SelectQuote, Inc. (NYSE: SLQT) reported consolidated revenue for the fourth quarter of fiscal year 2023 of $221.8 million compared to consolidated revenue for the fourth quarter of fiscal year 2022 of $139.4 million. Consolidated net loss for the fourth quarter of fiscal year 2023 was $47.8 million compared to consolidated net loss for the fourth quarter of fiscal year 2022 of $104.7 million. Finally, consolidated Adjusted EBITDA* for the fourth quarter of fiscal year 2023 was $(5.8) million compared to consolidated Adjusted EBITDA* for the fourth quarter of fiscal year 2022 of $(60.8) million.
Consolidated revenue for the fiscal year ended June 30, 2023, was $1.0 billion compared to consolidated revenue for the fiscal year ended June 30, 2022, of $764.0 million. Consolidated net loss for the fiscal year ended June 30, 2023, was $58.5 million compared to consolidated net loss for the fiscal year ended June 30, 2022, of $297.5 million. Finally, consolidated Adjusted EBITDA* for the fiscal year ended June 30, 2023, was $74.3 million compared to consolidated Adjusted EBITDA* of $(260.5) million for the fiscal year ended June 30, 2022.
*See “Non-GAAP Financial Measures” below.
1) $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.
SelectQuote Chief Executive Officer, Tim Danker, remarked, “SelectQuote completed a highly successful fiscal 2023 with another strong quarter of results across each of our businesses. In total, our full year results significantly surpassed our initial forecasts driven by both higher growth, but most importantly, with outstanding operational execution against our paramount goal to optimize profitability and cash flow. The most stark example is nearly $80 million of outperformance in full-year Adjusted EBITDA versus our initial guidance. Similarly, excluding our investment in the growth of SelectRx, the SelectQuote model would have produced positive operating cash flow for the year, which we plan to scale in the quarters and years ahead.”
Mr. Danker continued, “Looking toward the future, our teams are excited to leverage our strategic redesign across each of our businesses, and we believe there is significant opportunity in our Healthcare Services segment. We can, and will, reproduce the success we have achieved in SelectRx with additional value-add services needed by seniors, healthcare providers, and our insurance carrier partners. We believe strongly that SelectQuote is unique in our ability to provide and optimize these services given the information and the leverage we can create via our role as the connective tissue between those in need and the providers of care and coverage. To say it more directly, SelectQuote is not just a Medicare Advantage distribution company, and we plan to decisively demonstrate that through our results in the coming years.”
Segment Results
We currently report on four segments: 1) Senior, 2) Healthcare Services, 3) Life, and 4) Auto & Home. The performance measures of the segments include total revenue and Adjusted EBITDA.* Costs of revenue, cost of goods sold-pharmacy revenue, marketing and advertising, selling, general, and administrative, and technical development operating expenses that are directly attributable to a segment are reported within the applicable segment. Indirect costs of revenue, marketing and advertising, selling, general, and administrative, and technical development operating expenses are allocated to each segment based on varying metrics such as headcount. Adjusted EBITDA is calculated as total revenue for the applicable segment less direct and allocated costs of revenue, cost of goods sold, marketing and advertising, technical development, and selling, general, and administrative operating costs and expenses, excluding depreciation and amortization expense; gain or loss on disposal of property, equipment, and software; share-based compensation expense; and non-recurring expenses such as severance payments and transaction costs. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by revenue.
Senior
Financial Results
The following table provides the financial results for the Senior segment for the periods presented:
(in thousands) | 4Q 2023 | 4Q 2022 | % Change | FY 2023 | FY 2022 | % Change | |||||||||||||||
Revenue | $ | 103,592 | $ | 68,452 | 51 | % | $ | 590,131 | $ | 527,907 | 12 | % | |||||||||
Adjusted EBITDA* | 16,147 | (32,574 | ) | 150 | % | 155,077 | (161,702 | ) | 196 | % | |||||||||||
Adjusted EBITDA Margin* | 16 | % | (48 | )% | 26 | % | (31 | )% | |||||||||||||
Operating Metrics
Submitted Policies
Submitted policies are counted when an individual completes an application with our licensed agent and provides authorization to the agent to submit the application to the insurance carrier partner. The applicant may have additional actions to take before the application will be reviewed by the insurance carrier.
