UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2020~~2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

001-39295

(Commission File Number)

SelectQuote, Inc.

(Exact name of registrant as specified in its charter)


Delaware		94-3339273
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

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

(913) 599-9225

(Registrant's telephone number, including area code)

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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

SLQT

New York Stock Exchange

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

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

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


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

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

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

The registrant had outstanding ~~162,631,704~~163,958,397 shares of common stock as of October 31, ~~2020.~~

2021.

Table of Contents

SELECTQUOTE, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS


	PART I FINANCIAL INFORMATION	PAGE
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of September 30 ~~2020~~, 2021 and June 30, ~~2020~~202 1	2
	Condensed Consolidated Statements of Comprehensive Income ~~Comprehensive Inc~~(Loss) ~~ome~~for the Three Months Ended September 30, ~~2020~~2021 and ~~2019~~2020	3
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three ~~Three~~ Months Ended ~~September~~Sep tember 30 , 2021 and 2020 ~~and~~ ~~2019~~	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30 , 2021 and 2020 ~~and~~ ~~2019~~	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4243
Item 4.	Controls and Procedures	4243
	PART II OTHER INFORMATION
Item 1.	Legal Proceedings	4344
Item 1A.	Risk Factors	4344
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4344
Item 3.	Defaults Upon Senior Securities	4344
Item 4.	Mine Safety Disclosures	4344
Item 5.	Other Information	4344
Item 6.	Exhibits	4445
	Signatures	4546

Table of Contents

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SELECTQUOTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)


		September 30, 2020		June 30, 2020			September 30, 2021		June 30, 2021
ASSETS	ASSETS					ASSETS
CURRENT ASSETS:	CURRENT ASSETS:					CURRENT ASSETS:
Cash and cash equivalents	Cash and cash equivalents	$	305,389	$	321,065	Cash and cash equivalents	$	183,618	$	286,454
Restricted cash		41,982		47,805

Accounts receivable	Accounts receivable	69,273		83,634		Accounts receivable	96,673		113,375
Commissions receivable-current	Commissions receivable-current	56,321		51,209		Commissions receivable-current	155,482		89,120
Other current assets	Other current assets	7,528		10,121		Other current assets	7,917		4,486
Total current assets	Total current assets	480,493		513,834		Total current assets	443,690		493,435
COMMISSIONS RECEIVABLE—Net		502,582		461,752
COMMISSIONS RECEIVABLE						COMMISSIONS RECEIVABLE	748,190		756,777
PROPERTY AND EQUIPMENT—Net	PROPERTY AND EQUIPMENT—Net	24,535		22,150		PROPERTY AND EQUIPMENT—Net	38,525		29,510
SOFTWARE—Net	SOFTWARE—Net	9,339		8,399		SOFTWARE—Net	14,264		12,611
OPERATING LEASE RIGHT-OF-USE ASSETS	OPERATING LEASE RIGHT-OF-USE ASSETS	30,142		0		OPERATING LEASE RIGHT-OF-USE ASSETS	30,547		31,414
INTANGIBLE ASSETS—Net	INTANGIBLE ASSETS—Net	18,820		19,673		INTANGIBLE ASSETS—Net	39,432		40,670
GOODWILL	GOODWILL	46,456		46,577		GOODWILL	73,732		68,019
OTHER ASSETS	OTHER ASSETS	1,438		1,408		OTHER ASSETS	1,362		1,436
TOTAL ASSETS	TOTAL ASSETS	$	1,113,805	$	1,073,793	TOTAL ASSETS	$	1,389,742	$	1,433,872
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:	CURRENT LIABILITIES:					CURRENT LIABILITIES:
Accounts payable	Accounts payable	$	10,184	$	22,891	Accounts payable	$	28,495	$	34,079
Accrued expenses	Accrued expenses	14,667		14,936		Accrued expenses	22,836		20,676
Accrued compensation and benefits	Accrued compensation and benefits	24,530		22,228		Accrued compensation and benefits	43,648		40,909

Earnout liability		31,571		30,812

Operating lease liabilities—current	Operating lease liabilities—current	4,685		0		Operating lease liabilities—current	5,355		5,289
Current portion of long-term debt						Current portion of long-term debt	3,540		2,360
Other current liabilities	Other current liabilities	22,406		4,944		Other current liabilities	24,618		5,504
Total current liabilities	Total current liabilities	108,043		95,811		Total current liabilities	128,492		108,817
DEBT		312,575		311,814
LONG-TERM DEBT, less current portion						LONG-TERM DEBT, less current portion	458,652		459,043

DEFERRED INCOME TAXES	DEFERRED INCOME TAXES	104,547		105,844		DEFERRED INCOME TAXES	125,181		140,988
OPERATING LEASE LIABILITIES	OPERATING LEASE LIABILITIES	37,600		0		OPERATING LEASE LIABILITIES	37,186		38,392
OTHER LIABILITIES	OTHER LIABILITIES	6,066		14,635		OTHER LIABILITIES	6,446		11,743
Total liabilities	Total liabilities	568,831		528,104		Total liabilities	755,957		758,983
COMMITMENTS AND CONTINGENCIES (Note 9)
COMMITMENTS AND CONTINGENCIES (Note 8)						COMMITMENTS AND CONTINGENCIES (Note 8)	0		0
SHAREHOLDERS’ EQUITY:	SHAREHOLDERS’ EQUITY:					SHAREHOLDERS’ EQUITY:
Common stock, $0.01 par value	Common stock, $0.01 par value	1,625		1,622		Common stock, $0.01 par value	1,639		1,635
Additional paid-in capital	Additional paid-in capital	546,815		548,113		Additional paid-in capital	549,034		544,771

Accumulated deficit		(1,955)		(2,792)
Accumulated other comprehensive loss		(1,511)		(1,254)
Retained earnings						Retained earnings	82,889		128,254
Accumulated other comprehensive income						Accumulated other comprehensive income	223		229
Total shareholders’ equity	Total shareholders’ equity	544,974		545,689		Total shareholders’ equity	633,785		674,889
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,113,805	$	1,073,793	TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,389,742	$	1,433,872

See accompanying notes to condensed consolidated financial statements.

Table of Contents

SELECTQUOTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands)


		Three Months Ended September 30,				Three Months Ended September 30,
		2020		2019				2021		2020
REVENUE:	REVENUE:						REVENUE:
Commission	Commission	$	106,545	$	57,822		Commission	$	134,651	$	106,545
Production bonus and other	Production bonus and other	17,624		7,345			Production bonus and other	25,272		17,624
Total revenue	Total revenue	124,169		65,167			Total revenue	159,923		124,169
OPERATING COSTS AND EXPENSES:	OPERATING COSTS AND EXPENSES:						OPERATING COSTS AND EXPENSES:
Cost of revenue	Cost of revenue	51,045		32,637			Cost of revenue	92,165		51,045
Marketing and advertising	Marketing and advertising	49,800		26,101			Marketing and advertising	90,677		49,800
General and administrative	General and administrative	12,202		5,126			General and administrative	23,392		12,202
Technical development	Technical development	3,848		2,713			Technical development	5,853		3,848
Total operating costs and expenses	Total operating costs and expenses	116,895		66,577			Total operating costs and expenses	212,087		116,895
INCOME (LOSS) FROM OPERATIONS	INCOME (LOSS) FROM OPERATIONS	7,274		(1,410)			INCOME (LOSS) FROM OPERATIONS	(52,164)		7,274
INTEREST EXPENSE, NET	INTEREST EXPENSE, NET	(6,761)		(705)			INTEREST EXPENSE, NET	(8,535)		(6,761)
OTHER EXPENSES, NET		(780)		(13)

OTHER EXPENSE, NET							OTHER EXPENSE, NET	(102)		(780)
LOSS BEFORE INCOME TAX BENEFIT	LOSS BEFORE INCOME TAX BENEFIT	(267)		(2,128)			LOSS BEFORE INCOME TAX BENEFIT	(60,801)		(267)
INCOME TAX BENEFIT	INCOME TAX BENEFIT	(1,104)		(440)			INCOME TAX BENEFIT	(15,436)		(1,104)
NET INCOME (LOSS)	NET INCOME (LOSS)	$	837	$	(1,688)		NET INCOME (LOSS)	$	(45,365)	$	837

NET INCOME (LOSS) PER SHARE:	NET INCOME (LOSS) PER SHARE:						NET INCOME (LOSS) PER SHARE:
Basic	Basic	$	0.01	$	(0.05)		Basic	$	(0.28)	$	0.01
Diluted	Diluted	$	0.01	$	(0.05)		Diluted	$	(0.28)	$	0.01
WEIGHTED-AVERAGE COMMON STOCK OUTSTANDING USED IN PER SHARE AMOUNTS:	WEIGHTED-AVERAGE COMMON STOCK OUTSTANDING USED IN PER SHARE AMOUNTS:						WEIGHTED-AVERAGE COMMON STOCK OUTSTANDING USED IN PER SHARE AMOUNTS:
Basic	Basic	162,448		87,516			Basic	163,692		162,448
Diluted	Diluted	165,192		87,516			Diluted	163,692		165,192

OTHER COMPREHENSIVE LOSS NET OF TAX:
OTHER COMPREHENSIVE LOSS, NET OF TAX:							OTHER COMPREHENSIVE LOSS, NET OF TAX:
Loss on cash flow hedge	Loss on cash flow hedge	(257)		0			Loss on cash flow hedge	(6)		(257)
OTHER COMPREHENSIVE LOSS	OTHER COMPREHENSIVE LOSS	(257)		0			OTHER COMPREHENSIVE LOSS	(6)		(257)
COMPREHENSIVE INCOME (LOSS)	COMPREHENSIVE INCOME (LOSS)	$	580	$	(1,688)		COMPREHENSIVE INCOME (LOSS)	$	(45,371)	$	580

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

SELECTQUOTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)

(In thousands)

Three Months Ended September 30, 2020
Common Stock Additional
Paid-In
Capital Accumulated Deficit Treasury
Stock Accumulated Other Comprehensive Loss Total
Shareholders'
Equity
Shares Amount
BALANCES-June 30, 2020 162,191 $ 1,622 $ 548,113 $ (2,792) $ 0 $ (1,254) $ 545,689
Net income — — — 837 — — 837
Loss on cash flow hedge, net of tax — — — — — (374) (374)
Amount reclassified into earnings, net tax — — — — — 117 117
Exercise of employee stock options, net of shares withheld for cashless exercises and to cover tax withholdings 316 3 (2,203) — — — (2,200)
Share-based compensation expense — — 905 — — — 905
BALANCES-September 30, 2020 162,507 $ 1,625 $ 546,815 $ (1,955) $ 0 $ (1,511) $ 544,974


Three Months Ended September 30, 2021
	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Shareholders' Equity
	Shares	Amount
BALANCES-June 30, 2021	163,510	$	1,635	$	544,771	$	128,254	$	229	$	674,889
Net loss	—	—		—		(45,365)		—		(45,365)
Loss on cash flow hedge, net of tax	—	—		—		—		(179)		(179)
Amount reclassified into earnings, net of tax	—	—		—		—		173		173
Exercise of employee stock options, net of shares withheld for cashless exercises and to cover tax withholdings	284	3		1,203		—		—		1,206
Issuance of common stock pursuant to employee stock purchase plan	90	1		988		—		—		989
Vesting of restricted stock unit awards net of shares withheld to cover tax withholdings	46	—		(143)		—		—		(143)
Share-based compensation expense	—	—		2,215		—		—		2,215
BALANCES-September 30, 2021	163,930	$	1,639	$	549,034	$	82,889	$	223	$	633,785

Three Months Ended September 30, 2019
Common Stock Additional
Paid-In
Capital Retained Earnings Treasury
Stock Accumulated Other Comprehensive Loss Total
Shareholders'
Equity
Shares Amount
BALANCES-June 30, 2019 90,619 $ 906 $ 138,378 $ 200,446 $ (77,275) $ 0 $ 262,455
Net loss — — — (1,688) — — (1,688)
Exercise of employee stock options 1,348 14 1,672 — — — 1,686
Share-based compensation expense — — 22 — — — 22
BALANCES-September 30, 2019 91,967 $ 920 $ 140,072 $ 198,758 $ (77,275) $ 0 $ 262,475


Three Months Ended September 30, 2020
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Shareholders' Equity
	Shares	Amount
BALANCES-June 30, 2020	162,191	$	1,622	$	548,113	$	(2,792)	$	(1,254)	$	545,689
Net income	—	—		—		837		—		837
Loss on cash flow hedge, net of tax	—	—		—		—		(374)		(374)
Amount reclassified into earnings, net of tax	—	—		—		—		117		117
Exercise of employee stock options, net of shares withheld for cashless exercises and to cover tax withholdings	316	3		(2,203)		—		—		(2,200)
Share-based compensation expense	—	—		905		—		—		905
BALANCES-September 30, 2020	162,507	$	1,625	$	546,815	$	(1,955)	$	(1,511)	$	544,974

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

SELECTQUOTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Three Months Ended September 30,
2020 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 837 $ (1,688)
Adjustments to reconcile net income (loss) to net cash, cash equivalents, and restricted cash used in operating activities:
Depreciation and amortization 3,347 1,440
Loss (gain) on disposal of property, equipment, and software 82 (2)
Share-based compensation expense 924 22
Deferred income taxes (1,214) (445)
Amortization of debt issuance costs and debt discount 822 24
Fair value adjustments to contingent earnout obligations 759 0
Non-cash lease expense 911 0
Changes in operating assets and liabilities:
Accounts receivable 14,361 3,484
Commissions receivable (45,942) (18,945)
Other assets 1,790 (721)
Accounts payable and accrued expenses (8,718) 4,933
Operating lease liabilities (995) 0
Other liabilities 23,691 201
Net cash used in operating activities (9,345) (11,697)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (2,751) (3,002)
Proceeds from sales of property and equipment 0 3
Purchases of software and capitalized software development costs (1,585) (1,282)
Acquisition of business 121 0
Net cash used in investing activities (4,215) (4,281)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit 0 42,868
Payments on revolving line of credit 0 (31,153)
Proceeds from other debt 0 4,600
Payments on other debt (68) (831)
Proceeds from common stock option exercises 309 1,663
Payments of tax withholdings related to net share settlement of equity awards (2,509) 0
Payments of debt issuance costs 0 (885)
Payments of costs incurred in connection with private placement (1,771) 0
Payments of costs incurred in connection with initial public offering (3,899) 0
Net cash (used in) provided by financing activities (7,938) 16,262
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH (21,498) 284
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of period 368,869 570
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—End of period $ 347,371 $ 854

Reconciliation to the Consolidated Balance Sheets:
Cash and cash equivalents 305,389 854
Restricted cash 41,982 0
Total cash, cash equivalents, and restricted cash $ 347,371 $ 854
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid, net $ (5,992) $ (582)
(Payments) refunds of income taxes, net (13) 27


	Three Months Ended September 30,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(45,365)	$	837
Adjustments to reconcile net income (loss) to net cash, cash equivalents, and restricted cash used in operating activities:
Depreciation and amortization	5,103		3,347
Loss on disposal of property, equipment, and software	350		82
Share-based compensation expense	2,215		924
Deferred income taxes	(15,807)		(1,214)
Amortization of debt issuance costs and debt discount	862		822

Fair value adjustments to contingent earnout obligations	—		759
Non-cash lease expense	994		911
Changes in operating assets and liabilities:
Accounts receivable	17,336		14,361
Commissions receivable	(57,775)		(45,942)
Other assets	(2,957)		1,790
Accounts payable and accrued expenses	(6,942)		(8,718)
Operating lease liabilities	(1,267)		(995)
Other liabilities	16,178		23,690
Net cash used in operating activities	(87,075)		(9,346)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(7,824)		(2,751)

Purchases of software and capitalized software development costs	(3,016)		(1,585)
Acquisition of business	(6,927)		121
Net cash used in investing activities	(17,767)		(4,215)
CASH FLOWS FROM FINANCING ACTIVITIES:





Payments on other debt	(46)		(68)
Proceeds from common stock options exercised and employee stock purchase plan	2,194		309



Payments of tax withholdings related to net share settlement of equity awards	(142)		(2,509)

Payments of costs incurred in connection with private placement	—		(1,771)
Payments of costs incurred in connection with initial public offering	—		(3,899)


Net cash provided by (used in) financing activities	2,006		(7,938)
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(102,836)		(21,499)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of period	286,454		368,870
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—End of period	$	183,618	$	347,371


Reconciliation to the Condensed Consolidated Balance Sheets:
Cash and cash equivalents	183,618		305,389
Restricted cash	—		41,982
Total cash, cash equivalents, and restricted cash	$	183,618	$	347,371
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid, net	$	(7,670)	$	(5,992)
Income taxes paid, net	(3)		(13)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

SELECTQUOTE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~(Unaudited)~~

1.SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business—SelectQuote, Inc. and its subsidiaries (the ~~“Company”~~"Company" or ~~“SelectQuote”~~"SelectQuote") contract with numerous insurance carriers to sell senior health, ~~(“Senior”),~~ life, ~~(“Life”),~~ and auto and home insurance ~~(“Auto & Home”)~~ policies by telephone to individuals throughout the United States through the use of multi-channel marketing and advertising campaigns. ~~Senior sells~~ Medicare Advantage, Medicare Supplement, Medicare Part D, and other ancillary senior health insurance related ~~policies.~~policies are sold by SelectQuote’s Senior segment ("Senior"). InsideResponse and Population Health are also included in Senior. SelectQuote’s Life segment ("Life") sells ~~primarily~~ term ~~and permanent~~ life ~~insurance policies~~ and final expense policies, along with other ancillary products. SelectQuote’s Auto & Home segment ("Auto & Home") primarily sells non-commercial auto &and home property and casualty insurance policies. SelectQuote’s licensed insurance agents provide comparative rates from a variety of insurance carriers relying on our technology distribution channel with a combination of proprietary and commercially available software to perform its quote service and sell insurance policies on behalf of the insurance carriers. The Company primarily earns revenue in the form of commission payments from the insurance carriers. Commission payments are received both when the initial policy is sold (“("first ~~year”~~year") and when the underlying policyholder renews their policy in subsequent years ~~(“renewal”~~("renewal"). ~~Additionally, the~~The Company also receives certain volume-based bonuses from some carriers on first-year policies sold ~~which we refer to as production bonuses and marketing development funds,~~ based on attaining various predetermined target sales levels or other agreed upon objectives. These bonuses are referred to as "production bonuses" or "marketing development funds." Additionally, the Company earns revenue from its Population Health platform (including mail order prescription revenue from SelectRx) and lead generation revenue from InsideResponse.

