turn harm our reputation, business, operating results, financial condition and prospects.
As a result of past acquisitions, we carry goodwill and other acquired intangible assets on our balance sheet. The Company allocates the fair value of purchase consideration to the tangible assets, liabilities, and intangible assets acquired in an acquisition based on their fair values, and any excess purchase price over those fair values is recorded as goodwill.
The Company allocates the fair value of purchase consideration to the tangible assets, liabilities, and intangible assets acquired in an acquisition based on their fair values, and 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 significant estimates and assumptions provided by management.
Some of these competitors include: • companies that operate insurance search websites or websites that provide quote information or the opportunity to purchase insurance products online; • individual insurance carriers, including through the operation of their own websites, physical storefront operations and broker arrangements; • traditional insurance agents or brokers; and • field marketing organizations. 23 Table of Contents New competitors may enter the market for the distribution of insurance products with competing insurance distribution platforms, which could have an adverse effect on our business, operating results, financial condition and prospects.
Some of these competitors include: • companies that operate insurance search websites or websites that provide quote information or the opportunity to purchase insurance products online; • individual insurance carriers, including through the operation of their own websites, physical storefront operations and broker arrangements; • traditional insurance agents or brokers; and • field marketing organizations.
If our Senior segment cannot successfully respond to changes in the seasonality of the Medicare business, our business, operating results, financial condition and prospects could be harmed. We rely on our insurance carrier partners to prepare accurate commission reports and send them to us in a timely manner.
If our Senior segment cannot successfully respond to changes in the seasonality of the Medicare business, our business, operating results, financial condition and prospects could be harmed.
Such disruptions would jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability and damage our reputation. 34 Table of Contents It is difficult or impossible to defend against every risk being posed by changing technologies as well as criminals’ intent on committing cyber-crime and these measures may not be successful in preventing, detecting, or stopping attacks.
It is difficult or impossible to defend against every risk being posed by changing technologies as well as criminals’ intent on committing cyber-crime and these measures may not be successful in preventing, detecting, or stopping attacks.
Changes in the health insurance market or in the variety, quality and affordability of the insurance products offered by our insurance carrier partners could harm our business, operating results, financial condition and prospects. The demand for our agency services is impacted by the variety, quality and price of the insurance products we distribute.
The demand for our agency services is impacted by the variety, quality and price of the insurance products we distribute.
Failure to make payments or comply with covenants under our existing debt instruments could result in an event of default.
Our future compliance with these covenants is dependent on our ability to restructure our existing debt or secure additional financing from other sources. Failure to maintain compliance with these covenants or make payments under the Senior Secured Credit Facility could result in an event of default.
Subsequently, we entered into the Fourth Amendment to the Senior Secured Credit Facility (as defined and discussed further in Note 10 to the consolidated financial statements) to amend the required debt covenants through October 31, 2024.
We are subject to various obligations and covenants under the Senior Secured Credit Facility, as described further herein in Note 10 to the consolidated financial statements.
Based on our financial projections, we believe we will remain in compliance with the revised debt covenants within one year after the date that the consolidated financial statements are issued.
Based on our financial 30 Tabl e of Contents projections, we believe we will remain in compliance with the debt covenants included in the Senior Secured Credit Facility through the 12 months following the date of issuance of our consolidated financial statements.
Removed
A significant amount of judgment is involved in determining if an indication of impairment exists.
Added
New competitors may enter the market for the distribution of insurance products with competing insurance distribution platforms, which could have an adverse effect on our business, operating results, financial condition and 23 Tabl e of Contents prospects.
Removed
In our Quarterly Report on Form 10-Q for the three months ended March 31, 2022, we disclosed that there was substantial doubt about our ability to continue as a going concern as a result of conditions that existed as of March 31, 2022.
Added
If we are unable to attract new pharmacy customers and retain and grow our relationships with existing pharmacy customers, our business, results of operations, financial condition, and future prospects may be materially and adversely affected. The success of our pharmacy business is reliant on our ability to grow the number of pharmacy customers we serve.
Removed
Specifically, our financial projections indicated that we would not be in compliance with a certain asset coverage ratio under the Senior Secured Credit Facility within one year after the date that the consolidated financial statements were issued.
Added
Our pharmacy services are offered only to certain Medicare Advantage patients managing multiple chronic conditions, and our ability to attract new pharmacy customers may be limited by the number of patients who meet these medical and demographic criteria.
Removed
Our future compliance is dependent upon the successful implementation of our new strategic direction discussed above, and we will need to continue to stay in compliance in the future with these revised covenants for one year after the date our consolidated financial statements are issued.
Added
Further, we have faced and may continue to face certain challenges in completing the onboarding process for some patients, including delays in obtaining patients’ prescriptions from their healthcare providers or transferring prescriptions from their previous pharmacies.
Removed
We have identified a material weakness in our internal control over financial reporting.
Added
If we are unable to overcome these hurdles in a cost-effective and timely manner, our ability to increase our number of customers and scale our pharmacy business may be harmed.
Removed
If this material weakness is not remediated, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial condition and the trading price of our common stock.
Added
In addition, our ability to attract and retain pharmacy customers is dependent on several factors, including our brand and reputation, our technology, the products and services offered by our competitors, and our customer experience and satisfaction, which is informed by, among other factors, the reliability of our services, including the 28 Tabl e of Contents accuracy and timely delivery of our prescription boxes; our customer service; and our flexibility in responding to patients’ changing needs and preferences.
Removed
As previously disclosed in our Form 10-K/A for the year ended June 30, 2021, filed with the SEC on February 14, 2022, and subsequent filings, management previously identified a material weakness in our internal control over financial reporting related to the first year revenue provision for certain final expense policies.
Added
If we fail to maintain and deepen our relationships with existing pharmacy customers, or if we are unable to attract new customers to our pharmacy business, our pharmacy revenues and margins may suffer, and our results of operations, cash flows, and financial condition could be materially and adversely affected.
Removed
As a result of the identification of this material weakness, management concluded that our internal control over financial reporting and disclosure controls and procedures were not effective as of June 30, 2021.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs the majority of our office lease footprint now represents a hybrid in-person and remote work model, we may continue to reduce our excess space through subleasing in areas of low utilization, where commercially reasonable and to the extent unnecessary for future expansion.
Biggest changeAs the majority of our office lease footprint now represents a hybrid in-person and remote work model, we have terminated or sub-leased our excess space, where commercially reasonable and to the extent unnecessary for future expansion.
Location Approximate Square Footage Leased Approximate Square Footage Subleased Approximate Square Footage Occupied Primary Use Overland Park, Kansas 243,320 148,212 95,108 Corporate headquarters, marketing and advertising, technical development, general and administrative, operations for all segments. Attempting to sublease underutilized space. Exercised early termination option for 42,046 of square footage currently leased, and must be fully vacated by July 31, 2023.
Location Approximate Square Footage Leased Approximate Square Footage Subleased Approximate Square Footage Occupied Primary Use Overland Park, Kansas 243,320 95,874 147,446 Corporate headquarters, marketing and advertising, technical development, general and administrative, operations for all segments. Attempting to sublease underutilized space. Exercised early termination option for 42,046 of square footage currently leased, and must be fully vacated by July 31, 2023.
ITEM 2. PROPERTIES The following table sets forth the location, approximate square footage and primary use of each of the principal properties we occupied as of August 29, 2022. All of the properties listed below are leased, and we believe our properties are in good operating condition and are suitable for their primary use.
ITEM 2. PROPERTIES The following table sets forth the location, approximate square footage and primary use of each of the principal properties we occupied as of September 13, 2023. All of the properties listed below are leased, and we believe our properties are in good operating condition and are suitable for their primary use.
