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SelectQuote, Inc.

SelectQuote, Inc.SLQTEarnings & Financial Report

NYSE · Financials · Insurance Agents, Brokers & Service

SelectQuote is a direct-to-consumer distribution platform for selling insurance policies and healthcare services. Their insurance business earns commissions by connecting consumers with insurance carriers that provide senior health, life, automobile, and home insurance. The healthcare services business mainly consists of SelectRx, an accredited pharmacy. The company went public on May 21, 2020.

What changed in SelectQuote, Inc.'s 10-K — 2023 vs 2024

Top changes in SelectQuote, Inc.'s 2024 10-K

383 paragraphs added · 428 removed · 302 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

110 edited+17 added−22 removed83 unchanged
Separate from our comparison-shopping platform, we have established several carrier-specific sales platform arrangements with several of our insurance carrier partners, which we call “pods.” These arrangements give us access to various marketing assets from our insurance carrier partners, such as use of the insurance carrier’s brand, which allows us to target customers for specific insurance carrier partners to give us access to incremental sales volume.
Separate from our comparison-shopping platform, we have established carrier-specific sales platform arrangements with several of our insurance carrier partners, which we call “pods.” These arrangements give us access to various marketing assets from our insurance carrier partners, such as use of the insurance carrier’s brand, which allows us to target customers for specific insurance carrier partners to give us access to incremental sales volume.
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.
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 services and products to our consumers.
As part of these efforts, we strive to offer a competitive compensation and benefits program, foster a performance-based, meritocratic organization where everyone feels empowered to do to their best work, and give employees the opportunity to give back to their communities and make a social impact.
As part of these efforts, we strive to offer a competitive compensation and benefits program, foster a performance-based, meritocratic organization where everyone feels empowered to do their best work, and give employees the opportunity to give back to their communities and make a social impact.
Maximizing policyholder lifetime value involves continued investment in: • Our agent experience and customer care team, which, together, enhance our close rates, commissionable premium, and ability to earn renewal and cross-sell revenue; • Carrier relationships and, in particular, negotiation of more favorable terms; • Pre-AEP outreach to our Senior segment policyholders to better understand emerging trends in consumer decision making; • Technology, data, and analytics that help us optimize our marketing and lead acquisition spend; • Our pod offerings, which offer an opportunity to earn economics on a more favorable basis than our broader comparison shopping platform; and • Population Health, which supports increased policy persistency by helping patients understand and utilize the full spectrum of benefits available under their plans.
Maximizing lifetime value involves continued investment in: • Our agent experience and customer care team, which, together, enhance our close rates, commissionable premium, and ability to earn renewal and cross-sell revenue; • Carrier relationships and, in particular, negotiation of more favorable terms; • Pre-AEP outreach to our Senior segment policyholders to better understand emerging trends in consumer decision making; • Technology, data, and analytics that help us optimize our marketing and lead acquisition spend; • Our pod offerings, which offer an opportunity to earn economics on a more favorable basis than our broader comparison shopping platform; and • Population Health, which supports increased policy persistency by helping patients understand and utilize the full spectrum of benefits available under their plans.
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.
Life is one of the country’s largest and most established DTC insurance distributors for term life insurance, having sold over 2.4 million policies nationwide since our founding in 1985. Our platform provides unbiased comparison shopping for life insurance products such as term life, final expense, and other ancillary products like critical illness, accidental death, and juvenile insurance.
We believe that a technology-enabled agent-based distribution model generates superior return on investment and policyholder lifetime value relative to solely web-based or traditional distribution models. As a result, we have built processes that allow us to attract, train and retain top talent, and to grow our agent force when necessary.
We believe that a technology-enabled agent-based distribution model generates superior return on investment and lifetime value relative to solely web-based or traditional distribution models. As a result, we have built processes that allow us to attract, train and retain top talent, and to grow our agent force when necessary.
Our compliance record and efficiency have led insurance carriers to partner with us on another key value proposition—our insurance carrier dedicated agent pods. These pods deepen our relationship with these insurance carrier partners and enable us to sell more policies. Pod marketing is specific to each individual pod and is separate from SelectQuote’s comparison shopping platform.
Our compliance record and efficiency have led insurance carriers to partner with us on another key value proposition—our insurance carrier dedicated pods. These pods deepen our relationship with these insurance carrier partners and enable us to sell more policies. Pod marketing is specific to each individual pod and is separate from SelectQuote’s comparison shopping platform.
Our training is designed to ensure that every agent is well-equipped with a deep understanding of the products they sell and the customer service and sales skills necessary to best service the customer. A goal of ours is that every agent in whom we invest will build a long and rewarding career with us.
Our training is designed to ensure that every agent is well-equipped with a deep understanding of the products they sell and the customer service and sales skills necessary to best service the customer. Our goal is that every agent in whom we invest will build a long and rewarding career with us.
In the pharmaceutical market, SelectRx competes with other closed-door and online pharmacies such as Accudose Pharmacy and ExactCare Pharmacy, along with traditional brick and mortar pharmacies such as Walgreen’s and CVS that primarily sell directly to customers in person.
In the pharmaceutical market, SelectRx competes with other closed-door and online pharmacies such as Accudose Pharmacy and ExactCare Pharmacy, along with traditional brick and mortar pharmacies such as Walgreen’s and Caremark CVS that primarily sell directly to customers in person.
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.
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.
As we continue to operate, these algorithms feed a vast and ever growing pool of millions of data points, which, with the assistance of our team of highly skilled data scientists, enhances our ability to more accurately estimate a new lead’s lifetime value and enables us to make more informed decisions when generating leads.
As we continue to operate, these algorithms feed a vast and ever growing pool of millions of data points, which, with the assistance of our team of highly skilled data scientists, enhances our ability to more accurately estimate a new lead’s lifetime value and enables us to make more informed decisions when acquiring leads.
As a provider of services to entities subject to HIPAA, we are directly subject to certain provisions of the regulations as a “Business Associate.” When acting as a Business Associate under HIPAA, to the extent permitted by applicable privacy regulations and contracts with customers, we are permitted to use and disclose protected health information (“PHI”) to provide our services, and for certain other limited purposes; however, other uses and disclosures of PHI, such as in marketing communications, require written authorization from the patient or must meet an exception specified under the applicable privacy regulations.
As a provider of services to entities subject to HIPAA, we are directly subject to certain provisions of the regulations as a “Business Associate.” 15 Table of Contents When acting as a Business Associate under HIPAA, to the extent permitted by applicable privacy regulations and contracts with customers, we are permitted to use and disclose protected health information (“PHI”) to provide our services, and for certain other limited purposes; however, other uses and disclosures of PHI, such as in marketing communications, require written authorization from the patient or must meet an exception specified under the applicable privacy regulations.
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.
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 65 of the largest and most respected blue-chip insurance carriers.
There 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.
There 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 and life 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 Table 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 medications and our ability to meet such demand; • Safety risks associated with consumers’ use of prescription medications dispensed by our pharmacy; • 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.
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.
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 medications.
Platforms like ours are well positioned to serve these customers as we allow consumers to compare insurance in a transparent manner, without having to solicit individual quotes from carriers in the market or rely on the options presented by a traditional insurance distributor and to do so from the comfort of their homes.
Platforms like ours are well positioned to serve these customers as we allow consumers to compare insurance in a transparent manner, without having to solicit individual quotes from carriers in the market or rely on the options presented by a traditional insurance distributor; and to do so from the comfort of their own home.
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.
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 people who are united in our mission to provide solutions that help consumers with their overall financial well-being and protect their most valued assets.
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.
If one or more events related to these or other risks or 19 Table of Contents 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.
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.
Additionally, through our Healthcare Services business, we offer pharmaceutical products and other health-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 earn commission revenue on the successful sale and renewal of polices we distribute and, accordingly, our financial model does not reflect the inherent uncertainties associated with underwriting insurance risk.
We earn commissions revenue on the successful sale and renewal of polices we distribute and, accordingly, our financial model does not reflect the inherent uncertainties associated with underwriting insurance risk.
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.
We monitor our acquisition costs to dynamically allocate our marketing spend to the most attractive channels, benefiting from nearly 40 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 believe providing personalized advice and guidance from policy research to enrollment is a key differentiator in the senior health market as consumers tend to prefer or require more personalized attention to navigate increasingly complex and ever-changing coverage options. Our agents are trained to offer unbiased advice in order to be more aligned to the specific needs of each customer.
We believe providing personalized advice and guidance from policy research to enrollment is a key differentiator in the senior health market, as consumers tend to prefer or require more personalized attention to navigate increasingly complex and ever-changing coverage options. Our agents are trained to offer unbiased advice in order to align with the specific needs of each customer.
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. This allows us to assemble a world-class team of people who envision building their careers at SelectQuote.
Through 12 Table of Contents our recruiting processes, we are able to identify people who enjoy being a part of, and are motivated by, a performance-based, meritocratic organization. This allows us to assemble a world-class team of people who envision building their careers at SelectQuote.
While we are focused on providing consumers with greater choice, we also strive to be a meaningful component of our insurance carrier partners’ distribution strategy, and are therefore selective when it comes to which carriers we accept onto our platform.
While we are focused on providing consumers with greater 11 Table of Contents choice, we also strive to be a meaningful component of our insurance carrier partners’ distribution strategy, and are therefore selective when it comes to which carriers we accept onto our platform.
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.
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 selling insurance policies and healthcare services.
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.
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 and sold by our agents across our three insurance distribution businesses: Senior, Life, and Auto & Home.
Our Products The core products we distribute on behalf of our insurance carrier partners are needs-based and critical to the overall financial well-being of consumers and the protection of their most valued assets: their families, their health and their property.
Our Products 5 Table of Contents The core insurance products we distribute on behalf of our insurance carrier partners are needs-based and critical to the overall financial well-being of consumers and the protection of their most valued assets: their families, their health, and their property.
We do not currently generate significant revenues directly from the consumers to whom we sell insurance policies on behalf of our insurance carrier partners.
We do not generate revenues directly from the consumers to whom we sell insurance policies on behalf of our insurance carrier partners.
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.
Our Agents 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.
Our dedicated retention-focused customer care (“CCA”) team leverages this technology to help consumers successfully onboard and to identify customers we determine to be likely to purchase additional products, thereby improving the likelihood that a consumer retains his or her policy and identifying cross-sell opportunities.
