Table of Contents
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 MarchDecember 31, 2021
OR
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)
Delaware94-3339273
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
6800 West 115th StreetSuite 251166211
Overland ParkKansas(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareSLQTNew York Stock Exchange

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller 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 163,389,853164,017,054 shares of common stock as of April 30, 2021.
January 31, 2022.



Table of Contents
SELECTQUOTE, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS


PART I FINANCIAL INFORMATIONPAGE
Item 1.
Item 2.
Item 3.
Item 4.
PART II OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.



Table of Contents
PART I
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SELECTQUOTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)

March 31, 2021June 30, 2020December 31, 2021June 30, 2021
ASSETSASSETSASSETS
CURRENT ASSETS:CURRENT ASSETS:CURRENT ASSETS:
Cash and cash equivalentsCash and cash equivalents$369,048 $321,065 Cash and cash equivalents$193,357 $286,454 
Restricted cash47,805 
Accounts receivableAccounts receivable137,839 83,634 Accounts receivable149,399 105,298 
Commissions receivable-currentCommissions receivable-current79,579 51,209 Commissions receivable-current202,289 89,120 
Other current assetsOther current assets4,958 10,121 Other current assets10,511 4,486 
Total current assetsTotal current assets591,424 513,834 Total current assets555,556 485,358 
COMMISSIONS RECEIVABLE—Net684,570 461,752 
COMMISSIONS RECEIVABLECOMMISSIONS RECEIVABLE683,516 756,777 
PROPERTY AND EQUIPMENT—NetPROPERTY AND EQUIPMENT—Net23,311 22,150 PROPERTY AND EQUIPMENT—Net42,676 29,510 
SOFTWARE—NetSOFTWARE—Net11,513 8,399 SOFTWARE—Net15,009 12,611 
OPERATING LEASE RIGHT-OF-USE ASSETSOPERATING LEASE RIGHT-OF-USE ASSETS30,381 OPERATING LEASE RIGHT-OF-USE ASSETS30,571 31,414 
INTANGIBLE ASSETS—NetINTANGIBLE ASSETS—Net41,438 19,673 INTANGIBLE ASSETS—Net37,727 40,670 
GOODWILLGOODWILL49,955 46,577 GOODWILL73,732 68,019 
OTHER ASSETSOTHER ASSETS1,522 1,408 OTHER ASSETS6,046 1,436 
TOTAL ASSETSTOTAL ASSETS$1,434,114 $1,073,793 TOTAL ASSETS$1,444,833 $1,425,795 
LIABILITIES AND SHAREHOLDERS’ EQUITYLIABILITIES AND SHAREHOLDERS’ EQUITYLIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:
Accounts payableAccounts payable$35,467 $22,891 Accounts payable$47,579 $34,079 
Accrued expensesAccrued expenses23,090 14,936 Accrued expenses22,904 20,676 
Accrued compensation and benefitsAccrued compensation and benefits41,693 22,228 Accrued compensation and benefits43,384 40,909 
Earnout liability30,812 
Operating lease liabilities—currentOperating lease liabilities—current5,130 Operating lease liabilities—current5,251 5,289 
Current portion of long-term debtCurrent portion of long-term debt7,169 2,360 
Other current liabilitiesOther current liabilities9,869 4,944 Other current liabilities9,120 5,504 
Total current liabilitiesTotal current liabilities115,249 95,811 Total current liabilities135,407 108,817 
DEBT460,615 311,814 
LONG-TERM DEBT, NET—less current portionLONG-TERM DEBT, NET—less current portion700,350 459,043 
DEFERRED INCOME TAXESDEFERRED INCOME TAXES138,870 105,844 DEFERRED INCOME TAXES76,942 139,240 
OPERATING LEASE LIABILITIESOPERATING LEASE LIABILITIES37,716 OPERATING LEASE LIABILITIES36,951 38,392 
OTHER LIABILITIESOTHER LIABILITIES11,149 14,635 OTHER LIABILITIES2,779 11,743 
Total liabilitiesTotal liabilities763,599 528,104 Total liabilities952,429 757,235 
COMMITMENTS AND CONTINGENCIES (Note 9)00
COMMITMENTS AND CONTINGENCIES (Note 8)COMMITMENTS AND CONTINGENCIES (Note 8)00
SHAREHOLDERS’ EQUITY:SHAREHOLDERS’ EQUITY:SHAREHOLDERS’ EQUITY:
Common stock, $0.01 par valueCommon stock, $0.01 par value1,634 1,622 Common stock, $0.01 par value1,640 1,635 
Additional paid-in capitalAdditional paid-in capital543,524 548,113 Additional paid-in capital551,002 544,771 
Retained earnings (accumulated deficit)Retained earnings (accumulated deficit)124,942 (2,792)Retained earnings (accumulated deficit)(62,236)121,925 
Accumulated other comprehensive income (loss)415 (1,254)
Accumulated other comprehensive incomeAccumulated other comprehensive income1,998 229 
Total shareholders’ equityTotal shareholders’ equity670,515 545,689 Total shareholders’ equity492,404 668,560 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITYTOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$1,434,114 $1,073,793 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$1,444,833 $1,425,795 
See accompanying notes to condensed consolidated financial statements.
2

Table of Contents
SELECTQUOTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands)

Three Months Ended March 31,Nine Months Ended March 31,Three Months Ended December 31,Six Months Ended December 31,
20212020202120202021202020212020
REVENUE:REVENUE:REVENUE:
CommissionCommission$236,793 $137,455 $664,312 $353,926 Commission$140,701 $320,265 $272,956 $425,415 
Production bonus and otherProduction bonus and other30,130 11,149 85,054 36,142 Production bonus and other54,280 37,300 79,552 54,924 
Total revenueTotal revenue266,923 148,604 749,366 390,068 Total revenue194,981 357,565 352,508 480,339 
OPERATING COSTS AND EXPENSES:OPERATING COSTS AND EXPENSES:OPERATING COSTS AND EXPENSES:
Cost of revenueCost of revenue71,439 43,367 206,605 126,488 Cost of revenue148,108 84,121 240,273 135,166 
Marketing and advertisingMarketing and advertising116,690 55,274 298,696 132,246 Marketing and advertising193,246 132,206 283,923 182,006 
General and administrativeGeneral and administrative19,251 6,656 44,496 25,779 General and administrative20,147 13,043 43,539 25,245 
Technical developmentTechnical development4,860 2,865 13,458 9,088 Technical development6,386 4,750 12,239 8,598 
Total operating costs and expensesTotal operating costs and expenses212,240 108,162 563,255 293,601 Total operating costs and expenses367,887 234,120 579,974 351,015 
INCOME FROM OPERATIONS54,683 40,442 186,111 96,467 
INCOME (LOSS) FROM OPERATIONSINCOME (LOSS) FROM OPERATIONS(172,906)123,445 (227,466)129,324 
INTEREST EXPENSE, NETINTEREST EXPENSE, NET(7,355)(9,356)(20,898)(16,239)INTEREST EXPENSE, NET(10,587)(6,782)(19,122)(13,543)
LOSS ON EXTINGUISHMENT OF DEBT(3,315)(3,315)
OTHER EXPENSES, NET(349)(4)(1,545)(20)
INCOME BEFORE INCOME TAX EXPENSE43,664 31,082 160,353 80,208 
INCOME TAX EXPENSE7,183 7,366 32,619 19,110 
NET INCOME$36,481 $23,716 $127,734 $61,098 
OTHER EXPENSE, NETOTHER EXPENSE, NET(51)(416)(153)(1,196)
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)(183,544)116,247 (246,741)114,585 
INCOME TAX EXPENSE (BENEFIT)INCOME TAX EXPENSE (BENEFIT)(46,536)26,391 (62,580)24,994 
NET INCOME (LOSS)NET INCOME (LOSS)$(137,008)$89,856 $(184,161)$89,591 
NET INCOME (LOSS) PER SHARE:NET INCOME (LOSS) PER SHARE:NET INCOME (LOSS) PER SHARE:
BasicBasic$0.22 $0.23 $0.79 $(0.38)Basic$(0.84)$0.55 $(1.12)$0.55 
DilutedDiluted$0.22 $0.17 $0.77 $(0.38)Diluted$(0.84)$0.54 $(1.12)$0.54 
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:
BasicBasic163,023 92,077 162,705 89,989 Basic163,966 162,645 163,829 162,546 
DilutedDiluted165,731 138,754 165,495 89,989 Diluted163,966 165,563 163,829 165,377 
OTHER COMPREHENSIVE INCOME NET OF TAX:
Gain on cash flow hedge1,810 1,669 
OTHER COMPREHENSIVE INCOME1,810 1,669 
COMPREHENSIVE INCOME$38,291 $23,716 $129,403 $61,098 
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Gain (loss) on cash flow hedgeGain (loss) on cash flow hedge1,775 116 1,769 (141)
OTHER COMPREHENSIVE INCOME (LOSS)OTHER COMPREHENSIVE INCOME (LOSS)1,775 116 1,769 (141)
COMPREHENSIVE INCOME (LOSS)COMPREHENSIVE INCOME (LOSS)$(135,233)$89,972 $(182,392)$89,450 
See accompanying notes to the condensed consolidated financial statements.
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Table of Contents
SELECTQUOTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(In thousands)

Three Months Ended March 31, 2021
Three Months Ended December 31, 2021Three Months Ended December 31, 2021
Common StockAdditional
Paid-In
Capital
Retained EarningsAccumulated Other Comprehensive (Loss) GainTotal
Shareholders'
Equity
Common StockAdditional
Paid-In
Capital
Retained Earnings/(Accumulated Deficit)Accumulated Other Comprehensive IncomeTotal
Shareholders'
Equity
SharesAmountTotal
Shareholders'
Equity
SharesAmountAdditional
Paid-In
Capital
Retained Earnings/(Accumulated Deficit)Accumulated Other Comprehensive Income
BALANCES-December 31, 2020162,774 $1,628 $545,441 $88,461 $(1,395)$634,135 
Net income— — — 36,481 — 36,481 
BALANCES-September 30, 2021BALANCES-September 30, 2021163,930 $1,639 $549,034 $74,772 $223 $625,668 
Net lossNet loss— — — (137,008)— (137,008)
Gain on cash flow hedge, net of taxGain on cash flow hedge, net of tax— — — — 1,675 1,675 Gain on cash flow hedge, net of tax— — — — 1,602 1,602 
Amount reclassified into earnings, net taxAmount reclassified into earnings, net tax— — — — 135 135 Amount reclassified into earnings, net tax— — — — 173 173 
Exercise of employee stock options, net of shares withheld for cashless exercises and to cover tax withholdingsExercise of employee stock options, net of shares withheld for cashless exercises and to cover tax withholdings552 (4,331)— — (4,326)Exercise of employee stock options, net of shares withheld for cashless exercises and to cover tax withholdings55 — 76 — — 76 
Issuance of common stock pursuant to employee stock purchase planIssuance of common stock pursuant to employee stock purchase plan56 985 — — 986 Issuance of common stock pursuant to employee stock purchase plan— — — — — — 
Vesting of restricted stock unit awards net of shares withheld to cover tax withholdingsVesting of restricted stock unit awards net of shares withheld to cover tax withholdings28 (2)— — (1)
Share-based compensation expenseShare-based compensation expense— — 1,429 — — 1,429 Share-based compensation expense1,894 — — 1,894 
BALANCES-March 31, 2021$163,382 $1,634 $543,524 $124,942 $415 $670,515 
BALANCES-December 31, 2021BALANCES-December 31, 2021164,013 $1,640 $551,002 $(62,236)$1,998 $492,404 

Three Months Ended March 31, 2020
Common StockAdditional
Paid-In
Capital
Retained Earnings / (Accumulated Deficit)Treasury
Stock
Total
Shareholders'
Equity
SharesAmount
BALANCES-December 31, 201995,270 $953 $84,754 $30,487 $(77,275)$38,919 
Net income— — — 23,716 — 23,716 
Exercise of employee stock options496 541 — — 546 
Share-based compensation expense— — 19 — — 19 
Treasury stock retirement(3,520)$(36)$— $(77,044)$77,275 $195 
BALANCES-March 31, 202092,246 $922 $85,314 $(22,841)$$63,395 
See accompanying notes to the condensed consolidated financial statements.

Three Months Ended December 31, 2020
Common StockAdditional
Paid-In
Capital
Retained Earnings/(Accumulated Deficit)Accumulated Other Comprehensive LossTotal
Shareholders'
Equity
SharesAmount
BALANCES-September 30, 2020162,507 $1,625 $546,815 $(4,560)$(1,511)$542,369 
Net income— — — 89,856 — 89,856 
Loss on cash flow hedge, net of tax— — — — — — 
Amount reclassified into earnings, net tax— — — — 116 116 
Exercise of employee stock options, net of shares withheld for cashless exercises and to cover tax withholdings267 (2,710)— — (2,707)
Share-based compensation expense— — 1,336 — — 1,336 
BALANCES-December 31, 2020162,774 $1,628 $545,441 $85,296 $(1,395)$630,970 

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SELECTQUOTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(In thousands)
Six Months Ended December 31, 2021
Common StockAdditional
Paid-In
Capital
Retained Earnings/(Accumulated Deficit)Accumulated Other Comprehensive IncomeTotal
Shareholders'
Equity
SharesAmount
BALANCES-June 30, 2021163,510 $1,635 $544,771 $121,925 $229 $668,560 
Net loss— — — (184,161)(184,161)
Gain on cash flow hedge, net of tax— — — — 1,423 1,423 
Amount reclassified into earnings, net of tax— — — — 346 346 
Exercise of employee stock options, net of shares withheld for cashless exercises and to cover tax withholdings339 1,279 — — 1,282 
Issuance of common stock pursuant to employee stock purchase plan90 988 — — 989 
Vesting of restricted stock unit awards net of shares withheld to cover tax withholdings74 (145)— — (144)
Share-based compensation expense— — 4,109 — — 4,109 
BALANCES-December 31, 2021164,013 $1,640 $551,002 $(62,236)$1,998 $492,404 

Nine Months Ended March 31, 2021
Common StockAdditional
Paid-In
Capital
(Accumulated Deficit)/Retained EarningsAccumulated Other Comprehensive (Loss) GainTotal
Shareholders'
Equity
SharesAmount
BALANCES-June 30, 2020162,191 $1,622 $548,113 $(2,792)$(1,254)$545,689 
Net income— — — 127,734 — 127,734 
Gain on cash flow hedge, net of tax— — — — 1,301 1,301 
Amount reclassified into earnings, net tax— — — — 368 368 
Exercise of employee stock options, net of shares withheld for cashless exercises and to cover tax withholdings1,135 11 (9,244)— — (9,233)
Issuance of common stock pursuant to employee stock purchase plan56 985 — — 986 
Share-based compensation expense— — 3,670 — — 3,670 
BALANCES-March 31, 2021$163,382 $1,634 $543,524 $124,942 $415 $670,515 

Nine Months Ended March 31, 2020
Common StockAdditional
Paid-In
Capital
Retained Earnings / (Accumulated Deficit)Treasury
Stock
Total
Shareholders'
Equity
SharesAmount
BALANCES-June 30, 201990,619 $906 $138,378 $200,446 $(77,275)$262,455 
Net income— — — 61,098 — 61,098 
Exercise of employee stock options5,147 52 5,313 — — 5,365 
Share-based compensation expense— — 9,282 — — 9,282 
Dividends paid(1)
— — — (207,341)— (207,341)
Dividends paid on unexercised stock options(1)
— — (9,221)— — (9,221)
Return of capital— — (58,438)— — (58,438)
Treasury stock retirement(3,520)$(36)$— $(77,044)$77,275 $195 
BALANCES-March 31, 202092,246 $922 $85,314 $(22,841)$$63,395 
(1) Dividends paid for common stock and unexercised stock options were $1.96 per share and $15.66 per share for preferred series A-D during the nine months ended March 31, 2020. Refer to Note 8 to the condensed consolidated financial statements for further details.