Basis of Presentation—The accompanying unaudited condensed consolidated financial statements include the accounts of SelectQuote, Inc., and its wholly owned subsidiaries: SelectQuote Insurance Services, SelectQuote Auto & Home Insurance Services, LLC ~~(“SQAH”~~("SQAH"), ChoiceMark Insurance Services, Inc., Tiburon Insurance Services, InsideResponse, LLC, and ~~GenMark, LLC.~~SelectQuote Ventures, Inc. The unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and reflect all normal recurring adjustments that are necessary to present fairly the results for the interim periods presented. All intercompany accounts and transactions have been eliminated in consolidation. Certain information and disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in accordance with those rules and regulations and with the instructions to Form 10-Q and ~~Article 10~~Rule 10-01 of Regulation S-X. The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended June 30, ~~2020,~~2021, and include all adjustments necessary for the fair presentation of our financial position for the periods presented, the results of which are not necessarily indicative of the results to be expected for any subsequent period, including for the year ending June 30, ~~2021,~~2022, and therefore should not be relied upon as an indicator of future results. The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements for the year ended June 30, ~~2020. Results of operations were not materially impacted by the COVID-19 pandemic, but the Company is continuously assessing the evolving situation related~~2021. Certain reclassifications have been made to ~~the pandemic.~~prior periods to conform with current year presentation.

Use of Estimates—The preparation of condensed 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. The Company regularly assesses these estimates; however, actual amounts could differ from those estimates. The most significant items involving management’s estimates include estimates of revenue recognition, commissions receivable, the provision for income taxes, share-based compensation, and valuation of intangible assets and ~~goodwill, and the provision for income taxes.~~goodwill. The impact of changes in estimates is recorded in the period in which they become known.

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

Table of Contents

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

~~Table~~ A majority of ~~Contents~~

policies sold during AEP are effective and renew annually on January 1.

Significant Accounting Policies—~~With the exception of the adoption of recent accounting pronouncements, there~~There have been no material changes to the Company’s significant accounting policies as described in our Annual Report on Form 10-K for the year ended June 30, ~~2020.~~2021.

~~Adoption of New Accounting Pronouncements—In February 2016, the Financial Accounting Standards Board (the "FASB") issued~~ ~~Accounting Standards Update ("ASU") 2016-02~~, ~~Leases (Topic 842)~~, which has been clarified and amended by various subsequent updates. The core principle of this standard is that a lessee should recognize the assets and liabilities that arise from leases, by recognizing in the consolidated balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. In accordance with the guidance of Topic 842, leases are classified as finance or operating leases, and both types of leases are recognized on the consolidated balance sheet. The accounting applied by a lessor is largely unchanged from that applied under previous guidance. The new guidance requires certain expanded qualitative disclosures and specific quantitative disclosures in order to provide users of financial statements enough information to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing activities.

Although the effective date of this ASU has been deferred for emerging growth companies until annual periods beginning after December 15, 2021, the Company has early adopted the new guidance and related amendments on July 1, 2020, and has elected the transition package of practical expedients permitted under the transition guidance, which allowed the carry forward of historical assessments of whether a contract contains a lease, lease classification and initial direct costs. The new guidance and related amendments have been applied on a modified retrospective basis using the optional transition method with an application date of July 1, 2020.

As a result of adopting this standard, on July 1, 2020, the Company recorded lease liabilities of $41.3 million and right-of-use assets of $29.7 million, which includes reclassifications of existing assets and liabilities primarily related to deferred rent. The adoption of this new standard did not have a material impact on the Company’s consolidated statement of comprehensive income or the consolidated statement of cash flows. The Company has included expanded disclosures on the consolidated balance sheets and in Note 7 to the consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” This ASU amends the subsequent measurement of goodwill whereby Step 2 from the goodwill impairment test is eliminated. As a result, an entity should recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. The standard was adopted and applied prospectively by the Company as of July 1, 2020, but it did not have an impact on the Company's consolidated financial statements and disclosures.

Recent Accounting Pronouncements ~~Not Yet~~ Adopted—~~In June 2016, the FASB issued ASU No. 2016-13,~~ ~~Financial Instruments — Credit Losses (Topic 326),~~ which amends the guidance for accounting for assets that are potentially subject to credit risk. The amendment affects contract assets, loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. As an emerging growth company, the standard is effective for the Company beginning in fiscal years starting after December 15, 2022, and interim periods within those fiscal years; however, early adoption is permitted. The Company is currently evaluating the impact to its consolidated financial statements and related disclosures but does not expect this ASU to have a material impact.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies and changes the accounting for certain income tax transactions, among other minor improvements. This standard ~~becomes~~was effective for the Company on July 1, ~~2022,~~2021, and ~~for interim periods beginning July 1, 2023, with early adoption permitted. The Company is currently evaluating~~did not have a material impact on the ~~impact to its~~condensed consolidated financial statements and related ~~disclosures but does not expect this ASU to have a material impact.~~disclosures.

~~Table of Contents~~

2.ACQUISITIONS

In accordance with ASC Topic 805, Business Combinations ~~(“ASC 805”)~~, the Company allocates the purchase price of its acquisitions to the tangible assets, liabilities, and intangible assets acquired based on fair values. Any excess purchase price over those fair values is recorded as goodwill. The fair value assigned to intangible assets acquired is supported by valuations using estimates and assumptions provided by management.

On May 1, 2020, the Company acquired 100% of the outstanding membership units of InsideResponse, LLC (“InsideResponse”) for an aggregate purchase price of up to $65.0 million (subject to customary adjustments), as set forth in the Agreement and Plan of Merger, as amended on May 1, 2020 (the “Merger Agreement”). The purchase price is comprised of $32.7 million, which was paid in cash at the closing of the transaction and an earnout of up to $32.3 million. InsideResponse is an online marketing consulting firm the Company purchases leads from (refer to Note 15 to the consolidated financial statements for related party information).

~~Under the terms of the Merger Agreement, total consideration in the acquisition consisted of the following as of the acquisition date:~~


~~(in thousands)~~
~~Base purchase price~~	$	~~32,700~~
~~Fair value of earnout~~	~~30,437~~
~~Net working capital true-up(1)~~	~~3,527~~
~~Closing cash~~	~~904~~
~~Closing indebtedness~~	~~(476)~~
~~Total purchase consideration~~	$	~~67,092~~

~~(1) The Company recorded a $0.1 million measurement period adjustment to the carrying amount of goodwill related to the net working capital true-up for the three months ended September 30, 2020.~~

The earnout, if any, will be paid no later than 15 days after the accountant-reviewed stand-alone financial statements of InsideResponse, as of and for the period ending December 31, 2020, are finalized, and will be paid 65% in cash and 35% in shares of the Company's common stock (to be valued based on the average closing price of its common stock for the 10 trading days ending three trading days immediately preceding such payment date). The earnout is contingent upon the achievement of certain gross profit targets for InsideResponse in calendar year 2020, as set forth in the Merger Agreement, which provides for a range of possible payouts of up to $32.3 million. This assumes the minimum gross profit target of $12.3 million is reached, as otherwise there will be no consideration payout. As of the acquisition date, May 1, 2020, the fair value of the earnout liability was $30.4 million recorded as a current liability on the consolidated balance sheet. Per the valuation, the earnout was discounted back to the valuation date at a counterparty risk adjusted rate of 5.00% which is designed to represent the Company’s incremental borrowing cost. As of September 30, 2020, the Company determined that InsideResponse had achieved the maximum gross profit target for calendar year 2020, therefore, the maximum fair market value of the earnout has been accrued. As a result, the company recorded $0.8 million in other expenses, net in the consolidated statement of comprehensive income as an adjustment to the fair market value of the earnout liability during the three months ended September 30, 2020. Furthermore, each period until the March 15, 2021 payout, the Company will accrete the earnout liability so that the fully expected earnout will be accrued as of the payout date. Changes in this measure have been recorded in the Company’s consolidated statements of cash flows as a noncash reconciling item in the reconciliation of net income to net cash flows from operating activities.

Based on the valuation inputs, the Company has recorded assets acquired and liabilities assumed according to the following fair value hierarchy:

~~Table of Contents~~


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

Lead distribution company—On February 1, 2021, the Company acquired substantially all of the assets of a lead distribution company for an aggregate purchase price of up to $33.5 million (subject to customary adjustments), as set forth in the Asset Purchase Agreement, dated February 1, 2021 (the "Asset Purchase Agreement"). The purchase price is comprised of $30.0 million, of which $24.0 million was paid in cash at the closing of the transaction with an additional $6.0 million of holdback for indemnification claims, net working capital adjustments, and underperformance. Additionally, the purchase price includes an earnout of up to $3.5 million. The primary purpose of the acquisition was to secure and incorporate the exclusive publisher relationships into the lead generation business of InsideResponse. The Company recorded $0.4 million of acquisition-related costs in general and administrative operating costs and expenses in the condensed consolidated statement of comprehensive income.

The earnout is contingent upon the achievement of a minimum of 50,000 insurance policies sold to closed policy leads during calendar year 2021 and will be paid in cash no later than five days after the accountant-reviewed stand-alone financial statements of the lead distribution company, as of and for the period ending December 31, 2021, are finalized. While the earnout provides for a range of possible payouts, if the lead distribution company fails to hit the minimum target threshold set forth in the Asset Purchase Agreement, there will be no payout, but in no circumstance can the earnout exceed $3.5 million. As the earnout payment is contingent upon continued employment of certain individuals, the Company will recognize the earnout as compensation expense in general and administrative operating costs and expenses in the condensed consolidated statement of comprehensive income in the period in which it is earned. As of September 30, 2021, the Company has not accrued an earnout payment based on current forecasted performance.

The underperformance amount related to the $6.0 million holdback is calculated as follows: if the lead performance percentage, calculated as the calendar year 2021 closed policy amount divided by the closed policy performance target of 50,000 closed policy leads, is less than or equal to 60%, the underperformance amount shall be calculated as 100% less the lead performance percentage multiplied by $30.0 million. As of September 30, 2021, current forecasted performance is expected to exceed 60%.

Table of Contents

The Company will accrue interest on the remaining holdback of $5.5 million, after the net working capital true-up of $0.5 million, through the 15-month anniversary of the closing date in interest expense, net in the condensed consolidated statement of comprehensive income.

Under the terms of the Asset Purchase Agreement, the total consideration for the acquisition consisted of the following as of the acquisition date (in thousands):


Base purchase price	$	30,000
Net working capital true-up	(499)
Total Purchase Consideration	$	29,501

At the date of acquisition, the fair value of net tangible assets acquired approximated their carrying value. The trade name acquired was determined using the relief from royalty method, which measures the value by estimating the cost savings associated with owning the asset rather than licensing it. For the proprietary software acquired, the replacement cost method under the cost approach was used, estimating the cost to rebuild the software. The non-compete agreements were valued using the income approach, and the customer relationships were valued using the multiple period excess earnings method. As such, all aforementioned intangible assets were valued using Level 3 inputs. ~~Further,~~ ~~the Company believes that the fair value of the earn-out liability falls within Level 3 of the fair value hierarchy as a result of the unobservable inputs used for the measurement.~~

Goodwill resulting from the transaction ~~represents~~constitutes the excess of the consideration ~~transferred~~paid over the fair values of the assets acquired and liabilities assumed and primarily represents the ~~expected synergies~~benefits of leveraging the exclusive publisher relationships in ~~streamlining~~ the Company's marketing and advertising process by consolidating a primary vendor into its marketing team, providing full access to a rapidly growing and scalable lead generation strategy, guaranteeing our ability to consume more leads and reducing cost.business. This acquired goodwill is allocated to the Senior segment (which is also the reporting unit), and ~~approximately $5.0 million~~ is not deductible for tax ~~purposes.~~purposes after adding back acquisition costs and excluding the holdback not yet paid.

The ~~valuation of the acquired net assets remains preliminary while management completes its valuation, particularly the valuation of acquired intangible assets. The~~ following table summarizes the ~~preliminary~~ estimated fair values of the assets acquired and liabilities assumed as of the acquisition date (in thousands):


Description	Estimated Life	Amount
~~Cash and cash equivalents~~Accounts receivable		$	~~955~~1,301
~~Accounts receivable~~		~~8,220~~
~~Other current assets~~		~~459~~
~~Property and equipment, net~~		51
~~Accounts payable~~		~~(2,922)~~
~~Accrued expenses~~		~~(737)~~
~~Other current liabilities~~		~~(8)~~
~~Other liabilities~~		~~(1)~~
~~Net~~Total tangible assets acquired		~~6,017~~1,301

~~Trade Name~~Non-compete agreements	5 years	~~2,680~~1,000
~~Proprietary Software~~	~~2-5 years~~	~~1,042~~
~~Non-compete agreements~~Vendor relationships	39 years	~~192~~
~~Customer relationships~~	~~7 years~~	~~16,069~~23,700
Goodwill	Indefinite	~~41,092~~3,500
Total intangible assets acquired		~~61,075~~28,200

Net ~~assets acquired~~Assets Acquired		$	~~67,092~~29,501

The Company will amortize the intangible assets acquired on a straight-line basis over their estimated remaining lives, ranging from five to nine years.

Express Med Pharmaceuticals—On April 30, 2021, the Company acquired 100% of the outstanding shares of Express Med Pharmaceuticals, now branded SelectRx, aleading specialty pharmaceutical distributor, for an aggregate purchase price of up to $24.0 million (subject to customary adjustments), as set forth in the Stock Purchase Agreement dated April 30, 2021 (the "Stock Purchase Agreement"). The aggregate purchase price of up to $24.0 million is comprised of $17.5 million in cash paid at the closing of the transaction, an additional $2.5 million of holdback for indemnification claims, if any, and an earnout of up to $4.0 million, if any. The primary purpose of the acquisition was to take advantage of the Company's technology and customer base to facilitate better patient care through coordination of strategic, value-based care partnerships. The Company recorded $0.3 million of acquisition-related costs in general and administrative operating costs and expenses in the condensed consolidated statement of

Table of Contents

comprehensive income. In addition, as a result of the acquisition, the Company has entered into an operating lease with a related party. Refer to Note 6 in the condensed consolidated financial statements for further details.

The earnout of up to $4.0 million is comprised of 2 separate provisions. The first provision provides for an earnout of up to $3.0 million and is contingent upon achievement of the following within the first 20 months following the acquisition: facility updates that would allow for processing a minimum of 75,000 active patients, the issuance of pharmacy licenses in all 50 states, and active patients of 15,000 or more. The second provision provides for an earnout of up to $1.0 million and is contingent upon achievement of the following within 36 months following the acquisition: construction of a new facility to accommodate the servicing of additional active patients or 75,000 or more active patients as of the last day of any month prior to the end of the second earnout provision period or as of the end of the second earnout provision period. As the earnout payment is contingent upon continued employment of certain individuals, the Company will recognize the earnout as compensation expense in general and administrative operating costs and expenses in the condensed consolidated statement of comprehensive income in the period in which it is earned. As of September 30, 2021, the Company has not accrued an earnout payment based on performance to date. The $2.5 million of holdback will be due upon the 15-month anniversary of the closing date of the acquisition.

Under the terms of the Stock Purchase Agreement, total consideration in the acquisition consisted of the following as of the acquisition date (in thousands):


Base purchase price	$	20,000
Net working capital true-up	(483)
Closing cash	20
Total purchase consideration	$	19,537

At the date of acquisition, the fair value of net tangible assets acquired, excluding property and equipment, approximated their carrying value. The property and equipment was valued primarily using the cost and sales comparison approach to value. For the proprietary software acquired, the replacement cost method under the cost approach was used, estimating the cost to rebuild the software. The non-compete agreement was valued using the income approach, and the customer relationships were valued using the multiple period excess earnings method. As such, all aforementioned intangible assets were valued using Level 3 inputs.

Goodwill resulting from the transaction constitutes the excess of the consideration paid over the fair values of the assets acquired and liabilities assumed and primarily represents the additional value of the synergies of combining the SelectRx business with the Company's technology and existing customer base. This acquired goodwill is allocated to the Senior segment (which is also the reporting unit), and the Company expects approximately $16.3 million to be deductible for tax purposes after adding back acquisition costs and excluding the holdback not yet paid.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date (in thousands):

Table of Contents


Description	Estimated Life	Amount
Cash and cash equivalents		$	20
Accounts receivable		613
Other current assets		28
Property and equipment, net		287
Accounts payable		(280)
Accrued expenses, including compensation and benefits		(45)
Net tangible assets acquired		623

Proprietary Software	3 years	550
Non-compete agreements	5 years	100
Customer relationships	1 year	200
Goodwill	Indefinite	18,064
Total intangible assets acquired		18,914
Net assets acquired		$	19,537

The Company will amortize the intangible assets acquired on a ~~straight line~~straight-line basis over their estimated remaining lives, ranging from ~~two~~one to ~~seven~~five years.

Simple Meds—On August 31, 2021, SelectRx acquired 100% of the outstanding equity interests of Simple Meds, a full-service pharmaceutical distributor, for an aggregate purchase price of $7.0 million (subject to customary adjustments), as set forth in the Membership Interest Purchase Agreement dated August 31, 2021. The aggregate purchase price of $7.0 million was paid in cash at the closing of the transaction. The primary purpose of the acquisition was to accelerate the expansion of the prescription drug management business by combining the operations and existing infrastructure of Simple Meds into that of SelectRx.

Under the terms of the Membership Interest Purchase Agreement, total consideration in the acquisition consisted of the following as of the acquisition date (in thousands):


Base purchase price	$	7,000
Net working capital true-up	347
Closing cash	61
Total purchase consideration	$	7,408

At the date of acquisition, the fair value of net tangible assets acquired approximated their carrying value. The customer relationships were valued using the multiple period excess earnings method, and as such, were valued using Level 3 inputs.

Goodwill resulting from the transaction constitutes the excess of the consideration paid over the fair values of the assets acquired and liabilities assumed and primarily represents the additional value of the synergies of combining the Simple Meds business with the Company's technology and existing customer base. This acquired goodwill is allocated to the Senior segment (which is also the reporting unit), and the Company expects approximately $5.6 million to be deductible for tax purposes after adding back acquisition costs.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date (in thousands):

Table of Contents


Description	Estimated Life	Amount
Cash and cash equivalents		$	61
Accounts receivable		634
Other current assets		474
Property and equipment, net		415
Accounts payable		(259)
Net tangible assets acquired		1,325

Customer relationships	1 year	370
Goodwill	Indefinite	5,713
Total intangible assets acquired		6,083
Net assets acquired		$	7,408

From the date of acquisition, August 31, 2021, through September 30, 2021, Simple Meds generated $1.0 million of mail order prescription revenue.

3.PROPERTY AND EQUIPMENT—NET

Property and equipment—net consisted of the following:

(in thousands) September 30, 2020 June 30, 2020
Computer hardware $ 13,189 $ 9,829
Equipment(1)
2,415 2,443
Leasehold improvements 19,323 17,692
Furniture and fixtures 5,259 5,259
Work in progress 5 1,267
Total 40,191 36,490
Less accumulated depreciation (15,656) (14,340)
Property and equipment—net $ 24,535 $ 22,150


(in thousands)	September 30, 2021		June 30, 2021
Computer hardware	$	20,569	$	13,351
Machinery and equipment(1)	3,091		2,667
Leasehold improvements	18,525		18,525
Furniture and fixtures	5,134		5,004
Work in progress	10,221		7,220
Total	57,540		46,767
Less accumulated depreciation	(19,015)		(17,257)
Property and equipment—net	$	38,525	$	29,510

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

Work in progress as of September 30, ~~2020~~2021 and June 30, ~~2020,~~2021, primarily represents ~~tenant improvements~~computer equipment and machinery not yet put into service and ~~are~~ not yet being depreciated. Depreciation ~~expenses~~expense for the three months ended September 30, 2021 and 2020, ~~and 2019, were $1.6~~was $2.1 million and ~~$1.1~~$1.6 million, respectively.