Monaca, Pennsylvania 18,000 — 18,000 Senior segment (SelectRx) operations Indianapolis, Indiana 17,904 — 17,904 Senior segment (SelectRx) operations Oakland, California 8,623 — 8,623 Life segment operations San Diego, California 5,874 — 5,874 Life segment operations
Centennial, Colorado 45,373 45,373 — Monaca, Pennsylvania 18,000 — 18,000 Healthcare Services segment (SelectRx) operations Indianapolis, Indiana 17,904 — 17,904 Healthcare Services segment (SelectRx) operations Oakland, California 8,623 — 8,623 Life segment operations San Diego, California 5,874 — 5,874 Life segment operations
Removed
Centennial, Colorado 45,373 13,064 32,309 Partially vacated, attempting to sublease remaining space. Des Moines, Iowa 24,464 — 24,464 Exercised early termination option and must be fully vacated by September 30, 2022.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeHowever, in the event of unexpected further developments, it is possible that the ultimate resolution of these matters, or other similar matters, if unfavorable, may be materially adverse to our business, prospects, financial condition, liquidity, results of operation, cash flows or capital levels.
Biggest changeHowever, in the event of unexpected further developments, it is possible that the ultimate resolution of these matters, or other similar matters, if unfavorable, may be materially 41 Tabl e of Contents adverse to our business, prospects, financial condition, liquidity, results of operation, cash flows or capital levels.
For additional details, see Part II, Item 8, Note 11, Commitments and Contingencies – “Legal Contingencies and Obligations,” in the notes to consolidated financial statements in Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference. 41 Table of Contents
For additional details, see Part II, Item 8, Note 11, Commitments and Contingencies – “Legal Contingencies and Obligations,” in the notes to consolidated financial statements in Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe stock price performance shown in the following graph is not intended to forecast or be indicative of possible future stock price performance. 43 Table of Contents 5/21/2020 06/20 09/20 12/20 03/21 06/21 09/21 12/21 03/22 06/22 SelectQuote, Inc. $ 100.00 $ 93.81 $ 75.00 $ 76.85 $ 109.30 $ 71.33 $ 47.89 $ 33.56 $ 10.33 $ 9.19 NYSE Composite Index $ 100.00 $ 104.78 $ 111.90 $ 127.95 $ 137.44 $ 145.84 $ 142.23 $ 151.20 $ 146.86 $ 127.63 CRSP US Small Cap Index $ 100.00 $ 106.55 $ 112.35 $ 142.36 $ 156.47 $ 164.78 $ 160.01 $ 165.71 $ 155.68 $ 128.92 44 Table of Contents
Biggest changeThe stock price performance shown in the following graph is not intended to forecast or be indicative of possible future stock price performance. 43 Tabl e of Contents 5/21/2020 06/20 06/21 06/22 6/23 SelectQuote, Inc. $ 100.00 $ 93.81 $ 71.33 $ 9.19 $ 7.22 NYSE Composite Index $ 100.00 $ 104.78 $ 145.84 $ 127.63 $ 139.86 CRSP US Small Cap Index $ 100.00 $ 106.55 $ 164.78 $ 128.92 $ 145.64 44 Tabl e of Contents
Stock Performance Graph The graph below compares the cumulative total return to stockholders on our common stock to the cumulative total return on the NYSE Composite Index and the Center for Research in Security Prices US Small Cap Index (the “CRSP US Small Cap Index”) for the period beginning on May 21, 2020 (the date our common stock commenced trading on the NYSE) through June 30, 2022.
Stock Performance Graph The graph below compares the cumulative total return to stockholders on our common stock to the cumulative total return on the NYSE Composite Index and the Center for Research in Security Prices US Small Cap Index (the “CRSP US Small Cap Index”) for the period beginning on May 21, 2020 (the date our common stock commenced trading on the NYSE) through June 30, 2023.
In addition, our Senior Secured Credit Facility contains covenants that restrict our ability to pay cash dividends, subject to certain exceptions. Issuer Purchases of Equity Securities We did not repurchase any of our common stock during the year ended June 30, 2022.
In addition, our Senior Secured Credit Facility contains covenants that restrict our ability to pay cash dividends, subject to certain exceptions. Issuer Purchases of Equity Securities We did not repurchase any of our common stock during the year ended June 30, 2023.
As of July 31, 2022, there were approximately 100 common stockholders of record.
As of August 31, 2023, there were approximately 100 common stockholders of record.
Removed
Use of Proceeds from the IPO On May 26, 2020, we closed our IPO, in which we sold 18,000,000 shares of our common stock and certain selling stockholders sold an additional 14,775,000 shares of our common stock.
Removed
The offer and sale of the shares in the IPO were registered under the Securities Act pursuant to a Registration Statement on Form S-1 (File No. 333-236555) effective as of February 21, 2020.
Removed
There has been no material change in the use of proceeds from our IPO as described in our final prospectus filed with the SEC pursuant to Rule 424(b) of the Securities Act and other periodic reports previously filed with the SEC.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

138 edited+58 added−70 removed81 unchanged
Biggest change(2) These expenses consist of one-time consulting expenses associated with adopting ASC 606, non-recurring compensation to certain former board members, non-restructuring severance expenses, employer payroll taxes on the one-time Distribution to stock option holders, costs related to our IPO, cost related to the acquisition of InsideResponse, and expenses related to business continuity in response to the COVID-19 pandemic. 62 Table of Contents The following table depicts the disaggregation of revenue by segment and product for the years ended June 30: (dollars in thousands) 2022 $ % 2021 $ % 2020 Senior: Commission revenue: Medicare advantage $ 409,090 $ (186,042) (31) % $ 595,132 $ 309,175 108 % $ 285,957 Medicare supplement 5,224 (18,207) (78) % 23,431 (10,870) (32) % 34,301 Prescription drug plan (170) (1,822) (110) % 1,652 (1,215) (42) % 2,867 Dental, vision, and health 15,056 (913) (6) % 15,969 8,211 106 % 7,758 Other commission revenue 5,257 3,101 144 % 2,156 1,794 496 % 362 Total commission revenue 434,457 (203,883) (32) % 638,340 307,095 93 % 331,245 Total production bonus revenue 66,888 22,381 50 % 44,507 19,460 78 % 25,047 Total other revenue 94,030 48,176 105 % 45,854 40,473 752 % 5,381 Total Senior revenue 595,375 (133,326) (18) % 728,701 367,028 101 % 361,673 Life: Commission revenue: Term 65,539 (15,049) (19) % 80,588 4,024 5 % 76,564 Final expense 68,295 (5,932) (8) % 74,227 45,104 155 % 29,123 Total commission revenue 133,834 (20,981) (14) % 154,815 49,128 46 % 105,687 Total production bonus revenue 20,139 (2,715) (12) % 22,854 751 3 % 22,103 Total other revenue — — — % — — — % — Total Life revenue 153,973 (23,696) (13) % 177,669 49,879 39 % 127,790 Auto & Home: Total commission revenue 25,851 (1,770) (6) % 27,621 (10,410) (27) % 38,031 Total production bonus revenue 2,030 (1,262) (38) % 3,292 134 4 % 3,158 Total other revenue — — — % — — — % — Total Auto & Home revenue 27,881 (3,032) (10) % 30,913 (10,276) (25) % 41,189 Eliminations: Total commission revenue (6,624) (4,620) 231 % (2,004) (1,470) 275 % (534) Total production bonus revenue — — — % — — — % — Total other revenue (6,560) (1,262) 24 % (5,298) (4,518) 579 % (780) Total Elimination revenue (13,184) (5,882) 81 % (7,302) (5,988) 456 % (1,314) Total commission revenue 587,518 (231,254) (28) % 818,772 344,343 73 % 474,429 Total production bonus revenue 89,057 18,404 26 % 70,653 20,345 40 % 50,308 Total other revenue 87,470 46,914 116 % 40,556 35,955 781 % 4,601 Total revenue $ 764,045 $ (165,936) (18) % $ 929,981 $ 400,643 76 % $ 529,338 Revenue by Segment 2022 compared to 2021 —Revenue from our Senior segment was $595.4 million for the year ended June 30, 2022, a $133.3 million, or 18%, decrease compared to revenue of $728.7 million for the year ended June 30, 2021.