*See “Non-GAAP Financial Measures” below.
The following table shows the number of submitted policies for the periods presented:
4Q 2023 | 4Q 2022 | % Change | FY 2023 | FY 2022 | % Change | ||||||||
Medicare Advantage | 114,383 | 129,289 | (12 | )% | 652,630 | 808,116 | (19 | )% | |||||
Medicare Supplement | 539 | 890 | (39 | )% | 3,444 | 7,208 | (52 | )% | |||||
Dental, Vision and Hearing | 14,668 | 23,502 | (38 | )% | 74,181 | 145,716 | (49 | )% | |||||
Prescription Drug Plan | 351 | 649 | (46 | )% | 2,433 | 6,842 | (64 | )% | |||||
Other | 2,099 | 3,340 | (37 | )% | 7,501 | 14,776 | (49 | )% | |||||
Total | 132,040 | 157,670 | (16 | )% | 740,189 | 982,658 | (25 | )% | |||||
Approved Policies
Approved policies represents the number of submitted policies that were approved by our insurance carrier partners for the identified product during the indicated period. Not all approved policies will go in force.
The following table shows the number of approved policies for the periods presented:
4Q 2023 | 4Q 2022 | % Change | FY 2023 | FY 2022 | % Change | ||||||||
Medicare Advantage | 110,027 | 115,707 | (5 | )% | 577,567 | 661,738 | (13 | )% | |||||
Medicare Supplement | 435 | 807 | (46 | )% | 2,619 | 5,461 | (52 | )% | |||||
Dental, Vision and Hearing | 12,884 | 23,738 | (46 | )% | 60,824 | 124,989 | (51 | )% | |||||
Prescription Drug Plan | 350 | 809 | (57 | )% | 2,144 | 6,124 | (65 | )% | |||||
Other | 1,356 | 3,208 | (58 | )% | 5,288 | 12,407 | (57 | )% | |||||
Total | 125,052 | 144,269 | (13 | )% | 648,442 | 810,719 | (20 | )% | |||||
Lifetime Value of Commissions per Approved Policy
Lifetime value of commissions per approved policy represents commissions estimated to be collected over the estimated life of an approved policy based on multiple factors, including but not limited to, contracted commission rates, carrier mix and expected policy persistency with applied constraints. The lifetime value of commissions per approved policy is equal to the sum of the commission revenue due upon the initial sale of a policy, and when applicable, an estimate of future renewal commissions.
The following table shows the lifetime value of commissions per approved policy for the periods presented:
(dollars per policy): | 4Q 2023 | 4Q 2022 | % Change | FY 2023 | FY 2022 | % Change | |||||||||||
Medicare Advantage | $ | 830 | $ | 877 | (5 | )% | $ | 877 | $ | 925 | (5 | )% | |||||
Medicare Supplement | 1,207 | 1,236 | (2 | )% | 1,030 | 1,270 | (19 | )% | |||||||||
Dental, Vision and Hearing | 121 | 122 | (1 | )% | 100 | 123 | (19 | )% | |||||||||
Prescription Drug Plan | 185 | 225 | (18 | )% | 207 | 234 | (12 | )% | |||||||||
Other | 105 | 64 | 64 | % | 101 | 73 | 38 | % | |||||||||
Healthcare Services
Financial Results
The following table provides the financial results for the Healthcare Services segment for the periods presented:
(in thousands) | 4Q 2023 | 4Q 2022 | % Change | FY 2023 | FY 2022 | % Change | |||||||||||||||
Revenue | $ | 82,803 | $ | 30,036 | 176 | % | $ | 252,075 | $ | 70,035 | 260 | % | |||||||||
Adjusted EBITDA* | 1,685 | (11,800 | ) | 114 | % | (22,769 | ) | (32,097 | ) | 29 | % | ||||||||||
Adjusted EBITDA Margin* | 2 | % | (39 | )% | (9 | )% | (46 | )% | |||||||||||||
Operating Metrics
Members
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.