Six Months Ended December 31, 2020
Common StockAdditional
Paid-In
Capital
Retained Earnings/(Accumulated Deficit)Accumulated Other Comprehensive LossTotal
Shareholders'
Equity
SharesAmount
BALANCES-June 30, 2020162,191 $1,622 $548,113 $(4,295)$(1,254)$544,186 
Net income— — — 89,591 — 89,591 
Loss on cash flow hedge, net of tax— — — — (375)(375)
Amount reclassified into earnings, net tax— — — — 234 234 
Exercise of employee stock options, net of shares withheld for cashless exercises and to cover tax withholdings583 (4,912)— — (4,906)
Share-based compensation expense— — 2,240 — — 2,240 
BALANCES-December 31, 2020162,774 $1,628 $545,441 $85,296 $(1,395)$630,970 
See accompanying notes to the condensed consolidated financial statements.


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Table of Contents
SELECTQUOTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended March 31,
20212020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$127,734 $61,098 
Adjustments to reconcile net income to net cash, cash equivalents, and restricted cash used in operating activities:
Depreciation and amortization11,260 5,273 
Loss on disposal of property, equipment, and software261 235 
Share-based compensation expense3,689 9,283 
Deferred income taxes32,475 19,117 
Amortization of debt issuance costs and debt discount2,482 1,431 
Write-off of debt issuance costs2,570 
Fair value adjustments to contingent earnout obligations1,487 
Non-cash lease expense2,869 
Changes in operating assets and liabilities:
Accounts receivable(52,905)(17,057)
Commissions receivable(251,188)(142,454)
Other assets4,349 1,420 
Accounts payable and accrued expenses26,223 12,896 
Operating lease liabilities(2,631)
Other liabilities30,378 6,726 
Net cash used in operating activities(60,947)(42,032)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment(6,520)(6,185)
Proceeds from sales of property and equipment
Purchases of software and capitalized software development costs(5,807)(4,443)
Acquisition of business(23,879)
Net cash used in investing activities(36,206)(10,625)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit85,975 
Payments on revolving line of credit(97,007)
Net proceeds from Term Loans228,753 416,500 
Payments on Term Loans(84,118)
Proceeds from other debt12,125 
Payments on other debt(189)(2,432)
Proceeds from common stock options exercised and employee stock purchase plan1,778 5,364 
Cash dividends paid(275,000)
Payments of tax withholdings related to net share settlement of equity awards(10,026)
Payments of debt issuance costs(885)(7,694)
Payments of costs incurred in connection with private placement(1,771)
Payments of costs incurred in connection with initial public offering(3,911)(2,117)
Payment of contingent earnout liability(32,300)
Net cash provided by financing activities97,331 135,714 
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH178 83,057 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of period368,870 570 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—End of period$369,048 $83,627 
Reconciliation to the Condensed Consolidated Balance Sheets:
Cash and cash equivalents369,048 28,960 
Restricted cash54,667 
Total cash, cash equivalents, and restricted cash$369,048 $83,627 
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid, net$(18,309)$(14,654)
Income taxes paid, net(121)(48)
Six Months Ended December 31,
20212020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)$(184,161)$89,591 
Adjustments to reconcile net income (loss) to net cash, cash equivalents, and restricted cash used in operating activities:
Depreciation and amortization11,278 6,937 
Loss on disposal of property, equipment, and software355 162 
Share-based compensation expense4,109 2,259 
Deferred income taxes(62,940)24,879 
Amortization of debt issuance costs and debt discount2,974 1,644 
Fair value adjustments to contingent earnout obligations— 1,153 
Non-cash lease expense2,040 1,887 
Changes in operating assets and liabilities:
Accounts receivable(43,429)(61,251)
Commissions receivable(39,908)(219,132)
Other assets(5,555)1,906 
Accounts payable and accrued expenses15,135 15,692 
Operating lease liabilities(2,676)(1,245)
Other liabilities(2,963)32,370 
Net cash used in operating activities(305,741)(103,148)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment(17,904)(5,768)
Purchases of software and capitalized software development costs(5,231)(3,449)
Acquisition of business(6,927)121 
Investment in equity securities(1,000)— 
Net cash used in investing activities(31,062)(9,096)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit50,000 — 
Payments on revolving line of credit(50,000)— 
Net proceeds from senior secured delayed draw term loan facility242,000 — 
Payments on other debt(93)(108)
Proceeds from common stock options exercised and employee stock purchase plan2,271 391 
Payments of tax withholdings related to net share settlement of equity awards(144)(5,320)
Payments of debt issuance costs(328)— 
Payments of costs incurred in connection with private placement— (1,771)
Payments of costs incurred in connection with initial public offering— (3,911)
Net cash provided by (used in) financing activities243,706 (10,719)
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH(93,097)(122,963)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of period286,454 368,870 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—End of period$193,357 $245,907 
Reconciliation to the Condensed Consolidated Balance Sheets:
Cash and cash equivalents193,357 209,739 
Restricted cash— 36,168 
Total cash, cash equivalents, and restricted cash$193,357 $245,907 
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid, net$(15,447)$(11,953)
Income taxes paid, net(19)(86)
See accompanying notes to condensed consolidated financial statements.
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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(together with its subsidiaries, (thethe “Company” or “SelectQuote”) contractcontracts 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. The Company obtains leads from, among other sources, InsideResponse, a wholly-owned subsidiary that provides sales leads to the consumer insurance industry. The Company also coordinates various healthcare-related services through its Population Health platform, which includes SelectRx, a closed-door, long-term care pharmacy that offers pharmacy services, including essential prescription medications, OTC medications, customized medication packaging, medication therapy management, and other consultative services under the Patient Centered Pharmacy Home (PCPH) model. SelectQuote’s Senior division sells Medicare Advantage, Medicare Supplement, Medicare Part D, and other ancillary senior health insurance related policies. Life sells termproducts, and permanent life insurance policies (togetheralong with Population Health and InsideResponse, is referred to as "core"“Senior”. SelectQuote’s Life division (“Life”) andsells term life, final expense, policies, along withand other ancillary products.products, and SelectQuote’s Auto & Home division (“Auto & Home”) primarily sells non-commercial auto &and home property and casualty insurance policies.products. 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”) and when the underlying policyholder renews their policy in subsequent years (“renewal”). Additionally, theThe Company also receives certain volume-based bonuses from some carriers on first-year policies sold which are referred 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”), ChoiceMark Insurance Services, Inc., Tiburon Insurance Services, and InsideResponse, LLC, ("InsideResponse").and SelectQuote Ventures, Inc. The unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and reflect all normal recurring adjustments that are necessary to present fairly the results for the interim periods presented. All intercompany accounts and transactions have been eliminated in consolidation. Certain information and disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in accordance with those rules and regulations and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements in our AnnualAnnual Report on Form 10-K for the year ended June 30, 2020,2021, as amended by the Form 10-K/A filed with the SEC on February 14, 2022 (the “2021 Annual Report”) and include all adjustments necessary for the fair presentation of our financial position for the periods presented. Our results for the periods presented the results of whichin our financial statements 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 related2021. 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
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revenue recognition, commissions receivable, the provision for income taxes, share-based compensation, and valuation of intangible assets and goodwill, share-based compensation expense, 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”) in, which runs from October through December each year, and are allowed to switch plans from an existing plan during the open
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enrollment period (“OEP”) in, which runs from January through March each year. As a result, the Company’scommission revenue for our Senior segment’s commission revenuesegment is highest in the second quarter during AEP and to a lesser extent, the third quarter during OEP. Most policies sold during AEP are effective as of and renew annually on January 1.

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

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 condensed 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 condensed 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 condensed consolidated statements of comprehensive income or the condensed consolidated statements of cash flows. The Company has included expanded disclosures on the condensed consolidated balance sheets and in Note 7 to the condensed 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 condensed consolidated financial statements and disclosures.

Recent Accounting Pronouncements Not Yet Adopted—In June 2016,October 2021, the FASBFinancial Accounting Standards Board (“FASB”) issued ASUAccounting Standards Update (“ASU”) No. 2016-13,2021-08, Financial Instruments — Credit LossesBusiness Combinations (Topic 326),805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which amends the guidance for accounting for assetsrequires that are potentially subject to credit risk. The amendment affectsan acquirer recognize and measure contract assets loans, debt securities, trade receivables, net investmentsand contract liabilities acquired in leases, off-balance-sheet credit exposures, reinsurance receivables,a business combination in accordance with Topic 606 as if the acquirer had originated the contracts. Prior to this ASU, an acquirer generally recognizes contract assets acquired and any other financial assets not excludedcontract liabilities assumed that arose from contracts with customers at fair value on the scope that have the contractual right to receive cash. As an emerging growth company, the standardacquisition date. The ASU is effective for the Company beginning in fiscal years startingbeginning after December 15, 2022, and interim periods within those fiscal years; however,with early adoption is permitted. The ASU is to be applied prospectively to business combinations occurring on or after the effective date of the amendment (or if adopted early as of an interim period, as of the beginning of the fiscal year that includes the interim period of early application). The Company is currently evaluatingwill continue to evaluate the impact to its condensed consolidated financial statementsof this guidance, which will depend on the contract assets and related disclosures but does not expect this ASU to have a material impact.liabilities acquired in future business combinations.

Recent Accounting Pronouncements AdoptedIn 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 becomeswas effective for the Company on July 1, 2022,2021 and did not have a material impact on the condensed consolidated financial statements and related disclosures.

Immaterial Correction of Prior Period Financial Statements—Subsequent to the issuance of the Company’s financial statements as of and for interimthe year ended June 30, 2021, the Company discovered that the provision for first year commission revenue for certain final expense policies offered by one of its insurance carrier partners should have been accrued based on a higher lapse rate. The error in the lapse rate resulted in commission revenue being misstated by $6.1 million and $2.0 million, for the years ended June 30, 2021 and 2020, and $2.4 million for the three months ended September 30, 2021, respectively. Accounts receivable was misstated by $8.1 million and $2.0 million as of June 30, 2021 and 2020, respectively. The impact of the error on net income for the year ended June 30, 2021 was a decrease of $4.8 million. Management has evaluated this misstatement and concluded it was not material to prior periods, beginning July 1, 2023, with early adoption permitted.individually or in aggregate. However, correcting the cumulative effect of the error in the three and six months ended December 31, 2021 would have had a significant effect on the results of operations. Therefore, the Company is correcting the relevant prior period condensed consolidated financial statements and related footnotes for this error for comparative purposes. The Company is currently evaluatingwill also correct previously reported financial information for such immaterial errors in future filings, as applicable (see “Part II, Item 5. Other Information” below for additional information).

The following table reflects the effects of the correction on all affected line items of the Company’s previously reported condensed consolidated statement of comprehensive income (loss) for the three months ended September 30, 2021, which will be corrected in future filings:

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impact to its
CORRECTED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (unaudited)
Three Months Ended September 30, 2021
(in thousands)As Previously ReportedAdjustmentAs Corrected
Commission revenue$134,651 $(2,397)$132,254 
Total revenue159,923 (2,397)157,526 
Loss from operations(52,164)(2,397)(54,561)
Loss before income tax benefit(60,801)(2,397)(63,198)
Income tax benefit(15,436)(609)(16,045)
Net loss(45,365)(1,788)(47,153)
Net loss per share:
Basic(0.28)(0.01)(0.29)
Diluted(0.28)(0.01)(0.29)
Comprehensive loss$(45,371)$(1,788)$(47,159)

The following tables reflect the effects of the correction on all affected line items of the Company’s previously reported condensed consolidated financial statements and related disclosures but does not expectpresented in this ASU to have a material impact.Form 10-Q:

CORRECTED CONDENSED CONSOLIDATED BALANCE SHEET (unaudited)
June 30, 2021
(in thousands)As Previously ReportedAdjustmentAs Corrected
Accounts receivable$113,375 $(8,077)$105,298 
Total current assets493,435 (8,077)485,358 
Total assets1,433,872 (8,077)1,425,795 
Deferred income taxes140,988 (1,748)139,240 
Total liabilities758,983 (1,748)757,235 
Retained earnings (accumulated deficit)128,254 (6,329)121,925 
Total shareholders’ equity674,889 (6,329)668,560 
Total liabilities and shareholders’ equity$1,433,872 $(8,077)$1,425,795 

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CORRECTED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)
Three Months Ended December 31, 2020Six Months Ended December 31, 2020
(in thousands)As Previously ReportedAdjustmentAs CorrectedAs Previously ReportedAdjustmentAs Corrected
Commission revenue$320,974 $(709)$320,265 $427,519 $(2,104)$425,415 
Total revenue358,274 (709)357,565 482,443 (2,104)480,339 
Income (loss) from operations124,154 (709)123,445 131,428 (2,104)129,324 
Income (loss) before income tax expense (benefit)116,956 (709)116,247 116,689 (2,104)114,585 
Income tax expense (benefit)26,540 (149)26,391 25,436 (442)24,994 
Net income (loss)90,416 (560)89,856 91,253 (1,662)89,591 
Net income (loss) per share:
Basic0.56 (0.01)0.55 0.56 (0.01)0.55 
Diluted0.55 (0.01)0.54 0.55 (0.01)0.54 
Comprehensive income (loss)$90,532 $(560)$89,972 $91,112 $(1,662)$89,450 

CORRECTED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
Three Months Ended December 31, 2020
(in thousands)(Accumulated Deficit)/Retained EarningsTotal
Shareholders'
Equity
As Previously Reported
BALANCES-September 30, 2020$(1,955)$544,974 
Net income90,416 90,416 
BALANCES-December 31, 202088,461 634,135 
Adjustments
BALANCES-September 30, 2020(2,605)(2,605)
Net loss(560)(560)
BALANCES-December 31, 2020(3,165)(3,165)
As Corrected
BALANCES-September 30, 2020(4,560)542,369 
Net income89,856 89,856 
BALANCES-December 31, 2020$85,296 $630,970 

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CORRECTED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
Six Months Ended December 31, 2020
(in thousands)(Accumulated Deficit)/Retained EarningsTotal
Shareholders'
Equity
As Previously Reported
BALANCES-June 30, 2020$(2,792)$545,689 
Net income91,253 91,253 
BALANCES-December 31, 202088,461 634,135 
Adjustments
BALANCES-June 30, 2020(1,503)(1,503)
Net loss(1,662)(1,662)
BALANCES-December 31, 2020(3,165)(3,165)
As Corrected
BALANCES-June 30, 2020(4,295)544,186 
Net income89,591 89,591 
BALANCES-December 31, 2020$85,296 $630,970 

CORRECTED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Six Months Ended December 31, 2020
(in thousands)As Previously ReportedAdjustmentAs Corrected
Net income (loss)$91,253 $(1,662)$89,591 
Deferred income taxes25,321 (442)24,879 
Accounts receivable(63,355)2,104 (61,251)
Net cash used in operating activities$(103,148)$— $(103,148)

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

Level 1Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2Unadjusted 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 3Unobservable inputs for the asset or liability

InsideResponse, LLC—On May 1, 2020, the Company acquired 100% of the outstanding membership units of InsideResponse, an online marketing consulting firm the Company previously purchased leads from, 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 was 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, which was paid in full during the nine months ended March 31, 2021, as InsideResponse achieved the applicable earnout target for calendar year 2020, as set forth in the Merger Agreement. Additionally, during the three and nine months ended March 31, 2021, the Company recorded $0.4 million and $1.2 million, respectively, in other expenses, net in the condensed consolidated statements of comprehensive income as an adjustment to the fair market value of the earnout liability.