Table of Contents

4.SOFTWARE—NET

Software—net consisted of the following:


(in thousands)	(in thousands)	September 30, 2020		June 30, 2020		(in thousands)	September 30, 2021		June 30, 2021
Software	Software	$	12,361	$	10,999	Software	$	19,956	$	16,530
Work in progress	Work in progress	2,347		1,922		Work in progress	3,435		3,826
Total	Total	14,708		12,921		Total	23,391		20,356
Less accumulated amortization	Less accumulated amortization	(5,369)		(4,522)		Less accumulated amortization	(9,127)		(7,745)
Software—net	Software—net	$	9,339	$	8,399	Software—net	$	14,264	$	12,611

Work in progress as of September 30, ~~2020~~2021 and June 30, ~~2020,~~2021, primarily represents costs incurred for software not yet put into service and are not yet being ~~depreciated.~~amortized. For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the Company capitalized internal-use software and website development costs of ~~$1.6~~$2.4 million and ~~$1.2~~$1.6 million, respectively, and recorded amortization expense of ~~$0.9~~$1.4 million and ~~$0.3~~$0.9 million, respectively.

5.INTANGIBLE ASSETS AND GOODWILL

Intangible assets—The Company's intangible assets include those acquired as part of the ~~acquisition of~~acquisitions listed in the ~~controlling interest in Auto & Home in August 2012 as well as from~~table below (refer to Note 2 to the ~~May 2020 acquisition of InsideResponse.~~condensed consolidated financial statements for further details). The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. During the three months ended September 30, ~~2020,~~2021 and ~~2019,~~2020, there were no such indicators.

Goodwill—In August of 2012, the Company acquired the remaining interest in Auto & Home, and recorded goodwill as the excess of the total consideration transferred plus the acquisition-date fair value of the previously held equity interest over the fair values of the identifiable net assets acquired. Further, in May 2020, the

~~Table of Contents~~

The Company recorded as goodwill the excess of the purchase price over the estimated fair values of identifiable assets and liabilities acquired ~~from InsideResponse.~~as part of the acquisitions listed in the table below (refer to Note 2 to the condensed consolidated financial statements for further details). There were 0no goodwill impairment charges recorded during the three months ended September 30, ~~2020~~2021 and ~~2019.~~2020.

Goodwill is assigned to reporting units that are expected to benefit from the synergies of the business combination as of the acquisition date and becomes identified with that reporting unit in its entirety. As such, the reporting unit as a whole supports the recovery of its goodwill. For the ~~aforementioned~~following acquisitions, the reporting units to which goodwill has been assigned and the associated reportable segments are ~~Auto & Home and Senior, respectively.~~as follows:

Acquisition

Reporting Unit

Reportable Segment

Auto & Home-controlling interest

Auto & Home

InsideResponse

Senior

Lead distribution company

Senior

Express Med Pharmaceuticals

Senior

Simple Meds

Senior

The carrying amounts, accumulated amortization, net carrying value, and weighted average remaining life of our definite-lived amortizable intangible assets as well as our goodwill are presented in the tables below (dollars in thousands, useful life in years):

September 30, 2020 June 30, 2020
Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted-average Remaining Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted-average Remaining Useful Life
Total intangible assets subject to amortization
Customer relationships-Auto & Home $ 853 $ (689) $ 164 $ 853 $ (680) $ 173
InsideResponse — — —
Trade Name 2,680 (223) 2,457 2,680 (88) 2,592
Proprietary Software-5 year 780 (65) 715 780 (26) 754
Proprietary Software-2 year 262 (55) 207 262 (22) 240
Non-compete agreements 192 (27) 165 192 (16) 176
Customer relationships 16,069 (957) 15,112 16,069 (331) 15,738
Total intangible assets $ 20,836 $ (2,016) $ 18,820 6.2 $ 20,836 $ (1,163) $ 19,673 6.4
Total indefinite-lived assets
Goodwill-Auto & Home $ 5,364 $ 5,364 $ 5,364 $ 5,364
Goodwill-Senior 41,092 41,092 41,213 41,213
Total goodwill $ 46,456 $ 46,456 $ 46,577 $ 46,577

Table of Contents


	September 30, 2021							June 30, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted-Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted-Average Remaining Useful Life
Total intangible assets subject to amortization
Customer relationships	$	17,492	$	(4,093)	$	13,399		$	17,122	$	(3,448)	$	13,674
Trade name	2,680		(759)		1,921			2,680		(625)		2,055
Proprietary software	1,592		(484)		1,108			1,592		(382)		1,210
Non-compete agreements	1,292		(232)		1,060			1,292		(163)		1,129
Vendor relationships	23,700		(1,756)		21,944			23,700		(1,098)		22,602
Total intangible assets	$	46,756	$	(7,324)	$	39,432	6.9	$	46,386	$	(5,716)	$	40,670	7.1

Total indefinite-lived assets
Goodwill-Auto & Home					$	5,364						$	5,364
Goodwill-Senior					68,368							62,655
Total goodwill					$	73,732						$	68,019

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, amortization expense related to intangible assets totaled ~~$0.8~~$1.6 million and ~~less than $0.1~~$0.8 million, respectively.

Changes in the ~~carrying amount~~balance of goodwill for the three months ended September 30, ~~2020,~~2021, are as follows (in thousands):


Balance, June 30, ~~2020~~2021	$	~~46,577~~68,019
~~Measurement period adjustments~~Goodwill from the acquisition of Simple Meds~~(1)~~	~~(121)~~5,713
Balance, September 30, ~~2020~~2021	$	~~46,456~~

~~(1) Represents measurement period adjustments related to the InsideResponse acquisition (see Note 2 to the consolidated financial statements).~~

~~Table of Contents~~

~~As of September 30, 2020, expected amortization expense in future periods were as follows (in thousands):~~

Customer Relationships-Auto & Home Trade Name Proprietary Software Non-compete agreements Customer relationships Total
Remainder fiscal 2021 $ 29 $ 402 $ 215 $ 48 $ 1,722 $ 2,416
2022 32 536 265 64 2,296 3,193
2023 28 536 156 53 2,296 3,069
2024 23 536 156 0 2,296 3,011
2025 20 447 130 0 2,296 2,893
Thereafter 32 0 0 0 4,206 4,238
Total $ 164 $ 2,457 $ 922 $ 165 $ 15,112 $ 18,820

6.~~DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES~~

The Company uses derivative financial instruments to hedge against the interest rate risk associated with its variable rate debt as a result of the Company's exposure to fluctuations in interest rates associated with a senior secured term loan facility in an aggregate principal amount of $425.0 million with a syndicate of lenders led by Morgan Stanley as the administrator for the lending group (the “Term Loan”). To accomplish this hedging strategy, the Company enters into interest rate swaps designated as cash flow hedges that are designed to be highly correlated to the underlying terms of the debt instruments to which their forecasted, variable interest rate payments are tied. To qualify for hedge accounting, the Company documents and assesses effectiveness at inception and in subsequent reporting periods. The fair value of interest rate swaps are recorded on our consolidated balance sheets as an asset or liability with the related gains or losses reported as a component of accumulated other comprehensive income. The changes in fair value are reclassified from accumulated other comprehensive income into earnings as an offset to interest expense in the same period that the hedged items affect earnings. The Company does not engage in the use of derivative instruments for speculative or trading purposes.

~~We entered into a USD floored interest rate swap agreement on~~ ~~May 12, 2020,~~ with an effective date of May 29, 2020, wherein the Company has exchanged a floating rate of interest of LIBOR (subject to a 1% floor) plus 6.00% on the notional amount of $325.0 million of the Company’s $425.0 million Term Loan (currently recorded in long term debt on the consolidated balance sheets) for a fixed rate payment of 6.00% plus 1.188%. 84.6% and 15.4% of this derivative hedge $275.0 million at USD-LIBOR-BBA 1-month and $50.0 million at USD-LIBOR-BBA 6-month, respectively, until September 30, 2020, when repricing occurs on the $50.0 million tranche, at which point the derivative instrument hedges the interest rate risk of the full $325.0 million in Term Loan debt at USD-LIBOR-BBA 1-month. The interest rate swap terminates on November 5, 2024.

The interest rate swap qualifies for cash flow hedge accounting as it was determined to be highly effective at inception and it continued to remain effective as of September 30, 2020. The Company did not record any ineffectiveness related to the interest rate swap.

In addition, the Company has determined that the majority of the inputs used to value its interest rate swap fall within Level 2 of the fair value hierarchy as they primarily include other than quoted prices that are observable. Further this valuation uses standard calculations and models that use readily observable market data as their basis. As a result, the Company classifies its interest rate swap in Level 2 of the fair value hierarchy.

~~Table of Contents~~

The following table presents the fair value of the Company’s derivative financial instrument on a gross basis, as well as its classification on the Company’s consolidated balance sheets for the periods presented:

(in thousands) September 30, 2020 June 30, 2020
Derivatives Designated as Hedging Instruments Balance Sheet Location Fair Value Balance Sheet Location Fair Value
Cash flow hedge Other current liabilities $ (2,009) Other current liabilities $ (1,669)

The following table presents the unrealized losses deferred to accumulated other comprehensive loss resulting from the Company’s derivative instruments designated as cash flow hedging instruments for the three months ended September 30, 2020:


~~(in thousands)~~	~~2020~~
~~Unrealized loss, before taxes~~	$	~~(497)~~
~~Income tax benefit~~	~~123~~
~~Unrealized loss, net of taxes~~	$	~~(374)~~

The following table presents information about the reclassification of gains and losses from accumulated other comprehensive loss into earnings resulting from the Company’s derivative instruments designated as cash flow hedging instruments for three months ended September 30, 2020:


~~(in thousands)~~	~~2020~~
~~Interest expense~~	$	~~156~~
~~Income tax benefit~~	~~(39)~~
~~Net reclassification into earnings~~	$	~~117~~

~~Amounts included in accumulated other comprehensive loss are recorded net of the related income tax effects. The following table details the changes in accumulated other comprehensive loss:~~


~~(in thousands)~~	~~Derivative Instruments~~
~~Balance at June 30, 2020~~	$	~~(1,254)~~
~~Unrealized losses, net of related tax benefit of $0.1 million~~	~~(374)~~
~~Amount reclassified into earnings, net of related taxes of less than $0.1 million~~	~~117~~
~~Balance at September 30, 2020~~	$	~~(1,511)~~73,732

As of September 30, ~~2020, the Company estimates that $0.6 million will be reclassified into interest~~2021, expected amortization expense ~~during the next twelve months.~~in future fiscal periods is as follows (in thousands):


	Trade Name		Proprietary Software		Non-compete agreements		Vendor Relationships		Customer relationships		Total
Remainder fiscal 2022	$	402	$	331	$	213	$	1,975	$	2,139	$	5,060
2023	536		339		273		2,633		2,385		6,166
2024	536		308		220		2,633		2,319		6,016
2025	447		130		220		2,633		2,316		5,746
2026	—		—		134		2,633		2,313		5,080
Thereafter	—		—		—		9,437		1,927		11,364
Total	$	1,921	$	1,108	$	1,060	$	21,944	$	13,399	$	39,432

7.6.LEASES

The Company has entered into various lease agreements for office space and other equipment as lessee. At contract inception, the Company determines that a contract contains a lease if the contract conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. If a contract contains a lease, the Company recognizes a right-of-use asset and a lease liability on the consolidated balance sheet at lease commencement. The Company has elected a practical expedient to make an accounting policy not to record short-term leases on the consolidated balance sheet, defined as leases with an initial term of 12 months or less that do not contain purchase options that the lessee is reasonably certain to elect.

~~Table of Contents~~

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term as the Company has control over an economic resource and is benefiting from the use of the asset. Lease liabilities represent the Company’s obligation to make payments for that right of use. Right-of-use assets and lease liabilities are determined by recognizing the present value of future lease payments using the Company’s incremental borrowing rate, which is the rate we would have to pay to borrow on a collateralized basis based upon information available at the lease commencement date. The right-of-use asset is measured at the commencement date by totaling the amount of the initial measurement of the lease liability, adding any lease payments made to the lessor at or before the commencement date, subtracting any lease incentives received, and adding any initial direct costs incurred by the Company.

When lease terms include renewal or termination options, the Company determines the lease term as the noncancelable period of the lease, plus periods covered by an option to extend the lease if the Company is reasonably certain to exercise the option. The Company considers an option to be reasonably certain to be exercised by the Company when a significant economic incentive exists.

The Company has lease agreements with lease and nonlease components. The Company elected the practical expedient to make an accounting policy election by class of underlying asset, to not separate nonlease components from the associated lease components and instead account for each separate lease component and its associated nonlease components as a single lease component. The Company has applied this accounting policy election to all asset classes.

The majority of the Company’s leases are operating leases related to office ~~space.~~space for which the Company recognizes lease expense on a straight-line basis over the respective lease term. The Company leases office facilities in the United States in ~~San Francisco, California;~~ San Diego, California; Centennial, Colorado; Jacksonville, Florida; Overland Park, Kansas; Wilmington, North Carolina; ~~and~~ Des Moines, ~~Iowa under noncancelable~~Iowa; Oakland, California; Indianapolis, Indiana; and Monaca, Pennsylvania. (SelectRx leases the Monaca, PA operating facility from a related party. Over the term of the lease, the Company expects to incur $3.6 million in total rental payments over the initial ten-year term plus an additional

Table of Contents

five-year extension option that it is reasonably certain to exercise.) The Company's operating leases ~~that expire at various dates through July 2029. The Company recognizes lease expense for operating leases on a straight-line basis over the respective lease term. The Company has operating leases with~~have remaining lease terms of less than one year to ~~nine~~fifteen years.

The Company has entered into noncancelable agreements to sublease portions of its office facilities to unrelated third parties. Sublease rental income is recorded as a reduction of rent expense in the accompanying consolidated statement of comprehensive income. Sublease rental income was $0.1 million for the three months ended September 30, 2020.

Operating lease expense was $1.9 million for the three months ended September 30, 2020, recorded in general and administrative operating costs and expenses in the consolidated statements of comprehensive income.

~~The Company has not entered into any leases which have not yet commenced as of September 30, 2020.~~

~~Table of Contents~~

~~Right-of-Use Asset and Lease Liability—The right-of-use assets and lease liabilities were as follows as of September 30, 2020:~~


~~(in thousands)~~	~~Balance Sheet Classification~~	~~Amount~~
~~Assets~~
~~Operating leases~~	~~Operating lease right-of-use assets~~	$	~~30,142~~
~~Finance leases~~	~~Property and equipment - net~~	~~157~~
~~Total lease right-of-use assets~~		~~30,299~~

~~Liabilities~~
~~Current~~
~~Operating leases~~	~~Operating lease liabilities - current~~	~~4,685~~
~~Finance leases~~	~~Other current liabilities~~	~~168~~
~~Non-current~~
~~Operating leases~~	~~Operating lease liabilities~~	~~37,600~~
~~Finance leases~~	~~Other liabilities~~	48
~~Total lease liabilities~~		$	~~42,501~~

Lease Costs—The components of lease costs ~~for the three months ended September 30, 2020,~~ were as ~~follows:~~follows periods presented:


~~(in thousands)~~	~~Amount~~
~~Finance lease costs(1)~~	$	66
~~Operating lease costs(2)~~	~~1,927~~
~~Short-term lease costs~~	67
~~Variable lease costs(3)~~	~~265~~
~~Sublease income~~	~~(65)~~
~~Total net lease costs~~	$	~~2,260~~


	Three Months Ended September 30,
(in thousands)	2021		2020
Finance lease costs(1)	$	42	$	66
Operating lease costs(2)	2,011		1,927
Short-term lease costs	13		67
Variable lease costs(3)	213		265
Sublease income	(337)		(65)
Total net lease costs	$	1,942	$	2,260

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

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

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

~~Table of Contents~~

~~Supplemental Information—Supplemental information related to leases was as follows as of and for the three months ended September 30, 2020:~~

(in thousands) Operating Leases Finance leases Total
Cash paid for amounts included in measurement of liabilities:
Operating cash flows from leases $ 1,451 $ 3 $ 1,454
Financing cash flows from leases 0 68 68
Right-of-use assets obtained in exchange for new lease liabilities $ 1,478 $ 0 $ 1,478

Operating Leases Finance leases
Weighted-average remaining lease term (in years) 7.55 1.17
Weighted-average discount rate 9.64 % 5.22 %

Maturities of Lease Liabilities—As of September 30, ~~2020,~~2021, remaining maturities of lease liabilities for each of the next five fiscal years and thereafter are as follows:

(in thousands) Operating leases Finance leases Total
Remainder of 2021 $ 5,731 $ 156 $ 5,887
2022 8,493 59 8,552
2023 7,936 5 7,941
2024 8,298 0 8,298
2025 8,294 0 8,294
2026 5,997 0 5,997
Thereafter 15,066 0 15,066
Total undiscounted lease payments 59,815 220 60,035
Less: interest (17,530) (4) (17,534)
Present value of lease liabilities $ 42,285 $ 216 $ 42,501

~~The following table summarizes the future annual minimum lease obligations under non-cancelable operating leases at June 30, 2020, under the previous lease accounting standard ASC 840,~~ ~~Leases~~ ~~(in thousands):~~


2021		$	8,781
2022		8,497
(in thousands)				(in thousands)	Operating leases		Finance leases		Total
Remainder fiscal 2022				Remainder fiscal 2022	6,938		146		7,084
2023	2023	7,991		2023	8,745		27		8,772
2024	2024	8,353		2024	9,085		—		9,085
2025	2025	8,306		2025	9,098		—		9,098
2026				2026	6,881		—		6,881
2027				2027	5,502		—		5,502
Thereafter	Thereafter	21,262		Thereafter	12,034		—		12,034
Total minimum lease payments		$	63,190
Total undiscounted lease payments				Total undiscounted lease payments	58,283		173		58,456
Less: interest				Less: interest	15,742		5		15,747
Present value of lease liabilities				Present value of lease liabilities	$	42,541	$	168	$	42,709

1614

Table of Contents

8.7.DEBT

~~Credit Agreement and Senior Secured Credit Facility~~— Debt consisted of the following:

(in thousands) September 30, 2020 June 30, 2020
Term Loan 325,000 $ 325,000
Unamortized debt issuance costs on Term Loan (5,483) (5,819)
Unamortized debt discount on Term Loan (6,942) (7,367)
Total debt $ 312,575 $ 311,814


(in thousands)	September 30, 2021		June 30, 2021
Term Loans	$	471,912	$	471,912
Unamortized debt issuance costs on Term Loans	(3,775)		(4,081)
Unamortized debt discount on Term Loans	(5,945)		(6,428)
Total debt	462,192		461,403
Less current portion of long-term debt:	(3,540)		(2,360)
Long-term debt	$	458,652	$	459,043

On November 5, 2019, the Company entered into a ~~new~~ credit agreement with UMB Bank N.A. ~~(“UMB”~~("UMB") as a lender and revolving agent and Morgan Stanley Capital Administrators, Inc. (“("Morgan ~~Stanley”~~Stanley") as a lender and the administrative agent for a syndicate of lenders party to the agreement. On February 24, 2021, the Company entered into the First Amendment to the credit agreement (the ~~“Senior~~"First Amendment", together with the original credit agreement and any subsequent amendments, the "Senior Secured Credit ~~Facility”~~Facility"). with certain of its existing lenders and Morgan Stanley as administrative agent. The Senior Secured Credit Facility provides for (1) a secured revolving loan facility with UMB in an aggregate principal amount of up to $75.0 million (the ~~“Revolving~~"Revolving Credit ~~Facility”~~Facility"), (2) a senior secured term loan facility in an aggregate principal amount of $656.0 million (the "Term Loans"), and ~~(2)~~(3) a $145.0 million senior secured delayed draw term loan facility (the "DDTL Facility"). As of September 30, 2021, the ~~Term Loan. The outstanding balance~~borrowing capacities under ~~the prior credit agreement with UMB was rolled into~~ the Revolving Credit Facility and ~~will continue to be used for general working capital purposes as needed. The proceeds of~~DDTL Facility were $75.0 million and $145.0 million, respectively, and the ~~Term Loan were used (i) to finance a distribution in November 2019 to all holders of the Company’s common and preferred stock as well as holders of stock options in an~~ aggregate principal amount of ~~$275.0 million (the “Distribution”), (ii) to fund cash to the balance sheet in an aggregate amount of $68.0 million, equal to the first two years of interest-only payments due in respect of the~~ Term Loan, (iii) to pay the debt issuance costs incurred for the Senior Secured Credit Facility, and (iv) for general corporate purposes. The Senior Secured Credit Facility contains customary events of default and an asset coverage ratio covenant. As of September 30, 2020, the CompanyLoans outstanding was ~~in compliance with all of the covenants. The Company has granted a security interest in all of the Company’s assets as collateral.~~$471.9 million.