Biggest changeThe following table depicts the disaggregation of revenue by segment and product for the years ended June 30: (dollars in thousands) 2023 $ % 2022 $ % 2021 Senior: Commission revenue: Medicare advantage $ 500,501 $ 91,411 22 % $ 409,090 $ (186,042) (31) % $ 595,132 Medicare supplement 1,668 (3,556) (68) % 5,224 (18,207) (78) % 23,431 Prescription drug plan 513 683 (402) % (170) (1,822) (110) % 1,652 Dental, vision, and health 3,855 (11,201) (74) % 15,056 (913) (6) % 15,969 Other commission revenue 2,697 (5,127) (66) % 7,824 5,668 263 % 2,156 Total commission revenue 509,234 72,210 17 % 437,024 (201,316) (32) % 638,340 Total other revenue 80,897 (9,986) (11) % 90,883 4,412 5 % 86,471 Total Senior revenue 590,131 62,224 12 % 527,907 (196,904) (27) % 724,811 Healthcare Services: Total pharmacy revenue 239,547 180,087 303 % 59,460 57,669 3220 % 1,791 Total other revenue 12,528 1,953 18 % 10,575 8,476 404 % 2,099 Total Healthcare Services revenue 252,075 182,040 260 % 70,035 66,145 1700 % 3,890 Life: Commission revenue: Term 70,094 4,555 7 % 65,539 (15,049) (19) % 80,588 Final expense 56,488 (11,807) (17) % 68,295 (5,932) (8) % 74,227 Total commission revenue 126,582 (7,252) (5) % 133,834 (20,981) (14) % 154,815 Total other revenue 19,250 (889) (4) % 20,139 (2,715) (12) % 22,854 Total Life revenue 145,832 (8,141) (5) % 153,973 (23,696) (13) % 177,669 Auto & Home: Total commission revenue 20,450 (5,401) (21) % 25,851 (1,770) (6) % 27,621 Total other revenue 1,412 (618) (30) % 2,030 (1,262) (38) % 3,292 Total Auto & Home revenue 21,862 (6,019) (22) % 27,881 (3,032) (10) % 30,913 Eliminations: Total commission revenue (2,796) 6,395 (70) % (9,191) (7,187) 359 % (2,004) Total other revenue (4,256) 2,304 (35) % (6,560) (1,262) 24 % (5,298) Total Elimination revenue (7,052) 8,699 (55) % (15,751) (8,449) 116 % (7,302) Total commission revenue 653,470 65,952 11 % 587,518 (231,254) (28) % 818,772 Total pharmacy revenue 239,547 180,087 303 % 59,460 57,669 3220 % 1,791 Total other revenue 109,831 (7,236) (6) % 117,067 7,649 7 % 109,418 Total revenue $ 1,002,848 $ 238,803 31 % $ 764,045 $ (165,936) (18) % $ 929,981 Revenue by Segment 63 Tabl e of Contents 2023 compared to 2022 —Revenue from our Senior segment was $590.1 million for the year ended June 30, 2023, a $62.2 million, or 12%, increase compared to revenue of $527.9 million for the year ended June 30, 2022.
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 and, in return, earn commissions from our insurance carrier partners for the policies we sell on their behalf.
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.
On February 1, 2021, we acquired substantially all of the assets of a lead distribution company for an aggregate purchase price of up to $33.5 million (subject to customary adjustments), comprised of $24.0 million in cash paid at the closing of the transaction, $6.0 million of holdback for, if any, indemnification claims, net working capital adjustments, and underperformance, and an earnout of up to $3.5 million.
Acquisitions On February 1, 2021, we acquired substantially all of the assets of a lead distribution company for an aggregate purchase price of up to $33.5 million (subject to customary adjustments), comprised of $24.0 million in cash paid at the closing of the transaction, $6.0 million of holdback for, if any, indemnification claims, net working capital adjustments, and underperformance, and an earnout of up to $3.5 million.
The aggregate purchase price of $7.0 million was paid in cash at the closing of the transaction. Refer to Note 2 to the consolidated financial statements for further details concerning our recent acquisitions. Financing Activities Our financing activities primarily consist of proceeds from the issuance of debt and equity and proceeds and payments related to stock-based compensation.
The aggregate purchase price of $7.0 million was paid in cash at the closing of the transaction. Refer to Note 2 to the consolidated financial statements for further details concerning acquisitions. Financing Activities Our financing activities primarily consist of proceeds from the issuance of debt and equity and proceeds and payments related to stock-based compensation.
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.
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.
Contractual Obligations Our principal commitments consist of obligations under our outstanding operating leases for office facilities; our Senior Secured Credit Facility which includes the Term Loans, DDTL Facility, and Revolving Credit Facility (as defined in Note 10 to the consolidated financial statements); and our Amended Interest Rate Swap (as defined in Note 9 to the consolidated financial statements) .
Contractual Obligations Our principal commitments consist of obligations under our outstanding operating leases for office facilities; our Senior Secured Credit Facility which includes the Term Loans and Revolving Credit Facility (as defined in Note 10 to the consolidated financial statements); and our Amended Interest Rate Swap (as defined in Note 9 to the consolidated financial statements) .
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 commission revenue, evaluate our business performance and facilitate our operations.
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.
Additionally, we earn certain volume-based bonuses from some carriers on first-year policies sold, which we refer to as both production bonuses and marketing development funds, based on attaining various predetermined target sales levels or other agreed upon objectives, as presented in the consolidated statements of comprehensive income as production bonus revenue.
Additionally, we earn certain volume-based bonuses from some carriers on first-year policies sold, which we refer to as both production bonuses and marketing development funds, based on attaining various predetermined target sales levels or other agreed upon objectives, as presented in the consolidated statements of comprehensive income (loss) as other revenue.
The Company recognizes a significant deferred tax liability due to the timing of recognizing revenue when a policy is sold, while revenue for tax purposes is not recognized until future renewal commission payments are received. This deferred tax liability is a source of income that can be used to support the realizability of the Company’s deferred tax assets.
The Company recognizes a significant deferred tax liability due to the timing of recognizing revenue when a policy is sold, while revenue for tax purposes is not recognized until future renewal commission payments are received. This deferred tax liability is an objective source of future income that can be used to support the realizability of the Company’s deferred tax assets.
We define Adjusted EBITDA as 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 define Adjusted EBITDA as income (loss) before interest expense, income tax expense (benefit), depreciation and amortization, and certain add-backs for transaction costs and 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).
There were no impairment charges recorded on the Company’s long-lived assets for the years ended June 30, 2021 and 2020. Refer to Note 7 to the consolidated financial statements for additional details. Goodwill represents the excess of the purchase price over the estimated fair values of identifiable assets and liabilities acquired in a business combination as of the acquisition date.