Our dedicated retention-focused customer care (“CCA”) team leverages this technology to help consumers successfully onboard and to identify customers we determine to be likely to purchase additional products, thereby improving the likelihood that a consumer retains their policy and identifying cross-sell opportunities.
Our systems analyze and intelligently route consumer leads to agents and allow us to monitor, segment, and enhance our agents’ performance. This technological advantage also allows us to rapidly conduct a needs-based, tailored analysis for each consumer that maximizes sales, enhances customer retention, and ultimately maximizes policyholder lifetime revenues.
Our systems analyze and intelligently route consumer leads to agents and allow us to monitor, segment, and enhance our agents’ performance. This technological advantage also allows us to rapidly conduct a needs-based, tailored analysis for each consumer that maximizes sales, enhances customer retention, and ultimately maximizes LTV’s.
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.
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 LTV’s and, ultimately, optimizing our financial performance and shareholder value.
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.
Since then, in addition to introducing a range of other life insurance products, SelectQuote expanded into the fast-growing senior health insurance market and auto & home insurance market. Today we provide consumers with access to over 50 insurance products sourced from approximately 65 carriers.
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.
DTC distribution has become 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.
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.
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 services and products, and we are focused on increasing cross-selling across our existing customer base.
Additionally, we have leveraged our existing Senior database and distribution model to cross-sell to our Healthcare Services segment, as the marketing acquisition costs associated with the sale of a Senior policy are now also utilized to attain consumers for SelectRx and Population Health. Grow Healthcare Services.
Additionally, we have leveraged our existing Senior database and distribution model to cross-sell to our Healthcare Services segment, as the marketing acquisition costs associated with the sale of a Senior policy are now also utilized to attain consumers for Healthcare Services as well. Grow Healthcare Services.
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.
In addition, because we are not the issuer of the insurance policy to the consumer, we bear no underwriting risks. 4 Table of Contents Founded nearly 40 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.
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.
Our insurance distribution business, which has operated continuously for nearly 40 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.
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.
Auto & Home was launched in 2011 as an unbiased comparison shopping platform for insurance products such as homeowners, auto, dwelling fire, and other ancillary insurance products underwritten by approximately 25 leading, nationally recognized insurance carrier partners.
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.
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 LTV.
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.
As of June 30, 2024, our dedicated CCA team was comprised of nearly 250 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.
SelectQuote has a long history of successful DTC product distribution and consumer engagement, and we bring this same capability to healthcare. We saw a large opportunity to leverage our existing customer base and distribution model to improve access to healthcare services for our consumers and to create value for SelectQuote shareholders.
SelectQuote has a long history of successful DTC product distribution and consumer engagement, and we bring this same capability to healthcare services. We saw a large opportunity to leverage our existing customer base and distribution model to improve education and access to healthcare services for our senior consumers and to create value for our shareholders and insurance carrier partners.
This coupling of our technology with our skilled agents provides the consumer with greater transparency in pricing terms and choice, and an overall better consumer experience that maximizes sales, enhances customer retention and, ultimately, maximizes our policyholder lifetime revenues.
This coupling of our technology with our skilled agents provides the consumer with greater transparency in pricing terms and choice and an overall better consumer experience that maximizes sales, enhances customer retention and, ultimately, maximizes LTV’s.
Our database is the result of more than 35 years of dedicated focus and investment, providing us with unparalleled insights that are difficult for competitors to replicate. Financial profile. As a distributor of insurance products, we benefit from favorable industry trends.
Our database is the result of nearly 40 years of dedicated focus and investment, providing us with unparalleled insights that are difficult for competitors to replicate. Financial profile. As a distributor of insurance products, we benefit from favorable industry trends.
Furthermore, our proprietary technology and tech-enabled agent model is focused on maximizing policyholder lifetime value, meaning that our insurance carrier partners enjoy higher quality business from each transaction sourced through us.
Furthermore, our proprietary technology and tech-enabled agent model is focused on maximizing LTV’s, meaning that our insurance carrier partners enjoy higher quality business from each transaction sourced through us.
Our systems allow us to gain valuable insights from the rich sources of consumer information we have gathered over more than three decades, and we use data analytics and proprietary algorithms to enhance our sales and marketing strategies in an effort to maximize our return on our marketing spend and enhance our agents’ close rates.
Our systems allow us to gain valuable insights from the rich sources of consumer information we have gathered over nearly four decades, and we use complex data analytics and proprietary algorithms to enhance our sales and marketing strategies in an effort to maximize our return on our marketing spend and enhance our agents’ close rates.
We are subject, whether directly or indirectly, to numerous federal laws and regulations related to the privacy and security of health information.
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.
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.
Within our Auto & Home segment, we 13 Table of Contents have been successful in bundling products (selling multiple products to the same customer), with bundle rates over each of the last three years of 58%, 55%, and 49%, respectively.
Our insurance carrier partners also rely on our strong internal compliance function, which records all of our calls and audits a subset of them with our Quality Assurance team to ensure that we are complying with Centers for Medicare & Medicaid Services (“CMS”) rules and regulation, telemarketing regulations, carrier internal requirements and that the agents are meeting certain quality metrics that we deem important.
Our insurance carrier partners also rely on our strong internal compliance function, which records all of our calls and audits a subset of them with our Quality Assurance team to ensure that we are complying with CMS rules and regulation, telemarketing regulations, carrier internal requirements and that the agents are meeting certain quality metrics that we deem important.
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.
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.
We are affected by laws and regulations that apply to the insurance industry, as well as those applying to businesses operating on the internet and businesses in general.
We are affected by laws and regulations that apply to the insurance industry, 14 Table of Contents as well as those applying to businesses operating on the internet and businesses in general.
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).
For the years ended June 30, 2024, 2023, and 2022, this timeline 16 Table of Contents resulted in 31%, 32%, and 25%, 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 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.
We have an attractive and scalable platform with strong consumer acquisition capabilities, backed by flexible systems that can be leveraged to introduce new services and products. Our platform has funneled more than 82,000 active members to SelectRx since its launch in 2021, and our current production capacity can support approximately 105,000 members.
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.
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.
In addition to laws and regulations related to the sale of insurance products, our Senior segment, including Population Health, is also subject to various laws governing the relationships of the business with pharmaceutical manufacturers, physicians and other healthcare providers, pharmacies, customers, and consumers, including regulations relating to anti-fraud and abuse, false claims, anti-kickbacks, beneficiary inducement, prohibited referrals, and inappropriate reduction or limitation of health care services.
Additionally, our Healthcare Services segment is also subject to various laws governing the relationships of the business with pharmaceutical manufacturers, physicians and other healthcare providers, pharmacies, customers, and consumers, including regulations relating to anti-fraud and abuse, false claims, anti-kickbacks, beneficiary inducement, prohibited referrals, and inappropriate reduction or limitation of health care services.
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%.
We represent approximately 20 leading, nationally-recognized insurance carrier partners, with many of these relationships exceeding 20 years. Term life policies accounted for 45% of new premium within Life for the year ended June 30, 2024, with final expense policies accounting for 55%.
We represent approximately 25 leading, nationally-recognized insurance carrier partners, including UnitedHealthcare (“UHC”), Humana, and Wellcare. MA and MS plans accounted for 89% of our approved Senior policies for the year ended June 30, 2023, with other ancillary type policies accounting for the remainder.
We represent approximately 25 leading, nationally-recognized insurance carrier partners, including carriers owned by UnitedHealthcare (“UHC”), Humana, Wellcare, and Aetna. MA and MS plans accounted for 91% of our approved Senior policies for the year ended June 30, 2024, with other ancillary type policies accounting for the remainder.
Applying information gathered since our founding more than 35 years ago to drive sophisticated attribution modeling, we have continued to optimize our decision-making and advance our goal of maximizing policyholder lifetime value and profitability.
Applying information gathered since our founding nearly 40 years ago to drive sophisticated attribution modeling, we have continued to optimize our decision-making and advance our goal of maximizing lifetime value and profitability.
Our complex regression and machine-learning models drive marketing spend and lead purchasing, scoring and routing, sales execution and post-sale customer engagement, all to further our goal of maximizing policyholder lifetime value. As we continue to grow, we will naturally acquire more data that will continue to better inform our decision-making. Highly scalable platform with growing network effects.
Our complex regression and machine-learning models drive marketing spend and lead purchasing, scoring and routing, sales 10 Table of Contents execution and post-sale customer engagement, all to further our goal of maximizing policyholder lifetime value. As we continue to grow, we will naturally acquire more data that will continue to better inform our decision-making.
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.
Our production facilities currently have the capacity to support approximately 105,000 members, 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 health related products and services, including value-based care providers, chronic care management and resources for addressing social needs.
We have developed what we believe is a best-in-class talent management system that allows us to recruit from across the United States and build and retain top agents. We provide each new agent with up to 10 weeks of proprietary in-house training, which is later supplemented by ongoing training during the agent’s full-time employment.
We have developed what we believe is a best-in-class talent management system that allows us to recruit from across the United States and build 6 Table of Contents and retain top agents. We provide each new agent with up to 10 weeks of proprietary in-house training, which is supplemented by ongoing training throughout the year.
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.
For the year ended June 30, 2024, we sold over 685,000 policies for our Senior insurance carrier partners and produced more than $210 million in new premium for our Life and Auto & Home insurance carrier partners.
We have built our business model to maximize commissions collected over the life of an approved policy less the cost of acquiring the business, a metric we refer to as “policyholder lifetime value”, and which is a key component to our overall profitability. Our proprietary routing and workflow system is a key competitive advantage and driver of our business performance.
We have built our business model to maximize commissions collected over the life of an approved policy, a metric we refer to as “ lifetime value of commissions” or “LTV”, which is a key component to our overall profitability. Our proprietary routing and workflow system is a key competitive advantage and driver of our business performance.
We estimate the total value-based care market for Medicare Advantage patients to be over $600 billion. Further, with more than half of MA beneficiaries living below 200% of the federal poverty level, many of our consumers need help accessing social resources that impact health outcomes.
We estimate the total value-based care market for Medicare Advantage patients to be over $600 billion. Further, with 33% of Medicare beneficiaries living below 200% of the federal poverty level, according to the Kaiser Family Foundation in 2022, many of our consumers need help accessing social resources that impact health outcomes.