The Company paid $8.5 million to the lenders of the Term Loan as an original issue discount which was recorded as a reduction to the carrying amount of the Term Loan in debt in the consolidated balance sheets as of September 30, 2020 and June 30, 2020. The debt discount is being amortized through interest expense on a straight-line basis over the ~~five-year life of the Senior Secured Credit Facility. As of September 30, 2020, the balance of the unamortized debt discount in debt in the consolidated balance sheet was $6.9 million.~~

The Revolving Credit Facility accrues interest on amounts drawn at a rate per annum equal to either (a) LIBOR plus 4.0% or (b) a base rate plus 3.0%, at the Company’s ~~option.~~option, and the Company pays an unused commitment fee of 0.15% in respect of the unutilized commitments under the Revolving Credit Facility. The Term ~~Loan bears~~Loans and any loans under the DDTL Facility bear interest on the outstanding principal amount thereof at a rate per annum equal to either (a) LIBOR (subject to a floor of 0.75%) plus ~~6.0%~~5.00% or (b) a base rate plus ~~5.0%~~4.00%, at the Company’s ~~option.~~option, and the Company pays a ticking fee based on the average daily balance of the unused amount of the aggregate DDTL Facility commitments during the preceding fiscal quarter, multiplied by 1% per annum. The Company’s risk management strategy includes entering into interest rate swap agreements from time to time to protect against unfavorable interest rate changes relating to forecasted debt transactions. See Note 6 toSenior Secured Credit Facility has a maturity date of November 5, 2024, with the ~~consolidated financial statements for more information.~~

~~The~~ Term ~~Loan is~~Loans being mandatorily repayable beginning ~~from~~ March 31, 2022, in equal quarterly installments in an aggregate annual amount equal to 1% of the original principal amount of the Term ~~Loan,~~Loans, with the remaining balance payable on the maturity date. The DDTL Facility may be drawn from time to time, subject to certain conditions, during the first twelve months following the date of ~~November 5, 2024.~~ ~~Upon~~ the ~~completion~~First Amendment of February 24, 2021. The Senior Secured Credit Facility contains customary affirmative and negative covenants and events of default and a financial covenant requiring the Company and certain of its subsidiaries to maintain a minimum asset coverage ratio. As of September 30, 2021, the Company was in compliance with all of the ~~Company's~~required covenants. ~~initial public offering on May 26, 2020 (the "IPO"),~~The obligations of the Company ~~paid down $100.0 million~~are guaranteed by certain of the ~~Term Loan.~~Company’s subsidiaries and secured by a security interest in all assets of the Company, subject to certain exceptions.

~~In addition~~The Company has incurred a total of $19.7 million in debt issuance costs and debt discounts related to ~~paying interest on outstanding principal amounts under~~ the Senior Secured Credit ~~Facilities,~~Facility, and the ~~Company~~remaining unamortized balance is ~~required to pay UMB an unused commitment fee of 0.15%, in respect~~being amortized on a straight-line basis over the remaining life of the ~~unutilized commitments under the Revolving~~Senior Secured Credit Facility. ~~The Revolving Credit Facility also has a maturity date of November 5, 2024.~~

~~Amortization of debt financing costs~~Total amortization was $0.9 million and $0.8 million ~~and less than $0.1 million during~~for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, which was included in interest expense, net in the Company’s condensed consolidated statements of comprehensive income.

On November 2, 2021, the Company entered into the Second Amendment to the Senior Secured Credit Facility (the "Second Amendment") with certain of its existing lenders. The Second Amendment amends the Senior Secured Credit Facility to provide for an additional $25.0 million and $200.0 million under the Revolving Credit Facility and the DDTL Facility, respectively, of which $100.0 million must be drawn on the DDTL Facility by

Table of Contents

January 31, 2022, but only after the current unused $145.0 million DDTL Facility has been drawn. The remaining $100.0 million may be drawn from time to time, subject to certain conditions, during the first fifteen months following the date of the Second Amendment of November 2, 2021. As of November 5, 2021, the borrowing capacities under the Revolving Credit Facility and DDTL Facility are $100.0 million and $345.0 million, respectively, and the aggregate principal amount of Term Loans outstanding is $471.9 million.

The Company uses derivative financial instruments to hedge against its exposure to fluctuations in interest rates associated with the Term Loans. As of September 30, 2021, the Company had an outstanding receive-variable, pay-fixed interest rate swap on the notional amount of $325.0 million of the Company’s total outstanding Term Loans balance with a fixed rate of 5.00% plus 1.03% (the "Amended Interest Rate Swap"), which terminates on November 5, 2024. The Company classifies its Amended Interest Rate Swap as a Level 2 on the fair value hierarchy as the majority of the inputs used to value it primarily includes other than quoted prices that are observable, and it uses standard calculations and models that use readily observable market data as their basis. As of September 30, 2021, the Company estimates that $0.9 million will be reclassified into interest expense during the next twelve months.

9.8.COMMITMENTS AND CONTINGENCIES

Lease Obligations—Refer to Note 76 to the condensed consolidated financial statements for commitments related to our operating leases.

Legal Contingencies and Obligations—From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business. The Company currently is not aware of any legal proceedings or claims that it believes will have, individually or in the aggregate, a material adverse effect on its business, financial condition, operating results, or cash flows.

On August 17, 2021, a putative securities class action lawsuit was filed against the Company and two of its executive officers in the U.S. District Court for the Southern District of New York. The complaint, captioned Hartel v. SelectQuote, Inc., et al., Case No. 1:21-cv-06903, asserts securities fraud claims on behalf of a putative class of plaintiffs who purchased or otherwise acquired shares of the Company’s common stock between February 8, 2021 and May 11, 2021 (the "Hartel Relevant Period"). Specifically, the complaint alleges the defendants violated Sections 10(b) and 20(a) and Rule 10b-5 of the Exchange Act by making materially false and misleading statements and failing to disclose material adverse facts about the Company’s business, operations, and prospects, allegedly causing the Company’s common stock to trade at artificially inflated prices during the Hartel Relevant Period. The plaintiffs seek unspecified damages and reimbursement of attorneys’ fees and certain other costs.

~~10.~~

On October 7, 2021, a putative securities class action lawsuit was filed in the U.S. District Court for the Southern District of New York against the Company, 2 of its executive officers, and 6 current or former members of the Company’s Board of Directors, along with the underwriters of the Company’s initial public offering of common stock (the "Offering"). The complaint, captioned West Palm Beach Police Pension Fund v. SelectQuote, Inc., et al., Case No. 1:21-cv-08279, asserts claims for securities law violations on behalf of a putative class of plaintiffs who purchased shares of the Company’s common stock (i) in or traceable to the Offering or (ii) between May 20, 2020 and August 25, 2021 (the "WPB Relevant Period"). Specifically, the complaint alleges the defendants violated Sections 10(b) and 20(a) and Rule 10b-5 of the Exchange Act by making materially false and misleading statements and failing to disclose material adverse facts about the Company’s financial well-being and prospects, allegedly causing the Company’s common stock to trade at artificially inflated prices during the WPB Relevant Period. The complaint also alleges the defendants violated Sections 11, 12(a)(2), and 15 of the Securities Act by making misstatements and omissions of material facts in connection with the Offering, allegedly causing a decline in the value of the Company’s common stock. The plaintiffs seek unspecified damages, rescission, and reimbursement of attorneys’ fees and certain other costs.

The Company believes the allegations in the complaints are without merit and intends to defend the cases vigorously. Accordingly, we currently believe that these matters will not have a material adverse effect on any of our

Table of Contents

results of operations, financial condition or liquidity. However, depending on how the matters progress, they could be costly to defend and could divert the attention of management and other resources from operations. The Company has not concluded that a loss related to these matters is probable and, therefore, has not accrued a liability related to these matters.

9.SHAREHOLDERS' EQUITY

Common Stock—As of September 30, ~~2020,~~2021, the Company has reserved the following authorized, but unissued, shares of common stock:


Employee Stock Purchase Plan ("ESPP")						~~1,400,000~~1,253,575
Stock awards outstanding under 2020 Plan						~~1,858,343~~3,569,723
Stock awards available for grant under 2020 Plan						~~7,741,657~~10,784,650
Options outstanding under 2003 Plan						~~3,265,989~~1,773,725
Options available for grant under 2003 Plan						0—
Total						~~14,265,989~~17,381,673

Share-Based Compensation Plans

The Company has awards outstanding from ~~two~~2 share-based compensation plans: the 2003 Stock Incentive Plan (the "2003 Stock Plan") and the 2020 Omnibus Incentive Plan (the "2020 Stock Plan"~~) (collectively,~~ and, collectively with the ~~“Stock Plans”~~2003 Stock Plan, the "Stock Plans"). However, no further awards will be made under the 2003 Stock Plan. The Company's Board of Directors adopted, and shareholders approved, the 2020 Stock Plan in connection with the IPO, which provides for the grant of incentive stock options ~~(“ISOs”~~("ISO's"), nonstatutory stock options ~~(“NSOs”~~("NSO's"), stock appreciation rights, restricted stock awards, restricted stock unit awards ("~~RSUs"~~RSU's"), performance-based ~~cash awards~~restricted stock units ("~~PSUs"~~PSU's"), and other forms of equity compensation (collectively, ~~“stock awards”~~"stock awards"). All awards may be granted to employees, non-employee directors, and consultants of the Company and its subsidiaries and affiliates except for ~~ISOs,~~ISO's, which can only be granted to current employees of the Company.

The number of shares of common stock available for issuance as of September 30, 2021, pursuant to future awards under the Company's 2020 Stock Plan is 10,784,650. The number of shares of the Company's common stock reserved under the 2020 Stock Plan is subject to an annual increase on the first day of each fiscal year, beginning on July 1, 2021, equal to 3% of the total outstanding shares of common stock as of the last day of the immediately preceding fiscal year. The maximum number of shares of common stock that may be issued upon the exercise of ISO's will be 4,000,000. The shares of common stock covered by any award (including any award granted pursuant to the 2003 Stock Plan) that is forfeited, terminated, expired, or lapsed without being exercised or settled for cash will again become available for issuance under the 2020 Stock Plan. With respect to any award, if the exercise price and/or tax withholding obligations are satisfied by delivering shares to the Company (by actual delivery or attestation), or if the exercise price and/or tax withholding obligations are satisfied by withholding shares otherwise issuable pursuant to the award, the share reserve shall nonetheless be reduced by the gross number of shares subject to the award.

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

Total share-based compensation for stock awards included in general and administrative expense in our condensed consolidated statements of comprehensive income was as ~~follows:~~

Three Months Ended September 30,
(in thousands) 2020 2019
Share-based compensation related to:
Equity classified stock options $ 362 22
Equity classified restricted stock units 415 0
Equity classified performance stock units 128 0
Total share-based compensation $ 905 $ 22
follows for the periods presented:

1817

Table of Contents


	Three Months Ended September 30,
(in thousands)	2021		2020
Share-based compensation related to:
Equity classified stock options	$	740	$	362
Equity classified RSU's	953		415
Equity classified PSU's	392		128
Total	$	2,085	$	905

Stock Options—The stock options outstanding under the 2003 Stock Plan vest as to one-third after the vesting commencement date and as to 1/24 of the remaining shares subject to the stock option monthly thereafter, subject to the award recipient’s continued employment through the applicable vesting date. Upon a termination of employment for any reason other than for "Cause" (as defined in the 2003 Stock Plan), any unvested and outstanding stock options would generally be forfeited for no consideration, and any vested and outstanding stock options would remain exercisable for 90 days following the date of termination (and, in the case of a termination of employment due to death or disability, for 12 months following the date of termination). Stock options expire 10 years from the date of grant. The terms for ISO's and NSO's awarded in the 2020 Stock Plan are the same as in the 2003 Stock Plan with the exception that the options generally shall vest and become exercisable in 4 equal installments on each of the first four anniversaries of the grant date, subject to the award recipient’s continued employment through the applicable vesting date. Stock options are granted with an exercise price that is no less than 100% of the fair market value of the underlying shares on the date of the grant.

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

The Company used the following weighted-average assumptions for the stock options granted during the ~~three months ended September 30, 2020. There were no stock options granted during the three months ended September 30, 2019.~~periods presented below:

~~2020~~

~~Volatility~~

~~25.0%~~

~~Risk-free interest rate~~

~~0.3%~~

~~Dividend yield~~

~~Assumed forfeitures~~

~~Expected lives (in years)~~

~~6.25~~

~~Weighted-average fair value (per share)~~

~~$4.84~~


	Three Months Ended September 30,
	2021	2020
Volatility	30.0%	25.0%
Risk-free interest rate	0.9%	0.3%
Dividend yield	—%	—%
Assumed forfeitures	—%	—%
Expected term (in years)	6.25	6.25
Weighted-average fair value (per share)	$5.52	$4.84

The following table summarizes stock option activity under the Stock Plans for the three months ended September 30, ~~2020:~~2021:

Table of Contents


		Number of Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value (in Thousands)			Number of Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value (in Thousands)
Outstanding—June 30, 2020		4,067,417	$	2.69
Outstanding—June 30, 2021								Outstanding—June 30, 2021	3,398,513	$	8.61
Options granted	Options granted	993,675	19.09					Options granted	1,228,282	17.69
Options exercised	Options exercised	(440,428)	0.86					Options exercised	(284,713)	4.27
Options forfeited/expired/cancelled	Options forfeited/expired/cancelled	0	0					Options forfeited/expired/cancelled	(15,728)	17.85
Outstanding—September 30, 2020		4,620,664	$	6.39	5.92	$	64,536
Vested and exercisable—September 30, 2020		2,970,757	$	0.91	3.94	$	57,469
Outstanding—September 30, 2021								Outstanding—September 30, 2021	4,326,354	$	11.42	6.97	$	21,218
Vested and exercisable—September 30, 2021								Vested and exercisable—September 30, 2021	2,044,608	$	3.76	4.33	$	20,813

As of September 30, ~~2020,~~2021, there was ~~$6.2~~$11.0 million in unrecognized compensation cost related to unvested stock options granted, which is expected to be recognized over a weighted-average period of ~~3.58~~3.33 years.

The Company received cash of ~~$0.3~~$2.2 million and ~~$1.7~~$0.3 million in connection with stock options exercised during the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

~~Table of Contents~~

Restricted Stock—The following table summarizes restricted stock unit activity under the 2020 Stock Plan for the three months ended September 30, ~~2020:~~2021:


		Number of Restricted Stock Units	Weighted-Average Grant Date Fair Value			Number of Restricted Stock Units	Weighted-Average Grant Date Fair Value
Unvested as of June 30, 2020		150,000	$	20.00
Unvested as of June 30, 2021					Unvested as of June 30, 2021	356,285	$	19.12
Granted	Granted	221,294	17.94		Granted	393,483	17.83
Vested	Vested	0			Vested	(53,761)	17.95
Cancelled	Cancelled	0			Cancelled	(7,914)	17.94
Unvested as of September 30, 2020		371,294	$	18.77
Unvested as of September 30, 2021					Unvested as of September 30, 2021	688,093	$	18.49

As of September 30, ~~2020,~~2021, there was ~~$6.4~~$11.3 million of unrecognized compensation cost related to unvested restricted stock units granted, which is expected to be recognized over a weighted-average period of ~~3.34~~3.23 years.

Performance Stock—The following table summarizes performance stock unit activity under the 2020 Stock Plan for the three months ended September 30, ~~2020:~~2021:


		Number of Performance Stock Units	Weighted-Average Grant Date Fair Value			Number of Performance Stock Units	Weighted-Average Grant Date Fair Value
Unvested as of June 30, 2020		0
Unvested as of June 30, 2021					Unvested as of June 30, 2021	132,921	$	17.97
Granted	Granted	132,374	$	17.92	Granted	196,080	18.01
Vested	Vested	0			Vested	—	—
Cancelled	Cancelled	0			Cancelled	—	—
Unvested as of September 30, 2020		132,374	$	17.92
Unvested as of September 30, 2021					Unvested as of September 30, 2021	329,001	$	18.00

As of September 30, ~~2020,~~2021, there was ~~$2.2~~$4.8 million of unrecognized compensation cost related to unvested performance stock units granted, which is expected to be recognized over a weighted-average period of ~~2.91~~2.55 years.

2019

Table of Contents

~~11.~~ESPP—The purpose of the ESPP is to provide the Company's eligible employees with an opportunity to purchase shares of its common stock through accumulated payroll deductions at 95% of the fair market value on the exercise date, but no less than the lesser of 85% of the fair market value of a share of common stock on the date the offering period commences or 85% of the fair market value of the common stock on the exercise date. For the three months ended September 30, 2021, the Company issued 89,985 shares to its employees and as of September 30, 2021, there are 1,253,575 shares reserved for future issuance under the plan. The Company recorded share-based compensation expense of $0.1 million for the three months ended September 30, 2021, and recorded no share-based compensation expense with respect to the ESPP for the three months ended September 30, 2020.