There were no impairment charges recorded on the Company’s long-lived assets for the year ended June 30, 2021. Refer to Note 7 to the consolidated financial statements for additional details. Goodwill represents the excess of the purchase price over the estimated fair values of identifiable assets and liabilities acquired in a business combination as of the acquisition date.
Commission Revenue Recognition and Commissions Receivable In accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when a customer obtains control of promised goods or services and 69 Table of Contents is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services.
Commission Revenue Recognition and Commissions Receivable In accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services.
Technological innovations, including the development of machine learning for business applications and the proliferation of smart mobile devices as a means of consumer purchasing, are changing the insurance distribution landscape. As the composition of the U.S. population gradually shifts to the mobile-first generation, consumers are becoming more tech-savvy and comfortable shopping online.
Technological innovations, including the development of machine learning for business applications and the proliferation of smart mobile devices as a means of consumer purchasing, are changing the insurance distribution landscape. As the composition of the U.S. population gradually shifts to the mobile-first generation, consumers are becoming more tech-savvy and comfortable shopping online. According to J.D.
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 50 Table of Contents 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.
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.
The Company recognizes revenue for both first year and renewal commissions when it has completed its performance obligation, which is at different milestones for each segment based on the contractual enforceable rights, the Company’s historical experience, and established customer business practices: • Senior—Commission revenue is recognized at the earliest of when the insurance carrier has approved the policy sold, when a commission payment is received from the insurance carrier, or when the policy sold becomes effective. • Life—Term commission revenue is recognized when the insurance carrier has approved the policy sold and payment information has been obtained from the policyholder.
The Company recognizes revenue when it has completed its performance obligation, which is at different milestones for each segment based on the contractual enforceable rights, the Company’s historical experience, and established customer business practices: • Senior—Commission revenue is recognized at the earliest of when the insurance carrier has approved the policy sold, when a commission payment is received from the insurance carrier, or when the policy sold becomes effective. • Life—Term commission revenue is recognized when the insurance carrier has approved the policy sold and payment information has been obtained from the policyholder.
The cash decrease resulting from changes in net operating assets and liabilities primarily consisted of increases of $25.7 million in accounts receivable, net related to the increase in approved policies, increases of $10.9 million in other assets primarily related to increases in prepaid balances and SelectRx inventory, and decreases of $5.1 million in operating lease liabilities, partially offset by a decrease of $7.3 million in commissions receivable.
The cash decrease resulting from changes in net operating assets and liabilities primarily consisted of increases of $25.7 million in accounts receivable, net related to the 66 Tabl e of Contents increase in approved policies, increases of $10.9 million in other assets primarily related to increases in prepaid balances and SelectRx inventory, and decreases of $5.1 million in operating lease liabilities, partially offset by a decrease of $7.3 million in commissions receivable.
Our platform then captures and utilizes our experience to further build upon the millions of data points that feed our marketing algorithms, which further enhances our ability to deploy subsequent marketing dollars efficiently and target more high-quality consumer leads.
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.
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.
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 47 Tabl e of Contents measures to evaluate the performance of Senior.
The Company is continuously reviewing and monitoring the assumptions and inputs into the Company’s calculation of renewal commission revenue, including reviewing changes in the data used to estimate LTV’s as well as monitoring the cash received for each cohort as compared to the original estimates at the time the policy was sold.
The Company is continuously reviewing and monitoring the assumptions and inputs into the Company’s calculation of renewal commission revenue, including reviewing changes in the data used to estimate LTV’s as well as monitoring the cash received for each cohort as compared to the original estimates at 69 Tabl e of Contents the time the policy was sold.
Adjusted EBITDA is calculated as total revenue for the applicable segment less direct and allocated costs of revenue, marketing and advertising, technical development, and general and administrative operating costs and expenses, excluding depreciation and amortization expense; gain or loss on disposal of property, equipment, and software; share-based compensation expense; restructuring expenses; and non-recurring expenses such as severance payments and transaction costs.
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.
The estimate of the future renewal commissions is 49 Table of Contents 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 material reversal in revenue would not be expected to occur.
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.
Homeowners and 12-month auto products accounted for 76%, 79%, and 78% of new premium within the Auto & Home segment for years ended June 30, 2022, 2021, and 2020, respectively, with six-month auto, dwelling fire, and other products accounting for a majority of the remainder.
Homeowners and 12-month auto products accounted for 74%, 76%, and 79% of new premium within the Auto & Home segment for years ended June 30, 2023, 2022, and 2021, respectively, with six-month auto, dwelling fire, and other products accounting for a majority of the remainder.
The auto insurance industry has grown at an annual rate of 6.3% from 2013—2018 based on Statutory Direct Premiums Written, according to S&P Global, with 2018 written premium totaling $247 billion. Industry growth is driven by growth in the number of registered vehicles, increases in insurance premium rates and general economic growth.
The auto insurance industry has grown at an annual rate of 5.3% from 2013—2021 based on Statutory Direct Premiums Written, according to S&P Global, with 2021 written premium totaling $261 billion. Industry growth is driven by growth in the number of registered vehicles, increases in insurance premium rates and general economic growth.
The following table presents our technical development expenses for the years ended June 30 and the percentage changes from the prior year: Percent Change (dollars in thousands) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Technical development $ 24,729 $ 18,623 $ 12,347 33% 51% 2022 compared to 2021— Technical development expenses increased $6.1 million, or 33%, in 2022 compared to 2021, primarily due to a $3.4 million increase in compensation costs related to our technology personnel as we increased the number of people in our desktop support and development efforts to support the increase in total headcount.
The following table presents our technical development expenses for the years ended June 30 and the percentage changes from the prior year: Percent Change (dollars in thousands) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Technical development $ 26,015 $ 24,729 $ 18,623 5% 33% 2023 compared to 2022— Technical development expenses increased $1.3 million, or 5%, in 2023 compared to 2022, primarily due to a $2.3 million increase in compensation costs related to our technology personnel. 2022 compared to 2021— Technical development expenses increased $6.1 million, or 33%, in 2022 compared to 2021, primarily due to a $3.4 million increase in compensation costs related to our technology personnel as we increased the number of people in our desktop support and development efforts to support the increase in total headcount.
Industry Trends We estimate that the total addressable market for the insurance products we distribute is greater than $180 billion. Further, while these markets are already substantial, they are also growing, in part due to a number of highly attractive demographic trends. Our Senior segment serves consumers predominantly in the over 65 age category.
Industry Trends We estimate that the total addressable market for the insurance products we distribute is greater than $180 billion. Further, while these markets are already substantial, they are also growing, in part due to a number of highly attractive demographic trends. Our Senior and Healthcare Services segments serve consumers predominantly in the over 65 age category.
In addition, there was a $133.3 million decrease in total Senior revenue, driven by the $193.3 million downward adjustment from a change in estimate of MA cohort transaction prices discussed above.
In addition, there was a $196.9 million decrease in Senior revenue, driven by the $193.3 million downward adjustment from a change in estimate of MA cohort transaction prices discussed above.
Recent Accounting Pronouncements For a discussion of new accounting pronouncements recently adopted and not yet adopted, see the notes to our consolidated financial statements.
Recent Accounting Pronouncements 68 Tabl e of Contents For a discussion of new accounting pronouncements recently adopted and not yet adopted, see the notes to our consolidated financial statements.
For the year ended June 30, 2022, the Company recorded impairment charges of $3.1 million in general and administrative expense in the consolidated statement of comprehensive income related to write-offs of previously acquired definite-lived intangible assets from which the Company does not expect to receive future economic benefit.