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 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.
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.
Our unique platform then further enabled us to expand our business again in recent years to include Healthcare Services. Our product segments are a natural fit with consumer insurance and healthcare needs across different life stages.
We continue to enhance our visibility with advertisements on nationwide television networks and radio outlets, while also maintaining a strong online presence through our market-leading comparison websites, complemented by search engine advertising and a social media presence.
Over this time, we have built a highly successful and recognizable household brand. We continue to enhance our visibility with advertisements on nationwide television networks and radio outlets, while also maintaining a strong online presence through our market-leading comparison websites, complemented by search engine advertising and a social media presence.
Since our founding in 1985, we have been pioneers of insurance distribution, and, through our technology-driven sales model, we believe we are well placed to support policyholders and insurance carrier partners as consumers continue shifting toward online channels to make purchasing decisions for their insurance needs.
Since 1985, we have helped over seven million policyholders save time and money on critical insurance purchases. We have been pioneers of insurance distribution, and, through our technology-driven sales model, we believe we are well placed to support policyholders and insurance carrier partners as consumers continue shifting toward online channels to make purchasing decisions for their insurance needs.
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 we can realize additional growth by expanding our product offerings through Population Health as well as adding new business lines that can provide needed services for Medicare beneficiaries. Competition The market for distribution of insurance products is highly competitive, fragmented, and evolving as consumers increasingly transact online.
The degree to which we will realize a corresponding increase in revenue will be determined by our ability to continue to successfully place new Medicare policies for this enlarged potential consumer base.
The degree to which we will realize a corresponding increase in revenue will be determined by our ability to continue to successfully place new Medicare policies for this enlarged potential consumer base. Despite our scale, we account for only a fraction of the total market for Medicare Advantage plans.
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.
Our focus on offering high-quality products has resulted in improved retention rates, increasing the value of our distribution model to insurance carrier partners. We also believe Population Health deepens 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.
In support of this goal, we will continue to invest in training and technology to enable our agents to increase their productivity. Further, as we expand our product offering within Healthcare Services and the insurance distribution business, our agents will have additional opportunities to increase their earnings and develop their careers.
In support of this goal, we will continue to invest in training and technology to enable our agents to increase their productivity. Further, as we continue to grow as a company, our agents will have additional opportunities to increase their earnings and develop their careers.
ARC and AQE allow us to build quotes for potential customers in real time based on specific carrier underwriting requirements and risk tolerances. • SelectQuote Revenue Tracking System : Fully integrated, proprietary revenue tracking and financial reporting tool that also supports financial and customer falloff/retention prediction algorithms, allowing for real-time workflow and actions with our customer service teams.
ARC and AQE allow us to build quotes for potential customers in real time based on specific carrier underwriting requirements and risk tolerances. • SelectQuote Revenue Tracking System : Fully integrated, proprietary revenue tracking and financial reporting tool that also supports financial and customer falloff/retention prediction algorithms, allowing for real-time workflow and actions with our customer service teams. • AI and Machine Learning: We leverage AI and machine learning to refine our lead scoring, routing, and agent support systems, ensuring compliance and enhancing agent productivity and accuracy in policy recommendations across all insurance lines.
In contrast, the insurance distribution landscape today is one in which consumers of insurance demand greater choice, seek more transparency in pricing, and use the internet to self-research their insurance options.
In contrast, the insurance distribution landscape today is one in which consumers of insurance demand greater choice, seek more transparency in pricing, and use the internet to self-research their insurance options. Technological innovations, consumer demand for price transparency and comparison shopping, and the development of machine learning for business applications, continue to transform the insurance distribution landscape.
Life Market DTC sales of life insurance are becoming more prevalent as an increasing proportion of consumers are conducting self-directed online research prior to buying policies. Due to the typically more complex and longer-term nature of life insurance products, we expect agent expertise and consultation to continue as a prominent aspect of the sales process prior to ultimate purchase.
Due to the typically more complex and longer-term nature of life insurance products, we expect agent expertise and consultation to continue as a prominent aspect of the sales process prior to ultimate purchase.
Our recruiting and development processes lead to strong agent productivity rates allowing us to offer competitive compensation packages and attractive career paths. This results in a virtuous cycle, which we believe gives SelectQuote a sustainable competitive advantage in the recruitment of new agents. Diverse product offering. At our inception, we specialized in the distribution of term life insurance products.
This results in a virtuous cycle, which we believe gives SelectQuote a sustainable competitive advantage in the recruitment of new agents. Diverse product offering. At our inception, we specialized in the distribution of term life insurance products.
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.
We believe what sets us apart from our competitors is our almost 40 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.
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.
Our Growth Strategy Maximize lifetime value. Lifetime value, which represents commissions estimated to be collected over the life of an approved policy, is a key component of our overall profitability. Our goal is to maximize LTV’s, and we do so through strategies designed to maximize the revenue opportunity.
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).
As of June 30, 2024, we employed a total of 1,335 agents and 2,957 non-agent full-time equivalent employees. During AEP, we typically hire additional full-time employees to capitalize on the peak selling season and hired approximately 700 employees for the 2023 AEP (fiscal 2024).
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.
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 (“CMS”) in June 2023. 8 Table of Contents Research from the Center for Disease Control and Prevention shows almost half of seniors need more information and assistance to better manage their care.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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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.
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 Table 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 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 and other healthcare-related products and services could harm our business, operating results, financial condition and prospects.
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 and other health-related products and services could harm our business, operating results, financial condition and prospects.
We face risks relating to the availability, pricing and safety profiles of prescription drugs that we purchase and sell. Our pharmacy business is dependent on our customers’ use of prescription drugs to treat or address symptoms of chronic medical conditions.
We face risks relating to the availability, pricing and safety profiles of prescription medications that we purchase and sell. Our pharmacy business is dependent on our customers’ use of prescription medications to treat or address symptoms of chronic medical conditions.
Our business model does not require us to hold a significant amount of cash and cash equivalents at any given time, and if our cash needs exceed our expectations or we experience rapid growth, we could experience strain in our cash flow, which could adversely affect our operations in the event we were unable to obtain other sources of liquidity.
Our business model does not require us to hold a significant amount of cash and cash equivalents at any given time, and if our cash needs exceed our expectations or we experience rapid growth, we could experience strain in our cash flow, which could adversely 31 Table of Contents affect our operations in the event we were unable to obtain other sources of liquidity.
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.
If the relevant state authorities or our insurance carrier partners experience shutdowns or business disruptions due to 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.
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.
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 Table 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. • We may be subject to significant liability should the consumption of any of our pharmacy products cause injury, illness or death. • Our existing and any future indebtedness could adversely affect our ability to operate our business. • Operating and growing our business will 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 revenues, operating results, and cash flows may be negatively affected if consumers’ use of prescription drugs is reduced, including due to: • increased safety profiles or regulatory restrictions; • a reduction in drug manufacturers’ participation in federal programs; • certain products being withdrawn from the market by their manufacturers or transitioned to over-the-counter products; • future FDA rulings restricting the supply or increasing the cost of products; or • inflation in the price of drugs.
Our revenues, operating results, and cash flows may be negatively affected if consumers’ use of prescription medications is reduced, including due to: • increased safety profiles or regulatory restrictions; • a reduction in prescription medication manufacturers’ participation in federal programs; • certain products being withdrawn from the market by their manufacturers or transitioned to over-the-counter products; • future FDA rulings restricting the supply or increasing the cost of products; or • inflation in the price of prescription medications.
Our pharmacy business is also subject to risks relating to manufacturing and supply issues. The success of our pharmacy business depends on our ability to reliably source prescription drugs in a timely and cost-effective manner.
Our pharmacy business is also subject to risks relating to manufacturing and supply issues. The success of our pharmacy business depends on our ability to reliably source prescription medications in a timely and cost-effective manner.
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.
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. 21 Table of Contents • We are required to make significant estimates and assumptions in the preparation of our financial statements.
In particular, because our DTC platform provides consumers with a venue to shop for insurance policies from a curated panel of the nation’s leading insurance carriers, the expansion of government-sponsored coverage through “Medicare-for-All” or the implementation of a single-payer system may adversely impact our business.
In particular, because our DTC platform provides consumers with a venue to shop for insurance policies from a curated panel of the nation’s leading insurance carriers, the expansion of government- 38 Table of Contents sponsored coverage through “Medicare-for-All” or the implementation of a single-payer system may adversely impact our business.
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.
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 28 Table of Contents margins may suffer, and our results of operations, cash flows, and financial condition could be materially and adversely affected.
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.
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 accuracy and timely delivery of our prescription boxes; our customer service; and our flexibility in responding to patients’ changing needs and preferences.
The United States regulates marketing by telephone and email and the laws and regulations governing the use of emails and telephone calls for marketing purposes continue to evolve, and changes in technology, the marketplace or consumer preferences may lead to the adoption of additional laws or regulations or changes in interpretation of existing laws or regulations.
The United States regulates marketing by telephone and email and the laws and regulations governing the use of emails 40 Table of Contents and telephone calls for marketing purposes continue to evolve, and changes in technology, the marketplace or consumer preferences may lead to the adoption of additional laws or regulations or changes in interpretation of existing laws or regulations.
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.
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.
For example, in April 2023, CMS finalized rules that could increase compliance costs and otherwise impact our business results by, among other things, requiring new disclosures that could make certain forms of marketing less practicable and potentially requiring a 48-hour waiting period between initial contact with a beneficiary and enrolling that 36 Tabl e of Contents beneficiary.
For example, in April 2023, CMS finalized rules that could increase compliance costs and otherwise impact our business results by, among other things, requiring new disclosures that could make certain forms of marketing less practicable and potentially requiring a 48-hour waiting period between initial contact with a beneficiary and enrolling that beneficiary.
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.
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 41 Table of Contents Directors deems relevant.
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.
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 Table of Contents prospects.
During periods when we are unable to recruit high-performing agents and enrollment and consumer service specialists, we tend to experience higher turnover rates. The productivity of our agents and enrollment and consumer service specialists is influenced by their average tenure.
During periods when we are 25 Table of Contents unable to recruit high-performing agents and enrollment and consumer service specialists, we tend to experience higher turnover rates. The productivity of our agents and enrollment and consumer service specialists is influenced by their average tenure.
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.
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 insurance industry.