10.REVENUES FROM CONTRACTS WITH CUSTOMERS

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


		Three Months Ended September 30,				Three Months Ended September 30,
(in thousands)	(in thousands)	2020		2019			(in thousands)	2021		2020
Senior:	Senior:						Senior:
Commission revenue:	Commission revenue:						Commission revenue:
Medicare advantage	Medicare advantage	$	48,731	$	20,187		Medicare advantage	$	80,083	$	48,731
Medicare supplement	Medicare supplement	7,992		4,151			Medicare supplement	1,604		7,992
Prescription drug plan	Prescription drug plan	615		376			Prescription drug plan	269		615
Dental, vision, and health	Dental, vision, and health	2,723		1,001			Dental, vision, and health	3,216		2,723
Other commission revenue	Other commission revenue	459		(52)			Other commission revenue	900		459
Total commission revenue	Total commission revenue	60,520		25,663			Total commission revenue	86,072		60,520
Production bonus and other revenue	Production bonus and other revenue	12,679		1,921			Production bonus and other revenue	20,248		12,679
Total Senior revenue	Total Senior revenue	73,199		27,584			Total Senior revenue	106,320		73,199
Life:	Life:						Life:
Commission revenue:	Commission revenue:						Commission revenue:
Term	Term	19,376		18,584			Term	16,246		19,744
Final expense	Final expense	17,637		3,493			Final expense	26,982		17,853
Ancillary		584		569
Total commission revenue	Total commission revenue	37,597		22,646			Total commission revenue	43,228		37,597
Production bonus and other revenue	Production bonus and other revenue	5,226		4,961			Production bonus and other revenue	6,598		5,226
Total Life revenue	Total Life revenue	42,823		27,607			Total Life revenue	49,826		42,823
Auto & Home:	Auto & Home:						Auto & Home:
Total commission revenue	Total commission revenue	8,613		9,589			Total commission revenue	6,992		8,613
Production bonus and other revenue	Production bonus and other revenue	925		463			Production bonus and other revenue	477		925
Total Auto & Home revenue	Total Auto & Home revenue	9,538		10,052			Total Auto & Home revenue	7,469		9,538
Eliminations:	Eliminations:						Eliminations:
Total commission revenue	Total commission revenue	(185)		(76)			Total commission revenue	(1,641)		(185)
Production bonus and other revenue	Production bonus and other revenue	(1,206)		0			Production bonus and other revenue	(2,051)		(1,206)
Total Elimination revenue	Total Elimination revenue	(1,391)		(76)			Total Elimination revenue	(3,692)		(1,391)
Total commission revenue	Total commission revenue	106,545		57,822			Total commission revenue	134,651		106,545
Total production bonus and other revenue	Total production bonus and other revenue	17,624		7,345			Total production bonus and other revenue	25,272		17,624
Total revenue	Total revenue	$	124,169	$	65,167		Total revenue	$	159,923	$	124,169

Table of Contents

Contract Balances—After a policy is sold, the Company has no material additional or recurring obligations to the policyholder or the insurance carrier. As such, there are no contract liabilities recorded in the condensed consolidated balance sheets. AsDuring the three months ended September 30, 2020, there iswas no activity in the contract asset balances other than the movement over time between long-term and short-term commissions receivable and accounts receivable as the policy is renewed, aas shown on the balance sheet. A separate roll forward ~~other than what~~of commissions receivable (current and long term) is shown onbelow for the ~~consolidated balance sheets is not relevant.~~period presented:


(in thousands)
Balance as of June 30, 2021	$	845,897
Commission revenue from revenue recognized	73,030
Net commission revenue adjustment from change in estimate (1)	(2,938)
Amounts recognized as accounts receivable	(12,317)
Balance as of September 30, 2021	$	903,672

(1) Represents ~~Cumulative revenue catch-up adjustments related to changes in~~ the ~~estimates~~reassessment of transaction prices ~~were not material for the three months ended September 30, 2020 and 2019.~~on cohorts.

~~Table of Contents~~

Production Bonuses and Other—During the three months ended September 30, ~~2020,~~2021, the Company received advance payments of ~~fiscal year 2021~~ marketing development funds, which will be amortized over the course of the appropriate fiscal year based on policies sold. As of September 30, ~~2020,~~2021, there was an unamortized balance remaining of ~~$19.2~~$17.0 million of fiscal year 2022 marketing development funds recorded in other current liabilities in the condensed consolidated balance sheet.

~~12.~~11.INCOME TAXES

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the Company recognized income tax ~~benefits~~benefit of ~~$1.1~~$15.4 million and ~~$0.4~~$1.1 million,, respectively, representing an effective tax rate of ~~413.5%~~25.4% and ~~20.7%~~413.5%, respectively. The differences from the Company’s federal statutory tax ~~rates~~rate to the ~~effective tax rates for the three months ended September 30, 2020, were primarily related to discrete items impacting the quarter. The~~ effective tax rate for the three months ended September 30, ~~2019, was primarily impacted by~~2021, were related to state income taxes, ~~and non-deductible meals and entertainment expenses,~~ partially offset by state tax credits such as the Kansas High Performance Incentive Program ~~(“HPIP”~~("HPIP"). The differences from the Company’s federal statutory tax ~~credits.~~rate to the effective tax rate for the three months ended September 30, 2020, were related to state income taxes, partially offset by state tax credits such as the HPIP and discrete items for the period, primarily from the exercise of non-qualified stock options.

Assessing the realizability of the Company’s deferred tax assets is dependent upon several factors, including the likelihood and amount, if any, of future taxable income in relevant jurisdictions during the periods in which those temporary differences become deductible. The Company forecasts taxable income by considering all available positive and negative evidence, including historical data and future plans and estimates. These assumptions require significant judgment about future taxable income. As a result, the amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change. The Company continues to recognize its deferred tax assets as of September 30, ~~2020,~~2021, as it believes it is more likely than not that the net deferred tax assets will be realized. The Company recognizes a significant deferred tax liability due to the difference in the timing of ~~recognizing~~ revenue recognition for financial statement and tax purposes. For financial statement purposes, revenue is recognized when a policy is sold, while revenue recognition for tax purposes ~~is not recognized until~~occurs when future renewal commission payments are received. This deferred tax liability is a source of income that can be used to support the realizability of the Company’s deferred tax assets. As such, the Company does not believe a valuation allowance is necessary as of September 30, ~~2020,~~2021, and will continue to evaluate in the future as circumstances may change.

~~13.~~12.NET INCOME (LOSS) PER SHARE

The Company calculates net income (loss) per share as defined by ASC Topic 260, “"Earnings per Share”". Basic net income (loss) per share (“("Basic ~~EPS”~~EPS") is computed by dividing net income (loss) attributable to common shareholders by the weighted-average common stock outstanding during the respective period. Net income attributable to common shareholders is computed by deducting both the dividends declared in the period on preferred stock and the dividends accumulated for the period on cumulative preferred stock from net income. Diluted net income

Table of Contents

(loss) per share (“("Diluted ~~EPS”~~EPS") is computed by dividing net income (loss) attributable to common and common equivalent shareholders by the total of the weighted-average common stock outstanding and common equivalent shares outstanding during the respective period. For the purpose of calculating the Company’s Diluted EPS, common equivalent shares outstanding include ~~the conversion of the preferred stock on an 8:1 ratio, as the rights and privileges dictate as such and~~ common shares issuable upon the exercise of outstanding employee stock ~~options.~~options, unvested RSU's, and common shares issuable upon the conclusion of each ESPP offering period. The number of common equivalent shares outstanding has been determined in accordance with the ~~if-converted method for the preferred stock and the~~ treasury stock method for employee stock options, RSU's, and common stock issuable pursuant to the ESPP to the extent they are dilutive. Under the treasury stock method, the exercise price paid by the option holder and future share-based compensation expense that the Company has not yet recognized are assumed to be used to repurchase shares.

~~Table of Contents~~

The following table sets forth the computation of net income (loss) per share for the ~~three months ended September 30:~~periods presented:

(in thousands, except per share amounts) 2020 2019
Basic:
Numerator:
Net income (loss) $ 837 $ (1,688)
Less: dividends declared on Series A, B, C & D preferred stock 0 0
Less: cumulative dividends on Series D preferred stock 0 (3,025)
Net income (loss) attributable to common shareholders 837 (4,713)
Denominator:
Weighted-average common stock outstanding 162,448 87,516
Net income (loss) per share—basic: $ 0.01 $ (0.05)
Diluted:
Numerator:
Net income (loss) attributable to common shareholders $ 837 $ (4,713)
Add: dividends declared on Series A, B & C preferred stock 0 0
Add: dividends declared on Series D preferred stock 0 0
Add: cumulative dividends on Series D preferred stock(2)
0 0
Add: mark-to-market adjustment on earnout liability(1)
0 0
Net income (loss) attributable to common and common equivalent shareholders 837 (4,713)
Denominator:
Weighted-average common stock outstanding 162,448 87,516
Series A, B & C preferred stock outstanding(2)
0 0
Series D preferred stock outstanding(2)
0 0
Stock options outstanding to purchase shares of common stock(2)
2,744 0
Contingently issuable shares(1)
0 0
Total common and common equivalent shares outstanding 165,192 87,516
Net income (loss) per share—diluted: $ 0.01 $ (0.05)


	Three Months Ended September 30,
(in thousands, except per share amounts)	2021		2020
Basic:
Numerator:
Net income (loss)	$	(45,365)	$	837


Net income (loss) attributable to common shareholders	(45,365)		837
Denominator:
Weighted-average common stock outstanding	163,692		162,448
Net income (loss) per share—basic:	$	(0.28)	$	0.01
Diluted:
Numerator:
Net income (loss) attributable to common shareholders	$	(45,365)	$	837



Add: mark-to-market adjustment on earnout liability(2)	—		—
Net income (loss) attributable to common and common equivalent shareholders	(45,365)		837
Denominator:
Weighted-average common stock outstanding	163,692		162,448


Stock options outstanding to purchase shares of common stock including unvested RSU's and from the ESPP(1)	—		2,744
Contingently issuable shares(2)	—		—
Total common and common equivalent shares outstanding	163,692		165,192
Net income (loss) per share—diluted:	$	(0.28)	$	0.01

(1) Excluded from the computation of net income (loss) per share-diluted for the three months ended September 30, 2021, because the effect would have been anti-dilutive.

(2) Excluded from the computation of net income (loss) per share-diluted for the three months ended September 30, 2020, because the effect would have been anti-dilutive.

~~(2) Excluded from the computation~~The weighted average potential shares of ~~net loss per share-diluted for the three months ended September 30, 2019, because the effect would have been anti-dilutive.~~

~~The number of outstanding anti-dilutive shares~~common stock that were excluded from the ~~computation~~calculation of ~~diluted~~ net income (loss) per ~~share consisted of the following~~share-diluted for the ~~three months ended September 30:~~

(in thousands) 2020 2019
Series A, B & C preferred stock outstanding 0 12,071
Series D preferred stock outstanding 0 32,000
Stock options outstanding to purchase shares of common stock 0 5,972
Contingently issuable shares 551 0
Total 551 50,043
periods presented because including them would have been anti-dilutive are as follows for the periods presented:

2322

Table of Contents


	Three Months Ended September 30,
(in thousands)	2021	2020



Stock options outstanding to purchase shares of common stock including unvested RSU's and from the ESPP	4,683	—
Shares subject to outstanding PSU's(1)	329	—
Contingently issuable shares	—	551
Total	5,012	551

(1) The weighted-average number of shares excluded from the computation of net income (loss) per share-diluted because the performance conditions associated with these awards were not met.

~~14.~~

13.SEGMENT INFORMATION

The Company’s reportable segments have been determined in accordance with ASC 280, Segment Reporting (“("ASC ~~280”~~280"). The Company currently has 3 reportable segments: i) Senior, ii) Life, and iii) Auto & Home, which represent the three main types of insurance products sold by the Company. The Senior segment primarily sells senior Medicare-related health insurance ~~the~~and also includes InsideResponse and Population Health. The Life segment primarily sells term life insurance and final expense policies, and the Auto & Home segment primarily sells individual automobile and homeowners’ insurance. In addition, the Company accounts for non-operating activity, share-based compensation expense, certain intersegment eliminations, and the costs of providing corporate and other administrative services in its administrative division, Corporate & Eliminations. These services are not directly identifiable with the Company’s reportable segments and are shown in the tables below to reconcile the reportable segments to the condensed consolidated financial statements. The Company has not aggregated any operating segments together to represent a reportable segment.

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

Costs of revenue, marketing and advertising, and technical development operating expenses that are directly attributable to a segment are reported within the applicable segment. Indirect costs of revenue, marketing and advertising, and technical development operating expenses are allocated to each segment based on varying metrics such as headcount. Adjusted EBITDA is calculated as total revenue for the applicable segment less direct and allocated costs of revenue, marketing and advertising, technical development, and general and administrative operating costs and expenses, excluding depreciation and amortization expense; gain or loss on disposal of property, equipment, and software; share-based compensation expense; restructuring expenses; and non-recurring expenses such as severance payments and transaction costs. Our CODM does not separately evaluate assets by segment; therefore, assets by segment are not presented.

The following table presents information about the reportable segments for the three months ended September 30, ~~2020:~~

(in thousands) Senior Life Auto & Home Corp & Elims Consolidated
Revenue $ 73,199 $ 42,823 $ 9,538 $ (1,391) $ 124,169
Operating expenses (64,297) (32,346) (5,922) (9,518) (1) (112,083)
Other expenses, net 0 0 0 (21) (21)
Adjusted EBITDA $ 8,902 $ 10,477 $ 3,616 $ (10,930) 12,065
Share-based compensation expense (924)
Non-recurring expenses (2)
(438)
Fair value adjustments to contingent earnout obligations (759)
Restructuring expenses (21)
Depreciation and amortization (3,347)
Loss on disposal of property, equipment, and software (82)
Interest expense, net (6,761)
Income tax benefit 1,104
Net income $ 837
2021:

2423

Table of Contents


(in thousands)	Senior		Life		Auto & Home		Corp & Elims			Consolidated
Revenue	$	106,320	$	49,826	$	7,469	$	(3,692)		$	159,923
Operating expenses	(139,291)		(45,128)		(6,095)		(13,351)		(1)	(203,865)
Other expenses, net	—		—		—		(102)			(102)
Adjusted EBITDA	$	(32,971)	$	4,698	$	1,374	$	(17,145)		(44,044)
Share-based compensation expense										(2,215)
Non-recurring expenses (2)										(554)


Depreciation and amortization										(5,103)
Loss on disposal of property, equipment, and software										(350)
Interest expense, net										(8,535)

Income tax benefit										15,436
Net loss										$	(45,365)

(1) Operating expenses in the Corp & Elims division primarily include $10.4 million in salaries and benefits for certain general, administrative, and IT related departments, and $4.7 million in professional services fees.

(2) These expenses primarily consist of costs related to the acquisitions of Express Med Pharmaceuticals and Simple Meds.

The following table presents information about the reportable segments for the three months ended September 30, 2020:


(in thousands)	Senior		Life		Auto & Home		Corp & Elims			Consolidated
Revenue	$	73,199	$	42,823	$	9,538	$	(1,391)		$	124,169
Operating expenses	(64,297)		(32,346)		(5,922)		(9,518)		(1)	(112,083)
Other expenses, net	—		—		—		(21)			(21)
Adjusted EBITDA	$	8,902	$	10,477	$	3,616	$	(10,930)		12,065
Share-based compensation expense										(924)
Non-recurring expenses (2)										(438)
Fair value adjustments to contingent earnout obligations										(759)
Restructuring expenses										(21)
Depreciation and amortization										(3,347)
Loss on disposal of property, equipment, and software										(82)
Interest expense, net										(6,761)
Income tax benefit										1,104
Net income										$	837

(1) Operating expenses in the Corp & Elims division primarily include $6.6 million in salaries and benefits for certain general, administrative, and IT related departments and $3.0 million in professional services fees.

(2) These expenses consist of non-restructuring severance expenses, costs related to the acquisition of InsideResponse, and expenses related to business continuity in response to the COVID-19 pandemic.

~~The following table presents information about the reportable segments for the three months ended September 30, 2019:~~

(in thousands) Senior Life Auto & Home Corp & Elims Consolidated
Revenue $ 27,584 $ 27,607 $ 10,052 $ (76) $ 65,167
Operating expenses (29,523) (21,789) (7,562) (5,413) (1) (64,287)
Other expenses, net 0 0 0 (13) (13)
Adjusted EBITDA $ (1,939) $ 5,818 $ 2,490 $ (5,502) 867
Share-based compensation expense (22)
Non-recurring expenses(2)
(832)
Restructuring expenses 2
Depreciation and amortization (1,440)
Gain on disposal of property, equipment, and software 2
Interest expense (705)
Income tax benefit 440
Net loss $ (1,688)

(1) Operating expenses in the Corp & Elims division primarily include $3.2 million in salaries and benefits for certain general, administrative, and IT related departments and $1.6 million in professional services fees.

~~(2)~~ These expenses consist of one-time consulting expenses associated with adopting ASC 606, non-recurring compensation to certain former board members, non-restructuring severance expenses, and costs related to our IPO.

Revenues from each of the reportable segments are earned from transactions in the United States and follow the same accounting policies used for the Company’s condensed consolidated financial statements. All of the Company’s long-lived assets are located in the United States. For the three months ended September 30, ~~2020, two~~2021, four insurance carrier customers, three from the Senior Segment and one from the Life Segment, accounted for 17%, 15%, 11%, and 11% of total revenue, respectively. For the three months ended September 30, 2020, two insurance

Table of Contents

carrier customers from the Senior Segment and one from the Life Segment, accounted for 20%, 15%, and 10% of total revenue, respectively. ~~For the three months ended September 30, 2019, two insurance carrier customers from Senior and one from Life, accounted for 17%, 16%, and 11% of total revenue, respectively~~

~~15.RELATED-PARTY TRANSACTIONS~~

The Company purchases leads from InsideResponse which was previously owned in part by individuals who are related to one of the Company’s shareholders or are members of the Company's management. On May 1, 2020, the Company acquired 100% of the outstanding membership units of InsideResponse for an aggregate purchase price of up to $65.0 million (subject to customary adjustments) as set forth in the Merger Agreement. Refer to Note 2 to the consolidated financial statements for further details. Prior to the acquisition, the Company incurred $2.8 million in lead costs with InsideResponse for the three months ended September 30, 2019, which were recorded in marketing and advertising expense in the consolidated statement of comprehensive income.

Table of Contents

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

You should read the following discussion and analysis of our financial condition and result of operations together with our condensed consolidated financial statements and footnotes included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Please refer to a discussion of the Company’s forward-looking statements and associated risks in "Cautionary Note Regarding Forward-Looking Statements" of the Company’s Form 10-K for the year ended June 30, 2021. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled ~~“Risk Factors”~~"Risk Factors" in our most recent Form 10-K.

Company Overview

COVID-19. While the ongoing pandemic has caused disruptions to the economy both domestically and globally, including limitations on various businesses and activities that could have an indirect effect on our business, travel restrictions, and the extended shutdown of certain industries in various countries, due to the nature of our products and technology-enabled business model, these disruptions have not had a material adverse impact on our business on a consolidated basis. We will continue to evaluate the potential impacts and closely monitor developments as they arise.