For the years ended June 30, 2023 and June 30, 2022, the Company recorded impairment charges of $17.3 million and $3.1 million, respectively, in general and administrative expense in the consolidated statements of comprehensive income (loss) related to write-offs of previously acquired definite-lived intangible assets from which the Company does not expect to receive future economic benefit.
The homeowners insurance industry has grown at an annual rate of 3.8% from 2013—2018 based on Statutory Direct Premiums Written, according to S&P Global, with 2018 written premium totaling $99 billion. Industry growth is driven by growth in housing supply, increases in insurance premium rates and general economic growth.
The homeowners insurance industry has grown at an annual rate of 4.9% from 2013—2021 based on Statutory Direct Premiums Written, according to S&P Global, with 2021 written premium totaling $120 billion. Industry growth is driven by growth in housing supply, increases in insurance premium rates and general economic growth.
Fluctuations in approved policies are in direct correlation to submitted policies; however, this year we experienced a 4% decrease in MA submitted-to-approved conversion rates for the year ended June 30, 2022, compared to the year ended June 30, 2021, driven by higher consumer switching behavior.
Fluctuations in approved policies are normally in direct correlation to submitted policies; however, we experienced a 4% decrease in MA submitted-to-approved conversion rates for the year ended June 30, 2022, compared to the year ended June 30, 2021, driven by higher consumer switching behavior. This resulted in MA approved policies growing at a slower rate than MA submitted policies.
SelectQuote Auto & Home (“Auto & Home”) was founded 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 22 leading, nationally recognized insurance carrier partners.
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.
According to estimates, Medicare Advantage penetration is likely to reach 50% penetration for all Medicare-eligible individuals by 2025 and could reach as high as 60% to 70% between 2030 and 2040, highlighting the pace with which this already large segment of the Medicare market is growing.
According to estimates, Medicare Advantage penetration is likely to surpass 50% penetration for all Medicare-eligible individuals in 2023 and could reach as high as 60% by 2030, highlighting the pace with which this already large segment of the Medicare market is growing.
As a result of our annual goodwill impairment test as of April 1, 2022, the Company recorded goodwill impairment charges of $44.6 million in goodwill impairment in the consolidated statement of comprehensive income for the year ended June 30, 2022. There were no goodwill impairment charges recorded for the years ended June 30, 2021 and 2020.
There were no goodwill impairment charges recorded for the year end June 30, 2023. As a result of our annual goodwill impairment test as of April 1, 2022, the Company recorded goodwill impairment charges of $44.6 million in goodwill impairment in the consolidated statement of comprehensive income (loss) for the year ended June 30, 2022.
Term life policies accounted for 36%, 46%, and 68% of new premium within the Life segment for the years ended June 30, 2022, 2021, and 2020, respectively, with final expense policies accounting for 64%, 54%, and 32% for the years ended June 30, 2022, 2021, and 2020, respectively.
Term life policies accounted for 47%, 36%, and 46% of new premium within the Life segment for the years ended June 30, 2023, 2022, and 2021, respectively, with final expense policies accounting for 53%, 64%, and 54% for the years ended June 30, 2023, 2022, and 2021, respectively.
Revenue from our Auto & Home segment was $27.9 million for the year ended June 30, 2022, a $3.0 million, or 10%, decrease compared to revenue of $30.9 million for the year ended June 30, 2021, primarily due to o ur strategy to reduce the growth in Auto & Home. 2021 compared to 2020 —Revenue from our Senior segment was $728.7 million for the year ended June 30, 2021, a $367.0 million, or 101%, increase compared to revenue of $361.7 million for the year ended June 30, 2020.
Revenue from our Auto & Home segment was $27.9 million for the year ended June 30, 2022, a $3.0 million, or 10%, decrease compared to revenue of $30.9 million for the year ended June 30, 2021, primarily due to o ur strategy to reduce the growth in Auto & Home.
Additionally, the following table presents a summary of our cash flows for the years ended June 30: 65 Table of Contents (in thousands) 2022 2021 2020 Net cash used in operating activities $ (338,314) $ (115,442) $ (61,776) Net cash used in investing activities (42,576) (64,016) (51,370) Net cash provided by financing activities 235,433 97,042 481,446 Operating Activities 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; share-based compensation expense; impairment charges; and the effect of changes in working capital and other activities.
Additionally, the following table presents a summary of our cash flows for the years ended June 30: (in thousands) 2023 2022 2021 Net cash used in operating activities $ (19,377) $ (338,314) $ (115,442) Net cash used in investing activities (9,125) (42,576) (64,016) Net cash (used in) provided by financing activities (29,339) 235,433 97,042 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; share-based compensation expense; impairment charges; and the effect of changes in working capital and other activities.
The differences from our federal statutory tax rate to the effective tax rate for the year ended June 30, 2021, were primarily due to the net effects of state income taxes partially offset by Kansas High Performance Incentive Program (“HPIP”) tax credits and the exercise of non-qualified stock options.
For the year ended June 30, 2021, we recognized an income tax expense of $33.2 million, representing an effective tax rate of 21.0%, with the differences from our federal statutory tax rate to the effective tax rate primarily due to the net effects of state income taxes partially offset by Kansas High Performance Incentive Program (“HPIP”) tax credits and the exercise of non-qualified stock options.
The LTV per MA approved policy was negatively impacted by lower MA persistency rates, which includes an increase in constraint and higher provision for renewal year lapse rates; higher provision for first year lapse rates; carrier mix; and the switch to policy level persistency, somewhat offset by higher commission rates. 2021 compared to 2020— The LTV per MA and MS approved policy decreased 2% and 8%, respectively, for the year ended June 30, 2021, compared to the year ended June 30, 2020.
The LTV per MA approved policy was negatively impacted by lower MA persistency rates, which includes an increase in constraint and higher provision for renewal year lapse rates; higher provision for first year lapse rates; carrier mix; and the switch to policy level persistency, somewhat offset by higher commission rates.
Per Unit Economics Per unit economics represents total MA and MS commissions, other product commissions, other revenues, and costs associated with Senior, each shown per number of approved MA and MS approved policies over a given time period.
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.
Treasury zero-coupon issues with a remaining term equal to the expected term of our stock options. Expected volatility is determined using historical stock prices for a combination of publicly traded peer group companies and our stock price. The estimated attainment of performance-based awards and related expense is based on the expectations of target achievement.
Treasury zero-coupon issues with a remaining term equal to the expected term of our stock options. Expected volatility is determined using historical stock prices for a combination of publicly traded peer group companies and our stock price.
This assessment considers various financial, macroeconomic, industry and segment specific qualitative factors. If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, a quantitative test is then performed by estimating the fair value of the reporting unit and comparing it with its carrying value, including goodwill.
If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, a quantitative test is then performed by estimating the fair value of the reporting unit and comparing it with its carrying value, including goodwill.
The assumptions used in calculating the fair value of stock-based payment awards and expected attainment of performance-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment.
The estimated attainment of performance-based awards and related expense is based on the expectations of target achievement. The assumptions used in calculating the fair value of stock-based payment awards and expected attainment of performance or market based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment.
On average, 11,000 “Baby Boomers” are expected to turn 65 every day or nearly 4.2 million per year, for the next 10 years.
On average, 11,000 “Baby Boomers” are expected to turn 65 every day or nearly 4.2 million per year through the end of the decade.
The expected term for stock options granted is determined using the simplified method, which deems the expected term to be the midpoint between the vesting date and the contractual life of the stock-based awards.
The estimated grant date fair value of our stock options is determined using the Black-Scholes-Merton pricing model. The expected term for stock options granted is determined using the simplified method, which deems the expected term to be the midpoint between the vesting date and the contractual life of the stock-based awards.