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 earnout30,437 
Net working capital true-up(1)
3,527 
Closing cash904 
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 nine months ended March 31, 2021.

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.

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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 expected synergies 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. This acquired goodwill is allocated to the Senior segment and approximately $5.0 million is deductible for tax purposes.

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

DescriptionEstimated LifeAmount
Cash and cash equivalents$955 
Accounts receivable8,220 
Other current assets459 
Property and equipment, net51 
Accounts payable(2,922)
Accrued expenses(737)
Other current liabilities(8)
Other liabilities(1)
Net tangible assets acquired6,017 
Trade Name5 years2,680 
Proprietary Software2-5 years1,042 
Non-compete agreements3 years192 
Customer relationships7 years16,069 
GoodwillIndefinite41,092 
Total intangible assets acquired61,075 
Net assets acquired$67,092 

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

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
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adjustments), as set forth in the Asset Purchase Agreement, dated February 1, 2021 (the "Asset“Asset Purchase Agreement"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 $0.3$0.4 million of acquisition-related costs in general and administrative operating costs and expenses in the condensed consolidated statementsstatement of comprehensive income.

The earnout is contingent upon the achievement of a minimum of 50,000 insurance policies sold to closed policy leads duringDuring 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 hitdid not achieve the minimum earnout target thresholdas set forth in the Asset Purchase Agreement, there will be no payout, but in no circumstance can the earnout exceed $3.5 million. AsAgreement; as a result, the earnout payment, iswhich was contingent upon continued
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employment of certain individuals, will not be paid. However, the Company will recognizeremaining holdback was earned in full, as the earnoutlead distribution company did not fall below the underperformance thresholds as compensation expense in general and administrative operating costs and expensesset forth in the condensed consolidated statement of comprehensive income in the period in which it is earned. As of March 31, 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 March 31, 2021, current forecasted performance is expected to exceed 60%.

Asset Purchase Agreement. 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 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.

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 benefits of leveraging the exclusive publisher relationships in the business. This acquired goodwill is allocated to Senior (which is also the Senior segmentreporting unit), and $3.8 million is not deductible for tax purposes after adding back acquisition costs.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):

DescriptionEstimated LifeAmount
Accounts receivable$1,301 
Total tangible assets acquired1,301 
Non-compete agreements5 years1,000 
Vendor relationships9 years23,700 
GoodwillIndefinite3,500 
Total intangible assets acquired28,200 
Net Assets Acquired$29,501 

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

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From the date of acquisition, February 1, 2021, through March 31, 2021, the lead distribution company generated $2.6 million of lead generation revenue, all of which was consumed by the Senior segment.

Recent AcquisitionExpress Med Pharmaceuticals—On April 30, 2021, the Company acquired 100% of the outstanding shares of Express Med PharmaceuticalPharmaceuticals, Inc., now SelectRx, a leading specialty pharmaceutical distributor,closed-door, long term care pharmacy provider, 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, 2021.2021 (the “Stock Purchase Agreement”). The aggregate purchase price of up to $24.0 million is comprised of $20.0 million, of which $17.5 million was paid in cash paid at the closing of the transaction, with an additional $2.5 million of holdback for indemnification claims, if any, and an earnout of up to $4.0 million.million, if any. The primary purpose of the acquisition was to take advantage of ourthe 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 comprehensive income. In addition, as a result of the acquisition, the Company has entered into an operating lease with the former President and Chief Executive Officer of Express Med Pharmaceuticals, now our Executive Vice President of SelectRx. 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 December 31, 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 cash20 
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 Senior (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.

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

DescriptionEstimated LifeAmount
Cash and cash equivalents$20 
Accounts receivable613 
Other current assets28 
Property and equipment, net287 
Accounts payable(280)
Accrued expenses, including compensation and benefits(45)
Net tangible assets acquired623 
Proprietary Software3 years550 
Non-compete agreements5 years100 
Customer relationships1 year200 
GoodwillIndefinite18,064 
Total intangible assets acquired18,914 
Net assets acquired$19,537 

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

Simple Meds—On August 31, 2021, SelectRx acquired 100% of the outstanding equity interests of Simple Meds, a full-service pharmaceutical distributor, for an aggregate purchase price of $7.0 million (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 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-up347 
Closing cash61 
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 Senior (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.

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

DescriptionEstimated LifeAmount
Cash and cash equivalents$61 
Accounts receivable634 
Other current assets474 
Property and equipment, net415 
Accounts payable(259)
Net tangible assets acquired1,325 
Customer relationships1 year370 
GoodwillIndefinite5,713 
Total intangible assets acquired6,083 
Net assets acquired$7,408 

From the date of acquisition, August 31, 2021, through December 31, 2021, Simple Meds generated $4.0 million of pharmacy prescription revenue.

3.PROPERTY AND EQUIPMENT—NET

Property and equipment—net consisted of the following:

(in thousands)(in thousands)March 31, 2021June 30, 2020(in thousands)December 31, 2021June 30, 2021
Computer hardwareComputer hardware$14,448 $9,829 Computer hardware$25,268 $13,351 
Equipment(1)
2,429 2,443 
Machinery and equipment(1)
Machinery and equipment(1)
9,074 2,667 
Leasehold improvementsLeasehold improvements18,526 17,692 Leasehold improvements19,536 18,525 
Furniture and fixturesFurniture and fixtures5,012 5,259 Furniture and fixtures5,229 5,004 
Work in progressWork in progress67 1,267 Work in progress5,344 7,220 
TotalTotal40,482 36,490 Total64,451 46,767 
Less accumulated depreciationLess accumulated depreciation(17,171)(14,340)Less accumulated depreciation(21,775)(17,257)
Property and equipment—netProperty and equipment—net$23,311 $22,150 Property and equipment—net$42,676 $29,510 
(1) Includes financing lease right-of-use assets.

Work in progress as of MarchDecember 31, 2021 and June 30, 2020, primarily represents furniturecomputer equipment and fixtures and tenantleasehold improvements respectively, not yet put into service and arenot yet being depreciated. Work in progress as of June 30, 2021, primarily represents computer equipment and machinery not yet put into service and not yet being depreciated. Depreciation expense for the three months ended MarchDecember 31, 2021 and 2020, were $2.0was $2.9 million and $1.4$2.0 million, respectively, and $5.6$5.1 million and $3.8$3.6 million for the ninesix months ended MarchDecember 31, 2021 and 2020, respectively.

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4.SOFTWARE—NET

Software—net consisted of the following:

(in thousands)(in thousands)March 31, 2021June 30, 2020(in thousands)December 31, 2021June 30, 2021
SoftwareSoftware$14,197 $10,999 Software$22,322 $16,530 
Work in progressWork in progress3,880 1,922 Work in progress3,341 3,826 
TotalTotal18,077 12,921 Total25,663 20,356 
Less accumulated amortizationLess accumulated amortization(6,564)(4,522)Less accumulated amortization(10,654)(7,745)
Software—netSoftware—net$11,513 $8,399 Software—net$15,009 $12,611 

Work in progress as of MarchDecember 31, 2021 and June 30, 2020, primarily2021, represents costs incurred for software not yet put into service and are not yet being depreciated.amortized. For the three months ended MarchDecember 31, 2021 and 2020, the Company capitalized internal-use software and website development costs of $2.2$2.0 million and $2.0$1.6 million, respectively, and recorded amortization expense of $1.0$1.5 million and $0.7$0.8 million, respectively. For the ninesix months ended MarchDecember 31, 2021 and 2020, the Company capitalized internal-use software and website development costs of $5.4$4.5 million and $4.4$3.2 million, respectively, and recorded amortization expense of $2.7$2.9 million and $1.5$1.7 million, respectively.

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5.INTANGIBLE ASSETS AND GOODWILL

Intangible assetsThe Company's intangible assets include those acquired as part of the acquisition ofacquisitions listed in the controlling interest in Auto & Home in August 2012,table below (refer to Note 2 to the May 2020 acquisition of InsideResponse, and the February 2021 acquisition of a lead distribution company.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 each of the three and ninesix months ended MarchDecember 31, 2021 and 2020, there were no such indicators.

Goodwill—In August 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 and February 2021, theThe Company recorded as goodwill the excess of the purchase price over the estimated fair values of identifiable assets and liabilities acquired from InsideResponse andas part of the lead distribution company, respectively. There were 0acquisitions listed in the table below (refer to Note 2 to the condensed consolidated financial statements for further details). The Company performs its annual goodwill impairment charges recorded duringassessment as of April 1, or more frequently if it believes that indicators of impairment exist. During each of the three and ninesix months ended MarchDecember 31, 2021 and 2020.2020 there were no such indicators.

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 aforementionedfollowing acquisitions, the reporting units to which goodwill has been assigned and the associated reportable segments are Auto & Home and Senior, respectively.as follows:

AcquisitionReporting UnitReportable Segment
Auto & Home-controlling interestAuto & HomeAuto & Home
InsideResponseSeniorSenior
Lead distribution companySeniorSenior
Express Med PharmaceuticalsSeniorSenior
Simple MedsSeniorSenior

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):

March 31, 2021June 30, 2020
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountWeighted-Average Remaining Useful LifeGross Carrying AmountAccumulated AmortizationNet Carrying AmountWeighted-Average Remaining Useful Life
Total intangible assets subject to amortization
Customer relationships$16,922 $(2,812)$14,110 $16,922 $(1,011)$15,911 
Trade Name2,680 (491)2,189 2,680 (88)2,592 
Proprietary Software-5 year780 (143)637 780 (26)754 
Proprietary Software-2 year262 (120)142 262 (22)240 
Non-compete agreements1,192 (92)1,100 192 (16)176 
Vendor Relationships23,700 (440)23,260 
Total intangible assets$45,536 $(4,098)$41,438 7.4$20,836 $(1,163)$19,673 6.4
Total indefinite-lived assets
Goodwill-Auto & Home$5,364 $5,364 $5,364 $5,364 
Goodwill-Senior44,591 44,591 41,213 41,213 
Total goodwill$49,955 $49,955 $46,577 $46,577 
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December 31, 2021June 30, 2021
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountWeighted-Average Remaining Useful LifeGross Carrying AmountAccumulated AmortizationNet Carrying AmountWeighted-Average Remaining Useful Life
Total intangible assets subject to amortization
Customer relationships$17,492 $(4,817)$12,675 $17,122 $(3,448)$13,674 
Trade name2,680 (893)1,787 2,680 (625)2,055 
Proprietary software1,592 (601)991 1,592 (382)1,210 
Non-compete agreements1,292 (303)989 1,292 (163)1,129 
Vendor relationships23,700 (2,415)21,285 23,700 (1,098)22,602 
Total intangible assets$46,756 $(9,029)$37,727 6.6$46,386 $(5,716)$40,670 7.1
Total indefinite-lived assets
Goodwill-Auto & Home$5,364 $5,364 
Goodwill-Senior68,368 62,655 
Total goodwill$73,732 $68,019 

For the three months ended MarchDecember 31, 2021 and 2020, amortization expense related to intangible assets totaled $1.3$1.7 million and less than $0.1$0.8 million, respectively, and $2.9$3.3 million and less than $0.1$1.7 million for the ninesix months ended MarchDecember 31, 2021 and 2020, respectively.

Changes in the balance of goodwill for the ninesix months ended MarchDecember 31, 2021, are as follows (in thousands):
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Balance, June 30, 20202021$46,577 
Measurement period adjustments(1)
(122)68,019 
Goodwill from the acquisition of a lead distribution companySimple Meds$3,5005,713 
Balance, MarchDecember 31, 2021$49,955 
(1) Represents measurement period adjustments related to the InsideResponse acquisition (refer to Note 2 to the condensed consolidated financial statements for further details).

As of March 31, 2021, expected amortization expense in future periods were as follows (in thousands):

Trade NameProprietary SoftwareNon-compete agreementsVendor RelationshipsCustomer relationshipsTotal
Remainder fiscal 2021$134 $72 $66 $658 $584 $1,514 
2022536 265 264 2,633 2,328 6,026 
2023536 156 253 2,633 2,324 5,902 
2024536 156 200 2,633 2,319 5,844 
2025447 130 200 2,633 2,316 5,726 
Thereafter117 12,070 4,239 16,426 
Total$2,189 $779 $1,100 $23,260 $14,110 $41,438 

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 the Term Loans (as defined in Note 8 to the condensed consolidated financial statements). 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- 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 the condensed 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, net 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 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 2019 Term Loan (as defined in Note 8 to the condensed consolidated financial statements) for a fixed rate payment of 6.00% plus 1.188%. Subsequently, on March 12, 2021, as a result of the First Amendment (as defined in Note 8 to the condensed consolidated financial statements), the Company de-designated and simultaneously re-designated the original interest rate swap with modified terms (the "Amended Interest Rate Swap"), matching those of the 2021 Term Loan (as defined in Note 8 to the condensed consolidated financial statements), in order to maintain a highly effective hedge relationship. The Amended Interest Rate Swap is designed as a hedge of the remaining forecasted interest payments on the notional amount of $325.0 million of the Term Loans (as defined in Note 8 to the condensed consolidated financial statements). As the results of the modification indicate that the hedge remains highly effective, the Amended Interest Rate Swap continues to qualify for hedge accounting. As of the date of de-designation, $0.5 million will be recorded directly to general and administrative expense in the condensed consolidated statement of comprehensive income, as this represents the ineffective portion of the hedge in re-designation. The Amended Interest Rate Swap terminates on November 5, 2024.

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In addition, the Company has determined that the majority of the inputs used to value its Amended 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 Amended Interest Rate Swap in Level 2 of the fair value hierarchy.

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 condensed consolidated balance sheets for the periods presented:

(in thousands)March 31, 2021June 30, 2020
Derivatives Designated as Hedging InstrumentsBalance Sheet LocationFair ValueBalance Sheet LocationFair Value
Cash flow hedgeOther Assets$12 Other current liabilities$(1,669)

The following table presents the unrealized gains deferred to accumulated other comprehensive income resulting from the Company’s derivative instruments designated as cash flow hedging instruments for the periods presented:

(in thousands)Three Months Ended March 31, 2021Nine Months Ended March 31, 2021
Unrealized gain, before taxes$2,226 $1,729 
Income tax expense(551)(428)
Unrealized gain, net of taxes$1,675 $1,301 

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 the periods presented:

(in thousands)Three Months Ended March 31, 2021Nine Months Ended March 31, 2021
Interest expense$180 $491 
Income tax benefit(45)(123)
Net reclassification into earnings$135 $368 

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

(in thousands)Derivative Instruments
Balance at June 30, 2020$(1,254)
Unrealized gains, net of related tax expense of $0.4 million1,301 
Amount reclassified into earnings, net of related taxes of $0.1 million368 
Balance at March 31, 2021$41573,732 

As of MarchDecember 31, 2021, the Company estimates that $0.9 million will be reclassified into interestexpected amortization expense during the next twelve months.in future fiscal periods is as follows (in thousands):

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7. LEASES
Trade NameProprietary SoftwareNon-compete agreementsVendor RelationshipsCustomer relationshipsTotal
Remainder fiscal 2022$268 $214 $142 $1,317 $1,415 $3,356 
2023536 339 273 2,633 2,385 6,166 
2024536 308 220 2,633 2,319 6,016 
2025447 130 220 2,633 2,316 5,746 
2026— — 134 2,633 2,313 5,080 
Thereafter— — — 9,436 1,927 11,363 
Total$1,787 $991 $989 $21,285 $12,675 $37,727 

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 condensed 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 condensed 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.