Our Business.We are a leading technology-enabled, direct-to-consumer ~~(“DTC”~~("DTC") distribution platform that provides consumers with a transparent and convenient venue to shop for complex senior health, life, and auto & home insurance policies from a curated panel of the nation’s leading insurance carriers. As an insurance distributor, we do not insure the consumer, but rather identify consumers looking to acquire insurance products and place these consumers with insurance carrier partners that provide these products and, in return, earn commissions from our insurance carrier partners for the policies we sell on their behalf. Because we are not the issuer of the insurance policy to the consumer, we bear no underwriting risks. Our proprietary technology allows us to take a broad funnel approach to marketing by analyzing and identifying high quality consumer leads sourced from a wide variety of online and offline marketing channels. Our primary sources of leads include search engine marketing, radio, television, and third-party marketing partners. We monitor our acquisition costs to dynamically allocate our marketing spend to the most attractive channel, 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 an agent whom we determine is best suited to meet the consumer’s need. Our platform then captures and utilizes our experience to further build upon the millions of data points that feed our marketing algorithms, which further enhances our ability to deploy subsequent marketing dollars efficiently and target more high-quality consumer leads. We have built our business model to maximize commissions collected over the life of an approved policy less the cost of acquiring the business, a metric we refer to as policyholder lifetime value and which is a key component to our overall profitability. Recently through acquisitions, we've begun expanding into lead generation sales, mail order prescription pharmacies, and overall health services through our Population Health platform.

We evaluate our business using the following three segments:

SelectQuote Senior ~~(“Senior”~~("Senior"), our fastest growing and largest segment, was launched in 2010 and provides unbiased comparison shopping for Medicare Advantage ~~(“MA”~~("MA") and Medicare Supplement ~~(“MS”~~("MS") insurance plans as well as prescription drug ~~plan,~~and dental, vision, and hearing ("DVH") plans, and critical illness products. We represent approximately 1520 leading, nationally-recognized insurance carrier partners, including Humana, UnitedHealthcare, and ~~Aetna.~~Wellcare. MA and MS plans accounted for 77% and 70% of our approved Senior policies for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, with other ancillary type policies ~~including prescription drug and dental, vision and hearing ("DVH") plans,~~ accounting for the ~~majority~~remainder. Additionally, InsideResponse and Population Health (which includes SelectRx) are included in Senior for segment reporting purposes.

Table of ~~the remainder.~~Contents

SelectQuote Life ~~(“Life”~~("Life") is one of the country’s largest and most established DTC insurance distributors for term life insurance, having sold over ~~1.75~~2.0 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 ~~including term life, guaranteed issue, final expense,~~like critical illness, accidental death, and juvenile insurance. We represent approximately 1518 leading, nationally-recognized insurance carrier partners, with many of these relationships exceeding 15 years. Term ~~and permanent~~ life ~~products~~policies accounted for ~~48%~~31% and ~~81%~~49% of new premium within the Life segment for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, with final expense policies accounting for ~~50%~~69% and ~~17%~~51% for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

SelectQuote Auto & Home (“("Auto & ~~Home”~~Home") was founded in 2011 as an unbiased comparison shopping platform for auto, home, and specialty insurance lines. ~~We offer~~Our platform provides unbiased comparison shopping for insurance products ~~including~~such as homeowners, auto,

~~Table of Contents~~

dwelling fire, and other ancillary insurance products underwritten by approximately 3027 leading, nationally-recognized insurance carrier partners. Homeowners and 12-month auto products accounted for ~~80%~~77% and ~~78%~~80% of new premium within the Auto & Home segment for each of the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, with six-month auto, dwelling fire, and other products accounting for the majority of the remainder.

The three months ended September 30 referenced throughout the commentary below refers to the first ~~quarters~~quarter and fiscal year-to-date performance of our fiscal years ending on June 30, ~~2021~~2022 and ~~2020.~~2021. Note that certain reclassifications have been made to prior periods to conform with current year presentation.

Key Business and Operating Metrics by Segment

In addition to traditional financial metrics, we rely upon certain business and operating metrics to estimate and recognize commission revenue, evaluate our business performance and facilitate our operations. In our Senior segment, 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 the Senior segment. In our Life and Auto & Home segments, we are typically paid a commission that is a percent of the premium that we generate for our insurance carrier partners. Therefore, we have determined that premium-based metrics are the most relevant measures to evaluate the performance of these segments. Below are the most relevant business and operating metrics for each segment:

Senior

Submitted Policies

Submitted policies are counted when an individual completes an application with our licensed agent and provides authorization to them to submit it to the insurance carrier partner. The applicant may have additional actions to take before the application will be reviewed by the insurance ~~carrier, such as providing additional information.~~carrier.

The following table shows the number of submitted policies for the ~~three months ended September 30:~~periods presented:

2020 2019
Medicare Advantage 47,991 20,851
Medicare Supplement 7,276 3,501
Dental, Vision and Hearing 20,042 9,925
Prescription Drug Plan 2,425 1,527
Other 1,883 669
Total 79,617 36,473

Table of Contents


	Three Months Ended September 30,
	2021	2020
Medicare Advantage	95,789	47,991
Medicare Supplement	1,812	7,276
Dental, Vision, and Hearing	28,604	20,042
Prescription Drug Plan	873	2,425
Other	3,562	1,883
Total	130,640	79,617

Total submitted policies increased by ~~118%~~64% for the three months ended September 30, ~~2020,~~2021, compared to the three months ended September 30, ~~2019.~~2020. The increase was driven primarily by a ~~130%~~100% increase in MA submitted policies and a ~~102%~~43% increase in ~~dental, vision and hearing~~DVH submitted policies, partially offset by a 75% decrease in MS submitted policies. The overall increase in submitted policies for Senior products was primarily due to an increase in the number of agents we employ and an increase in productivity per agent. During the three months ended September 30, ~~2020,~~2021, we increased the number of average productive agents by ~~100%~~approximately 35% and increased the productivity per productive agent by 8%30% from the three months ended September 30, ~~2019.~~2020. The increase in productivity was driven by improvements in ~~agent close rates and enhancements to our agent workflow and desktop.~~lead consumption.

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.

~~Table of Contents~~

The following table shows the number of approved policies for the ~~three months ended September 30:~~periods presented:


					Three Months Ended September 30,
		2020	2019		2021	2020
Medicare Advantage	Medicare Advantage	42,473	18,479	Medicare Advantage	84,116	42,473
Medicare Supplement	Medicare Supplement	6,325	2,626	Medicare Supplement	1,398	6,325
Dental, Vision and Hearing	Dental, Vision and Hearing	16,239	7,294	Dental, Vision and Hearing	22,223	16,239
Prescription Drug Plan	Prescription Drug Plan	2,632	1,502	Prescription Drug Plan	868	2,632
Other	Other	1,824	418	Other	2,880	1,824
Total	Total	69,493	30,319	Total	111,485	69,493

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

Total approved policies increased by ~~129%~~60% for the three months ended September 30, ~~2020,~~2021, compared to the three months ended September 30, ~~2019.~~2020. The increase was driven primarily by a ~~130%~~98% increase in MA approved policies ~~123%~~and a 37% increase in ~~dental, vision and hearing~~DVH approved policies, ~~and~~partially offset by a ~~141% increase~~78% decrease in ~~Medicare Supplement~~MS approved policies. Fluctuations in approved policies are in direct correlation to submitted policies; therefore, the increases in the number of ~~core and flex~~ productive agents and the increased agent productivity noted above also resulted in the increase in approved policies compared to the three months ended September 30, ~~2019.~~2020.

Lifetime Value of Commissions per Approved Policy

The lifetime value of commissions (the ~~“LTV”~~"LTV") per approved policy represents commissions estimated to be collected over the estimated life of an approved policy based on multiple factors, including but not limited to, contracted commission rates, carrier mix and expected policy persistency with applied constraints. The LTV per

Table of Contents

approved policy is equal to the sum of the commission revenue due upon the initial sale of a policy, and when applicable, an estimate of future renewal commissions. The estimate of the future renewal commissions is determined using contracted renewal commission rates constrained by a persistency-adjusted 10-year renewal period based on a combination of our historical experience and available insurance carrier historical experience to estimate renewal revenue only to the extent probable that a material reversal in revenue would not be expected to occur. These factors may result in varying values from period to period. The LTV per approved policy represents commissions only from policies sold during the period. That figure excludes renewals during the period from policies originally sold in a prior period with insurance carrier partners whose contracts preclude us from recognizing variable consideration for estimated renewal commissions and updated estimates of prior period variable consideration based on actual policy renewals in the current period.

The following table shows the LTV per approved policy for the ~~three months ended September 30:~~periods presented:


							Three Months Ended September 30,
		2020		2019			2021		2020
Medicare Advantage	Medicare Advantage	$	1,168	$	1,163	Medicare Advantage	$	978	$	1,168
Medicare Supplement	Medicare Supplement	1,274		1,275		Medicare Supplement	1,439		1,274
Dental, Vision and Hearing	Dental, Vision and Hearing	168		137		Dental, Vision and Hearing	152		168
Prescription Drug Plan	Prescription Drug Plan	240		264		Prescription Drug Plan	310		240
Other	Other	135		(91)		Other	111		135

The LTV per ~~Medicare Advantage and Medicare Supplement~~MA approved ~~polices were flat~~policy decreased 16% while the LTV per MS approved policy increased 13% for the three months ended September 30, ~~2020,~~2021, compared to the three months ended September 30, ~~2019. Medicare Advantage's~~2020. The MA LTV was negatively impacted by the switch to policy level persistency, lower MA persistency rates, carrier mix and higher ~~commission~~provision for first year and renewal year lapse rates, somewhat offset by ~~lower MA persistency rates. Medicare Supplement's~~higher commission rates. The MS LTV was positively impacted by ~~lower MS persistency rates offset by a carrier mix shift of policies to carriers that pay us higher commissions.~~

~~Table of Contents~~an improvement in first year lapse rates.

Per Unit Economics

Per unit economics represents total ~~Medicare Advantage~~MA and ~~Medicare Supplement~~MS commissions, other product commissions, other revenues, and costs associated with the Senior segment, each shown as per number of approved ~~Medicare Advantage~~MA and ~~Medicare Supplement~~MS approved policies over a given time period. Management assesses the business on a ~~per unit~~per-unit basis to help ensure that the revenue opportunity associated with a successful policy sale is attractive relative to the marketing acquisition cost. ~~All per~~Because not all acquired leads result in a successful policy sale, all per-policy metrics are based on approved policies, which is athe measure that triggers revenue recognition.

The ~~Medicare Advantage~~MA and ~~Medicare Supplement~~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 ~~dental, vision and hearing,~~DVH prescription drug plan, and other products, which management views as additional commission revenue on our agents’ core function of MA/MS policy sales. Other per MA/MS policy represents the production bonuses, ~~renewals~~marketing development funds, lead sales revenue from ~~policies originally sold in a prior period with insurance carrier partners whose contracts preclude us from recognizing variable consideration for estimated renewal commissions~~InsideResponse, revenue generated through the Population Health platform, and updated estimates of prior period variable consideration based on actual policy renewals in the current period. Total operating expenses per MA/MS policy ~~represent~~represents all of the operating expenses within the Senior segment. The Revenue to customer acquisition cost ~~(“CAC”~~("CAC") multiple represents total revenue per MA/MS policy as a multiple of total marketing acquisition cost, which represents the direct costs of acquiring ~~leads which is~~leads. These costs are included in marketing and advertising expense within the total operating expenses per MA/MS policy.

The following table shows per unit economics for the periods presented. Based on the seasonality of the Senior segment 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. These metrics are the basis on which management assesses the ~~business:~~business.

Table of Contents

Twelve Months Ended September 30,
(dollars per approved policy): 2020 2019
Medicare Advantage and Medicare Supplement approved policies 271,199 132,089
Medicare Advantage and Medicare Supplement commission per MA / MS policy $ 1,282 $ 1,280
Other commission per MA/MS policy 48 65
Other per MA / MS policy 171 159
Total revenue per MA / MS policy 1,501 1,504
Total operating expenses per MA / MS policy (924) (850)
Adjusted EBITDA per MA / MS policy (1)
$ 577 $ 654
Adjusted EBITDA Margin per MA / MS policy (1) 38 % 43 %
Revenue / CAC multiple 3.5X 4.0X


	Twelve Months Ended September 30,
(dollars per approved policy):	2021			2020
Medicare Advantage and Medicare Supplement approved policies	526,212			271,199
Medicare Advantage and Medicare Supplement commission per MA/MS policy	$	1,223		$	1,282
Other commission per MA/MS policy	37			48
Other per MA/MS policy	188			171
Total revenue per MA/MS policy	1,448			1,501
Total operating expenses per MA/MS policy	(1,064)			(924)
Adjusted EBITDA per MA/MS policy (1)	$	384		$	577
Adjusted EBITDA Margin per MA/MS policy (1)	27		%	38		%
Revenue/CAC multiple	2.8X			3.5X

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

Total revenue per policy ~~was flat~~decreased 4% for the ~~three~~twelve months ended September 30, 2021, compared to the twelve months ended September 30, 2020, ~~compared to the three months ended September 30, 2019,~~ due to a decrease in overall MS revenue, the amount of other ancillary insurance policies sold as a percent of MA/MS policies, and lower marketing development funds received per approved MA/MS policy due to a shift in mix towards carriers that do not pay us marketing development funds, offset by higher advertising revenue associated with ~~InsideResponse.~~InsideResponse and the addition of revenue from SelectRx. Total cost per policy increased 9%15% for the ~~three~~twelve months ended September 30, ~~2020,~~

~~Table of Contents~~

2021, compared to the ~~three~~twelve months ended September 30, ~~2019,~~2020, due to an increase in our marketing and advertising expense consistent with our strategy to drive higher absolute ~~Revenue~~revenue and Adjusted EBITDA with slightly lower Adjusted EBITDA ~~margin.~~margin, higher fulfillment costs associated with scaling Population Health and SelectRx, somewhat offset by lower sales expenses driven by agent productivity improvements.

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. ~~Core premiums are for term life and permanent life insurance policies while ancillary premiums are for various products, other than final expense.~~ Because our commissions are earned based on a percentage of total premium, total premium volume for a given period is the key driver of revenue for our Life segment.

The following table shows ~~core,~~term and final expense ~~and ancillary~~ premiums for the ~~three months ended September 30:~~periods presented:


							Three Months Ended September 30,
(in thousands):	(in thousands):	2020		2019		(in thousands):	2021		2020
Core Premiums		$	18,565	$	18,380
Term Premiums						Term Premiums	$	15,510	$	18,855
Final Expense Premiums	Final Expense Premiums	19,450		3,916		Final Expense Premiums	34,052		19,817
Ancillary Premiums		657		501
Total						Total	$	49,562	$	38,672

Total ~~core~~term premiums ~~were up slightly~~decreased 18% for the three months ended September 30, ~~2020,~~2021, compared to the three months ended September 30, ~~2019. However, the~~2020. The number of policies sold declined 4%30%, which was somewhat offset by a 5%17% increase in the average premium per policy sold. Final expense premiums increased ~~397%~~72% for the three months

Table of Contents

ended September 30, ~~2020,~~2021, compared to the three months ended September 30, ~~2019,~~2020, due to a significant increase in the number of agents selling final expense policies.

Auto & Home

Auto & Home premium represents the total premium value of all new policies that were approved by our insurance carrier partners during the indicated period. Because our commissions are earned based on a percentage of total premium, total premium volume for a given period is the key driver of revenue for our Auto & Home segment.

The following table shows premiums for the ~~three months ended September 30:~~periods presented:


							Three Months Ended September 30,
(in thousands):	(in thousands):	2020		2019		(in thousands):	2021		2020
Premiums	Premiums	$	16,900	$	17,286	Premiums	$	13,258	$	16,900

Total premiums decreased 2%22% for the three months ended September 30, ~~2020~~2021, compared to the three months ended September 30, ~~2019,~~2020, primarily due to our ~~strategic shift of agents from~~strategy to reduce the growth in our Auto & Home ~~to our Senior and Life divisions.~~segment.

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with GAAP and to provide investors with additional information regarding our GAAP financial results, we have presented in this Quarterly Report on Form 10-Q Adjusted EBITDA and Adjusted EBITDA Margin, which are non-GAAP financial measures. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly titled measures presented by other companies.

Adjusted EBITDA. We define Adjusted EBITDA as income before interest expense, income tax expense, depreciation and amortization, and certain add-backs for non-cash or non-recurring expenses, including restructuring

~~Table of Contents~~

and share-based compensation expenses. The most directly comparable GAAP measure is net income. We monitor and have presented in this Quarterly Report on Form 10-Q Adjusted EBITDA because it is a key measure used by our management and Board of Directors to understand and evaluate our operating performance, to establish budgets, and to develop operational goals for managing our business. In particular, we believe that excluding the impact of these expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core operating performance.

We believe that this non-GAAP financial measure helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in the calculations of this non-GAAP financial measure. Accordingly, we believe that this financial measure provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects.

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

Table of Contents

The following tables reconcile Adjusted EBITDA and net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, for the periods presented:

Three Months Ended September 30, ~~2020~~2021:


(in thousands)	(in thousands)	Senior		Life		Auto & Home		Corp & Elims		Consolidated		(in thousands)	Senior		Life		Auto & Home		Corp & Elims		Consolidated
Net income										$	837
Net loss												Net loss									$	(45,365)
Share-based compensation expense	Share-based compensation expense									924		Share-based compensation expense									2,215
Non-recurring expenses (1)	Non-recurring expenses (1)									438		Non-recurring expenses (1)									554
Fair value adjustments to contingent earnout obligations										759
Restructuring expenses										21

Depreciation and amortization	Depreciation and amortization									3,347		Depreciation and amortization									5,103
Loss on disposal of property, equipment, and software	Loss on disposal of property, equipment, and software									82		Loss on disposal of property, equipment, and software									350
Interest expense, net	Interest expense, net									6,761		Interest expense, net									8,535

Income tax benefit	Income tax benefit									(1,104)		Income tax benefit									(15,436)
Adjusted EBITDA	Adjusted EBITDA	$	8,902	$	10,477	$	3,616	$	(10,930)	$	12,065	Adjusted EBITDA	$	(32,971)	$	4,698	$	1,374	$	(17,145)	$	(44,044)

(1) These expenses primarily consist of costs related to the acquisitions of Express Med Pharmaceuticals and Simple Meds.

Three Months Ended September 30, 2020:


(in thousands)	Senior		Life		Auto & Home		Corp & Elims		Consolidated
Net income									$	837
Share-based compensation expense									924
Non-recurring expenses (1)									438
Fair value adjustments to contingent earnout obligations									759
Restructuring expenses									21
Depreciation and amortization									3,347
Loss on disposal of property, equipment, and software									82
Interest expense, net									6,761
Income tax benefit									(1,104)
Adjusted EBITDA	$	8,902	$	10,477	$	3,616	$	(10,930)	$	12,065

(1) These expenses consist of non-restructuring severance expenses, costs related to the acquisition of InsideResponse, and expenses related to business continuity in response to the COVID-19 pandemic.

Table of Contents

~~Three Months Ended September 30, 2019~~

(in thousands) Senior Life Auto & Home Corp & Elims Consolidated
Net loss $ (1,688)
Share-based compensation expense 22
Non-recurring expenses (1)
832
Restructuring expenses (2)
Depreciation and amortization 1,440
Gain on disposal of property, equipment, and software (2)
Interest expense 705
Income tax benefit (440)
Adjusted EBITDA $ (1,939) $ 5,818 $ 2,490 $ (5,502) $ 867

~~(1)~~ These expenses consist of one-time consulting expenses associated with adopting ASC 606, non-recurring compensation to certain former board members, non-restructuring severance expenses, and costs related to our IPO.