Income Tax Expense (Benefit) The following table presents our provision for income taxes for the years ended June 30 and the percentage changes from the prior year: Percent Change (dollars in thousands) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Income tax expense (benefit) $ (92,302) $ 33,156 $ 24,502 (378)% 35% Effective tax rate 23.7 % 21.0 % 23.6 % 2022 compared to 2021— For the year ended June 30, 2022, we recognized an income tax benefit of $92.3 million, representing an effective tax rate of 23.7%.
Income Tax Expense (Benefit) The following table presents our provision for income taxes for the years ended June 30 and the percentage changes from the prior year: Percent Change (dollars in thousands) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Income tax expense (benefit) $ (10,600) $ (92,302) $ 33,156 (89)% (378)% Effective tax rate 15.3 % 23.7 % 21.0 % 2023 compared to 2022— Income tax benefit increased $81.7 million, or 89%, in 2023 compared to 2022.
Final expense commission revenue is recognized when the carrier provides confirmation the policy is active. • Auto & Home—Commission revenue is recognized when the policy sold becomes effective. 70 Table of Contents Commissions receivable are contract assets that represent estimated variable consideration for performance obligations that have been satisfied but payment is not due as the underlying policy has not renewed yet and are therefore subject to the same assumptions, judgements, and estimates used when recognizing revenue as noted above.
Commissions receivable are contract assets that represent estimated variable consideration for performance obligations that have been satisfied but payment is not due as the underlying policy has not renewed yet and are therefore subject to the same assumptions, judgements, and estimates used when recognizing revenue as noted above.
The increase in headcount also drove increases in the allocations of $13.7 million for facilities, telecommunications, and software maintenance costs, and $8.4 million for licensing costs.
The increase in headcount also drove increases in the allocations of $1.6 million for facilities, telecommunications, and software maintenance costs.
The number of policies sold declined 24%, which was somewhat offset by a 22% increase in the average premium per policy sold. Final expense premiums increased 152% for the year ended June 30, 2021, compared to the year ended June 30, 2020, due to a significant increase in the number of agents selling final expense policies.
The number of policies sold declined 27%, driven by lower agent headcount, which was somewhat offset by a 12% increase in the average premium per policy sold. Final expense premiums increased 20% for the year ended June 30, 2022, compared to the year ended June 30, 2021, due to an increase in the number of agents selling final expense policies.
We believe our proprietary technology platform, vast datasets and use of machine learning in all aspects of our business put us in an excellent position to take advantage of these consumer trends.
Power, 90% of customers say they are open to purchasing their auto insurance online. We believe our proprietary technology platform, vast datasets and use of machine learning in all aspects of our business put us in an excellent position to take advantage of these consumer trends.
It also includes licensing costs for our agents and 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.
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.
The cash decrease resulting from changes in net operating assets and liabilities primarily consisted of increases of $332.9 million in commissions receivable and $20.0 million in accounts receivable, net related to the increase in approved policies, partially offset by increases of $19.7 million in accounts payable and accrued expenses and $25.6 million in other liabilities, which consists primarily of commission advances and accrued compensation and benefits, all driven by the increased marketing and personnel costs required to produce our increased revenue. 66 Table of Contents Year Ended June 30, 2020 —Cash used in operating activities was $61.8 million, consisting of net income of $79.5 million and adjustments for non-cash items of $45.2 million, offset by cash used in operating assets and liabilities of $186.5 million.
The cash decrease resulting from changes in net operating assets and liabilities primarily consisted of increases of $332.9 million in commissions receivable and $20.0 million in accounts receivable, net related to the increase in approved policies, partially offset by increases of $19.7 million in accounts payable and accrued expenses and $25.6 million in other liabilities, which consists primarily of commission advances and accrued compensation and benefits, all driven by the increased marketing and personnel costs required to produce our increased revenue.
The Company continues to recognize its deferred tax assets as of June 30, 2022, as it believes it is MLTN that the deferred tax assets will be realized.
The Company continues to recognize a majority of its deferred tax assets as of June 30, 2023, as it believes it is more likely than not that the deferred tax assets will be realized.
The following table shows the LTV per approved policy for the years ended June 30: 2022 2021 2020 Medicare Advantage $ 925 $ 1,260 $ 1,287 Medicare Supplement 1,270 1,269 1,376 Dental, Vision and Hearing 123 136 140 Prescription Drug Plan 234 224 229 Other 73 113 34 2022 compared to 2021— The LTV per MA approved policy decreased 27% for the year ended June 30, 2022, compared to the year ended June 30, 2021.
The following table shows the LTV per approved policy for the years ended June 30: 2023 2022 2021 Medicare Advantage $ 877 $ 925 $ 1,260 Medicare Supplement 1,030 1,270 1,269 Dental, Vision and Hearing 100 123 136 Prescription Drug Plan 207 234 224 Other 101 73 113 49 Tabl e of Contents 2023 compared to 2022— The LTV per MA approved policy decreased 5% for the year ended June 30, 2023, compared to the year ended June 30, 2022.
The following table shows the number of approved policies for the years ended June 30: 2022 2021 2020 Medicare Advantage 661,738 467,585 225,404 Medicare Supplement 5,461 21,911 18,102 Dental, Vision and Hearing 124,989 111,015 55,556 Prescription Drug Plan 6,124 10,747 13,009 Other 12,407 14,089 4,654 Total 810,719 625,347 316,725 In general, the relationship between submitted policies and approved policies has been steady over time.
The following table shows the number of approved policies for the years ended June 30: 48 Tabl e of Contents 2023 2022 2021 Medicare Advantage 577,567 661,738 467,585 Medicare Supplement 2,619 5,461 21,911 Dental, Vision and Hearing 60,824 124,989 111,015 Prescription Drug Plan 2,144 6,124 10,747 Other 5,288 12,407 14,089 Total 648,442 810,719 625,347 In general, the relationship between submitted policies and approved policies has been steady over time.
The increase was driven primarily by a 108% increase in MA submitted policies and an 89% increase in DVH submitted policies. The overall increase in submitted policies for Senior products was primarily due to an increase in the number of agents we employ and an increase in productivity per agent.
The increase was driven primarily by a 47% increase in MA submitted policies and a 10% increase in DVH submitted policies, partially offset by a 73% decrease in MS submitted policies. The overall increase in submitted policies for Senior products was primarily due to increases in the number of agents we employ, partially offset by lower agent productivity.
The following table presents our general and administrative expenses for the years ended June 30 and the percentage changes from the prior year: Percent Change (dollars in thousands) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 General and administrative $ 89,837 $ 63,114 $ 35,283 42% 79% 2022 compared to 2021— General and administrative expenses increased $26.7 million, or 42%, in 2022 compared to 2021, primarily due to $13.7 million in higher compensation costs due to additional headcount to support the growth in the business; $4.3 million in depreciation and amortization expenses due to additional fixed assets and software in service; $4.5 million in professional services fees due to increases in recruiting, accounting and legal, and insurance costs; and $3.1 million of charges related to the impairment of long-lived intangible assets as described in Note 7 to the consolidated financial statements. 2021 compared to 2020— General and administrative expenses increased $27.8 million, or 79%, in 2021 compared to 2020, primarily due to $10.2 million in higher compensation costs due to additional headcount to support the growth of the business; $4.2 million in corporate development charges, primarily related to the First Amendment to the Senior Secured Credit Facility, the recent acquisitions, and the Secondary Offering; and $7.1 million in higher professional fees and insurance costs.