The reliability and security of our systems, and those of our insurance carrier partners, is important not only to facilitating our sale of insurance products, but also to maintaining our reputation and ensuring the proper protection of our confidential and proprietary information.
The reliability and security of our systems, and those of our insurance carrier partners, is important not only to facilitating our sale of insurance 34 Table of Contents products, but also to maintaining our reputation and ensuring the proper protection of our confidential and proprietary 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.
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.
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.
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. • Changes and developments in the regulation of the healthcare industry and the health insurance system and markets could adversely affect our business.
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.
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.
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.
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.
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.
To the extent they are determined to apply to our operations, 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.
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.
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.
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.
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. 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.
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.
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.
For the year ended June 30, 2024, 50% of our total revenue was derived from our Senior segment. For the years ended June 30, 2023 and 2022, 59% and 69%, respectively, of our total revenue was derived from our Senior segment.
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.
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.
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.
For example, carriers owned by UHC, Humana, and Aetna accounted for 30%, 17% , and 16%, respectively, of our total revenue for the year ended June 30, 2024, carriers owned by UHC and Humana accounted for 33% and 20%, respectively, of our total revenue for the year ended June 30, 2023; and carriers owned by UHC, Wellcare, and Humana acc ounted for 18%, 17%, and 12%, respectively, of our total revenue for the year ended June 30, 2022.
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.
During the year ended June 30, 2024, no intangible or goodwill impairment charges were recorded. 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.
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.
Our business model relies on our ability to sell policies on behalf of our insurance carrier partners. 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.
Third parties also may take actions that diminish the value of our proprietary rights or our reputation or cause consumer confusion through the use of similar service names or domain names. Litigation regarding any intellectual property disputes may be costly and disruptive to us. Any of these results would harm our business, operating results, financial condition and prospects.
Third parties also may take actions that diminish the value of our proprietary rights or our reputation or cause consumer confusion through the use of similar service names or domain names. 33 Table of Contents Litigation regarding any intellectual property disputes may be costly and disruptive to us.
Accordingly, we must continually invest resources in product, technology and development in order to improve the comprehensiveness and effectiveness of our distribution platform.
Our continued improvement of our product and service offerings is critical to our success. Accordingly, we must continually invest resources in product, technology and development in order to improve the comprehensiveness and effectiveness of our distribution platform.
The timing of our revenue depends upon the timing of our insurance carrier partners’ approval of the policies sold on our platform and submitted for their review, as well as the timing of our receipt of commission reports and associated payments from our insurance carrier partners.
Our operating results fluctuate depending upon insurance carrier payment and policy approval practices and the timing of our receipt of commission reports from our insurance carrier partners. 32 Table of Contents The timing of our revenue depends upon the timing of our insurance carrier partners’ approval of the policies sold on our platform and submitted for their review, as well as the timing of our receipt of commission reports and associated payments from our insurance carrier partners.
Some statements in this Annual Report on Form 10-K, including statements in the following risk factors, constitute forward-looking statements. Please refer to “Cautionary Note Regarding Forward-Looking Statements.” Risk Factor Summary Risks Related to Our Business and Industry • We currently depend on a small group of insurance carrier partners for a substantial portion of our business.
Please refer to “Cautionary Note Regarding Forward-Looking Statements.” Risk Factor Summary Risks Related to Our Business and Industry • We currently depend on a small group of insurance carrier partners for a substantial portion of our business.
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.
If paid search advertising costs increase or become cost prohibitive, whether as a result of competition, algorithm changes or otherwise, our 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. 27 Table of Contents Our business could be harmed if we are unable to contact consumers or market the availability of our products by telephone.
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.
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. 24 Table of Contents If we are unable to develop new offerings, achieve increased consumer adoption of those offerings or penetrate new vertical markets, our business, operating results, financial condition and prospects could be materially and adversely affected.
Health reform efforts and measures may expand the role of government-sponsored coverage, including single payer or so called “Medicare-for-All” proposals, which could have far-reaching implications for the insurance industry if enacted. Government regulation may change in response to the COVID-19 pandemic, which may have an adverse effect on our business.
Health reform efforts and measures may expand the role of government-sponsored coverage, including single payer or so called “Medicare-for-All” proposals, which could have far-reaching implications for the insurance industry if enacted.
Additionally, we enter into confidentiality and invention assignment agreements with our employees and enter into confidentiality agreements with third parties, including suppliers and other partners. However, we cannot guarantee that we have entered into such agreements with each party that has or may have had access to our proprietary information, know-how and trade secrets.
However, we cannot guarantee that we have entered into such agreements with each party that has or may have had access to our proprietary information, know-how and trade secrets.
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.
Our existing and any future indebtedness could adversely affect our ability to operate our business. 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.
Our business could be harmed if we are unable to contact consumers or market the availability of our products by telephone. Telephone calls from our sales centers may be blocked by or subject to consumer warnings from telephone carriers. Furthermore, our telephone messages to existing or potential customers may not be reliably received due to those consumers’ call-screening practices.
Telephone calls from our sales centers may be blocked by or subject to consumer warnings from telephone carriers. Furthermore, our telephone messages to existing or potential customers may not be reliably received due to those consumers’ call-screening practices.
Our ability to match consumers to insurance products that suit their needs is dependent upon their provision of accurate information during the insurance shopping process. Our business depends on consumers’ provision of accurate information during the insurance shopping process.
Failure to do so could materially and adversely affect our business, operating results, financial condition and prospects. Our ability to match consumers to insurance products that suit their needs is dependent upon their provision of accurate information during the insurance shopping process. Our business depends on consumers’ provision of accurate information during the insurance shopping process.
These factors could prevent our Senior segment from successfully marketing and selling Medicare plans, which would harm our business, operating results, financial condition and prospects. We are also dependent upon the economic success of the life, automotive and home insurance industries.
These factors could prevent our Senior segment from successfully marketing and selling Medicare plans, which would harm our business, operating results, financial condition and prospects. We are also dependent upon the economic success of the life insurance industry. Declines in demand for life insurance could cause fewer consumers to shop for such policies using our distribution platform.
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.
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 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.
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.
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.
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 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.
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.
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.
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.
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.
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.
Failure to maintain compliance with these covenants or make payments under the Senior Secured Credit Facility could result in an event of default.
Changes and developments in the health insurance system and laws and regulations governing the health insurance markets in the United States could materially and adversely affect our business, operating results, financial condition and prospects. Our Senior segment depends upon the private sector of the U.S. insurance system, which is subject to rapidly evolving regulation.
Developments of this type could materially and adversely affect our business, operating results, financial condition and prospects. Changes and developments in the health insurance system and laws and regulations governing the health insurance markets in the United States could materially and adversely affect our business, operating results, financial condition and prospects.
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.
Based on our financial 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. Our future compliance with these covenants is dependent on our ability to restructure our existing debt or secure additional financing from other sources.
Changes to healthcare and insurance regulation arising from the effects of the COVID-19 pandemic may be possible. While it is difficult to determine the impact of potential reforms on our future business, it is possible that such changes in healthcare industry regulation could result in reduced demand for our insurance distribution services.
While it is difficult to determine the impact of potential reforms on our future business, it is possible that such changes in healthcare industry regulation could result in reduced demand for our insurance distribution services. Our insurance carrier partners may react to existing or future reforms, or general regulatory uncertainty, by reducing their reliance on our agents.
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.
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.
We 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.
We 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.
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.
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.
A breach of our security that results in unauthorized access to our data could expose us to a disruption or challenges relating to our daily operations, as well as to data loss, litigation, damages, fines and penalties, significant increases in compliance costs and reputational damage, any of which could have a material and adverse effect on our business, operating results, financial condition and prospects.
A breach of our security that results in unauthorized access to our data could expose us to a disruption or challenges relating to our daily operations, as well as to data loss, litigation, damages, fines and penalties, significant increases in compliance costs and reputational damage, any of which could have a material and adverse effect on our business, operating results, financial condition and prospects. 35 Table of Contents To the extent we or our systems rely on our insurance carrier partners or third-party service providers, through either a connection to, or an integration with, those third-parties’ systems, the risk of cybersecurity attacks and loss, corruption, or unauthorized publication of our information or the confidential information of consumers and employees may increase.
Further, we may incur additional goodwill or other impairment charges in the future associated with other acquisitions, and we cannot accurately predict the amount and timing of any impairments of these or other assets. Should the value of goodwill or other intangible assets become impaired, there could be an adverse effect on our financial condition and results of operations.
Further, we may incur additional goodwill or other 30 Table of Contents impairment charges in the future associated with other acquisitions, and we cannot accurately predict the amount and timing of any impairments of these or other assets.
Declines in demand for life, automotive and home insurance could cause fewer consumers to shop for such policies using our distribution platform. Downturns in any of these markets, which could be caused by a downturn in the economy at large, could materially and adversely affect our business, operating results, financial condition and prospects.
Downturns in any of these markets, which could be caused by a downturn in the economy at large, could materially and adversely affect our business, operating results, financial condition and prospects. Systemic changes in our insurance carrier partners’ sales strategies could adversely affect our business.
Healthcare laws and regulations are rapidly evolving and may change significantly in the future, impacting the coverage and plan designs that are or will be provided by certain insurance carriers.
Our Senior segment, operating results, financial condition and prospects may be materially and adversely affected if we are unable to adapt to developments in healthcare reform in the United States. Healthcare laws and regulations are rapidly evolving and may change significantly in the future, impacting the coverage and plan designs that are or will be provided by certain insurance carriers.
Various aspects of healthcare reform could also cause insurance carriers to discontinue certain health insurance products or prohibit us from distributing certain health insurance products in particular jurisdictions. Our Senior segment, operating results, financial condition and prospects may be materially and adversely affected if we are unable to adapt to developments in healthcare reform in the United States.
For example, healthcare reform could lead to increased competition in our industry, and the number of consumers shopping for insurance through our agents may decline. Various aspects of healthcare reform could also cause insurance carriers to discontinue certain health insurance products or prohibit us from distributing certain health insurance products in particular jurisdictions.
There can be no assurance that we will be able to continually collect and retain sufficient data, or improve our data technologies to satisfy our operating needs. Failure to do so could materially and adversely affect our business, operating results, financial condition and prospects.
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. There can be no 26 Table of Contents assurance that we will be able to continually collect and retain sufficient data, or improve our data technologies to satisfy our operating needs.