6.
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.

LEASES
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 Diego, California; Centennial, Colorado; Jacksonville, Florida; Overland Park, Kansas; Wilmington, North Carolina; Des Moines, Iowa; Oakland, California; Indianapolis, Indiana; and Oakland, California under noncancelable operatingMonaca, Pennsylvania (note that SelectRx leases that expire at various dates through July 2029.the Monaca facility from an Executive Vice President of SelectRx. The Company recognizes lease expense for operating leases on a straight-line basis over the respective lease term. The Company has operating leases with remaining lease terms of less than one year to eight 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 general and administrative operating costs and expenses in the condensed consolidated statements of comprehensive income. Sublease rental income was $0.4 million and $0.1 million for the three months ended March 31, 2021 and 2020, respectively, and $0.6 million and $0.2 million for the nine months ended March 31, 2021 and 2020, respectively.

Operating lease expense was $2.0 million and $5.9 million for the three and nine months ended March 31, 2021, respectively, recorded in general and administrative operating costs and expenses in the condensed consolidated statements of comprehensive income.

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Right-of-Use Asset and Lease LiabilityCompany expects to incur $3.6 million in total rental payments over the initial ten-year term plus an additional five-year extension option that it is reasonably certain to exercise.) The right-of-use assets andCompany's operating leases have remaining lease liabilities were as follows asterms of March 31, 2021:

(in thousands)Balance Sheet ClassificationAmount
Assets
Operating leasesOperating lease right-of-use assets$30,381 
Finance leasesProperty and equipment - net228 
Total lease right-of-use assets30,609 
Liabilities
Current
Operating leasesOperating lease liabilities - current5,130 
Finance leasesOther current liabilities202 
Non-current
Operating leasesOperating lease liabilities37,716 
Finance leasesOther liabilities75 
Total lease liabilities$43,123 
less than one year up to fourteen years.

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

Three Months Ended December 31,Six Months Ended December 31,
(in thousands)(in thousands)Three Months Ended March 31, 2021Nine Months Ended March 31, 2021(in thousands)2021202020212020
Finance lease costs(1)
Finance lease costs(1)
$69 $194 
Finance lease costs(1)
$42 $58 $84 $125 
Operating lease costs(2)
Operating lease costs(2)
1,980 5,859 
Operating lease costs(2)
2,048 1,952 4,058 3,879 
Short-term lease costsShort-term lease costs42 168 Short-term lease costs15 58 28 125 
Variable lease costs(3)
Variable lease costs(3)
201 915 
Variable lease costs(3)
256 449 469 714 
Sublease incomeSublease income(403)(638)Sublease income(128)(170)(465)(235)
Total net lease costsTotal net lease costs$1,889 $6,498 Total net lease costs$2,233 $2,347 $4,174 $4,608 
(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 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.

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Supplemental Information—Supplemental information related to leases was as follows as of and for the nine months ended March 31, 2021:

(in thousands)Operating LeasesFinance leasesTotal
Cash paid for amounts included in measurement of liabilities:
Operating cash flows from leases$5,045 $$5,053 
Financing cash flows from leases201 201 
Right-of-use assets obtained in exchange for new lease liabilities$3,632 $194 $3,826 

Operating LeasesFinance leases
Weighted-average remaining lease term (in years)7.051.31
Weighted-average discount rate9.63 %6.51 %

Maturities of Lease Liabilities—As of MarchDecember 31, 2021, remaining maturities of lease liabilities for each of the next five fiscal years and thereafter are as follows:

(in thousands)(in thousands)Operating leasesFinance leasesTotal(in thousands)Operating leasesFinance leasesTotal
Remainder of 2021$2,145 $65 $2,210 
20228,946 196 9,142 
Remainder fiscal 2022Remainder fiscal 20224,552 97 4,649 
202320238,478 27 8,505 20238,861 27 8,888 
202420248,857 8,857 20249,237 — 9,237 
202520258,870 8,870 20259,254 — 9,254 
202620266,591 6,591 20267,040 — 7,040 
202720275,666 — 5,666 
ThereafterThereafter15,115 15,115 Thereafter12,884 — 12,884 
Total undiscounted lease payments Total undiscounted lease payments59,002 288 59,290  Total undiscounted lease payments57,494 124 57,618 
Less: interestLess: interest16,156 11 16,167 Less: interest15,292 15,294 
Present value of lease liabilities Present value of lease liabilities$42,846 $277 $43,123  Present value of lease liabilities$42,202 $122 $42,324 

The following table summarizesAs of December 31, 2021, the Company had $3.5 million of undiscounted future annual minimum lease obligations under non-cancelablepayments for operating leases at June 30, 2020, underexpected to commence between the previousthird quarter of fiscal 2022 and the first quarter of fiscal 2023, with lease accounting standard ASC 840, terms ranging from sevenLeases (in thousands): to ten years. These amounts are excluded from the tables above and not yet recognized in the condensed consolidated balance sheets.

2021$8,781 
20228,497 
20237,991 
20248,353 
20258,306 
Thereafter21,262 
Total minimum lease payments$63,190 
7.DEBT

Debt consisted of the following:

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8.DEBT

Senior Secured Credit Facility— Debt consisted of the following:

(in thousands)(in thousands)March 31, 2021June 30, 2020(in thousands)December 31, 2021June 30, 2021
Term LoansTerm Loans$471,912 $325,000 Term Loans$471,912 $471,912 
Unamortized debt issuance costs on Term Loans(4,387)(5,819)
Unamortized debt discount on Term Loans(6,910)(7,367)
DDTL FacilityDDTL Facility245,000 — 
Unamortized debt issuance costsUnamortized debt issuance costs(3,469)(4,081)
Unamortized debt discountUnamortized debt discount(5,924)(6,428)
Total debtTotal debt$460,615 $311,814 Total debt707,519 461,403 
Less current portion of long-term debt:Less current portion of long-term debt:(7,169)(2,360)
Long-term debtLong-term debt$700,350 $459,043 

On November 5, 2019, the Company entered into a credit agreement with UMB Bank N.A. (“UMB”) as a lender and revolving agent and Morgan Stanley Capital Administrators, Inc. (“Morgan Stanley”) as a lender and the administrative agent for a syndicate of lenders party to the agreement. On February 24, 2021, November 2, 2021, and December 23, 2021, the Company entered into amendments to the credit agreement (the(individually, the “First Amendment”, “Second Amendment”, and “Third Amendment”, together with the original credit agreement and any subsequent amendments, the “Senior Secured Credit Facility”) with certain of its existing lenders and new lenders. The First Amendment provided for an additional $231.0 million in term loans (together with the initial $425.0 million, the “Term Loans”) and added a $145.0 million senior secured delayed draw term loan facility (the "DDTL Facility"). The Second Amendment provided for additional commitments of $25.0 million, in addition to the initial $75.0 million, for the secured revolving loan facility (the “Revolving Credit Facility”) and an additional $200.0 million under the DDTL Facility. The Third Amendment provided for additional commitments of $35.0 million under the Revolving Credit Facility. After giving effect to the amendments, in aggregate, as of December 31, 2021, 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$135.0 million (the “Revolvingunder the Revolving Credit Facility”) andFacility (2) a senior secured term loan facilityTerm Loans in an aggregate principal amount of $425.0$656.0 million, (the "2019 Term Loan"). The proceeds of the 2019 Term Loan were used (i) to financewhich $471.9 million is outstanding as of December 31, 2021, and (3) a distribution in November 2019 to all holders$345.0 million DDTL Facility, of the Company’s common and preferred stock as well as holders of stock options in an aggregate 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 2019 Term Loan, (iii) to pay the debt issuance costs incurred for the Senior Secured Credit Facility, and (iv) for general corporate purposes. Upon the completion of the Company's initial public offering on May 26, 2020 (the "IPO"),which the Company paid down $100.0borrowed $245.0 million of the 2019 Term Loan.

On February 24, 2021, the Company entered into the First Amendment to the Senior Secured Credit Facility (the “First Amendment”) with certain of its existing lenders (excluding "non-consenting lenders" that decided not to participate in the First Amendment) and Morgan Stanley as administrative agent. The First Amendment amends the existing Senior Secured Credit Facility to, among other things, (i) provide for (x) an additional $231.0 million senior secured term loan (the "2021 Term Loan", together with the 2019 Term Loan, the "Term Loans") and (y) a $145.0 million senior secured delayed draw term loan facility (the “DDTL Facility”), which may be drawn from time to time, subject to certain conditions, during the first twelve months following the date of the First Amendment, (ii) reduce the Company’s interest rate on the Term Loans, (iii) make certain changes to the covenants in the Senior Secured Credit Facility governing the Company’s operating flexibility and (iv) to eliminate the restricted cash balance reserved for interest noted above. The proceeds of the 2021 Term Loan were used (i) to pay back $84.1 million of the 2019 Term Loan to the non-consenting lenders, (ii) to finance permitted acquisitions and investments, (iii) to pay the debt issuance costs incurred for the First Amendment, and (iv) for general corporate purposes.December 22, 2021. As of March 31, 2021, after giving effect toFebruary 7, 2022, the First Amendment, the aggregate principal amount of Term Loans outstanding was $471.9 million, theavailable borrowing capacity under the DDTL Facility was $145.0 million, and the borrowing capacitycapacities under the Revolving Credit Facility and DDTL Facility were $135.0 million and $100.0 million, respectively.

In accordance with ASC 470-50-40 “Debt Modification and Extinguishments,” the Second and Third Amendments were accounted for as debt modifications, and the $3.0 million original issue discount paid to the 2 lenders of the DDTL Facility was $75.0 million.capitalized and is being amortized on a straight-line basis over the remaining life of the agreement through interest expense. Additionally, the Company paid $1.2 million in costs as part of the transaction that were included in general and administrative expense in the condensed consolidated statements of comprehensive income. As a result of the Third Amendment, the Company incurred $0.3 million of costs related to the new commitments, which costs were capitalized and are being amortized on a straight-line basis over the remaining life of the agreement through interest expense.

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 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 5.00% or (b) a base rate plus 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. Refer to Note 6 toSenior Secured Credit Facility has a maturity date of November 5, 2024, with the condensed consolidated financial statements for further details.

The Term Loans arebeing 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 Loans, with the remaining balance payable on the maturity date. The DDTL Facility is also mandatorily repayable beginning March 31, 2022, in equal quarterly installments equal to 0.25% of all DDTL facility loans that have been outstanding for a full fiscal quarter prior to each such repayment date, of November 5, 2024.with the remaining balance payable on the maturity date. The Revolving Credit Facility andremaining $100.0 million of the DDTL Facility also have a maturity date of November 5, 2024.

may be drawn from time to time, subject to certain conditions, until January 15, 2023.
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The First AmendmentSenior Secured Credit Facility contains customary affirmative and negative covenants and events of default. In addition, the First Amendment containsdefault and a financial covenant requiring the Company and certain of its subsidiaries to maintain a minimum asset coverage ratio. As of MarchDecember 31, 2021, the Company was in compliance with all of the required covenants. The obligations of the Company under the First Amendment are guaranteed by certain of the Company’s subsidiaries and secured by a security interest in all assets of the Company, subject to certain exceptions detailed in the First Amendment and related ancillary documentation.exceptions.

The Company hadhas incurred $8.0a total of $27.1 million in debt issuance costs and debt discounts related to the Senior Secured Credit Facility, of which $1.2$22.9 million was allocated to the Revolving Credit Facilitycapitalized and was recorded in other assets in the condensed consolidated balance sheet, and $6.8 million was allocated to the 2019 Term Loan and was recorded as a reduction to the carrying amount of the 2019 Term Loan in debt in the condensed consolidated balance sheet. Additionally, the Company paid $8.5 million to the lenders of the 2019 Term Loan as an original issue discount (“OID”), which also was recorded as a reduction to the carrying amount of the 2019 Term Loan in debt in the condensed consolidated balance sheets. The debt issuance costs and OID incurred wereis being amortized through interest expense on a straight-line basis over the five-year life of the Senior Secured Credit Facility.

To consummate the transaction, the Company incurred $0.7 million in debt issuance costs related to the First Amendment and paid $2.3 million to the remaining lenders of the 2021 Term Loan as an OID, both of which were recorded as a reduction to the carrying amount of the Term Loans.

In accordance with ASC 470-50-40 "Debt Modification and Extinguishments," the First Amendment was accounted for as a modification of debt for the lenders that remained in the syndicate, while the non-consenting lenders were accounted for as an extinguishment of debt. Therefore, the new debt issuance costs were allocated on a pro-rata basis and treated as follows:

Revolving Credit Facility—The remaining unamortized balance of debt issuance costs of $0.9 million and the new debt issuance costs incurred related to the First Amendment of $0.2 million will be deferred and amortized through interest expense on a straight-line basis over the remaining termlife of the agreement.

The Company is required to pay UMB an unused commitment fee of 0.15%, in respect of the unutilized commitments under the RevolvingSenior Secured Credit Facility.

DDTL Facility—As there were no upfront commitment fees for the DDTL Facility, the Company did not allocate any debt issuance costs to the DDTL Facility.

The Company is required to pay a ticking fee on the DDTL Facility commitments 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.

Term Loans—For the extinguished debt related to the non-consenting lenders, the Company recognized a $3.3 million loss on debt extinguishment in the condensed consolidated statements of comprehensive income for the three and nine months ended March 31, 2021, consisting of unamortized debt issuance costs of $1.1 Total amortization was $2.1 million and unamortized OID of $1.4 million and a 1% breakage fee associated with the payoff of the non-consenting lenders of $0.8 million.

The remaining unamortized balance of debt issuance costs and OID related to the 2019 Term Loan of $3.8 million and $4.8 million, respectively, and the new debt issuance costs incurred and the OID related to the First Amendment of $0.7 million and $2.3 million, respectively, will be deferred and amortized through interest expense on a straight-line basis over the remaining term of the agreement.

Total amortization of debt issuance costs was $0.8 million during bothfor the three months ended MarchDecember 31, 2021 and 2020, respectively, and $2.5$3.0 million and $1.4$1.6 million duringfor the ninesix months ended MarchDecember 31, 2021 and 2020,
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respectively, which was included in interest expense, net in the Company’s condensed consolidated statements of comprehensive income.
The Company uses derivative financial instruments to hedge against its exposure to fluctuations in interest rates associated with the Term Loans. As of December 31, 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 December 31, 2021, the Company estimates that $0.6 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
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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 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 is probable and, therefore, has not accrued a liability related to these matters.

9.SHAREHOLDERS' EQUITY

Common Stock—As of MarchDecember 31, 2021, the Company has reserved the following authorized, but unissued, shares of common stock:

Employee Stock Purchase Plan ("ESPP"(“ESPP”)1,343,5601,253,575 
Stock awards outstanding under 2020 Plan1,925,7293,603,818 
Stock awards available for grant under 2020 Plan7,674,27110,721,627 
Options outstanding under 2003 Plan2,102,3051,717,264 
Options available for grant under 2003 Plan
Total13,045,86517,296,284 

Share-Based Compensation Plans

The Company has awards outstanding from two2 share-based compensation plans: the 2003 Stock Incentive Plan (the "2003“2003 Stock Plan"Plan”) and the 2020 Omnibus Incentive Plan (the "2020“2020 Stock Plan"Plan” and, collectively with the 2003 Stock Plan, the “Stock Plans”). However, no further awards will be made under the 2003 Stock Plan. The Company's Board of Directors adopted, and shareholders approved, the 2020 Stock Plan in connection with the IPO, which provides for the grant of incentive stock options (“ISO's”), nonstatutory stock options (“NSO's”), stock appreciation rights, restricted stock awards, restricted stock unit awards ("RSU's"(“RSU's”), performance-based cash awards ("PSU's"restricted stock units (“PSU's”), and other forms of equity compensation (collectively, “stock awards”). All awards (other than ISOs, which may be granted only to current employees of the Company) may be granted to employees, non-employee directors, and consultants of the Company and its subsidiaries and affiliates exceptaffiliates.