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 |
Combined Senior and Healthcare Services - Consumer Per Unit Economics
The opportunity to leverage our existing database and distribution model to improve access to healthcare services for our consumers has created a need for us to review our key metrics related to our per unit economics. As we think about the revenue and expenses for Healthcare Services, we note that they are derived from the marketing acquisition costs associated with the sale of an MA or MS policy, some of which costs are allocated directly to Healthcare Services, and therefore determined that our per unit economics measure should include components from both Senior and Healthcare Services. See details of revenue and expense items included in the calculation below.
Combined Senior and Healthcare Services consumer per unit economics represents total MA and MS commissions; other product commissions; other revenues, including revenues from Healthcare Services; and operating expenses associated with Senior and Healthcare Services, each shown per number of approved MA and MS policies over a given time period. Management assesses the business on a per-unit basis to help ensure that the revenue opportunity associated with a successful policy sale is attractive relative to the marketing acquisition cost. Because not all acquired leads result in a successful policy sale, all per-policy metrics are based on approved policies, which is the measure that triggers revenue recognition.
The MA and MS commission per MA/MS policy represents the LTV for policies sold in the period. Other commission per MA/MS policy represents the LTV for other products sold in the period, including DVH prescription drug plan, and other products, which management views as additional commission revenue on our agents’ core function of MA/MS policy sales. Pharmacy revenue per MA/MS policy represents revenue from SelectRx, and other revenue per MA/MS policy represents revenue from Population Health, production bonuses, marketing development funds, lead generation revenue, and adjustments from the Company’s reassessment of its cohorts’ transaction prices. Total operating expenses per MA/MS policy represents all of the operating expenses within Senior and Healthcare Services. The revenue to customer acquisition cost (“CAC”) multiple represents total revenue as a multiple of total marketing acquisition cost, which represents the direct costs of acquiring leads. These costs are included in marketing and advertising expense within the total operating expenses per MA/MS policy.
The following table shows combined Senior and Healthcare Services consumer per unit economics for the periods presented. Based on the seasonality of Senior and the fluctuations between quarters, we believe that the most relevant view of per unit economics is on a rolling 12-month basis. All per MA/MS policy metrics below are based on the sum of approved MA/MS policies, as both products have similar commission profiles.
*See “Non-GAAP Financial Measures” below.
Twelve Months Ended June 30, | |||||||
(dollars per approved policy): | 2023 | 2022 | |||||
MA and MS approved policies | 580,186 | 667,199 | |||||
MA and MS commission per MA / MS policy | $ | 877 | $ | 928 | |||
Other commission per MA/MS policy | 12 | 27 | |||||
Pharmacy revenue per MA/MS policy | 413 | 89 | |||||
Other revenue per MA/MS policy | 149 | (147 | ) | ||||
Total revenue per MA / MS policy | 1,451 | 897 | |||||
Total operating expenses per MA / MS policy | (1,224 | ) | (1,187 | ) | |||
Adjusted EBITDA per MA/MS policy * | $ | 227 | $ | (290 | ) | ||
Adjusted EBITDA Margin per MA/MS policy * | 16 | % | (32 | )% | |||
Revenue / CAC multiple | 4.1X | 1.7X | |||||
Total revenue per MA/MS policy increased 62% for the twelve months ended June 30, 2023 compared to the twelve months ended June 30, 2022, primarily due to the increase in pharmacy revenue. Total operating expenses per MA/MS policy increased 3% for the twelve months ended June 30, 2023 compared to the twelve months ended June 30, 2022, driven by an increase in cost of goods sold-pharmacy revenue for Healthcare Services due to the growth of the business, offset by a decrease in our marketing and advertising costs.
Life
Financial Results
The following table provides the financial results for the Life segment for the periods presented:
(in thousands) | 4Q 2023 | 4Q 2022 | % Change | FY 2023 | FY 2022 | % Change | |||||||||||||||
Revenue | $ | 38,052 | $ | 37,331 | 2 | % | $ | 145,832 | |||||||||||||