Accordingly, the future financial performance of our Senior segment will depend in part on our ability to adapt to regulatory developments. For example, healthcare reform could lead to increased competition in our industry, and the number of consumers shopping for insurance through our agents may decline.
Our Senior segment depends upon the private sector of the U.S. insurance system, which is subject to rapidly evolving regulation. Accordingly, the future financial performance of our Senior segment will depend in part on our ability to adapt to regulatory developments.
The risks and uncertainties described below represent the material risks known to us, but they are not the only ones we face. Additional risks and uncertainties that we are unaware of or that we currently see as immaterial may also adversely affect our business.
The risks and uncertainties described below represent the material risks known to us, but they are not the only ones we face. Some statements in this Annual Report on Form 10-K, including statements in the following risk factors, constitute forward-looking statements.
For further information about the impairments we recorded during our most recently completed fiscal year, please refer to “Notes to Consolidated Financial Statements” under Item 8 below. Our existing and any future indebtedness could adversely affect our ability to operate our business.
Should the value of goodwill or other intangible assets become impaired, there could be an adverse effect on our financial condition and results of operations. For information about the impairments we recorded during the years ended June 30, 2023 and 2022, please refer to “Notes to Consolidated Financial Statements” under Item 8 below.
Removed
For the years ended June 30, 2023, 2022, and 2021, our top three insurance carrier partners by total revenue were from the Senior segment.
Added
Changes in third-party reimbursement levels for prescription drugs and changes in industry pricing benchmarks could reduce our pharmacy margins and have a material adverse effect on our business.
Removed
Systemic changes in our insurance carrier partners’ sales strategies could adversely affect our business. Our business model relies on our ability to sell policies on behalf of our insurance carrier partners.
Added
Our pharmacy business derives substantially all of its revenue from sales of prescription drugs reimbursed by third-party payors, including the Medicare Part D plans and state sponsored Medicaid and related managed care Medicaid plans.
Removed
If we are unable to develop new offerings, achieve increased consumer adoption of those offerings or penetrate new vertical markets, our business, operating results, financial condition and prospects could be materially and adversely affected. Our continued improvement of our product and service offerings is critical to our success.
Added
The continued efforts of Congress and federal agencies, health maintenance organizations, managed care organizations, pharmacy benefit management companies (PBMs), other State and local government entities, and other third-party payors to reduce prescription drug costs and pharmacy reimbursement rates, as well as litigation relating to how drugs are priced, may impact our profitability.
Removed
Impairment of the carrying value of our goodwill or other intangible assets could adversely affect our financial condition and results of operations. 29 Tabl e of Contents As a result of past acquisitions, we carry goodwill and other acquired intangible assets on our balance sheet.
Added
The competitive success of our pharmacy business is largely dependent on our ability to establish and maintain contractual relationships with PBMs and other payors on acceptable terms. Some of these entities may offer pricing terms that we may not be willing to accept or otherwise restrict or exclude our participation in their networks of pharmacy providers.
Removed
Our operating results fluctuate depending upon insurance carrier payment and policy approval practices and the timing of our receipt of commission reports from our insurance carrier partners.
Added
These challenges may be exacerbated by continued consolidation in the healthcare industry, which could reduce our bargaining power and weaken our ability to obtain advantageous contracting terms.
Removed
To the extent we or our systems rely on our insurance carrier partners or third-party service providers, through either a connection to, or an integration with, those third-parties’ systems, the risk of cybersecurity attacks and loss, corruption, or unauthorized publication of our information or the confidential information of consumers and employees may increase.
Added
In addition, any future changes to the use of Average Wholesale Price or other published pricing benchmarks used to establish pharmaceutical pricing, including changes in the basis for calculating reimbursement by federal and state health programs and/or other payors, could impact the reimbursement we receive from Medicare programs and Medicaid health plans, the reimbursement we receive from payors and/or our ability to negotiate rebates with pharmaceutical manufacturers and acquisition discounts with wholesalers.
Removed
Our insurance carrier partners may react to existing or future reforms, or general regulatory uncertainty, by reducing their reliance on our agents. Developments of this type could materially and adversely affect our business, operating results, financial condition and prospects.

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Item 2. Properties

Properties — owned and leased real estate

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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.
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, 2024. 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.
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
Centennial, Colorado 45,373 45,373 — Monaca, Pennsylvania 22,000 — 22,000 Healthcare Services segment (SelectRx) operations Indianapolis, Indiana 32,630 — 32,630 Healthcare Services segment (SelectRx) operations Oakland, California 8,623 — 8,623 Life segment operations San Diego, California 5,874 — 5,874 Life segment operations
As 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.
As 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. 43 Table of Contents Location Approximate Square Footage Leased Approximate Square Footage Subleased Approximate Square Footage Occupied Primary Use Overland Park, Kansas 232,068 95,874 136,194 Corporate headquarters, marketing and advertising, technical development, general and administrative, operations for all segments.
Removed
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 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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However, 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.
However, 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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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.
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, 2024.
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.
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, 2024.
As of August 31, 2023, there were approximately 100 common stockholders of record.
As of August 31, 2024, there were approximately 100 common stockholders of record.
The 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
The stock price performance shown in the following graph is not intended to forecast or be indicative of possible future stock price performance. 45 Table of Contents 5/21/2020 06/20 06/21 06/22 6/23 6/24 SelectQuote, Inc. $ 100.00 $ 93.81 $ 71.33 $ 9.19 $ 7.22 $ 10.22 NYSE Composite Index $ 100.00 $ 104.78 $ 145.84 $ 127.63 $ 139.86 $ 158.80 CRSP US Small Cap Index $ 100.00 $ 106.55 $ 164.78 $ 128.92 $ 145.64 $ 159.85 46 Table of Contents

Item 7. Management's Discussion & Analysis

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

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On April 30, 2021, we acquired 100% of the outstanding shares of Express Med Pharmaceuticals for an aggregate purchase price of up to $24.0 million (subject to customary adjustments), comprised of $17.5 million in cash paid at the closing of the transaction, an additional $2.5 million of holdback for indemnification claims, if any, and an earnout of up to $4.0 million, if any.
Acquisitions On April 30, 2021, we acquired 100% of the outstanding shares of Express Med Pharmaceuticals for an aggregate purchase price of up to $24.0 million (subject to customary adjustments), comprised of $17.5 million in cash paid at the closing of the transaction, an additional $2.5 million of holdback for indemnification claims, if any, and an earnout of up to $4.0 million, if any.
Factors Affecting Our Results of Operations Our primary source of revenue is commission revenue from selling policies in the senior health, life, and auto and home markets on behalf of our insurance carrier partners, the majority of which compensate us through first year and renewal commissions.
Factors Affecting Our Results of Operations Our primary source of revenue is commissions revenue from selling policies in the senior health, life, and auto and home markets on behalf of our insurance carrier partners, the majority of which compensate us through first year and renewal commissions.
Our goal is to maximize policyholder lifetime value by increasing retention rates, which starts by providing consumers with a transparent, valuable and best-in-class consumer experience and making sure consumers are buying a policy that meets their specific needs.
Our goal is to maximize lifetime value by increasing retention rates, which starts by providing consumers with a transparent, valuable, and best-in-class consumer experience and making sure consumers are buying a policy that meets their specific needs.
Critical Accounting Policies and Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, and liabilities and disclosure of contingent assets and liabilities in our financial statements.
Critical Accounting Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, and liabilities and disclosure of contingent assets and liabilities in our financial statements.
Lifetime Value of Commissions per Approved Policy The lifetime value of commissions (the “LTV”) per approved policy represents commissions estimated to be collected over the estimated life of an approved policy based on multiple factors, including but not limited to, contracted commission rates, carrier mix and expected policy persistency with applied constraints.
Lifetime Value of Commissions per Approved Policy The LTV per approved policy represents commissions estimated to be collected over the estimated life of an approved policy based on multiple factors, including but not limited to, contracted commission rates, carrier mix, and expected policy persistency with applied constraints.
An accounting policy is considered to be critical if the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and the effect of the estimates and assumptions on financial condition or operating performance.
An accounting estimate is considered to be critical if the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and the effect of the estimates and assumptions on financial condition or operating performance.
Revenue from our Life segment was $145.8 million for the year ended June 30, 2023, a $8.1 million, or 5%, decrease compared to revenue of $154.0 million for the year ended June 30, 2022, primarily due to a $7.3 million decrease in commission revenue.
Revenue from our Life segment was $145.8 million for the year ended June 30, 2023, a $8.1 million, or 5%, decrease compared to revenue of $154.0 million for the year ended June 30, 2022, primarily due to a $7.3 million decrease in commissions revenue.
We view agents as a critical component of helping consumers through the purchasing process to enable them to identify the most appropriate coverage that suits their needs. Through our years of experience, we have expanded our recruiting efforts and enhanced our training programs, both of which have allowed us to expand our agent force.
We view agents as a critical component of helping consumers through the purchasing process to enable them to identify the most appropriate coverage that suits their needs. Through our years of experience, we have expanded and tailored our recruiting efforts and enhanced our training programs, both of which have allowed us to expand our agent force when necessary.
Collection of commissions receivable depends upon the timing of our receipt of commission payments and associated commission statements from our insurance carrier partners. If we were to experience a delay in receiving a commission payment from an insurance carrier partner within a quarter, our operating cash flows for that quarter could be adversely impacted.
Collection of commissions receivable depends upon the timing of our receipt of commission payments and associated commission statements from our insurance carrier partners. If we were to experience a delay in receiving 63 Table of Contents a commission payment from an insurance carrier partner within a quarter, our operating cash flows for that quarter could be adversely impacted.
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 nearly 40 years of data accumulated through our proprietary, purpose-built technologies. Our advanced workflow processing system scores each acquired lead in real time, matching it with a sales agent whom we determine is best suited to meet the consumer’s need.
Our 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.
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.
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 estimate of renewal commission revenue is considered variable consideration and requires significant judgment to determine the renewal commission revenue to be recognized at the time the performance obligation is met and in the reassessment of the transaction price each reporting period.
Commission Revenue Recognition and Commissions Receivable The estimate of renewal commission revenue is considered variable consideration and requires significant judgment to determine the renewal commission revenue to be recognized at the time the performance obligation is met and in the reassessment of the transaction price each reporting period.