The number of shares of common stock available for ISO's, which can only be grantedissuance as of December 31, 2021, pursuant to current employeesfuture awards under the Company's 2020 Stock Plan is 10,721,627. The number of shares of the Company.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”) 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.

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Total share-based compensation for stock awards included in general and administrative expense in ourthe condensed consolidated statements of comprehensive income was as follows for the periods presented:
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Three Months Ended March 31,Nine Months Ended March 31,Three Months Ended December 31,Six Months Ended December 31,
(in thousands)(in thousands)2021202020212020(in thousands)2021202020212020
Share-based compensation related to:Share-based compensation related to:Share-based compensation related to:
Equity classified stock optionsEquity classified stock options$451 $19 $1,269 $9,283 Equity classified stock options$884 $455 $1,624 $818 
Equity classified RSU'sEquity classified RSU's648 1,608 Equity classified RSU's1,127 545 2,080 960 
Equity classified PSU'sEquity classified PSU's190 512 Equity classified PSU's(305)194 87 322 
TotalTotal$1,289 $19 $3,389 $9,283 Total$1,706 $1,194 $3,791 $2,100 

Stock OptionsThe 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 expense) is estimated using the Black-Scholes-Merton option pricing model that uses assumptions determined as of the date of the grant. Use of this option pricing model requires the input of subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them ("(“expected term"term”), the estimated volatility of the Company's common stock price over the expected term ("volatility"(“volatility”), the number of options that will ultimately not complete their vesting requirements ("(“assumed forfeitures"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"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"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 nine months ended March 31, 2021. There were no stock options granted during the nine months ended March 31, 2020.periods presented below:

2021
Volatility25.0%
Risk-free interest rate0.4%
Dividend yield0%
Assumed forfeitures0%
Expected term (in years)6.24
Weighted-average fair value (per share)$4.89
Six Months Ended December 31,
20212020
Volatility30.2%25.0%
Risk-free interest rate0.9%0.4%
Dividend yield—%—%
Assumed forfeitures—%—%
Expected term (in years)6.256.24
Weighted-average fair value (per share)$5.52$4.86

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The following table summarizes stock option activity under the Stock Plans for the ninesix months ended MarchDecember 31, 2021:
Number of OptionsWeighted- Average Exercise PriceWeighted- Average Remaining Contractual Term (in Years)Aggregate Intrinsic Value (in Thousands)
Outstanding—June 30, 20213,398,513 $8.60 
Options granted1,254,089 17.61 
Options exercised(339,670)3.81 
Options forfeited/expired/cancelled(34,068)17.12 
Outstanding—December 31, 20214,278,864 $11.54 6.78$13,904 
Vested and exercisable—December 31, 20212,009,390 $3.89 4.16$13,759 

Number of OptionsWeighted- Average Exercise PriceWeighted- Average Remaining Contractual Term (in Years)Aggregate Intrinsic Value (in Thousands)
Outstanding—June 30, 20204,067,417 $2.69 
Options granted1,035,181 19.25 
Options exercised(1,598,824)0.90 
Options forfeited/expired/cancelled(12,932)11.14 
Outstanding—March 31, 20213,490,842 $8.38 6.36$73,752 
Vested and exercisable—March 31, 20211,947,241 $0.98 4.16$55,560 

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As of MarchDecember 31, 2021, there was $5.5$10.2 million in unrecognized compensation cost related to unvested stock options granted, which is expected to be recognized over a weighted-average period of 3.10 years.

The Company received cash of $1.8$0.1 million and $5.4$0.1 million in connection with stock options exercised during the three months ended December 31, 2021 and 2020, respectively, and $2.3 million and $0.4 million in connection with stock options exercised, net of cashless exercises, during the ninesix months ended MarchDecember 31, 2021 and 2020, respectively.

Restricted StockThe following table summarizes restricted stock unit activity under the 2020 Stock Plan for the ninesix months ended MarchDecember 31, 2021. There were no RSU's granted during the nine months ended March 31, 2020.2021:

Number of Restricted Stock UnitsWeighted-Average Grant Date Fair ValueNumber of Restricted Stock UnitsWeighted-Average Grant Date Fair Value
Unvested as of June 30, 2020150,000 $20.00 
Unvested as of June 30, 2021Unvested as of June 30, 2021356,285 $19.12 
GrantedGranted258,697 18.67 Granted453,679 16.78 
VestedVestedVested(82,689)19.61 
CancelledCancelled(3,879)17.89 Cancelled(14,058)17.84 
Unvested as of March 31, 2021404,818 $19.17 
Unvested as of December 31, 2021Unvested as of December 31, 2021713,217 $17.61 

As of MarchDecember 31, 2021, there was $6.0$10.7 million of unrecognized compensation cost related to unvested restricted stock units granted, which is expected to be recognized over a weighted-average period of 2.732.96 years.

Performance StockThe following table summarizes performance stock unit activity under the 2020 Stock Plan for the ninesix months ended MarchDecember 31, 2021. There were no PSU's granted during the nine months ended March 31, 2020.2021:

Number of Performance Stock UnitsWeighted-Average Grant Date Fair Value
Unvested as of June 30, 2020$
Granted132,374 17.92 
Vested
Cancelled
Unvested as of March 31, 2021132,374 $17.92 
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Number of Performance Stock UnitsWeighted-Average Grant Date Fair Value
Unvested as of June 30, 2021(1)
132,921 $17.97 
Granted(1)
196,080 17.80 
Vested— — 
Performance adjustment(2)
(164,500)
Cancelled— — 
Unvested as of December 31, 2021164,501 $17.87 
(1) Reflects PSU’s at 100% achievement of predefined financial performance targets. If performance metrics are met, PSU’s will vest, at the end of a three-year performance period. The number of shares that could be earned for the fiscal year 2021 tranche will range from 0% to 150% of the target, and the number of shares that could be earned for the fiscal year 2022 tranche will range from 0% to 200% of the target.
(2) Represents adjustments to previously granted PSU’s to reflect changes in estimates of future financial performance against targets.

As of MarchDecember 31, 2021, there was $1.9$2.1 million of unrecognized compensation cost related to unvested performance stock units granted, which is expected to be recognized over a weighted-average period of 2.412.31 years.

ESPPThe 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. AtFor the conclusion of the six-month offering period on Marchsix months ended December 31, 2021, the Company issued 56,44089,985 shares to its employees and as of December 31, 2021, there are 1,253,575 shares reserved for future issuance under the plan. The Company recorded share-based compensation expense of $0.2 million and $0.1 million with respect to the ESPP for the three months ended December 31, 2021 and 2020, respectively, and recorded share-based compensation expense of $0.3 million and $0.1 million and $0.3 millionwith respect to the ESPP for the three and ninesix months ended MarchDecember 31, 2021 and 2020, respectively.

Secondary Offering—On March 8, 2021, the Company completed a secondary public offering ("Secondary Offering") of 10,600,000 shares of the Company’s common stock, par value $0.01 per share, by certain shareholders of the Company. The Company did not sell any shares of common stock and did not receive any
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proceeds from the Secondary Offering. Therefore, the offering did not increase the number of shares of common stock that are currently outstanding.

11.10.REVENUES FROM CONTRACTS WITH CUSTOMERS

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

Three Months Ended March 31,Nine Months Ended March 31,Three Months Ended December 31,Six Months Ended December 31,
(in thousands)(in thousands)2021202020212020(in thousands)2021202020212020
Senior:Senior:Senior:
Commission revenue:Commission revenue:Commission revenue:
Medicare advantageMedicare advantage$181,040 $86,396 $493,745 $220,536 Medicare advantage$99,262 $263,975 $179,345 $312,705 
Medicare supplementMedicare supplement2,981 13,831 23,716 27,284 Medicare supplement2,332 12,743 3,936 20,735 
Prescription drug planPrescription drug plan449 355 2,166 2,391 Prescription drug plan732 1,102 1,001 1,717 
Dental, vision, and healthDental, vision, and health4,671 2,450 13,041 5,674 Dental, vision, and health4,920 5,647 8,136 8,370 
Other commission revenueOther commission revenue619 221 1,822 380 Other commission revenue1,954 743 2,854 1,203 
Total commission revenueTotal commission revenue189,760 103,253 534,490 256,265 Total commission revenue109,200 284,210 195,272 344,730 
Production bonus and other revenueProduction bonus and other revenue25,840 4,098 69,819 17,543 Production bonus and other revenue48,767 31,300 69,015 43,979 
Total Senior revenueTotal Senior revenue215,600 107,351 604,309 273,808 Total Senior revenue157,967 315,510 264,287 388,709 
Life:Life:Life:
Commission revenue:Commission revenue:Commission revenue:
Core19,604 18,042 58,771 55,745 
TermTerm16,126 20,028 32,372 39,772 
Final expenseFinal expense20,625 6,596 48,641 13,480 Final expense10,886 9,816 35,473 26,274 
Ancillary1,213 604 2,180 1,859 
Total commission revenueTotal commission revenue41,442 25,242 109,592 71,084 Total commission revenue27,012 29,844 67,845 66,046 
Production bonus and other revenueProduction bonus and other revenue4,958 5,714 16,006 16,459 Production bonus and other revenue5,768 5,822 12,366 11,048 
Total Life revenueTotal Life revenue46,400 30,956 125,598 87,543 Total Life revenue32,780 35,666 80,211 77,094 
Auto & Home:Auto & Home:Auto & Home:
Total commission revenueTotal commission revenue5,910 9,105 21,014 26,921 Total commission revenue5,657 6,491 12,649 15,104 
Production bonus and other revenueProduction bonus and other revenue1,063 1,337 2,738 2,140 Production bonus and other revenue478 750 955 1,675 
Total Auto & Home revenueTotal Auto & Home revenue6,973 10,442 23,752 29,061 Total Auto & Home revenue6,135 7,241 13,604 16,779 
Eliminations:Eliminations:Eliminations:
Total commission revenueTotal commission revenue(319)(145)(784)(344)Total commission revenue(1,168)(280)(2,810)(465)
Production bonus and other revenueProduction bonus and other revenue(1,731)(3,509)Production bonus and other revenue(733)(572)(2,784)(1,778)
Total Elimination revenueTotal Elimination revenue(2,050)(145)(4,293)(344)Total Elimination revenue(1,901)(852)(5,594)(2,243)
Total commission revenueTotal commission revenue236,793 137,455 664,312 353,926 Total commission revenue140,701 320,265 272,956 425,415 
Total production bonus and other revenueTotal production bonus and other revenue30,130 11,149 85,054 36,142 Total production bonus and other revenue54,280 37,300 79,552 54,924 
Total revenueTotal revenue$266,923 $148,604 $749,366 $390,068 Total revenue$194,981 $357,565 $352,508 $480,339 

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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 six months ended December 31, 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, a separate roll forward other than what isas shown on the condensed consolidated balance sheetssheet. A roll forward of commissions receivable (current and long term) is not relevant.Cumulative revenue catch-up adjustments related to changes in the estimates of transaction prices were not materialshown below for the three and ninesix months ended MarchDecember 31, 2021:

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(in thousands)
Balance as of June 30, 2021$845,897 
Commission revenue from revenue recognized212,976 
Net commission revenue adjustment from change in estimate(149,174)
Amounts recognized as accounts receivable(23,894)
Balance as of December 31, 2021$885,805 

The $149.2 million adjustment from change in estimate includes adjustments from the Company’s reassessment of each of its cohorts’ transaction prices. $145.0 million of the total adjustment is due to the increase in actual lapse rates for Senior MA policies during calendar year 2021 and 2020.overall lower persistency from early data received for the January 2022 renewals. Therefore, it was determined that a downward adjustment to Senior MA revenue was probable, and commission revenue was reduced during the three months ended December 31, 2021. Approximately 62%, 28%, and 8% of the adjustment from the change in estimate were from approved policies sold in fiscal years 2021, 2020, and 2019, respectively.

Production Bonuses and Other—During the ninesix months ended MarchDecember 31, 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 MarchDecember 31, 2021, there was an unamortized balance remaining of $7.8$2.3 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 MarchDecember 31, 2021 and 2020, the Companywe recognized income tax benefit of $46.5 million and income tax expense of $7.2 million and $7.4$26.4 million, respectively, representing an effective tax raterates of 16.5%25.4% and 23.7%22.7%, respectively. The differences from the Company’sour federal statutory tax rate to the effective tax rate for the three months ended MarchDecember 31, 2021, were primarily related to state income taxes. The differences from our federal statutory tax rate to the effective tax rate for the three months ended December 31, 2020, were primarily related to state income taxes, partially offset by state tax credits such as the Kansas High Performance Incentive Program (“HPIP”) and discrete items for the period primarily fromrelated to the exercise of non-qualified stock options.

For the six months ended December 31, 2021 and 2020, we recognized income tax benefit of $62.6 million and income tax expense of $25.0 million, respectively, representing effective tax rates of 25.4% and 21.8%, respectively. The differences from the Company’sour federal statutory tax rate to the effective tax rate for the threesix months ended MarchDecember 31, 2020,2021, were primarily related to state income taxes, partially offset by state tax credits such as HPIP.

For the nine months ended March 31, 2021 and 2020, the Company recognized income tax expense of $32.6 million and $19.1 million, respectively, representing an effective tax rate of 20.3% and 23.8%, respectively.taxes. The differences from the Company’sour federal statutory tax rate to the effective tax rate for the ninesix months ended MarchDecember 31, 2021,2020, were primarily related to state income taxes, partially offset by state tax credits such as HPIP and discrete items for the period primarily fromrelated to the exercise of non-qualified stock options. The differences from the Company’s federal statutory tax rate to the effective tax rate for the nine months ended March 31, 2020, were primarily related to state income taxes and non-deductible meals and entertainment expenses, partially offset by state tax credits such as HPIP.

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 MarchDecember 31, 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 untiloccurs 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
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allowance is necessary as of MarchDecember 31, 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 ShareShare”. Basic net income (loss) per share (“Basic 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 (loss) per share
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(“ (“Diluted 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, common shares issuable upon the exercise of outstanding employee stock options, unvested RSU's, PSU’s assuming the performance conditions are satisfied as of the end of the reporting period, 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, PSU’s, and common stock issuable pursuant to the ESPP to the extent they are dilutive. Under the treasury stock method, the exercise price paid by the option holder and future share-based compensation expense that the Company has not yet recognized are assumed to be used to repurchase shares.