Key Components of our Results of Operations

The following table sets forth our operating results and related percentage of total revenues for the ~~three months ended September 30:~~periods presented:


													Three Months Ended September 30,
(in thousands)	(in thousands)	2020				2019				(in thousands)	2021				2020
Revenue	Revenue											Revenue
Commission	Commission	$	106,545	86	%	$	57,822	89	%			Commission	$	134,651	84	%	$	106,545	86	%
Production bonus and other	Production bonus and other	17,624		14	%	7,345		11	%			Production bonus and other	25,272		16	%	17,624		14	%
Total revenue	Total revenue	124,169		100	%	65,167		100	%			Total revenue	159,923		100	%	124,169		100	%
Operating costs and expenses	Operating costs and expenses											Operating costs and expenses
Cost of revenue	Cost of revenue	51,045		41	%	32,637		50	%			Cost of revenue	92,165		58	%	51,045		41	%
Marketing and advertising	Marketing and advertising	49,800		40	%	26,101		40	%			Marketing and advertising	90,677		57	%	49,800		40	%
General and administrative	General and administrative	12,202		10	%	5,126		8	%			General and administrative	23,392		15	%	12,202		10	%
Technical development	Technical development	3,848		3	%	2,713		4	%			Technical development	5,853		4	%	3,848		3	%
Total operating costs and expenses	Total operating costs and expenses	116,895		94	%	66,577		102	%			Total operating costs and expenses	212,087		134	%	116,895		94	%
Income (loss) from operations	Income (loss) from operations	7,274		6	%	(1,410)		(2)	%			Income (loss) from operations	(52,164)		(33)	%	7,274		6	%
Interest expense, net	Interest expense, net	(6,761)		(5)	%	(705)		(1)	%			Interest expense, net	(8,535)		(5)	%	(6,761)		(5)	%
Other expenses, net		(780)		(1)	%	(13)		—	%

Other expense, net												Other expense, net	(102)		—	%	(780)		(1)	%
Loss before income tax benefit	Loss before income tax benefit	(267)		—	%	(2,128)		(3)	%			Loss before income tax benefit	(60,801)		(38)	%	(267)		—	%
Income tax benefit	Income tax benefit	(1,104)		(1)	%	(440)		(1)	%			Income tax benefit	(15,436)		(10)	%	(1,104)		(1)	%
Net income (loss)	Net income (loss)	$	837	1	%	$	(1,688)	(3)	%			Net income (loss)	$	(45,365)	(28)	%	$	837	1	%

Revenue

~~We earn~~Our primary source of revenue are the commissions earned for the sale of first year and renewal policies from our insurance carrier partners, which are presented in our consolidated statements of comprehensive income as commission revenue. Additionally, we earn certain volume-based bonuses from some carriers on first-year policies sold, which we refer to as production bonuses and marketing development funds, based on attaining various predetermined target sales levels or other agreed upon objectives, as presented in the consolidated statements of comprehensive income as production

~~Table of Contents~~

bonus and other revenue (“("other ~~revenue”~~revenue"). Furthermore, the production bonus and other revenue also includes the lead generation revenue from InsideResponse and the revenue generated through the Population Health platform.

Our commission contracts with our insurance carrier partners contain a single performance obligation satisfied at the point in time to which we allocate the total transaction price. The transaction price is identified as the first year commission due upon the initial sale of a policy as well as an estimate of future renewal commissions and other revenue when applicable. After a policy is sold, we have no material additional or recurring obligations to the policyholder or the insurance carrier partner. Therefore, we do not incur any additional expense related to our receipt of future renewal commissions or other revenue. All of the costs associated with the sale of an individual policy are incurred prior to or at the time of the initial sale of an individual policy. Commission and other revenue are recognized at different milestones for each segment based on the contractual enforceable rights, our historical experience, and established customer business practices. InsideResponse's lead sales 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 do not experience a significant level of returns or re-shipments. There are no future revenue streams associated as patients have the option to cancel their service at any time with no further payments due.

Table of Contents

The following table presents our commission revenue, production bonus and other revenue, and total revenue for the ~~three months ended September 30~~periods presented and the ~~dollar and~~ percentage changes from the prior year:


												Three Months Ended September 30,				Percent Change
(dollars in thousands)	(dollars in thousands)	2020			$		%	2019			(dollars in thousands)	2021		2020		2021 vs. 2020
Commission	Commission	$	106,545		$	48,723	84%	$	57,822		Commission	$	134,651	$	106,545	26%
Percentage of total revenue		86		%				89		%
Production bonus and other	Production bonus and other	17,624			10,279		140%	7,345			Production bonus and other	25,272		17,624		43%
Percentage of total revenue		14		%				11		%
Total revenue	Total revenue	$	124,169		$	59,002	91%	$	65,167		Total revenue	$	159,923	$	124,169	29%

Three Months Ended September 30, 2021 and 2020–Commission revenue increased ~~$48.7~~$28.1 million, or ~~84%~~26%, for the three months ended September 30, 2021, which included increases in Senior and Life commission revenues of ~~$34.9~~$25.6 million and ~~$15.0~~$5.6 million, respectively, offset by a ~~slight~~ decrease in Auto & Home commission revenue of ~~$1.0~~$1.6 million. For Senior, the revenue growth was driven by the significant increase in our agent count that led to a ~~141%~~64% increase in Medicare Advantage commission revenue. Life’s ~~$15.0 million~~ revenue growth was driven by ~~$14.1~~a $9.1 million growth in final expense revenue which was a result of the investment we have made in agents to grow sales of these policies, ~~and~~offset by a ~~slight increase~~$3.5 million decrease in ~~core~~ term life revenue. The revenue decline for Auto & Home was driven by our ~~strategic shift~~strategy to reduce the growth in ~~agents from Auto & Home to our Senior and Life divisions.~~that division. The ~~$10.3~~$7.6 million increase in production bonus and other revenue was primarily driven by ~~$7.9~~$4.5 million of ~~advertising~~new mail order prescription revenue ~~associated with InsideResponse~~from Select Rx and ~~$1.6~~$3.0 million in marketing development funds received for ~~Senior.~~Senior, partially offset by a reduction of $2.3 million of external lead generation revenue from InsideResponse, as more of their leads were consumed within the Senior division than in the prior year.

Operating Costs and Expenses

Cost of Revenue

Cost of revenue represents the direct costs associated with fulfilling our obligations to our insurance carrier partners for the sale of insurance policies. Such costs primarily consist of compensation and related benefit costs for agents, fulfillment specialists and others directly engaged in servicing policy holders. It also includes licensing costs for our agents and allocations for facilities, telecommunications and software maintenance costs, which are all based on headcount. Facilities costs include rent and utilities expenses and other costs to maintain our office locations. Telecommunications and software maintenance costs includes costs related to the internal phone systems and various software applications that our agents use to make sales. These costs directly correlate to the number of agents we have as we are primarily charged based on per person usage for the phone systems and software applications. For SelectRx, cost of revenue represents the direct costs associated with inventory used to fulfill prescriptions for senior medication management.

The following table presents our cost of revenue for the ~~three months ended September 30~~periods presented and the ~~dollar and~~ percentage changes from the prior year:


												Three Months Ended September 30,				Percent Change
(dollars in thousands)	(dollars in thousands)	2020			$		%	2019			(dollars in thousands)	2021		2020		2021 vs. 2020
Cost of revenue	Cost of revenue	$	51,045		$	18,408	56%	$	32,637		Cost of revenue	$	92,165	$	51,045	81%
Percentage of total revenue		41		%				50		%

Three Months Ended September 30, 2021 and 2020–Cost of revenue increased ~~$18.4~~$41.1 million, or 81%, for the three months ended September 30, ~~2020 compared to the three months ended September 30, 2019,~~2021, primarily due to a ~~$15.6~~$29.3 million increase in compensation ~~expense~~costs driven by the growth in the number of agents within the Senior segment and, to a lesser extent, the Life segment to support

~~Table of Contents~~

the sale of ~~ancillary~~final expense policies. The increase in headcount also drove increases in the allocations of ~~$0.9~~$4.1 million for facilities, telecommunications, and software maintenance costs, and ~~$1.2~~$3.3 million for licensing costs. Additionally, there was $3.5 million of new medication costs in cost of revenue for SelectRx.

Table of Contents

Marketing and Advertising

Marketing and advertising expenses consist primarily of the direct costs associated with marketing and advertising of our services, such as television and radio commercials and online advertising. These direct costs generally represent ~~over 90%~~the vast majority of our marketing and advertising expenses. Other costs consist of compensation and other expenses related to marketing, business development, partner management, public relations, carrier relations personnel who support our offerings, and allocations for facilities, telecommunications, and software maintenance costs. Our marketing and advertising costs increase during AEP and OEP to generate more leads during these high-volume periods.

The following table presents our marketing and advertising expenses for the ~~three months ended September 30~~periods presented and the ~~dollar and~~ percentage changes from the prior year:


												Three Months Ended September 30,				Percent Change
(dollars in thousands)	(dollars in thousands)	2020			$		%	2019			(dollars in thousands)	2021		2020		2021 vs. 2020
Marketing and advertising	Marketing and advertising	$	49,800		$	23,699	91%	$	26,101		Marketing and advertising	$	90,677	$	49,800	82%
Percentage of total revenue		40		%				40		%

Three Months Ended September 30, 2021 and 2020–Marketing and advertising expenses increased ~~$23.7~~$40.9 million, or ~~91%~~82%, for the three months ended September 30, ~~2020,~~2021, primarily due to a ~~$13.8~~$27.8 million increase in Senior marketing and advertising costs associated with generating more leads for our larger agent base to consume. Marketing and advertising costs also increased ~~$5.3~~$11.4 million in our Life segment driven by an increase in leads specifically for our final expense policies. ~~Compensation~~Additionally, compensation costs related to our marketing personnel increased ~~$5.4~~$3.0 million as we increased the number of people supporting our marketing organization to produce more ~~leads.~~leads to support the growth of the business.

General and Administrative

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

The following table presents our general and administrative expenses for the ~~three months ended September 30~~periods presented and the ~~dollar and~~ percentage changes from the prior year:


												Three Months Ended September 30,				Percent Change
(dollars in thousands)	(dollars in thousands)	2020			$		%	2019			(dollars in thousands)	2021		2020		2021 vs. 2020
General and administrative	General and administrative	$	12,202		$	7,076	138%	$	5,126		General and administrative	$	23,392	$	12,202	92%
Percentage of total revenue		10		%				8		%

Three Months Ended September 30, 2021 and 2020–General and administrative expenses increased ~~$7.1~~$11.2 million, or ~~138%~~92%, for the three months ended September 30, ~~2020,~~2021, primarily due to ~~$4.0~~$7.0 million in higher compensation costs due to ~~growth in the number of general & administrative employees required~~additional headcount to support the ~~continued~~ growth of ~~our~~the business, ~~and $2.0~~$1.8 million in higher professional fees, and ~~insurance premiums.~~$1.1 million higher depreciation and amortization expense.

Technical Development

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

~~Table of Contents~~

The following table presents our technical development expenses for the ~~three months ended September 30~~periods presented and the ~~dollar and~~ percentage changes from the prior year:

Table of Contents

(dollars in thousands) 2020 $ % 2019
Technical development $ 3,848 $ 1,135 42% $ 2,713
Percentage of total revenue 3 % 4 %


	Three Months Ended September 30,				Percent Change
(dollars in thousands)	2021		2020		2021 vs. 2020
Technical development	$	5,853	$	3,848	52%

Three Months Ended September 30, 2021 and 2020–Technical development expenses increased ~~$1.1~~$2.0 million, or ~~42%~~52%, for the three months ended September 30, ~~2020,~~2021, primarily due to a ~~$1.5~~$1.5 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 and the growth in the ~~company offset by a $0.6~~business. The increase in headcount also drove increases in the allocations of $0.5 million ~~decrease in professional fees as we decreased our use of external application developers.~~ for facilities, telecommunications, and software maintenance costs.

Interest Expense, Net

The following table presents our interest expense, net for the ~~three months ended September 30~~periods presented and the ~~dollar and~~ percentage changes from the prior year:


												Three Months Ended September 30,				Percent Change
(dollars in thousands)	(dollars in thousands)	2020			$		%	2019			(dollars in thousands)	2021		2020		2021 vs. 2020
Interest expense, net	Interest expense, net	$	(6,761)		$	(6,056)	859%	$	(705)		Interest expense, net	$	(8,535)	$	(6,761)	26%
Percentage of total revenue		(5)		%				(1)		%

Three Months Ended September 30, 2021 and 2020–Interest expense increased ~~$6.1~~$1.8 million, or ~~859%~~26%, as a result of ~~interest incurred~~the increase in our outstanding balance on the Term ~~Loan.~~Loans and the ticking fee assessed on the unused amount of the DDTL Facility.

Income Tax Benefit

The following table presents our provision for income taxes for the ~~three months ended September 30~~periods presented and the ~~dollar and~~ percentage changes from the prior year:


												Three Months Ended September 30,						Percent Change
(dollars in thousands)	(dollars in thousands)	2020			$		%	2019			(dollars in thousands)	2021			2020			2021 vs. 2020
Income tax benefit	Income tax benefit	$	(1,104)		$	(664)	151%	$	(440)		Income tax benefit	$	(15,436)		$	(1,104)		1,298%

Effective tax rate	Effective tax rate	413.5		%				20.7		%	Effective tax rate	25.4		%	413.5		%

Three Months Ended September 30, 2021 and 2020–For the three months ended September 30, 2021 and 2020, we ~~recorded a benefit for~~recognized income ~~taxes~~tax benefits of $15.4 million and $1.1 million, respectively, representing an effective tax ~~rate~~rates of 25.4% and 413.5%, ~~which was higher than~~respectively. The differences from our federal statutory tax rate to the ~~statutory federal rate primarily related to discrete items impacting the quarter. The~~ effective tax rate for the three months ended September 30, ~~2019, was primarily impacted by~~2021, were related to state income taxes, ~~and non-deductible meals and entertainment expenses,~~ partially offset by state tax credits such as HPIP. The differences from our federal statutory tax rate to the effective tax rate for the three months ended September 30, 2020, were related to state income taxes, partially offset by state tax credits such as HPIP ~~tax credits.~~and discrete items for the period related to the exercise of non-qualified stock options.

Segment Information

We currently have three reportable segments: 1) Senior, 2) Life, and 3) Auto & Home. InsideResponse and Population Health are also included in Senior. The performance measures of the segments include total revenue and Adjusted EBITDA because management believes that such information is the most relevant in evaluating the results of the respective segments relative to other entities that operate in the same industries.

Table of Contents

In addition, we account for non-operating activity, share-based compensation expense, certain intersegment eliminations and the costs of providing corporate and other administrative services in our administrative division, Corporate & Eliminations. These services are not directly identifiable with our reportable segments and are shown in the tables below to reconcile the reportable segments to the condensed consolidated financial statements.

~~Table of Contents~~

Costs of revenue, marketing and advertising and technical development operating costs and expenses that are directly attributable to a segment are reported within the applicable segment. Indirect costs of revenue, marketing and advertising and technical development operating costs and 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, marketing and advertising, technical development and general and administrative operating costs and expenses, excluding depreciation and amortization expense; loss on disposal of property, equipment, and software; share-based compensation expense; restructuring expenses; and non-recurring expenses such as severance payments and transaction costs. Our CODM does not separately evaluate assets by segment; therefore, assets by segment are not presented.

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

Three Months Ended September 30, ~~2020~~2021:


(in thousands)	Senior		Life		Auto & Home		Corp & Elims			Consolidated
Revenue	$	106,320	$	49,826	$	7,469	$	(3,692)		$	159,923
Operating expenses	(139,291)		(45,128)		(6,095)		(13,351)		(1)	(203,865)
Other expenses, net	—		—		—		(102)			(102)
Adjusted EBITDA	$	(32,971)	$	4,698	$	1,374	$	(17,145)		(44,044)
Share-based compensation expense										(2,215)
Non-recurring expenses (2)										(554)


Depreciation and amortization										(5,103)
Loss on disposal of property, equipment, and software										(350)
Interest expense, net										(8,535)

Income tax benefit										15,436
Net loss										$	(45,365)

(1) Operating expenses in the Corp & Elims division primarily include $10.4 million in salaries and benefits for certain general, administrative, and IT related departments and $4.7 million in professional services fees.

(2) These expenses primarily consist of costs related to the acquisitions of Express Med Pharmaceuticals and Simple Meds.