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.
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.
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.
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 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.
Industry growth is driven by growth in the number of registered vehicles, 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.
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.
Homeowners and 12-month auto products accounted for 74%, of new premium within the Auto & Home segment for years ended June 30, 2024 and 2023, respectively, and 76% for the year ended June 30, 2022, with six-month auto, dwelling fire, and other products accounting for a majority of the remainder.
Fluctuations in approved policies are normally in direct correlation to submitted policies; however, due to our increased focus on agent training and development and a higher mix of tenured agents, we experienced a 6% improvement in the submitted-to-approved conversion rates for the year ended June 30, 2023, compared to the year ended June 30, 2022. 2022 compared to 2021— Total approved policies for all products increased by 30% for the year ended June 30, 2022, compared to the year ended June 30, 2021.
Fluctuations in approved policies are normally in direct correlation to submitted policies; however, due to our increased focus on agent training and development and a higher mix of tenured agents, we experienced a 6% improvement in the submitted-to-approved conversion rates for the year ended June 30, 2023, compared to the year ended June 30, 2022.
To the extent that the assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. In accordance with ASC 740, we account for income taxes using an asset and liability approach.
To the extent that the assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. We account for income taxes using an asset and liability approach.
The accounting policies we believe to reflect our more significant estimates, judgments and assumptions that are most critical to understanding and evaluating our reported financial results are: revenue recognition for commissions revenue, commissions receivable, accounting for income taxes, share-based compensation, the valuation of assets and liabilities acquired from acquisitions, and the impairment of intangible assets and goodwill.
The accounting estimates we believe to reflect our more significant estimates, judgments and assumptions that are most critical to understanding and evaluating our reported financial results are: revenue recognition for commissions revenue, commissions receivable, accounting for income taxes, share-based compensation, and the impairment of intangible assets and goodwill.
The differences in actual cash received for current period renewals may result in an adjustment by cohort (“cohort adjustment”) to revenue and commissions receivable. Cohort adjustments can be positive or negative and are recognized using actual experience from policy renewals.
The differences in actual cash received for current period renewals may result in an adjustment by cohort (“cohort adjustment”) to revenue and commissions receivable. Cohort adjustments are recognized using actual experience from policy renewals.
Life’s revenue decline was primarily driven by an $11.8 million decrease in final expense revenue, partially offset by a $4.6 million increase in term revenue. The $180.1 million increase in pharmacy revenue was due to the increase in members from June 30, 2023, due to the expansion of the SelectRx business.
Life’s revenue decline was primarily driven by an $11.8 million decrease in final expense revenue, partially offset by a $4.6 million increase in term revenue. Pharmacy revenue increased $180.1 million due to the increase in members from the growth of the SelectRx business.
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.
Recent Accounting Pronouncements For a discussion of new accounting pronouncements recently adopted and not yet adopted, see the notes to our consolidated financial statements.
The increase was due to a $182.0 million increase in revenue, offset by a $172.7 million increase in operating costs and expenses 64 Tabl e of Contents primarily as a result of a $134.8 million increase in medication costs, a $27.0 million increase in compensation costs, and a $6.4 million increase in fulfillment costs, due to the growth of Healthcare Services.
The increase was due to a $182.0 million increase in revenue as discussed above, offset by a $172.7 million increase in operating 62 Table of Contents costs and expenses primarily as a result of a $134.8 million increase in medication costs, a $27.0 million increase in compensation costs, and a $6.4 million increase in fulfillment costs, due to the growth of Healthcare Services.
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.
Additionally, the following table presents a summary of our cash flows for the years ended June 30: (in thousands) 2024 2023 2022 Net cash provided by (used in) operating activities $ 15,236 $ (19,377) $ (338,314) Net cash used in investing activities (14,846) (9,125) (42,576) Net cash (used in) provided by financing activities (40,856) (29,339) 235,433 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 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.
The estimate of the future renewal commissions is determined using contracted renewal commission rates, which does not include marketing development funds or production bonuses, 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.
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.
As a result, Medicare enrollment is growing steadily, with the number of Medicare enrollees expected to grow from 63 million 48 Table of Contents 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.
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.
Term life policies accounted for 45%, 47%, and 36% of new premium within the Life segment for the years ended June 30, 2024, 2023, and 2022, respectively, with final expense policies accounting for 55%, 53%, and 64% for the years ended June 30, 2024, 2023, and 2022, respectively.
The increase was due to a $62.2 million increase in revenue and a $254.6 million decrease in operating costs and expenses primarily due to a $157.1 million reduction in marketing and advertising costs, a $73.4 million reduction in compensation costs, and a $11.2 million reduction in licensing fees, all of which support our updated operating strategy.
The increase was due to a $62.2 million increase in revenue and a $254.6 million decrease in operating costs and expenses primarily due to a $157.1 million reduction in marketing and advertising costs, a $73.4 million reduction in compensation costs, and a $11.2 million reduction in licensing fees.
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.
Final expense premiums decreased 29% for the year ended June 30, 2023, compared to the year ended June 30, 2022. 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.
The number of average productive agents decreased 55% during the year ended June 30, 2023, compared to the year ended June 30, 2022; however, due to a higher mix of tenured agents and an increased focus on agent training and development, productivity per agent increased 25% and overall close rates increased 24%. 2022 compared to 2021— Total submitted policies for all products increased by 33% for the year ended June 30, 2022, compared to the year ended June 30, 2021.
The number of average productive agents decreased 55% during the year ended June 30, 2023, compared to the year ended June 30, 2022; however, due to a higher mix of tenured agents and an increased focus on agent training and development, productivity per agent increased 25% and overall close rates increased 24%.
Year Ended June 30, 2022 —Net cash provided by financing activities of $235.4 million was primarily due to $242.0 million in net proceeds from the DDTL Facility and $3.2 million in proceeds from common stock options exercised and the employee stock purchase plan, partially offset by a holdback settlement of $5.5 million for acquisition of a lead distribution company, principal payments of $2.4 million and $1.2 million on the Term Loans and DDTL Facility, respectively, and $0.3 million in debt issuance costs related to the amendments to the Senior Secured Credit Facility.
Year Ended June 30, 2022 —Net cash provided by financing activities of $235.4 million was primarily due to $242.0 million in net proceeds from the DDTL Facility and $3.2 million in proceeds from common stock options exercised and the employee stock purchase plan, partially offset by a holdback settlement of $5.5 million for acquisition of a lead distribution company, principal payments of $2.4 million and $1.2 million on the Term Loans and DDTL Facility, respectively, and $0.3 million in debt issuance costs related to the amendments to the Senior Secured Credit Facility. 65 Table of Contents Senior Secured Credit Facility We entered into the Senior Secured Credit Facility to provide access to cash, in a variety of methods, when necessary to fund the operations of the business.
The estimate of variable consideration is recognized only to the extent it is probable that a material reversal in revenue would not be expected to occur when the uncertainty associated with future commissions receivables is subsequently resolved when the policy renews or lapses.
The estimate of variable consideration is recognized only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with future commissions receivables is subsequently resolved when the policy renews or lapses.
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.
Adjusted EBITDA by Segment 2024 compared to 2023 — – Adjusted EBITDA from our Senior segment was $166.7 million for the year ended June 30, 2024, a $11.7 million, or 8%, increase compared to Adjusted EBITDA of $155.1 million for the year ended June 30, 2023.
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.
Income Taxes 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) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Income tax expense (benefit) $ 5,059 $ (10,600) $ (92,302) (148)% (89)% Effective tax rate (17.4)% 15.3% 23.7% 2024 compared to 2023— Income tax expense (benefit) increased $15.7 million, or 148%, in 2024 compared to 2023.
We have also developed proprietary technologies and processes that enable us to expand our lead acquisition efforts to keep pace with our expanding sales force and maintain agent productivity despite the significant growth in number of agents.
We have also developed proprietary technologies and processes that enable us to expand our lead acquisition efforts to keep pace with our expanding sales force and maintain agent productivity.
The LTV per MA approved policy was negatively impacted by carrier mix and lower persistency rates, which includes a higher provision for renewal year lapse rates, somewhat offset by higher commission rates. 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 LTV per MA approved policy was negatively impacted by carrier mix and lower persistency rates, which includes a higher provision for renewal year lapse rates, somewhat offset by higher commission rates.
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.
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. 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.
The following table shows the total number of SelectRx members as of the periods presented: June 30, 2023 June 30, 2022 Total SelectRx Members 49,044 25,503 The total number of SelectRx members increased by 92% as of June 30, 2023, compared to June 30, 2022, due to our operating strategy to grow the Healthcare Services segment.
SelectRx Members The following table shows the total number of SelectRx members as of June 30: 2024 2023 2022 Total SelectRx Members 82,385 49,044 25,503 The total number of SelectRx members increased by 68% as of June 30, 2024, compared to June 30, 2023, due to our operating strategy to grow SelectRx.
Adjusted EBITDA from our Auto & Home segment was $5.4 million for the year ended June 30, 2022, a $2.7 million, or 34%, decrease compared to Adjusted EBITDA of $8.2 million for the year ended June 30, 2021.
Adjusted EBITDA from our Auto & Home segment was $0.1 million for the year ended June 30, 2023, a $5.4 million, or 99%, decrease compared to Adjusted EBITDA of $5.4 million for the year ended June 30, 2022.
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.
The following table presents our technical development expenses for the years ended June 30 and the percentage changes from the prior year: 57 Table of Contents Percent Change (dollars in thousands) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Technical development $ 33,524 $ 26,015 $ 24,729 29% 5% 2024 compared to 2023— Technical development expenses increased $7.5 million, or 29%, in 2024 compared to 2023, primarily due to a $7.3 million increase in compensation costs due to an increase in headcount for technology personnel. 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.
Persistency is the estimate of policies expected to renew each year and renewal year provision is the estimate of policies expected to lapse during each renewal period. The estimated average duration of expected renewals for our cohorts used in the calculation of LTV is ten years.
Persistency is the estimate of policies expected to renew each year and renewal year provision is the estimate of policies expected to lapse during each renewal period. The estimated duration of expected renewals used in the calculation of LTV is ten 66 Table of Contents years, prior to the application of persistency estimates.