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

Three Months Ended
March 31,
Nine Months Ended
March 31,
(in thousands, except per share amounts)2021202020212020
Basic:
Numerator:
Net income$36,481 $23,716 $127,734 $61,098 
Less: dividends declared on Series A, B, C & D preferred stock(86,302)
Less: cumulative dividends on Series D preferred stock(2,992)(9,041)
Net income (loss) attributable to common shareholders36,481 20,724 127,734 (34,245)
Denominator:
Weighted-average common stock outstanding163,023 92,077 162,705 89,989 
Net income (loss) per share—basic:$0.22 $0.23 $0.79 $(0.38)
Diluted:
Numerator:
Net income (loss) attributable to common shareholders$36,481 $20,724 $127,734 $(34,245)
Add: dividends declared on Series A, B & C preferred stock(1)
Add: dividends declared on Series D preferred stock(1)
Add: cumulative dividends on Series D preferred stock(1)
2,992 
Net income (loss) attributable to common and common equivalent shareholders36,481 23,716 127,734 (34,245)
Denominator:
Weighted-average common stock outstanding163,023 92,077 162,705 89,989 
Series A, B & C preferred stock outstanding(1)
12,071 
Series D preferred stock outstanding(1)
32,000 
Stock options outstanding to purchase shares of common stock including unvested RSU's and from the ESPP(1)
2,708 2,606 2,790 
Total common and common equivalent shares outstanding165,731 138,754 165,495 89,989 
Net income (loss) per share—diluted:$0.22 $0.17 $0.77 $(0.38)
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Three Months Ended December 31,Six Months Ended December 31,
(in thousands, except per share amounts)2021202020212020
Basic:
Numerator:
Net income (loss)$(137,008)$89,856 $(184,161)$89,591 
Net income (loss) attributable to common shareholders(137,008)89,856 (184,161)89,591 
Denominator:
Weighted-average common stock outstanding163,966 162,645 163,829 162,546 
Net income (loss) per share—basic:$(0.84)$0.55 $(1.12)$0.55 
Diluted:
Numerator:
Net income (loss) attributable to common shareholders$(137,008)$89,856 $(184,161)$89,591 
Net income (loss) attributable to common and common equivalent shareholders(137,008)89,856 (184,161)89,591 
Denominator:
Weighted-average common stock outstanding163,966 162,645 163,829 162,546 
Stock options outstanding to purchase shares of common stock including unvested RSU's and from the ESPP(1)
— 2,918 — 2,831 
Total common and common equivalent shares outstanding163,966 165,563 163,829 165,377 
Net income (loss) per share—diluted:$(0.84)$0.54 $(1.12)$0.54 
(1) Excluded from the computation of net lossincome (loss) per share-diluted for the ninethree and six months ended MarchDecember 31, 2020,2021, because the effect would have been anti-dilutive.

The weighted average potential shares of common stock that were excluded from the calculation of net income (loss) per share-diluted for the periods presented because including them would have been anti-dilutive are as follows for the periods presented:
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Three Months Ended
March 31,
Nine Months Ended
March 31,
Three Months Ended December 31,Six Months Ended December 31,
(in thousands)(in thousands)2021202020212020(in thousands)2021202020212020
Series A, B & C preferred stock outstanding12,071 
Series D preferred stock outstanding32,000 
Stock options outstanding to purchase shares of common stock including unvested RSU's and from the ESPPStock options outstanding to purchase shares of common stock including unvested RSU's and from the ESPP322 918 4,146 Stock options outstanding to purchase shares of common stock including unvested RSU's and from the ESPP5,133 — 4,908 — 
Shares subject to outstanding PSU's(1)
Shares subject to outstanding PSU's(1)
132 117 
Shares subject to outstanding PSU's(1)
165 — 247 — 
TotalTotal454 1,035 48,217 Total5,298 — 5,155 — 
(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”). 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. TheHome. Senior segment primarily sells senior Medicare-related health insurance products and also includes the lead generation business of InsideResponse, of which the revenue is included in production bonusPopulation Health and other revenue in the condensed consolidated statements of comprehensive income. TheInsideResponse. Life segment primarily sells term life insurance and final expense policies,products, 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”) 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.

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The following table presents information about the reportable segments for the three months ended MarchDecember 31, 2021:

(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated
Revenue$215,600 $46,400 $6,973 $(2,050)$266,923 
Operating expenses(140,111)(43,225)(5,877)(12,507)(1)(201,720)
Other expenses, net(15)(15)
Adjusted EBITDA$75,489 $3,175 $1,096 $(14,572)65,188 
Share-based compensation expense(1,429)
Non-recurring expenses (2)
(4,667)
Fair value adjustments to contingent earnout obligations(334)
Depreciation and amortization(4,323)
Loss on disposal of property, equipment, and software(101)
Interest expense, net(7,355)
Loss on extinguishment of debt(3,315)
Income tax expense(7,183)
Net income$36,481 
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(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated
Revenue$157,967 $32,780 $6,135 $(1,901)$194,981 
Operating expenses(306,602)(30,930)(4,700)(15,979)(1)(358,211)
Other expenses, net— — — (51)(51)
Adjusted EBITDA$(148,635)$1,850 $1,435 $(17,931)(163,281)
Share-based compensation expense(1,894)
Non-recurring expenses (2)
(1,602)
Depreciation and amortization(6,175)
Loss on disposal of property, equipment, and software(5)
Interest expense, net(10,587)
Income tax benefit46,536 
Net loss$(137,008)
(1) Operating expenses in the Corp & Elims division primarily include $9.8$11.2 million in salaries and benefits for certain general, administrative, and IT related departments, and $3.2$4.3 million in professional services fees.

(2) These expenses primarily consist of debt issuance costs incurred for the First Amendment, the recent acquisition of a lead distribution company, re-designation of the hedge, and the Secondary Offering.Second Amendment.

The following table presents information about the reportable segments for the three months ended MarchDecember 31, 2020:

(in thousands)(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated
RevenueRevenue$107,351 $30,956 $10,442 $(145)$148,604 Revenue$315,510 $35,666 $7,241 $(852)$357,565 
Operating expensesOperating expenses(61,169)(27,462)(8,856)(7,059)(1)(104,546)Operating expenses(180,955)(29,961)(5,091)(12,746)(1)(228,753)
Other expenses, netOther expenses, net(4)(4)Other expenses, net— — — (21)(21)
Adjusted EBITDAAdjusted EBITDA$46,182 $3,494 $1,586 $(7,208)44,054 Adjusted EBITDA$134,555 $5,705 $2,150 $(13,619)128,791 
Share-based compensation expenseShare-based compensation expense(19)Share-based compensation expense(1,336)
Non-recurring expenses(2)
Non-recurring expenses(2)
(1,256)
Non-recurring expenses (2)
(362)
Fair value adjustments to contingent earnout obligationsFair value adjustments to contingent earnout obligations(395)
Depreciation and amortizationDepreciation and amortization(2,105)Depreciation and amortization(3,590)
Loss on disposal of property, equipment, and softwareLoss on disposal of property, equipment, and software(236)Loss on disposal of property, equipment, and software(79)
Interest expense, netInterest expense, net(9,356)Interest expense, net(6,782)
Income tax expenseIncome tax expense(7,366)Income tax expense(26,391)
Net incomeNet income$23,716 Net income$89,856 
(1) Operating expenses in the Corp & Elims division primarily include $4.3$8.4 million in salaries and benefits for certain general, administrative, and IT related departments and $2.0$3.3 million in professional services fees.

(2) These expenses primarily consist of non-recurring compensation to certain board members, non-restructuring severance expenses, costs incurred with respect to the acquisition of InsideResponse, and expenses related to business continuity in response to the COVID-19 pandemic.
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The following table presents information about the reportable segments for the nine months ended March 31, 2021:

(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated
Revenue$604,309 $125,598 $23,752 $(4,293)$749,366 
Operating expenses(385,363)(105,532)(16,889)(34,771)(1)(542,555)
Other expenses, net(58)(58)
Adjusted EBITDA$218,946 $20,066 $6,863 $(39,122)206,753 
Share-based compensation expense(3,689)
Non-recurring expenses (2)
(5,490)
Fair value adjustments to contingent earnout obligations(1,487)
Depreciation and amortization(11,260)
Loss on disposal of property, equipment, and software(261)
Interest expense, net(20,898)
Loss on extinguishment of debt(3,315)
Income tax expense(32,619)
Net income$127,734 
(1) Operating expenses in the Corp & Elims division primarily include $24.8 million in salaries and benefits for certain general, administrative, and IT related departments and $9.5 million in professional services fees.

(2) These expenses primarily consist of costs incurred for the First Amendment, the recent acquisition of a lead distribution company, re-designation of the hedge, and the Secondary Offering as well as non-recurring compensation to a former executive non-restructuring severance expenses, and expenses related to business continuity in response to the COVID-19 pandemic.

The following table presents information about the reportable segments for the ninesix months ended MarchDecember 31, 2020:2021:

(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated
Revenue$273,808 $87,543 $29,061 $(344)$390,068 
Operating expenses(161,456)(71,991)(23,467)(19,248)(1)(276,162)
Other expenses, net(20)(20)
Adjusted EBITDA$112,352 $15,552 $5,594 $(19,612)113,886 
Share-based compensation expense(9,283)
Non-recurring expenses(2)
(2,648)
Depreciation and amortization(5,273)
Loss on disposal of property, equipment, and software(235)
Interest expense, net(16,239)
Income tax expense(19,110)
Net income$61,098 
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(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated
Revenue$264,287 $80,211 $13,604 $(5,594)$352,508 
Operating expenses(445,893)(76,058)(10,796)(29,330)(1)(562,077)
Other expenses, net— — — (153)(153)
Adjusted EBITDA$(181,606)$4,153 $2,808 $(35,077)(209,722)
Share-based compensation expense(4,109)
Non-recurring expenses (2)
(2,155)
Depreciation and amortization(11,278)
Loss on disposal of property, equipment, and software(355)
Interest expense, net(19,122)
Income tax benefit62,580 
Net loss$(184,161)
(1) Operating expenses in the Corp & Elims division primarily include $10.7$21.6 million in salaries and benefits for certain general, administrative, and IT related departments, and $9.0 million in professional services fees.

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

The following table presents information about the reportable segments for the six months ended December 31, 2020:

(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated
Revenue$388,709 $77,094 $16,779 $(2,243)$480,339 
Operating expenses(245,252)(62,307)(11,012)(22,264)(1)(340,835)
Other expenses, net— — — (43)(43)
Adjusted EBITDA$143,457 $14,787 $5,767 $(24,550)139,461 
Share-based compensation expense(2,259)
Non-recurring expenses (2)
(822)
Fair value adjustments to contingent earnout obligations(1,153)
Depreciation and amortization(6,937)
Loss on disposal of property, equipment, and software(162)
Interest expense, net(13,543)
Income tax expense(24,994)
Net income$89,591 
(1) Operating expenses in the Corp & Elims division primarily include $15.0 million in salaries and benefits for certain general, administrative, and IT related departments and $6.3 million in professional services fees.
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(2) These expenses primarily consist primarily of one-time consulting expenses associated with adopting ASC 606, non-recurring compensation to certain board members,a former executive, non-restructuring severance expenses, payroll costs related to the Distribution, costs incurred with respect to the acquisition of InsideResponse,our IPO, and expenses related to business continuity in response to the COVID-19 pandemic.

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 MarchDecember 31, 2021, three insurance carrier customers from Senior accounted for 25%24%, 20%15%, and 15%11% of total revenue.revenue, respectively. For the three months ended MarchDecember 31, 2020, three insurance carrier customers from Senior, accounted for 24%30%, 17%22%,
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and 15%18% of total revenue.revenue, respectively. For the ninesix months ended MarchDecember 31, 2021, three insurance carrier customers from Senior, accounted for 26%21%, 20%14%, and 15%13% of total revenue.revenue, respectively. For the ninesix months ended MarchDecember 31, 2020, three insurance carrier customers from Senior, accounted for 27%, 19%20%, and 13%15% of total revenue.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 condensed consolidated financial statements for further details. Prior to the acquisition, the Company incurred $5.6 million and $13.6 million in lead costs with InsideResponse for the three and nine months ended March 31, 2020, respectively, which were recorded in marketing and advertising expense in the condensed consolidated statements of comprehensive income.

InsideResponse sells leads to a senior healthcare distribution platform that is owned in part by individuals related to one of the Company’s shareholders or who are members of the Company’s management. The Company earned $0.5 million and $1.7 million in lead sales revenue, which is recorded in production bonus and other in the condensed consolidated statements of comprehensive income, as a result of this relationship for the three and nine months ended March 31, 2021, respectively, and had $0.3 million and an immaterial amount of outstanding accounts receivable and accounts payable, respectively, as of March 31, 2021.
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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, 2020.in our 2021 Annual Report. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors” in our most recent Form 10-K.2021 Annual Report.

Correctionof Previously Issued Condensed Consolidated Financial Statements

Subsequent to the issuance of the Company’s financial statements as of and for the year ended June 30, 2021, the Company determined that first year provision for certain final expense policies offered by one of its insurance carrier partners should have been accrued based on a higher lapse rate. See Note 1 to the Condensed Consolidated Financial Statements included in Item 1 of this Form 10-Q for additional information related to the correction, including descriptions of the misstatements and the impacts to our condensed consolidated financial statements. In addition, we have corrected certain previously reported financial information for the three and six months ended December 31, 2020, in this Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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”) 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, closed-door, long-term care prescription pharmacies, and overall health services through our Population Health platform.
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We evaluate our business using the following three segments:

SelectQuote Senior, (“Senior”), our fastest growing and largest segment, was launched in 2010 and provides unbiased comparison shopping for Medicare Advantage (“MA”) and Medicare Supplement (“MS”) insurance plans as well as prescription drug and dental, vision, and hearing ("DVH"(“DVH”) plans, and critical illness products. We represent approximately 20 leading, nationally-recognized insurance carrier partners, including Humana, UnitedHealthcare, Wellcare, and Aetna.Humana. MA and MS plans each accounted for 77%84% of our approved Senior policies for each of the three months ended MarchDecember 31, 2021 and 2020, and 80%82% and 78%81% for the ninesix months ended MarchDecember 31, 2021 and 2020, respectively, with other ancillary type policies including DVH plans, accounting for the majority of the remainder. Additionally, the Senior segmentInsideResponse and Population Health (which includes InsideResponse, of which revenue isSelectRx) are included in production bonus and other revenue in the condensed consolidated statements of comprehensive income.Senior for segment reporting purposes.

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SelectQuote Life (“Life”) is one of the country’s largest and most established DTC insurance distributors for term life insurance, having sold over 1.82.0 million policies nationwide since our founding in 1985. Our platform provides unbiased comparison shopping for life insurance products such as term and permanent life, policies (together referred to as "core"), final expense, policies, and other ancillary products such aslike critical illness, accidental death, and juvenile insurance policies (together referred to as "ancillary").insurance. We represent approximately 1520 leading, nationally-recognized insurance carrier partners, with many of these relationships exceeding 15 years. CoreTerm life policies accounted for 43%42% and 67%62% of new premium within the Life segment for the three months ended MarchDecember 31, 2021 and 2020, respectively, with final expense policies accounting for 54%58% and 31%38% for the three months ended MarchDecember 31, 2021 and 2020, respectively. For the ninesix months ended MarchDecember 31, 2021 and 2020, coreterm life policies accounted for 50%36% and 76%55% of new premium within the Life, segment, respectively, with final expense policies accounting for 48%64% and 22%45%, respectively.

SelectQuote Auto & Home (“Auto & Home”) was founded in 2011 as an unbiased comparison shopping platform for auto, home, and specialty insurance lines. We offerOur platform provides unbiased comparison shopping for insurance products includingsuch as homeowners, auto, dwelling fire, and other ancillary insurance products underwritten by approximately 30 leading, nationally-recognized insurance carrier partners. Homeowners and 12-month auto products accounted for 80%76% and 78% of new premium within the Auto & Home segment for each of the three months ended MarchDecember 31, 2021 and 2020, respectively, and 76% and 79% and 78% for the ninesix months ended MarchDecember 31, 2021 and 2020, respectively, with six-month auto, dwelling fire, and other products accounting for thea majority of the remainder.

The three and ninesix months ended MarchDecember 31 referenced throughout the commentary below refers to the thirdsecond quarter and fiscal year-to-date performance of our fiscal years ending on June 30, 20212022 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.Senior. 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.