The following table presents our selling, general, and administrative expenses for the years ended June 30 and the percentage changes from the prior year: Percent Change (dollars in thousands) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Selling, general and administrative $ 136,518 $ 100,945 $ 63,114 35% 60% 2023 compared to 2022— Selling, general, and administrative expenses increased $35.6 million, or 35%, in 2023 compared to 2022, primarily due to a $18.9 million increase in compensation costs, mostly related to the 58 Tabl e of Contents expansion of SelectRx, and a $14.2 million increase in charges related to the impairment of long-lived assets as described in Notes 3, 4, and 7 to the consolidated financial statements. 2022 compared to 2021— Selling, general, and administrative expenses increased $26.7 million, or 42%, in 2022 compared to 2021, primarily due to $13.7 million in higher compensation costs due to additional headcount to support the growth in the business; $4.3 million in depreciation and amortization expenses due to additional fixed assets and software in service; $4.5 million in professional services fees due to increases in recruiting, accounting and legal, and insurance costs; and $3.1 million of charges related to the impairment of long-lived intangible assets as described in Note 7 to the consolidated financial statements.
The decrease was primarily due to a $186.0 million, or 31%, decrease in MA commission revenue driven by a $193.3 million downward adjustment from the change in estimate of cohort transaction prices, a $18.2 million decrease in MS commission revenue, and a reduction of $18.3 million in external lead generation revenue from InsideResponse, partially offset by $65.8 million of new revenue from Healthcare Services and a $22.4 million increase in marketing development funds received. 63 Table of Contents Revenue from our Life segment was $154.0 million for the year ended June 30, 2022, a $23.7 million, or 13%, decrease compared to revenue of $177.7 million for the year ended June 30, 2021.
The decrease was primarily due to a $186.0 million, or 31%, decrease in MA commission revenue driven by a $193.3 million downward adjustment from the change in estimate of cohort transaction prices, a $18.2 million decrease in MS commission revenue, and a reduction of $18.3 million in external lead generation revenue from InsideResponse, partially offset by a $22.4 million increase in marketing development funds received.
InsideResponse's 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. 55 Table of Contents Revenues generated from SelectRx are recognized upon shipment.
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.
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.
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.
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 56 Table of Contents 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.
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.
Year Ended June 30, 2021 Senior Life Auto & Home Corp & Elims Consolidated Revenue $ 728,701 $ 177,669 $ 30,913 $ (7,302) $ 929,981 Operating expenses (484,924) (155,127) (22,735) (46,899) (1) (709,685) Other expenses, net — — — (100) (100) Adjusted EBITDA $ 243,777 $ 22,542 $ 8,178 $ (54,301) 220,196 Share-based compensation expense (5,165) Non-recurring expenses (2) (6,065) Fair value adjustments to contingent earnout obligations (1,488) Depreciation and amortization (16,142) Loss on disposal of property, equipment, and software (686) Interest expense, net (29,320) Loss on extinguishment of debt (3,315) Income tax expense (33,156) Net income $ 124,859 (1) Operating expenses in the Corp & Elims division primarily include $34.0 million in salaries and benefits for certain general, administrative, and IT related departments, and $13.4 million in professional services fees.
Year Ended June 30, 2021 Senior Healthcare Services Life Auto & Home Corp & Elims Consolidated Revenue $ 724,811 $ 3,890 $ 177,669 $ 30,913 $ (7,302) (1) $ 929,981 Operating expenses (479,646) (5,280) (155,127) (22,735) (46,899) (2) (709,687) Other income (expenses), net — 2 — — (100) (98) Adjusted EBITDA $ 245,165 $ (1,388) $ 22,542 $ 8,178 $ (54,301) 220,196 Share-based compensation expense (5,165) Non-recurring expenses (2) (6,065) Fair value adjustments to contingent earnout obligations (1,488) Depreciation and amortization (16,142) Loss on disposal of property, equipment and software (686) Interest expense, net (29,320) Loss on extinguishment of debt (3,315) Income tax expense (33,156) Net income $ 124,859 62 Tabl e of Contents (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.
The differences from our federal statutory tax rate to the effective tax rate for the year ended June 30, 2022, were primarily related to state income taxes. 2021 compared to 2020— For the year ended June 30, 2021, we recognized income tax expense of $33.2 million, representing an effective tax rate of 21.0%.
For the year ended June 30, 2022, we recognized an income tax benefit of $92.3 million, representing an effective tax rate of 23.7%, with the differences from our federal statutory tax rate to the effective tax rate primarily related to state income taxes.
Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” in Part I, Item 1A above.
Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” in Part I, Item 1A above. Company Overview We are a leading technology-enabled, direct-to-consumer (“DTC”) distribution platform for insurance products and healthcare services.
We evaluate our business using the following three segments: SelectQuote Senior (“Senior”), our fastest growing and largest segment, 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 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.
Investing Activities Our investing activities primarily consist of purchases of furniture and fixtures, computer hardware, leasehold improvements related to facilities expansion, and capitalized salaries related to the development of internal-use software.
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.
The U.S. life insurance market is mature and has experienced annual premium growth of 1.4% since 2013, according to S&P Global. Growth in the 46 Table of Contents life insurance sector is driven by a number of macro-economic factors including population growth, general economic growth and individual wealth accumulation. Our Auto & Home segment predominantly sells automobile and homeowners insurance.
Growth in the life insurance sector is driven by a number of macro-economic factors including population growth, general economic growth and individual wealth accumulation. 46 Tabl e of Contents Our Auto & Home segment predominantly sells automobile and homeowners insurance.
The $46.9 million increase in other revenue was primarily driven by $65.8 million of new revenue from Healthcare Services, partially offset by a reduction of $18.3 million in external lead generation revenue from InsideResponse, as more of their leads were consumed within Senior than in the prior year. 2021 compared to 2020— Commission revenue increased $344.3 million, or 73%, which included increases in Senior and Life commission revenues of $307.1 million and $49.1 million, respectively, offset by a decrease in Auto & Home commission revenue of $10.4 million.
The $46.9 million increase in other revenue was primarily driven by $65.8 million of new revenue from Healthcare Services, partially offset by a reduction of $18.3 million in external lead generation revenue from InsideResponse, as more of their leads were consumed within Senior than in the prior year.
As a result, Medicare enrollment is growing steadily, with the number of Medicare enrollees expected to grow from 63 million in 2021 (up from 59 million in 2018 and 52.5 million in 2013), to approximately 82 million in 2030, according to CSG Actuarial, with 55% of people above 65 and older making online purchases monthly.
As a result, Medicare enrollment is growing steadily, with the number of Medicare enrollees expected to grow from 63 million in 2021 (up from 59 million in 2018 and 52.5 million in 2013), to approximately 75 million in 2030, according to the Centers for Medicare & Medicaid Services in June 2023.
We use our proprietary technology and processes to generate and obtain consumer leads and allocate those leads to agents who are best suited for those consumers.
We use our proprietary technology and processes to generate and obtain consumer leads and allocate those leads to agents who are best suited for those consumers. As a result, one of the primary factors affecting our growth is our total number of agents.
Revenue from our Life segment was $177.7 million for the year ended June 30, 2021, a $49.9 million, or 39%, increase compared to revenue of $127.8 million for the year ended June 30, 2020.
Revenue from our Life segment was $154.0 million for the year ended June 30, 2022, a $23.7 million, or 13%, decrease compared to revenue of $177.7 million for the year ended June 30, 2021.
Costs of revenue, marketing and advertising, 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, and technical development operating expenses are allocated to each segment based on varying metrics such as headcount.
Indirect costs of revenue, marketing and advertising, selling, general, and administrative, and technical development operating expenses are allocated to each segment based on varying 60 Tabl e of Contents metrics such as headcount.