Operating Costs and Expenses Cost of Revenue 56 Tabl e of Contents Cost of revenue represents the direct costs associated with fulfilling our obligations to our customers in the Senior, Life, Auto & Home, and Population Health divisions, primarily compensation, benefits, and licensing for sales agents, customer success agents, fulfillment specialists, and others directly engaged in serving customers.
Operating Costs and Expenses Cost of Commissions and Other Services Revenue Cost of commissions and other services revenue represents the direct costs associated with fulfilling our obligations to our customers in Senior, Life, Auto & Home, and Healthcare Services (excluding SelectRx discussed below); primarily compensation, benefits, and licensing for sales agents, customer success agents, fulfillment specialists, and others directly engaged in serving customers.
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 & home insurance policies from a curated panel of the nation’s leading insurance carriers.
Our insurance distribution business, which has operated continuously for nearly 40 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.
Such costs primarily consist of medication costs and compensation and related benefit costs for licensed pharmacists, pharmacy technicians, and other employees directly associated with fulfilling orders such as packaging and shipping clerks.
Cost of Goods Sold-Pharmacy Revenue Cost of goods sold-pharmacy revenue represents the direct costs associated with fulfilling pharmacy patient orders for SelectRx. Such costs primarily consist of medication costs and compensation costs for licensed pharmacists, pharmacy technicians, and other employees directly associated with fulfilling orders such as packaging and shipping clerks.
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 following table shows the number of approved policies for the years ended June 30: 50 Table of Contents 2024 2023 2022 Medicare Advantage 625,245 577,567 661,738 Medicare Supplement 1,885 2,619 5,461 Dental, Vision and Hearing 52,469 60,824 124,989 Prescription Drug Plan 3,229 2,144 6,124 Other 4,836 5,288 12,407 Total 687,664 648,442 810,719 In general, the relationship between submitted policies and approved policies has been steady over time.
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.
Refer to Note 2 to the consolidated financial statements for further details concerning material 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 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 LTV per approved policy for the years ended June 30: 2024 2023 2022 Medicare Advantage $ 910 $ 877 $ 925 Medicare Supplement 967 1,030 1,270 Dental, Vision and Hearing 114 100 123 Prescription Drug Plan 228 207 234 Other 115 101 73 2024 compared to 2023— The LTV per MA approved policy increased 4% for the year ended June 30, 2024, compared to the year ended June 30, 2023, primarily due to carrier mix. 51 Table 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.
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.
Lead generation revenue is recognized when the generated lead is accepted by our 54 Table of Contents customers, which is the point of sale, and we have no performance obligation after the delivery. Revenues generated from SelectRx are recognized upon shipment.
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.
The expected term for stock options granted is determined using the simplified method, which deems the expected 67 Table of Contents term to be the midpoint between the vesting date and the contractual life of the stock-based awards.
Additionally, we offer pharmacy services through SelectRx, our accredited Patient-Centered Pharmacy Home pharmacy, which offers essential prescription medications, OTC medications, customized medication packaging, medication therapy management, providing long-term pharmacy care that enables patients to optimize medication adherence to drive positive health outcomes while enabling patients to remain at home.
SelectRx offers essential prescription medications, OTC medications, customized medication packaging, and medication therapy management, providing long-term pharmacy care that enables patients to optimize medication adherence to drive positive health outcomes, while enabling patients managing polypharmacy and multiple chronic conditions to remain at home.
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.
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 SelectQuote, Inc.
We have built our business model to maximize commissions collected over the life of an approved policy less the cost of acquiring the business, a metric we refer to as policyholder lifetime value and which is a key component to our overall profitability.
We have built our business model to maximize commissions collected over the life of an approved policy, a metric we refer to as “ lifetime value of commissions” or “LTV”, which is a key component to our overall profitability. Our proprietary routing and workflow system is a key competitive advantage and driver of our business performance.
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.
As a result of our annual goodwill impairment test as of April 1, 2022, the Company recorded $44.6 million in goodwill impairment in the consolidated statement of comprehensive loss for the year ended June 30, 2022. Refer to Note 7 to the consolidated financial statements for additional details.
The following table shows term and final expense premiums for years ended June 30: 51 Tabl e of Contents (in thousands): 2023 2022 2021 Term Premiums $ 68,941 $ 62,364 $ 76,833 Final Expense Premiums 77,725 109,218 90,878 Total $ 146,666 $ 171,582 $ 167,711 2023 compared to 2022— Total term premiums increased 11% for the year ended June 30, 2023, compared to the year ended June 30, 2022, due to an 8% increase in the average premium per policy sold and a 3% increase in the number of policies sold.
The following table shows term and final expense premiums for the years ended June 30: (in thousands): 2024 2023 2022 Term Premiums $ 70,450 $ 68,941 $ 62,364 Final Expense Premiums 86,600 77,725 109,218 Total $ 157,050 $ 146,666 $ 171,582 2024 compared to 2023 — Total term premiums increased 2% for the year ended June 30, 2024, compared to the year ended June 30, 2023 , due to a 5% increase in the average premium per policy sold, offset by a 3% decrease in the number of policies sold.
The increase in Adjusted EBITDA was due to a $31.3 million decrease in operating costs and expenses primarily due to a $26.8 million reduction in marketing and advertising costs and a $3.7 million reduction in compensation costs, all of which support our updated operating strategy.
The increase in Adjusted EBITDA was due to a $31.3 million decrease in operating costs and expenses primarily due to a $26.8 million reduction in marketing and advertising costs and a $3.7 million reduction in compensation costs. The decrease in operating costs and expenses was offset by a $8.1 million decrease in revenue as discussed above.
The following table presents our cost of goods sold-pharmacy revenue for the periods presented and the percentage change from the prior year: Percent Change (dollars in thousands) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Cost of goods sold—pharmacy revenue $ 225,963 $ 64,172 $ 1,644 252% 3803% 2023 compared to 2022– Cost of goods sold-pharmacy revenue increased $161.8 million, or 252%, in 2023 compared to 2022, due to a $134.8 million increase in medication costs, a $6.6 million increase in shipping and fulfillment costs, and a $15.3 million increase in compensation costs as the number of SelectRx members increased 92% over the prior year. 2022 compared to 2021– Cost of goods sold-pharmacy revenue increased $62.5 million, or 3803%, in 2022 compared to 2021, due to a $43.8 million increase in medication costs, a $3.7 million increase in shipping and 57 Tabl e of Contents fulfillment costs, and a $15.0 million increase in compensation costs as the number of SelectRx members increased 923% over the prior year.
The following table presents our cost of goods sold-pharmacy revenue for the periods presented and the percentage change from the prior year: Percent Change (dollars in thousands) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Cost of goods sold—pharmacy revenue $ 405,004 $ 225,963 $ 64,172 79% 252% 2024 compared to 2023– Cost of goods sold-pharmacy revenue increased $179.0 million, or 79%, in 2024 compared to 2023, primarily due to a $158.9 million increase in medication costs as the number of SelectRx members increased 68% over the prior year as well as a $11.0 million increase in compensation costs due to an increase in employees directly associated with fulfilling pharmacy orders. 2023 compared to 2022– Cost of goods sold-pharmacy revenue increased $161.8 million, or 252%, in 2023 compared to 2022, due to a $134.8 million increase in medication costs due to an increase in volumes as well as an increase in average medication costs, a $6.6 million increase in shipping and fulfillment costs, and a $15.3 million increase in compensation costs as the number of SelectRx members increased 92% over the prior year.
Additionally, there was a $2.1 million increase in depreciation and amortization expense due to additional fixed assets and software in service. Selling, General, and Administrative Selling, general, and administrative expenses include compensation and benefits costs for staff working in our executive, finance, accounting, recruiting, human resources, administrative, business intelligence, data science, and part of the SelectRx customer onboarding departments.
Selling, General, and Administrative Selling, general, and administrative expenses include compensation and benefits costs for staff working in our executive, finance, accounting, recruiting, human resources, administrative, business intelligence, data science, and part of the SelectRx customer onboarding departments.
The decrease in Adjusted EBITDA was due to a $6.0 million decrease in revenue as a result of a $10.4 million change in estimate related to the mutual termination of a contract with a certain Auto & Home carrier to provide for the ability to migrate the book of business to other carriers.
The decrease was primarily due to a $5.4 million decrease in commissions revenue which was a result of a $10.4 million change in estimate related to the mutual termination of a contract with a certain Auto & Home carrier to restructure the book of business for that carrier.
The decrease in operating costs and expenses was offset by a $8.1 million decrease in revenue as discussed above. Adjusted EBITDA from our Auto & Home segment was $0.1 million for the year ended June 30, 2023, a $5.4 million, or 99%, decrease compared to Adjusted EBITDA of $5.4 million for the year ended June 30, 2022.
The increase in Adjusted EBITDA was due to a $14.4 million increase in revenue offset by a $0.3 million increase in operating costs and expenses due to a $1.3 million increase in compensation costs. 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.
Therefore, factors impacting the number of submitted policies also impact the number of approved policies. 2023 compared to 2022— Total approved policies for all products decreased by 20% for the year ended June 30, 2023, compared to the year ended June 30, 2022, in line with our updated operating strategy to reduce the policy growth in our Senior distribution business and focus additional resources on growing members for Healthcare Services.
Fluctuations in approved policies are normally in direct correlation to submitted policies; however, primarily due to carrier mix, we experienced a slight decrease in the submitted-to-approved conversion rates for the year ended June 30, 2024, compared to the year ended June 30, 2023. 2023 compared to 2022— Total approved policies for all products decreased by 20% for the year ended June 30, 2023, compared to the year ended June 30, 2022, in line with our updated operating strategy to reduce the policy growth in our Senior distribution business and focus additional resources on growing members for Healthcare Services.
The increase was due to a $72.2 million, or 17%, increase in commission revenue, offset by a $14.6 million decrease in lead generation revenue.
The increase was due to a $72.2 million, or 17%, increase in commissions revenue, offset by a $10.0 million decrease in other services revenue.
The following table presents our cost of revenue 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 Cost of revenue $ 301,524 $ 391,528 $ 269,071 (23)% 46% 2023 compared to 2022— Cost of revenue decreased $90.0 million, or 23%, in 2023 compared to 2022, primarily due to a $66.8 million decrease in compensation costs, a $13.0 million decrease in licensing costs, and a $10.5 million decrease in allocations for facilities, telecommunications, and software maintenance costs, all of which is due to the reduction in our agent headcount. 2022 compared to 2021— Cost of revenue increased $122.5 million, or 46%, in 2022 compared to 2021, primarily due to a $97.5 million increase in compensation costs driven by the growth in the number of employees within Senior.