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The following table shows the number of submitted policies for the periods presented:

Three Months Ended March 31,Nine Months Ended March 31,Three Months Ended December 31,Six Months Ended December 31,
20212020202120202021202020212020
Medicare AdvantageMedicare Advantage160,233 76,196 454,772 205,270 Medicare Advantage340,317 246,548 436,106 294,539 
Medicare SupplementMedicare Supplement3,738 3,703 24,287 16,383 Medicare Supplement3,117 13,273 4,929 20,549 
Dental, Vision and Hearing38,757 18,935 101,819 52,806 
Dental, Vision, and HearingDental, Vision, and Hearing53,432 43,020 82,036 63,062 
Prescription Drug PlanPrescription Drug Plan1,568 1,234 10,243 11,135 Prescription Drug Plan4,241 6,250 5,114 8,675 
OtherOther6,781 1,922 12,603 3,612 Other2,967 3,939 6,529 5,822 
TotalTotal211,077 101,990 603,724 289,206 Total404,074 313,030 534,714 392,647 

Total submitted policies increased by 107%29% for the three months ended MarchDecember 31, 2021, compared to the three months ended MarchDecember 31, 2020. The increase was driven primarily by a 110%38% increase in MA submitted policies and a 105%24% increase in DVH submitted policies, partially offset by a 77% decrease in MS submitted policies. The overall increase in submitted policies for Senior products was primarily driven by an increase in the number of agents we employ, offset by a significant decrease in productivity per agent. Agent productivity was down partly due to an increase in the mix of flex agents, who are less productive, as well as a reduction in overall close rates across all agent types and marketing channels. During the three months ended December 31, 2021, we increased the number of average productive agents by approximately 140%; however, average agent productivity decreased 45% from the three months ended December 31, 2020.

Total submitted policies increased by 36% for the six months ended December 31, 2021, compared to the six months ended December 31, 2020. The increase was driven primarily by a 48% increase in MA submitted policies and a 30% increase in DVH submitted policies, partially offset by a 76% decrease in MS submitted policies. The overall increase in submitted policies for Senior products was primarily due todriven by an increase in the number of agents we employ, and an increaseoffset by a significant decrease in productivity per agent. The increase in agent productivity we experienced in the first quarter of the year was more than offset by the reduction in agent productivity discussed above. During the threesix months ended MarchDecember 31, 2021, we increased the number of average productive agents by approximately 75% and increased the115%; however, average agent productivity per productive agent by 17%decreased 35% from the threesix months ended MarchDecember 31, 2020. The increase in productivity was driven by improvements in agent close rates and enhancements to our agent workflow and desktop.

Total submitted policies increased by 109% for the nine months ended March 31, 2021, compared to the nine months ended March 31, 2020. The increase was driven primarily by a 122% increase in MA submitted policies and a 93% increase in DVH submitted policies. The overall increase in submitted policies for Senior products was primarily due to an increase in the number of agents we employ and an increase in productivity per agent. During the nine months ended March 31, 2021, we increased the number of average productive agents by 75% and increased the productivity per productive agent by 24% from the nine months ended March 31, 2020. The increase in productivity was driven by improvements in agent close rates and enhancements to our agent workflow and desktop.

Approved Policies

Approved policies represents the number of submitted policies that were approved by our insurance carrier partners for the identified product during the indicated period. Not all approved policies will go in force.

The following table shows the number of approved policies for the periods presented:

Three Months Ended March 31,Nine Months Ended March 31,Three Months Ended December 31,Six Months Ended December 31,
20212020202120202021202020212020
Medicare AdvantageMedicare Advantage132,950 62,700 384,137 171,099 Medicare Advantage265,538 208,714 349,654 251,187 
Medicare SupplementMedicare Supplement3,073 2,702 19,849 11,740 Medicare Supplement2,097 10,451 3,495 16,776 
Dental, Vision and HearingDental, Vision and Hearing34,517 16,068 84,370 38,992 Dental, Vision and Hearing44,542 33,614 66,765 49,853 
Prescription Drug PlanPrescription Drug Plan2,109 1,647 9,556 10,528 Prescription Drug Plan3,352 4,815 4,220 7,447 
OtherOther5,129 1,399 10,209 2,596 Other2,483 3,256 5,363 5,080 
TotalTotal177,778 84,516 508,121 234,955 Total318,012 260,850 429,497 330,343 

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.
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Total approved policies increased by 110%22% for the three months ended MarchDecember 31, 2021, compared to the three months ended MarchDecember 31, 2020. The increase was driven primarily by a 112%27% increase in MA approved
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policies 115%and a 33% increase in DVH approved policies, partially offset by an 80% decrease in MS approved policies. Total approved policies increased by 30% for the six months ended December 31, 2021, compared to the six months ended December 31, 2020. The increase was driven primarily by a 39% increase in MA approved policies and a 14%34% increase in DVH approved policies, partially offset by a 79% decrease in MS approved policies. Fluctuations in approved policies are normally in direct correlation to submitted policies; therefore, the increaseshowever, this year we experienced an 8% and 6% decrease 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 toMA submitted-to-approved conversion rates for the three and six months ended March 31, 2020.

Total approved policies increased by 116% for the nine months ended MarchDecember 31, 2021, compared to the ninethree and six months ended MarchDecember 31, 2020. The increase was2020, respectively, driven primarily by a 125% increasehigher consumer switching behavior during AEP. This resulted in MA approved policies 116% increase in DVH approved policies, andgrowing at a 69% increase in MS approvedslower rate than MA submitted 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 nine months ended March 31, 2020.

Lifetime Value of Commissions per Approved Policy

The lifetime value of commissions (the “LTV”) per approved policy represents commissions estimated to be collected over the estimated life of an approved policy based on multiple factors, including but not limited to, contracted commission rates, carrier mix and expected policy persistency with applied constraints. The LTV per approved policy is equal to the sum of the commission revenue due upon the initial sale of a policy, and when applicable, an estimate of future renewal commissions. The estimate of the future renewal commissions is determined using contracted renewal commission rates constrained by a persistency-adjusted 10-year renewal period based on a combination of our historical experience and available insurance carrier historical experience to estimate renewal revenue only to the extent probable that a 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 periods presented:

Three Months Ended March 31,Nine Months Ended March 31,Three Months Ended December 31,Six Months Ended December 31,
20212020202120202021202020212020
Medicare AdvantageMedicare Advantage$1,362 $1,377 $1,290 $1,297 Medicare Advantage$922 $1,268 $936 $1,251 
Medicare SupplementMedicare Supplement1,345 1,478 1,263 1,372 Medicare Supplement1,347 1,233 1,384 1,248 
Dental, Vision and HearingDental, Vision and Hearing129 155 140 146 Dental, Vision and Hearing112 138 125 148 
Prescription Drug PlanPrescription Drug Plan213 214 230 229 Prescription Drug Plan218 232 237 235 
OtherOther60 93 95 99 Other127 64 130 

The LTV per MA andapproved policy decreased 27% while the LTV per MS approved policy decreased 1% andincreased 9%, respectively, for the three months ended MarchDecember 31, 2021, compared to the three months ended MarchDecember 31, 2020. The MA LTV was negatively impactedimpacted by lower MA persistency rates, andincrease in constraint, the switch to policy level persistency, carrier mix, and higher provision for first year and renewal year lapse rates, somewhat offset by higher commission rates. The MS LTV was negativelypositively impacted by a carrier mix shift of policies to a direct carrier pod that pays us lower commissions but has lower marketing costs.and an improvement in first year lapse rates.

The LTV per MA andapproved policy decreased 25% while the LTV per MS approved policy decreased 1% and 8%, respectively,increased 11% for the ninesix months ended MarchDecember 31, 2021, compared to the ninesix months ended MarchDecember 31, 2020. The MA LTV was negatively impactedimpacted by lower MA persistency rates, andincrease in constraint, the switch to policy level persistency, carrier mix, and higher provision for first year and renewal year lapse rates, somewhat offset by higher commission rates. The MS LTV was negativelypositively impacted by a carrier mix shift of policies to a direct carrier pod that pays us lower commissions but has lower marketing costs.

and an improvement in first year lapse rates.



Per Unit Economics
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Per Unit Economics

Per unit economics represents total Medicare AdvantageMA and Medicare SupplementMS commissions, other product commissions, other revenues, and costs associated with the Senior, segment, each shown as per number of approved Medicare AdvantageMA and Medicare SupplementMS approved policies over a given time period. Management assesses the business on a per unitper-unit basis to help ensure that the revenue opportunity associated with a successful policy sale is attractive relative to the marketing acquisition cost. All perBecause 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 AdvantageMA and Medicare SupplementMS commission per MA/MS policy represents the LTV for policies sold in the period. Other commission per MA/MS policy represents the LTV for other products sold in the period, including DVH prescription drug plan, and other products, which management views as additional commission revenue on our agents’ core function of MA/MS policy sales. Other per MA/MS policy represents the production bonuses, marketing development funds, lead sales revenue from 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 representrepresents all of the operating expenses within the Senior segment.Senior. The Revenue to customer acquisition cost (“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 isleads. 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.

Twelve Months Ended March 31,
(dollars per approved policy):20212020
Medicare Advantage and Medicare Supplement approved policies464,653 204,519 
Medicare Advantage and Medicare Supplement commission per MA / MS policy$1,286 $1,300 
Other commission per MA/MS policy38 51 
Other per MA / MS policy166 154 
Total revenue per MA / MS policy1,490 1,505 
Total operating expenses per MA / MS policy(947)(891)
Adjusted EBITDA per MA / MS policy (1)
$543 $614 
Adjusted EBITDA Margin per MA / MS policy (1)
36 %41 %
Revenue / CAC multiple3.1X3.6X
Twelve Months Ended December 31,
(dollars per approved policy):20212020
Medicare Advantage and Medicare Supplement approved policies574,682 394,032 
Medicare Advantage and Medicare Supplement commission per MA/MS policy$1,067 $1,276 
Other commission per MA/MS policy33 39 
Other per MA/MS policy(49)168 
Total revenue per MA/MS policy1,051 1,483 
Total operating expenses per MA/MS policy(1,193)(916)
Adjusted EBITDA per MA/MS policy (1)
$(142)$567 
Adjusted EBITDA Margin per MA/MS policy (1)
(14)%38 %
Revenue/CAC multiple1.9X3.2X
(1) These financial measuresmetrics are not calculated in accordance with GAAP. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for information regarding our use of these non-GAAP financial measures and a reconciliation of such measures to their nearest comparable financial measures calculated and presented in accordance with GAAP.

Total revenue per policy decreased 1%29% for the twelve months ended MarchDecember 31, 2021, compared to the twelve months ended MarchDecember 31, 2020,2020. Approximately 60% of the decrease was due to the $145.0 million adjustment from a change in estimate of primarily Senior MA cohort transaction prices, discussed further below in “Key Components of our Results of Operations.” Approximately 30% of the decrease was due to the lower LTV of MA policies, and the remainder was due to a decrease in the amount of other ancillary insurance policies sold as a percent of MA/overall MS policies and lowerrevenue somewhat offset by higher 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 advertisingand the addition of revenue associated with InsideResponse.from SelectRx. Total cost per policy increased 6%30% for the twelve months ended MarchDecember 31, 2021, compared to the twelve months ended MarchDecember 31, 2020, due to an increase in our marketing and advertising expense consistentdriven by lower close rates during AEP, higher fulfillment costs associated with our strategy to drivescaling Population Health and SelectRx, as well as higher absolute revenue and Adjusted EBITDA with slightly lower Adjusted EBITDA margin.sales expenses driven by a reduction in agent productivity.
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Life

Life premium represents the total premium value for all policies that were approved by the relevant insurance carrier partner and for which the policy document was sent to the policyholder and payment information was received by the relevant insurance carrier partner during the indicated period. Because our commissions are earned based on a percentage of total premium, total premium volume for a given period is the key driver of revenue for our Life segment.Life.

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

Three Months Ended March 31,Nine Months Ended March 31,Three Months Ended December 31,Six Months Ended December 31,
(in thousands):(in thousands):2021202020212020(in thousands):2021202020212020
Core Premiums$18,951 $18,637 $56,268 $56,486 
Term PremiumsTerm Premiums$15,548 $18,888 $31,057 $37,742 
Final Expense PremiumsFinal Expense Premiums23,881 8,639 54,595 15,979 Final Expense Premiums21,134 11,631 55,186 31,450 
Ancillary Premiums1,028 525 2,190 1,775 
TotalTotal$43,860 $27,801 $113,053 $74,240 Total$36,682 $30,519 $86,243 $69,192 

Total coreterm premiums increased slightlydecreased 18% for the three months ended MarchDecember 31, 2021, compared to the three months ended MarchDecember 31, 2020. The number of policies sold declined 4%24%, which was somewhat offset by a 6%8% increase in the average premium per policy sold. Final expense premiums increased 176%82% for the three months ended MarchDecember 31, 2021, compared to the three months ended MarchDecember 31, 2020, due to a significant increase in the number of agents selling final expense policies.

Total coreterm premiums decreased slightly18% for the ninesix months ended MarchDecember 31, 2021, compared to the ninesix months ended MarchDecember 31, 2020. The number of policies sold declined 5%27%, which was somewhat offset by a 5%12% increase in the average premium per policy sold. Final expense premiums increased 242%75% for the ninesix months ended MarchDecember 31, 2021, compared to the ninesix months ended MarchDecember 31, 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.Home.

The following table shows premiums for the periods presented:

Three Months Ended March 31,Nine Months Ended March 31,Three Months Ended December 31,Six Months Ended December 31,
(in thousands):(in thousands):2021202020212020(in thousands):2021202020212020
PremiumsPremiums$12,010 $16,923 $42,165 $48,925 Premiums$10,585 $13,255 $23,843 $30,155 

Total premiums decreased 29%20% for the three months ended MarchDecember 31, 2021, compared to the three months ended MarchDecember 31, 2020, primarily due to our strategic shift of agents fromstrategy to reduce the growth in Auto & Home to our Senior and Life divisions (see Segment Information below for further details).Home.

Total premiums decreased 14%21% for the ninesix months ended MarchDecember 31, 2021, compared to the ninesix months ended MarchDecember 31, 2020, primarily due to our strategic shift of agents fromstrategy to reduce the growth in Auto & Home to our Senior and Life divisions (see Segment Information below for further details).


Home.

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Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with GAAP and to provide investors with additional information regarding our GAAP financial results, we have presented in this Quarterly Report on Form
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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 (loss) before interest expense, income tax expense (benefit), depreciation and amortization, and certain add-backs for non-cash or non-recurring expenses, including restructuring and share-based compensation expenses. The most directly comparable GAAP measure is net income.income (loss). We monitor and have presented in this Quarterly Report on Form 10-Q Adjusted EBITDA because it is a key measure used by our management and Board of Directors to understand and evaluate our operating performance, to establish budgets, and to develop operational goals for managing our business. In particular, we believe that excluding the impact of these expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core operating performance.

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

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


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

Three Months Ended MarchDecember 31, 2021:

(in thousands)(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated
Net income$36,481 
Net lossNet loss$(137,008)
Share-based compensation expenseShare-based compensation expense1,429 Share-based compensation expense1,894 
Non-recurring expenses (1)
Non-recurring expenses (1)
4,667 
Non-recurring expenses (1)
1,602 
Fair value adjustments to contingent earnout obligations334 
Depreciation and amortizationDepreciation and amortization4,323 Depreciation and amortization6,175 
Loss on disposal of property, equipment, and softwareLoss on disposal of property, equipment, and software101 Loss on disposal of property, equipment, and software
Interest expense, netInterest expense, net7,355 Interest expense, net10,587 
Loss on extinguishment of debt3,315 
Income tax expense7,183 
Income tax benefitIncome tax benefit(46,536)
Adjusted EBITDAAdjusted EBITDA$75,489 $3,175 $1,096 $(14,572)$65,188 Adjusted EBITDA$(148,635)$1,850 $1,435 $(17,931)$(163,281)
(1) These expenses primarily consist of debt issuance costs incurred for the First Amendment, the recent acquisition of a lead distribution company, re-designation of the hedge, and the Secondary Offering.Second Amendment.