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.
During the year ended June 30, 2022, we increased the number of average productive agents by 100% and average productivity per agent declined by 29%. 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.
We represent approximately 21 leading, nationally-recognized insurance carrier partners, including UnitedHealthcare, Wellcare, and Humana. MA and MS plans accounted for 82%, 78%, and 77% of our approved Senior policies for the years ended June 30, 2022, 2021, and 2020, respectively, with other ancillary type policies accounting for the remainder.
MA and MS plans accounted for 89%, 82%, and 78% of our approved Senior policies for the years ended June 30, 2023, 2022, and 2021, respectively, with other ancillary type policies accounting for the remainder.
Adjusted EBITDA by Segment 2022 compared to 2021 — – Adjusted EBITDA from our Senior segment was $(193.8) million for the year ended June 30, 2022 , a $437.6 million, or 179%, decrease compared to Adjusted EBITDA of $243.8 million for the year ended June 30, 2021 .
Adjusted EBITDA by Segment 2023 compared to 2022 — – Adjusted EBITDA from our Senior segment was $155.1 million for the year ended June 30, 2023, a $316.8 million, or 196%, increase compared to Adjusted EBITDA of $(161.7) million for the year ended June 30, 2022.
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. 52 Table of Contents 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.
In particular, we believe that excluding the impact of these expenses in calculating 52 Tabl e of Contents Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core operating performance.
The number of policies sold declined 27%, driven by lower agent headcount, which was somewhat offset by a 12% increase in the average premium per policy sold.
The number of policies sold declined 36% driven by a lower average agent headcount, which was somewhat offset by a 12% increase in the average premium per policy sold. 2022 compared to 2021— Total term premiums decreased 19% for the year ended June 30, 2022, compared to the year ended June 30, 2021.
The following tables present information about the reportable segments for the periods presented: 60 Table of Contents Year Ended June 30, 2022 (in thousands) Senior Life Auto & Home Corp & Elims Consolidated Revenue $ 595,375 $ 153,973 $ 27,881 $ (13,184) $ 764,045 Operating expenses (789,174) (154,102) (22,448) (58,625) (1) (1,024,349) Other expenses, net — — — (202) (202) Adjusted EBITDA $ (193,799) $ (129) $ 5,433 $ (72,011) (260,506) Share-based compensation expense (7,052) Non-recurring expenses (2) (4,730) Depreciation and amortization (24,724) Loss on disposal of property, equipment, and software, net (1,456) Goodwill impairment (44,596) Impairment of long-lived assets (3,147) Interest expense, net (43,595) Income tax benefit 92,302 Net loss $ (297,504) (1) Operating expenses in the Corp & Elims division primarily include $44.2 million in salaries and benefits for certain general, administrative, and IT related departments, and $18.2 million in professional services fees.
Year Ended June 30, 2022 61 Tabl e of Contents Senior Healthcare Services Life Auto & Home Corp & Elims Consolidated Revenue $ 527,907 $ 70,035 $ 153,973 $ 27,881 $ (15,751) (1) $ 764,045 Operating expenses (689,609) (102,132) (154,102) (22,448) (56,058) (2) (1,024,349) Other expenses, net — — — — (202) (202) Adjusted EBITDA $ (161,702) $ (32,097) $ (129) $ 5,433 $ (72,011) (260,506) Share-based compensation expense (7,052) Non-recurring expenses (3) (4,730) Depreciation and amortization (24,724) Loss on disposal of property, equipment, and software (1,456) Goodwill impairment (44,596) Impairment of long-lived assets (3,147) Interest expense, net (43,595) Income tax benefit 92,302 Net loss $ (297,504) (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.
Because we are not the issuer of the insurance policy to the consumer, we bear no underwriting risks. 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.
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.
Adjusted EBITDA from our Auto & Home segment was $8.2 million for the year ended June 30, 2021, a $0.5 million, or 6%, decrease compared to Adjusted EBITDA of $8.7 million for the year ended June 30, 2020.
Revenue from our Auto & Home segment was $21.9 million for the year ended June 30, 2023, a $6.0 million, or 22%, decrease compared to revenue of $27.9 million for the year ended June 30, 2022.
The decrease in Adjusted EBITDA was primarily due to a $304.3 million increase in operating costs and expenses, driven by a $98.7 million increase in variable marketing expenses as discussed above, a $96.2 million increase in personnel costs associated with additional headcount, $51.0 million higher fulfillment costs associated with scaling Population Health and SelectRx, and $43.8 million in pharmaceutical costs for SelectRx.
The decrease in Adjusted EBITDA was primarily due to a $210.0 million increase in operating costs and expenses, driven by a $97.1 million increase in variable marketing expenses as discussed above, and a $95.1 million increase in personnel costs associated with additional headcount.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+1 added−0 removed3 unchanged
Biggest changeAs of June 30, 2022, three insurance carrier partners accounted for 29%, 20%, and 14% of total accounts and commissions receivable. As of June 30, 2021, three insurance carrier partners accounted for 29%, 21%, and 10% of total accounts and commissions receivable. As of June 30, 2020, three insurance carrier partners accounted for 26%, 20%, and 10% .
Biggest changeAs of June 30, 2021, three insurance carrier customers accounted for 29%, 21%, and 10% of total accounts and commissions receivable.
We do not require collateral or other security for our receivables, but believe the potential for collection issues with any of our customers was minimal as of June 30, 2022, 2021, and 2020, based on the lack of collection issues in the past and the high financial standards we require of our customers.
We do not require collateral or other security for our receivables, but believe the potential for collection issues with any of our customers was minimal as of June 30, 2023, 2022, and 2021, based on the lack of collection issues in the past and the high financial standards we require of our customers.
Seasonality See “Risk Factors—Risks Related to Our Business and Industry—Our existing and any future indebtedness could adversely affect our ability to operate our business” and “Risk Factors—Risks Related to Our Business and Industry—Developments with respect to LIBOR may affect our borrowings under our credit facilities” for additional information. 73 Table of Contents
Seasonality See “Risk Factors—Risks Related to Our Business and Industry—Our existing and any future indebtedness could adversely affect our ability to operate our business” and “Risk Factors—Risks Related to Our Business and Industry—Developments with respect to LIBOR may affect our borrowings under our credit facilities” for additional information. 73 Tabl e of Contents
Interest Rate Risk As of June 30, 2022, we had cash of $140.2 million deposited in non-interest bearing accounts, all at major banks with limited to no interest rate risk, and cash of $0.7 million deposited in a money market account with one of those banks.
As of June 30, 2022, we had cash of $140.2 million deposited in non-interest bearing accounts, all at major banks with limited to no interest rate risk, and cash of $0.7 million deposited in a money market account with one of those banks. Interest-earning instruments carry a degree of interest rate risk.
As of June 30, 2021, we had cash of $25.7 million deposited in non-interest bearing accounts, all at major banks with limited to no interest rate risk, and cash of $260.7 million deposited in a money market account with one of those banks. Interest-earning instruments carry a degree of interest rate risk.
Interest Rate Risk As of June 30, 2023, we had cash of $51.2 million deposited in non-interest bearing accounts, all at major banks with limited to no interest rate risk, and cash of $31.9 million deposited in a money market account with one of those banks.
Added
As of June 30, 2023, two insurance carrier customers accounted for 31% and 22% of total accounts and commissions receivable. As of June 30, 2022, three insurance carrier customers accounted for 29%, 20%, and 14% of total accounts and commissions receivable.

Other SLQT 10-K year-over-year comparisons