Table of Contents

Three Months Ended September 30, 2020:


(in thousands)	Senior		Life		Auto & Home		Corp & Elims			Consolidated
Revenue	$	73,199	$	42,823	$	9,538	$	(1,391)		$	124,169
Operating expenses	(64,297)		(32,346)		(5,922)		(9,518)		(1)	(112,083)
Other expenses, net	—		—		—		(21)			(21)
Adjusted EBITDA	$	8,902	$	10,477	$	3,616	$	(10,930)		12,065
Share-based compensation expense										(924)
Non-recurring expenses(2)										(438)
Fair value adjustments to contingent earnout obligations										(759)
Restructuring expenses										(21)
Depreciation and amortization										(3,347)
Loss on disposal of property, equipment, and software										(82)
Interest expense, net										(6,761)
Income tax benefit										1,104
Net income										$	837

~~Table of Contents~~

~~Three Months Ended September 30, 2019~~

(in thousands) Senior Life Auto & Home Corp & Elims Consolidated
Revenue $ 27,584 $ 27,607 $ 10,052 $ (76) $ 65,167
Operating expenses (29,523) (21,789) (7,562) (5,413) (1) (64,287)
Other expenses, net — — — (13) (13)
Adjusted EBITDA $ (1,939) $ 5,818 $ 2,490 $ (5,502) 867
Share-based compensation expense (22)
Non-recurring expenses(2)
(832)
Restructuring expenses 2
Depreciation and amortization (1,440)
Gain on disposal of property, equipment, and software 2
Interest expense (705)
Income tax benefit 440
Net loss $ (1,688)

3738

Table of Contents

The following table depicts the disaggregation of revenue by segment and product for the ~~three months ended September 30:~~periods presented:

(dollars in thousands) 2020 2019 $ %
Senior:
Commission revenue:
Medicare advantage $ 48,731 $ 20,187 $ 28,544 141 %
Medicare supplement 7,992 4,151 3,841 93 %
Prescription drug plan 615 376 239 64 %
Dental, vision, and health 2,723 1,001 1,722 172 %
Other commission revenue 459 (52) 511 NM
Total commission revenue 60,520 25,663 34,857 136 %
Production bonus and other revenue 12,679 1,921 10,758 560 %
Total Senior revenue 73,199 27,584 45,615 165 %
Life:
Commission revenue:
Term 19,376 18,584 792 4 %
Final expense 17,637 3,493 14,144 405 %
Ancillary 584 569 15 3 %
Total commission revenue 37,597 22,646 14,951 66 %
Production bonus and other revenue 5,226 4,961 265 5 %
Total Life revenue 42,823 27,607 15,216 55 %
Auto & Home:
Total commission revenue 8,613 9,589 (976) (10) %
Production bonus and other revenue 925 463 462 100 %
Total Auto & Home revenue 9,538 10,052 (514) (5) %
Eliminations:
Total commission revenue (185) (76) (109) 143 %
Production bonus and other revenue (1,206) — (1,206) NM(1)
Total Elimination revenue (1,391) (76) (1,315) 1730 %
Total commission revenue 106,545 57,822 48,723 84 %
Total production bonus and other revenue 17,624 7,345 10,279 140 %
Total revenue $ 124,169 $ 65,167 $ 59,002 91 %

~~(1) Not meaningful~~


	Three Months Ended September 30,
(dollars in thousands)	2021		2020		$		%
Senior:
Commission revenue:
Medicare advantage	$	80,083	$	48,731	$	31,352	64	%
Medicare supplement	1,604		7,992		(6,388)		(80)	%
Prescription drug plan	269		615		(346)		(56)	%
Dental, vision, and health	3,216		2,723		493		18	%
Other commission revenue	900		459		441		96	%
Total commission revenue	86,072		60,520		25,552		42	%
Production bonus and other revenue	20,248		12,679		7,569		60	%
Total Senior revenue	106,320		73,199		33,121		45	%
Life:
Commission revenue:
Term	16,246		19,744		(3,498)		(18)	%
Final expense	26,982		17,853		9,129		51	%
Total commission revenue	43,228		37,597		5,631		15	%
Production bonus and other revenue	6,598		5,226		1,372		26	%
Total Life revenue	49,826		42,823		7,003		16	%
Auto & Home:
Total commission revenue	6,992		8,613		(1,621)		(19)	%
Production bonus and other revenue	477		925		(448)		(48)	%
Total Auto & Home revenue	7,469		9,538		(2,069)		(22)	%
Eliminations:
Total commission revenue	(1,641)		(185)		(1,456)		787	%
Production bonus and other revenue	(2,051)		(1,206)		(845)		70	%
Total Elimination revenue	(3,692)		(1,391)		(2,301)		165	%
Total commission revenue	134,651		106,545		28,106		26	%
Total production bonus and other revenue	25,272		17,624		7,648		43	%
Total revenue	$	159,923	$	124,169	$	35,754	29	%

Revenue by Segment

Three Months Ended September 30, 2021 and 2020–Revenue from our Senior segment was $106.3 million for the three months ended September 30, 2021, a $33.1 million, or 45%, increase compared to revenue of $73.2 million for the three months ended September 30, ~~2020, a $45.6 million, or 165%, increase compared to revenue of $27.6 million for the three months ended September 30, 2019.~~2020. The increase was primarily due to a ~~$28.5~~$31.4 million, or ~~141%~~64%, increase in MA commission revenue, $4.5 million of new mail order prescription revenue from SelectRx, and $3.0 million in marketing development funds received, partially offset by a ~~$3.8~~reduction of $2.3 million ~~or 93%, increase in MS commission~~of external lead generation revenue ~~and a $7.9 million increase in advertising revenue.~~from InsideResponse.

Revenue from our Life segment was $49.8 million for the three months ended September 30, 2021, a $7.0 million, or 16%, increase compared to revenue of $42.8 million for the three months ended September 30, ~~2020, a $15.2 million, or 55%, increase compared to revenue of $27.6 million for the three months ended September 30, 2019.~~2020. The increase was primarily due to a ~~$14.1~~$9.1 million, or ~~405%~~51%, increase in final expense revenue, ~~which was the result of our focus on selling final expense policies.~~offset by a $3.5 million decrease in term life revenue.

3839

Table of Contents

Revenue from our Auto & Home segment was $7.5 million for the three months ended September 30, 2021, a $2.1 million, or 22%, decrease compared to revenue of $9.5 million for the three months ended September 30, 2020, ~~a $0.5 million, or 5%, decrease compared to revenue of $10.1 million for the three months ended September 30, 2019. The decrease was~~ primarily due to ~~a 2% decrease~~our strategy to reduce the growth in ~~premium sold.~~Auto & Home.

Adjusted EBITDA by Segment

Three Months Ended September 30, 2021 and 2020–Adjusted EBITDA from our Senior segment was ~~$8.9~~$(33.0) million for the three months ended September 30, ~~2020~~,2021, a ~~$10.8~~$41.9 million~~, increase~~ decrease compared to Adjusted EBITDA of ~~$(1.9)~~$8.9 million for the three months ended September 30, ~~2019~~.2020. The ~~increase~~decrease in Adjusted EBITDA was due to a ~~$45.6 million increase in revenue partially offset by a $34.8~~$75.0 million increase in operating costs and expenses primarily attributable to an increase in variable marketing expenses as the Company increased marketing spend to secure marketing channels and vendors in anticipation of AEP and OEP. Senior also incurred increased personnel costs associated with higher headcount that was driven by a significant increase in policies submitted and approved and an increase in the number of licensed ~~agents.~~agents in anticipation of AEP and OEP as well as higher fulfillment costs associated with scaling Population Health and SelectRx, all of which was partially offset by a $33.1 million increase in revenue.

Adjusted EBITDA from our Life segment was $4.7 million for the three months ended September 30, 2021, a $5.8 million, or 55%, decrease compared to Adjusted EBITDA of $10.5 million for the three months ended September 30, ~~2020, a $4.7 million, or 80%, increase compared to Adjusted EBITDA of $5.8 million for the three months ended September 30, 2019.~~2020. The ~~increase~~decrease in Adjusted EBITDA was primarily due to a ~~$15.2 million increase in revenue partially offset by a $10.6~~$12.8 million increase in operating costs and expenses primarily attributable to an increase in variable marketing expenses and variable sales commission expenses to agents. The increase in marketing expenses was primarily driven by a reduction in the amount of leads received from our term life business as more leads for final expense are being sourced externally as a result of the growth of that business. The increase in variable sales commission expenses to agents was driven by an increase in the amount of premium sold for ~~ancillary policies, most notably~~ final expense ~~policies.~~policies, all of which was partially offset by a $7.0 million increase in revenue.

Adjusted EBITDA from our Auto & Home segment was $1.4 million for the three months ended September 30, 2021, a $2.2 million, or 62%, decrease compared to Adjusted EBITDA of $3.6 million for the three months ended September 30, ~~2020, a $1.1 million, or 45%, increase compared to Adjusted EBITDA of $2.5 million for the three months ended September 30, 2019.~~2020. The ~~increase~~decrease in Adjusted EBITDA was primarily due to a ~~$1.6~~$2.1 million decrease in ~~operating costs and expenses partially offset by a $0.5 million decrease in~~ revenue. Revenue was negatively impacted by our shift of agents to 1) the Senior segment to maximize the opportunity of the AEP and OEP seasonal increase in demand and 2) the Life segment to sell final expense policies. Even with the slight decline in revenue, Adjusted EBITDA improved due to an increase in the mix of tenured agents who are more productive and have higher close rates.

Liquidity and Capital Resources

Our liquidity needs primarily include working capital and debt service requirements. We believe that our current sources of liquidity, which include the proceeds from the IPO and cash and funds available under the Senior Secured Credit Facility, will be sufficient to meet our projected operating and debt service requirements for at least the next 2412 months. To the extent that our current liquidity is insufficient to fund future activities, we may need to raise additional funds. If we raise additional funds by issuing equity securities, the ownership of our existing stockholders will be diluted. The incurrence of additional debt financing would result in debt service obligations, and any future instruments governing such debt could provide for operating and financing covenants that could restrict our operations. Further, while COVID-19 has caused disruptions to the economy both domestically and globally, ~~the Company expects to maintain its~~we have maintained our financial flexibility under current market conditions. However, there is inherent difficulty in assessing the possibility of future changes that could materially alter this ~~judgement.~~judgment. As such, we will continue to monitor our liquidity and capital resources through the disruption caused by COVID-19 and will continue to evaluate our financial position and ~~our~~ liquidity needs.

As of September 30, 2021 and June 30, 2021, our cash, cash equivalents, and restricted cash totaled $183.6 million and $286.5 million, respectively. Additionally, the following table presents a summary of our cash flows for the periods presented below:

Table of Contents

As of September 30, 2020 and June 30, 2020, our cash, cash equivalents, and restricted cash totaled $347.4 million and $368.9 million, respectively. The following table presents a summary of our cash flows as of September 30:


							Three Months Ended September 30,
(in thousands)	(in thousands)	2020		2019		(in thousands)	2021		2020
Net cash used in operating activities	Net cash used in operating activities	$	(9,345)	$	(11,697)	Net cash used in operating activities	$	(87,075)	$	(9,346)
Net cash used in investing activities	Net cash used in investing activities	(4,215)		(4,281)		Net cash used in investing activities	(17,767)		(4,215)
Net cash (used in) provided by financing activities		(7,938)		16,262
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	2,006		(7,938)

Operating Activities

Cash ~~provided by~~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 and the effect of changes in working capital and other activities.

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

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

Three Months Ended September 30, 2021—Cash used in operating activities was $87.1 million, consisting of net loss of $45.4 million and adjustments for non-cash items of $6.3 million, offset by cash used in operating assets and liabilities of $35.4 million. Adjustments for non-cash items primarily consisted of a decrease of $15.8 million in deferred income taxes, partially offset by $5.1 million of depreciation and amortization related to additional fixed assets purchases to accommodate our growth in headcount and internally developed software in service, and $2.2 million of share-based compensation expense. The cash decrease resulting from changes in net operating assets and liabilities primarily consisted of increases of $57.8 million in commissions receivable, partially offset by decreases of $17.3 million in accounts receivable and increases of $16.2 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 and the investment in agents for AEP.

Three Months Ended September 30, 2020—Cash used in operating activities was $9.3 million, consisting of net income of $0.8 million and adjustments for non-cash items of $5.6 million, offset by cash used in operating assets and liabilities of $15.8 million. Adjustments for non-cash items primarily consisted of $3.3 million of depreciation and amortization related to additional fixed assets purchases and internally developed software in service, $0.9 million of share-based compensation expense, and $0.9 million of non-cash lease expense, partially offset by a decrease in deferred income taxes of $1.2 million. The cash decrease resulting from changes in net operating assets and liabilities primarily consisted of increases of $45.9 million in commissions receivable and decreases of $8.7 million in accounts payable and accrued expenses, partially offset by increases of $23.7 million in other liabilities, primarily $18.5 million from commission advances.

~~Three Months Ended September 30, 2019~~—Cash used in operating activities was $11.7 million, consisting of net loss of $1.7 million and adjustments for non-cash items of $1.0 million, offset by cash used in operating assets and liabilities of $11.0 million. Adjustments for non-cash items primarily consisted of $1.4 million of depreciation and amortization related to the additional fixed assets purchases and internally developed software in service, offset by $0.4 million of deferred income taxes as the Company defers revenue related to certain commissions receivable into following years until it is collected. The cash decrease resulting from changes in net operating assets and liabilities primarily consisted of an increase of $18.9 million in commissions receivable, partially offset by an increase of $4.9 million in accounts payable and accrued expenses, and a decrease of $3.5 million in accounts receivable.

Investing Activities

Our investing activities primarily consist of purchases of furniture and fixtures, computer hardware, leasehold improvements related to facilities expansion, and capitalized salaries related to the development of internal-use software.

Table of Contents

Three Months Ended September 30, 2021—Net cash used in investing activities of $17.8 million was due to $7.8 million of purchases of property and equipment and $3.0 million in purchases of software and capitalized internal-use software spent to develop new programs and systems to efficiently accommodate our increased volumes as well as $6.9 million of net cash paid to acquire Simple Meds.

Three Months Ended September 30, 2020—Net cash used in investing activities of $4.2 million was due to $2.8 million of purchases of property and equipment and $1.6 million in purchases of software and capitalized internal-use software spent to develop new programs and systems to efficiently accommodate our increased volumes.

~~Three Months Ended September 30, 2019~~—Net cash used in investing activities of $4.3 million was due to $3.0 million of purchases of property and equipment and $1.3 million in purchases of software and capitalized internal-use software spent to develop new programs and systems to efficiently accommodate our increased volumes.

Financing Activities

Our financing activities primarily consist of ~~net~~ proceeds from the ~~revolving line~~issuance of ~~credit, non-recourse~~ debt and equity and proceeds and payments related to stock-based compensation.

Three Months Ended September 30, 2021—Net cash provided by financing activities of $2.0 million was primarily due to $2.2 million in proceeds from common stock options exercised ~~along with dividend~~and the employee stock purchase plan, partially offset by payments of $0.1 million for withholding taxes related to ~~stockholders.~~net share settlements of employee stock awards.

Three Months Ended September 30, 2020—Net cash used in financing activities of $7.9 million was primarily due to $3.9 million of costs incurred in the IPO, $1.8 million of costs incurred in connection with our private placement, and $2.5 million in payments for withholding taxes related to net share settlements of employee stock ~~option~~ awards, partially offset by $0.3 million of proceeds from common stock exercises.

~~Three Months Ended September 30, 2019~~—Net cash provided by financing activities of $16.3 million was due to $11.7 million in net proceeds from our revolving line of credit and $4.6 million gross proceeds from other debt incurred related to a receivables financing arrangement, which was subsequently terminated on June 8, 2020.Senior Secured Credit Facility

~~Senior Secured Credit Facilities~~

~~On November 5, 2019, the Company~~We entered into ~~a new credit agreement with UMB as a lender and revolving agent and Morgan Stanley Capital Administrators, Inc. as a lender and the administrative agent for a syndicate of lenders party to~~ the Senior Secured Credit ~~Facility. See Note 8~~Facility to provide access to cash, in a variety of methods, when necessary to fund the ~~consolidated financial statements for further details.~~operations of the business. There were no amounts drawn under the Revolving Credit Facility or DDTL Facility as of September 30, ~~2020.~~2021. As of September 30, ~~2020,~~2021, there was ~~$325.0~~$471.9 million outstanding under the Term ~~Loan.~~Loans. Refer to Note 7 to the condensed consolidated financial statements for further details.

Our risk management strategy includes entering into interest rate swap agreements to protect against unfavorable interest rate changes relating to forecasted debt transactions. ~~We entered into an interest rate swap agreement on~~ ~~May 12, 2020,~~ ~~with an effective date of May 29, 2020. It has a notional amount of $325.0 million that was~~The Company's Amended Interest Rate Swap is designated as a cash flow hedge of the interest payments on $325.0 million in principal of the ~~debt issuance.~~Term Loans. Refer to Note 7 to the condensed consolidated financial statements for further details.

Contractual Obligations

~~There were~~As of September 30, 2021, there have been no material changes to our contractual obligations ~~during~~as previously described in our annual report on Form 10-K for the ~~three months~~year ended ~~September~~June 30, ~~2020.~~2021.

Table of Contents

Off-Balance Sheet Arrangements

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

Recent Accounting Pronouncements

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

~~Table of Contents~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

We are primarily exposed to the market risk associated with unfavorable movements in interest rates. The risk inherent in our market risk-sensitive instruments and positions is the potential loss or increased expense arising from adverse changes in those factors. There have been no material changes to our market risk policies or our market risk-sensitive instruments and positions as described in our annual report on Form 10-K for the year ended June 30, ~~2020.~~2021.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Our Disclosure Controls and Procedures

As of September 30, ~~2020,~~2021, an evaluation of the effectiveness of our ~~“disclosure~~disclosure controls and ~~procedures”~~procedures (as ~~such term is~~ defined in Rules 13a-15(e) and 15d-15(e) under the ~~Securities~~ Exchange ~~Act of 1934)~~Act) was carried out by our management, with the participation of our ~~principal~~chief executive officer (principal executive officer) and ~~principal~~our chief financial ~~officer.~~officer (principal financial and accounting officer). Based upon ~~that~~our management's evaluation, our chief executive officer and our chief financial officer have concluded that as of the end of the period covered by this report, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

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

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting as(as defined in Rules 13a-15(f) and 15d-15(f) under the ~~Securities~~ Exchange ~~Act of 1934~~Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time we are a party to various litigation matters incidental to the conduct of our business. These legal matters primarily involve claims for damages arising out of the use of the Company’s services, insurance regulatory claims, and claims relating to intellectual property matters, employment matters, tax matters, commercial disputes, competition and sales practices. The Company may also become subject to lawsuits as a result of past or future acquisitions or as a result of liabilities retained from, or representations, warranties or indemnities provided in connection with, divested businesses. We are not presently party to any legal proceedings the resolution of which we believe would have a material adverse effect on 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. For additional details, see Part I, Item 1, Note 8, Commitments and Contingencies - "Legal Contingencies and Obligations," in the Notes to the Condensed Consolidated Financial Statements.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended June 30, ~~2020,~~2021, as filed with the SEC on ~~September 10, 2020.~~August 26, 2021. Before investing in our securities, we recommend that investors carefully consider the risks described in our most recent Form 10-K filed with the SEC, including those under the heading ~~“Risk~~"Risk Factors.”" Realization of any of these risks could have a material adverse effect on our business financial condition or results of operations. Additional risks and uncertainties not currently known to us or that we deem to be immaterial could also materially adversely affect our business, financial condition, or results of operations.

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

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

4344

Table of Contents

ITEM 6. EXHIBITS

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


Exhibit Number						Exhibit Description
31.1						Certification of Chief Executive Officer of SelectQuote, Inc. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2						Certification of Chief Financial Officer of SelectQuote, Inc. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1†						Certification of Chief Executive Officer of SelectQuote, Inc. Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2†						Certification of Chief Financial Officer of SelectQuote, Inc. Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS						XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
~~104.1~~104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

† The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q, are not deemed filed with the SEC and are not to be incorporated by reference into any filing of SelectQuote, Inc. under the Securities Act ~~of 1933, as amended,~~ or the ~~Securities~~ Exchange Act, ~~of 1934, as amended,~~ whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

4445

Table of Contents

SIGNATURES

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


			SELECTQUOTE, INC.
November ~~6, 2020~~5, 2021			By: /s/ Tim Danker
			Name: Tim Danker
			Title: Chief Executive Officer

			By: /s/ Raffaele Sadun
			Name: Raffaele Sadun
			Title: Chief Financial Officer

4546


Three Months Ended September 30, 2019
	Common Stock			Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Shareholders' Equity
	Shares	Amount
BALANCES-June 30, 2019	90,619	$	906	$	138,378	$	200,446	$	(77,275)	$	0	$	262,455
Net loss	—	—		—		(1,688)		—		—		(1,688)
Exercise of employee stock options	1,348	14		1,672		—		—		—		1,686
Share-based compensation expense	—	—		22		—		—		—		22
BALANCES-September 30, 2019	91,967	$	920	$	140,072	$	198,758	$	(77,275)	$	0	$	262,475


	Customer Relationships-Auto & Home		Trade Name		Proprietary Software		Non-compete agreements		Customer relationships		Total
Remainder fiscal 2021	$	29	$	402	$	215	$	48	$	1,722	$	2,416
2022	32		536		265		64		2,296		3,193
2023	28		536		156		53		2,296		3,069
2024	23		536		156		0		2,296		3,011
2025	20		447		130		0		2,296		2,893
Thereafter	32		0		0		0		4,206		4,238
Total	$	164	$	2,457	$	922	$	165	$	15,112	$	18,820


	Operating Leases		Finance leases
Weighted-average remaining lease term (in years)	7.55		1.17
Weighted-average discount rate	9.64	%	5.22	%