The following table presents our cost of commissions and other services revenue for the years ended June 30 and the percentage changes from the prior year: Percent Change (dollars in thousands) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Cost of commissions and other services revenue $ 318,798 $ 301,524 $ 391,528 6% (23)% 55 Table of Contents 2024 compared to 2023— Cost of commissions and other service revenue increased $17.3 million, or 6%, in 2024 compared to 2023, primarily due to an $18.2 million increase in compensation costs related to a $4.8 million increase in costs for our sales and customer care agents in Senior, a $4.4 million increase for Healthcare Services related to the growth of SelectRx, and a $6.4 million increase for Life related to compensation structure changes for our final expense sales agents. 2023 compared to 2022— Cost of commissions and other service revenue decreased $90.0 million, or 23%, in 2023 compared to 2022, primarily due to a $66.8 million decrease in compensation costs, a $13.0 million decrease in licensing costs, and a $10.5 million decrease in allocations for facilities, telecommunications, and software maintenance costs, all of which was due to the reduction in our agent headcount during the year ended June 30, 2023.
Year Ended June 30, 2021 —Cash used in operating activities was $115.4 million, consisting of net income of $124.9 million and adjustments for non-cash items of $66.2 million, offset by cash used in operating assets and liabilities of $306.5 million.
Year Ended June 30, 2024 —Net cash provided by operating activities was $15.2 million, consisting of net loss of $34.1 million, adjustments for non-cash items of $68.9 million, and cash used in operating assets and liabilities of $19.5 million.
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.
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.
Of this, Medicare Advantage plans are representing an increasing share of the Medicare market. 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.
Of this, Medicare Advantage plans are representing an increasing share of the Medicare market. According to the Kaiser Family Foundation, in 2023, Medicare Advantage surpassed 50% market penetration, with nearly 31 million Medicare Advantage enrollees.
Adjusted EBITDA from Healthcare Services was $(32.1) million for the year ended June 30, 2022, a $30.7 million decrease compared to Adjusted EBITDA of $(1.4) million for the year ended June 30, 2021.
Adjusted EBITDA from Healthcare Services was $7.8 million for the year ended June 30, 2024, a $30.6 million increase compared to Adjusted EBITDA of $(22.8) million for the year ended June 30, 2023.
Adjusted EBITDA from our Life segment was $(0.1) million for the year ended June 30, 2022, a $22.7 million, or 101%, decrease compared to Adjusted EBITDA of $22.5 million for the year ended June 30, 2021.
Adjusted EBITDA from our Life segment was $20.2 million for the year ended June 30, 2024, a $2.9 million, or 13%, decrease compared to Adjusted EBITDA of $23.1 million for the year ended June 30, 2023.
Based on our financial projections, we believe we will remain in compliance with the debt covenants through the 12 months following the date of issuance of our consolidated financial statements.
Additionally, we are required under the Senior Secured Credit Facility to maintain compliance with certain debt covenants, as discussed further in Note 10 to the consolidated financial statements. Based on our financial projections, we believe we will remain in compliance with the debt covenants through the 12 months following the date of issuance of our consolidated financial statements.
Life Life premium represents the total premium value for all policies that were approved by the relevant insurance carrier partner and for which the policy document was sent to the policyholder and payment information was received by the relevant insurance carrier partner during the indicated period.
Prescriptions Per Day The following table shows the average prescriptions shipped per day for the years ended June 30: 2024 2023 2022 Prescriptions Per Day 18,935 10,657 3,287 Life Life premium represents the total premium value for all policies that were approved by the relevant insurance carrier partner and for which the policy document was sent to the policyholder and payment information was received by the relevant insurance carrier partner during the indicated period.
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.
We represent approximately 25 leading, nationally-recognized insurance carrier partners, including UHC, Humana, Aetna, and Wellcare. MA and MS plans accounted for 91%, 89%, and 82% of our approved Senior policies for the years ended June 30, 2024, 2023, and 2022, respectively, with other ancillary type policies accounting for the remainder.
Revenue from Healthcare Services was $70.0 million for the year ended June 30, 2022 a $66.1 million, or 1700%, increase compared to revenue of $3.9 million for the year ended June 30, 2021, primarily due to a $57.7 million increase in SelectRx pharmacy revenue.
Revenue from Healthcare Services was $478.5 million for the year ended June 30, 2024, a $226.4 million, or 90%, increase compared to revenue of $252.1 million for the year ended June 30, 2023, primarily due to a $225.3 million increase in SelectRx pharmacy revenue.
Healthcare Services The total number of SelectRx members represents the amount of active customers to which an order has been shipped, as this is the primary key driver of revenue for Healthcare Services.
Healthcare Services The total number of SelectRx members represents the amount of active customers to which an order has been shipped and the prescriptions per day represents the total average prescriptions shipped per business day. These two metrics are the primary drivers of revenue for Healthcare Services.
The following table shows the number of submitted policies for the years ended June 30: 2023 2022 2021 Medicare Advantage 652,630 808,116 550,321 Medicare Supplement 3,444 7,208 26,785 Dental, Vision and Hearing 74,181 145,716 132,106 Prescription Drug Plan 2,433 6,842 11,436 Other 7,501 14,776 16,487 Total 740,189 982,658 737,135 2023 compared to 2022— Total submitted policies for all products decreased 25% for the year ended June 30, 2023, compared to the year ended June 30, 2022, in line with our updated operating strategy to reduce the Senior distribution business and focus resources on Healthcare Services.
The following table shows the number of submitted policies for the years ended June 30: 2024 2023 2022 Medicare Advantage 720,027 652,630 808,116 Medicare Supplement 2,790 3,444 7,208 Dental, Vision and Hearing 61,713 74,181 145,716 Prescription Drug Plan 3,100 2,433 6,842 Other 5,303 7,501 14,776 Total 792,933 740,189 982,658 2024 compared to 2023— Total submitted policies for all products increased 7% for the year ended June 30, 2024, compared to the year ended June 30, 2023.
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 cash decrease resulting from changes in net operating assets and liabilities primarily consisted of an increase of $40.8 million in commissions receivable, due to a 6% increase in approved policies for the year, a decrease of $4.9 million of operating lease liabilities and an increase of $2.0 million in other assets, all partially offset by an increase of $7.3 million in accounts payable and accrued expenses, related to an increase in revenue, an increase of $15.6 million in other liabilities, primarily related to an $6.4 million increase in our contract liability, and a $7.4 million increase in accrued compensation and benefits, related to our increased headcount, and a decrease of $5.2 million in accounts receivable, net, related to cash collections to date.
The following table presents our marketing and advertising 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 Marketing and advertising $ 301,245 $ 484,084 $ 385,291 (38)% 26% 2023 compared to 2022— Marketing and advertising expenses decreased $182.8 million, or 38%, in 2023 compared to 2022, due to a $173.9 million decrease in lead costs due to the decrease in volume associated with the Company’s updated operating strategy, as well as an $8.6 million decrease in compensation and benefits.
The following table presents our marketing and advertising expenses for the years ended June 30 and the percentage changes from the prior year: 56 Table of Contents Percent Change (dollars in thousands) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Marketing and advertising $ 358,858 $ 301,245 $ 484,084 19% (38)% 2024 compared to 2023— Marketing and advertising expenses increased $57.6 million, or 19%, in 2024 compared to 2023 , primarily due to a $50.7 million increase in lead costs and a $5.8 million increase in compensation costs for marketing personnel.
Interest Expense, Net The following table presents our interest expense, net 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 Interest expense, net $ (80,606) $ (43,595) $ (29,320) 85% 49% 2023 compared to 2022— Interest expense increased $37.0 million, or 85%, in 2023 compared to 2022, as a result of interest incurred on the Term Loans due to additional principal outstanding and changes under the Fourth Amendment, the amortization and write-off of additional deferred financing costs associated with the amendments to the Senior Secured Credit Facility, as well as higher interest rates during the period.
Interest Expense, Net The following table presents our interest expense, net for the years ended June 30 and the percentage changes from the prior year: Percent Change (dollars in thousands) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Interest expense, net $ 93,551 $ 80,606 $ 43,595 16% 85% 2024 compared to 2023— Interest expense increased $12.9 million, or 16%, in 2024 compared to 2023, as a result of higher interest rates during the period.
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.
The decrease in Adjusted EBITDA was due to a $15.0 million increase in operating costs and expenses primarily due to a $6.6 million increase in compensation costs and a $7.8 million increase in marketing and advertising costs. The decrease in operating costs and expenses was offset by a $12.1 million increase in revenue as discussed above.
We believe that the cash available under the Senior Secured Credit Facility will be sufficient to meet our projected operating and debt service requirements for at least the next 12 months. Additionally, we are required under the Senior Secured Credit Facility to maintain compliance with certain debt covenants, as discussed further in Note 10 to the consolidated financial statements.
Liquidity and Capital Resources Our liquidity needs primarily include working capital and debt service requirements. We believe that the cash available under the Senior Secured Credit Facility will be sufficient to meet our projected operating and debt service requirements for at least the next 12 months.
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.
Industry growth is driven by growth in housing supply, increases in insurance premium rates and general economic growth. Technological innovations 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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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.
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. Interest-earning instruments carry a degree of interest rate risk.
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.
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, 2024, 2023, and 2022, based on the lack of collection issues in the past and the high financial standards we require 68 Table of Contents 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 Tabl e 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. 69 Table of Contents
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.
As of June 30, 2022, three insurance carrier customers accounted for 29%, 20%, and 14% of total accounts and commissions receivable.
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.
Interest Rate Risk As of June 30, 2024, we had cash of $42.4 million deposited in non-interest bearing accounts, all at major banks with limited to no interest rate risk, and cash of $0.3 million deposited in a money market account with one of those banks.
As of June 30, 2021, three insurance carrier customers accounted for 29%, 21%, and 10% of total accounts and commissions receivable.
As of June 30, 2024, two insurance carrier customers accounted for 32% and 23% of total accounts and commissions receivable. As of June 30, 2023, two insurance carrier customers accounted for 31% and 22% of total accounts and commissions receivable.

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