Three Months Ended MarchDecember 31, 2020:

(in thousands)(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated
Net incomeNet income$23,716 Net income$89,856 
Share-based compensation expenseShare-based compensation expense19 Share-based compensation expense1,336 
Non-recurring expenses (1)
Non-recurring expenses (1)
1,256 
Non-recurring expenses (1)
362 
Fair value adjustments to contingent earnout obligationsFair value adjustments to contingent earnout obligations395
Depreciation and amortizationDepreciation and amortization2,105 Depreciation and amortization3,590 
Loss on disposal of property, equipment, and softwareLoss on disposal of property, equipment, and software236 Loss on disposal of property, equipment, and software79 
Interest expense, netInterest expense, net9,356 Interest expense, net6,782 
Income tax expenseIncome tax expense7,366 Income tax expense26,391 
Adjusted EBITDAAdjusted EBITDA$46,182 $3,494 $1,586 $(7,208)$44,054 Adjusted EBITDA$134,555 $5,705 $2,150 $(13,619)$128,791 
(1) These expenses primarily consist of non-recurring compensation to certain board members, non-restructuring severance expenses, costs incurred with respect to the acquisition of InsideResponse,a former executive and expenses related to business continuity in response to the COVID-19 pandemic.














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Nine Months Ended MarchSix months ended December 31, 2021:2021

(in thousands)(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated
Net income$127,734 
Net lossNet loss$(184,161)
Share-based compensation expenseShare-based compensation expense3,689 Share-based compensation expense4,109 
Non-recurring expenses (1)
Non-recurring expenses (1)
5,490 
Non-recurring expenses (1)
2,155 
Fair value adjustments to contingent earnout obligations1,487 
Depreciation and amortizationDepreciation and amortization11,260 Depreciation and amortization11,278 
Loss on disposal of property, equipment, and softwareLoss on disposal of property, equipment, and software261 Loss on disposal of property, equipment, and software355 
Interest expense, netInterest expense, net20,898 Interest expense, net19,122 
Loss on extinguishment of debt3,315 
Income tax expense32,619 
Income tax benefitIncome tax benefit(62,580)
Adjusted EBITDAAdjusted EBITDA$218,946 $20,066 $6,863 $(39,122)$206,753 Adjusted EBITDA$(181,606)$4,153 $2,808 $(35,077)$(209,722)
(1) These expenses primarily consist of costs incurred for the FirstSecond Amendment and costs related to the recent acquisitionacquisitions of a lead distribution company, re-designationExpress Med Pharmaceuticals and Simple Meds.

Six Months Ended December 31, 2020

(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated
Net income$89,591 
Share-based compensation expense2,259 
Non-recurring expenses (1)
822 
Fair value adjustments to contingent earnout obligations1,153
Depreciation and amortization6,937 
Loss on disposal of property, equipment, and software162 
Interest expense, net13,543 
Income tax expense24,994 
Adjusted EBITDA$143,457 $14,787 $5,767 $(24,550)$139,461 
(1) These expenses primarily consist of the hedge, and the Secondary Offering as well as non-recurring compensation to a former executive, non-restructuring severance expenses, costs related to our IPO, and expenses related to business continuity in response to the COVID-19 pandemic.

Nine Months Ended March 31, 2020:

(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated
Net income$61,098 
Share-based compensation expense9,283 
Non-recurring expenses (1)
2,648 
Depreciation and amortization5,273 
Loss on disposal of property, equipment, and software235 
Interest expense, net16,239 
Income tax expense19,110 
Adjusted EBITDA$112,352 $15,552 $5,594 $(19,612)$113,886 
(1) These expenses consist primarily of one-time consulting expenses associated with adopting ASC 606, non-recurring compensation to certain board members, non-restructuring severance expenses, payroll costs related to the Distribution, costs incurred with respect to the acquisition of InsideResponse, and expenses related to business continuity in response to the COVID-19 pandemic
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Key Components of our Results of Operations

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

Three Months Ended March 31,Nine Months Ended March 31,Three Months Ended December 31,Six Months Ended December 31,
(in thousands)(in thousands)2021202020212020(in thousands)2021202020212020
RevenueRevenueRevenue
CommissionCommission$236,793 89 %$137,455 92 %$664,312 89 %$353,926 91 %Commission$140,701 72 %$320,265 90 %$272,956 77 %$425,415 89 %
Production bonus and otherProduction bonus and other30,130 11 %11,149 %85,054 11 %36,142 %Production bonus and other54,280 28 %37,300 10 %79,552 23 %54,924 11 %
Total revenueTotal revenue266,923 100 %148,604 100 %749,366 100 %390,068 100 %Total revenue194,981 100 %357,565 100 %352,508 100 %480,339 100 %
Operating costs and expensesOperating costs and expensesOperating costs and expenses
Cost of revenueCost of revenue71,439 27 %43,367 29 %206,605 28 %126,488 32 %Cost of revenue148,108 76 %84,121 24 %240,273 68 %135,166 28 %
Marketing and advertisingMarketing and advertising116,690 44 %55,274 37 %298,696 40 %132,246 34 %Marketing and advertising193,246 99 %132,206 37 %283,923 81 %182,006 38 %
General and administrativeGeneral and administrative19,251 %6,656 %44,496 %25,779 %General and administrative20,147 10 %13,043 %43,539 12 %25,245 %
Technical developmentTechnical development4,860 %2,865 %13,458 %9,088 %Technical development6,386 %4,750 %12,239 %8,598 %
Total operating costs and expensesTotal operating costs and expenses212,240 80 %108,162 72 %563,255 76 %293,601 75 %Total operating costs and expenses367,887 188 %234,120 66 %579,974 164 %351,015 73 %
Income from operations54,683 20 %40,442 28 %186,111 24 %96,467 25 %
Income (loss) from operationsIncome (loss) from operations(172,906)(89)%123,445 35 %(227,466)(65)%129,324 27 %
Interest expense, netInterest expense, net(7,355)(3)%(9,356)(6)%(20,898)(3)%(16,239)(4)%Interest expense, net(10,587)(5)%(6,782)(2)%(19,122)(5)%(13,543)(3)%
Loss on extinguishment of debt(3,315)(1)%— — %(3,315)— %— — %
Other expenses, net(349)— %(4)— %(1,545)— %(20)— %
Income before income tax expense43,664 16 %31,082 22 %160,353 21 %80,208 21 %
Income tax expense7,183 %7,366 %32,619 %19,110 %
Net income$36,481 13 %$23,716 17 %$127,734 17 %$61,098 16 %
Other expense, netOther expense, net(51)— %(416)— %(153)— %(1,196)— %
Loss before income tax benefitLoss before income tax benefit(183,544)(94)%116,247 33 %(246,741)(70)%114,585 24 %
Income tax benefitIncome tax benefit(46,536)(24)%26,391 %(62,580)(18)%24,994 %
Net income (loss)Net income (loss)$(137,008)(70)%$89,856 26 %$(184,161)(52)%$89,591 19 %

Revenue

We earnOur 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 condensed 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 condensed consolidated statements of comprehensive income as production bonus and other revenue (“other revenue”). Furthermore, the production bonus and other revenue also includes the lead generation revenue from InsideResponse.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.

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

Three Months Ended March 31,Nine Months Ended March 31,Three Months Ended December 31,Percent ChangeSix Months Ended December 31,Percent Change
(dollars in thousands)(dollars in thousands)20212020$%20212020$%(dollars in thousands)202120202021 vs. 2020202120202021 vs. 2020
CommissionCommission$236,793 $137,455 $99,338 72%$664,312 $353,926 $310,386 88%Commission$140,701 $320,265 (56)%$272,956 $425,415 (36)%
Percentage of total revenue89 %92 %89 %91 %
Production bonus and otherProduction bonus and other30,13011,14918,981170%85,05436,14248,912 135%Production bonus and other54,280 37,300 46%79,552 54,924 45%
Percentage of total revenue11 %%11 %%
Total revenueTotal revenue$266,923 $148,604 $118,319 80%$749,366 $390,068 $359,298 92%Total revenue$194,981 $357,565 (45)%$352,508 $480,339 (27)%

Three Months Ended MarchDecember 31, 2021 and 2020–Commission revenue increased $99.3decreased $179.6 million, or 72%56%, for the three months ended MarchDecember 31, 2021, and included decreases of commission revenues in Senior, Life, and Auto & Home of $175.0 million, $2.8 million, and $0.8 million, respectively. For Senior, despite a 22% increase in approved policies, the reduction in revenue was driven by a $145.0 million downward adjustment from a change in estimate of Senior MA cohort transaction prices, in addition to a 27% reduction in LTV’s of approved MA policies, as a result of lower persistency assumptions. Based on an increase in actual lapse rates for Senior MA policies during calendar year 2021 and overall lower persistency from early data received for the January 2022 renewals, it was determined that a downward adjustment to Senior MA revenue was probable, and commission revenue was reduced during the three months ended December 31, 2021. Approximately 62%, 28%, and 8% of the adjustment from the change in estimate were from approved policies sold in fiscal years 2021, 2020, and 2019, respectively. Life’s revenue decline was primarily driven by a $3.9 million decrease in term life revenue, partially offset by a $1.1 million increase in final expense revenue. The revenue decline for Auto & Home was driven by our strategy to reduce the growth in that division. The $17.0 million increase in production bonus and other revenue was primarily driven by $8.7 million of new pharmacy prescription revenue from SelectRx and a $12.6 million increase in marketing development funds received for Senior, partially offset by a reduction of $6.3 million in external lead generation revenue from InsideResponse, as more of their leads were consumed within the Senior division than in the prior year.

Six Months Ended December 31, 2021 and 2020–Commission revenue decreased $152.5 million, or 36%, for the six months ended December 31, 2021, which included increasesdecreases of commission revenues in Senior and Life commission revenuesAuto & Home of $86.5$149.5 million and $16.2$2.5 million, respectively, offset by a decreasean increase in Auto & HomeLife commission revenue of $3.2$1.8 million. For Senior, the revenue growthdecline was primarily driven by the $145.0 million adjustment on commissions revenue noted above and a 25% reduction in LTV’s of approved MA policies. The revenue decline for Auto & Home was driven by our strategy to reduce the significant increasegrowth in our agent count that led to a 110% increase in Medicare Advantage commission revenue.division. Life’s $16.2 million revenue growth was driven by $14.0$9.2 million growth in final expense revenue which was a result of the investment we have made in agents to grow sales of these policies, andpartially offset by a slight increasedecrease in core term life revenue. revenue of $7.4 million. The revenue decline for Auto & Home was driven by our strategic shift in agents from Auto & Home to our Senior and Life divisions. The $19.0$24.6 million increase in production bonus and other revenue was primarily driven by $10.8$13.2 million of new pharmacy prescription revenue from SelectRx and a $15.7 million increase in marketing development funds received for Senior, and $8.4 million of advertising revenue associated with InsideResponse.

Nine Months Ended March 31, 2021 and2020–Commission revenue increased $310.4 million, or 88%, for the nine months ended March 31, 2021, which included increases in Senior and Life commission revenues of $278.2 million and $38.5 million, respectively,partially offset by a decrease in Auto & Home commission revenuereduction of $5.9 million. For Senior, the revenue growth was driven by the significant increase in our agent count that led to a 124% increase in Medicare Advantage commission revenue. Life’s $38.5 million revenue growth was driven by $35.2 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 a slight increase in core term life revenue. The revenue decline for Auto & Home was driven by our strategic shift in agents from Auto & Home to our Senior and Life divisions. The $48.9 million increase in production bonus and other revenue was primarily driven by $19.0$8.6 million in marketing development funds received forexternal lead generation revenue from InsideResponse, as more of their leads were consumed within Senior and $28.9 million of advertising revenue associated with InsideResponse.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.






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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 periods presented and the dollar and percentage changes from the prior year:

Three Months Ended March 31,Nine Months Ended March 31,Three Months Ended December 31,Percent ChangeSix Months Ended December 31,Percent Change
(dollars in thousands)(dollars in thousands)20212020$%20212020$%(dollars in thousands)202120202021 vs. 2020202120202021 vs. 2020
Cost of revenueCost of revenue$71,439 $43,367 $28,072 65%$206,605 $126,488 $80,117 63%Cost of revenue$148,108 $84,121 76%$240,273 $135,166 78%
Percentage of total revenue27 %29 %28 %32 %

Three Months Ended MarchDecember 31, 2021 and 2020–Cost of revenue increased $28.1$64.0 million, or 65%76%, for the three months ended MarchDecember 31, 2021, primarily due to a $23.7$45.8 million increase in compensation costs driven by the growth in the number of agents within the Senior segment and, to a lesser extent, the Life, segment to support the sale of final expense policies. The increase in headcount also drove increases in the allocations of $3.1$6.1 million for facilities, telecommunications, and software maintenance costs, and $0.9$3.8 million for licensing costs. Additionally, there was $6.7 million of new medication costs in cost of revenue for SelectRx.

NineSix Months Ended MarchDecember 31, 2021 and2020–Cost of revenue increased $80.1$105.1 million, or 63%78%, for the ninesix months ended MarchDecember 31, 2021, primarily due to a $68.6$75.1 million increase in compensation costs driven by the growth in the number of agents within the Senior segment and, to a lesser extent, the Life, segment to support the sale of final expense policies. The increase in headcount also drove increases in the allocations of $7.1$10.3 million for facilities, telecommunications, and software maintenance costs, and $3.6$7.1 million for licensing costs. Additionally, there was $10.2 million of new medication costs in cost of revenue for SelectRx.

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 periods presented and the dollar and percentage changes from the prior year:

Three Months Ended March 31,Nine Months Ended March 31,Three Months Ended December 31,Percent ChangeSix Months Ended December 31,Percent Change
(dollars in thousands)(dollars in thousands)20212020$%20212020$%(dollars in thousands)202120202021 vs. 2020202120202021 vs. 2020
Marketing and advertisingMarketing and advertising$116,690 $55,274 $61,416 111%$298,696 $132,246 $166,450 126%Marketing and advertising$193,246 $132,206 46%$283,923 $182,006 56%
Percentage of total revenue44 %37 %40 %34 %

Three Months Ended MarchDecember 31, 2021 and 2020–Marketing and advertising expenses increased $61.4$61.0 million, or 111%46%, for the three months ended MarchDecember 31, 2021, primarily due to a $41.8$56.3 million increase in SeniorSenior’s marketing and advertising costs associated with generating more leads for our larger agent base to consume.consume during AEP and lower overall close rates which impacted our marketing efficiency. Marketing and advertising costs also increased $11.1$1.5 million in our Life segment driven by an increase in leads specifically for our final expense policies. Additionally, compensation costs related to our marketing personnel increased $9.5$3.3 million as we increased the number of people supporting our marketing organization to produce more leads to support the growth ofgrow the business.

NineSix Months Ended MarchDecember 31, 2021 and2020–Marketing and advertising expenses increased $166.5$101.9 million, or 126%56%, for the ninesix months ended MarchDecember 31, 2021, primarily due to a $120.3$84.0 million increase in SeniorSenior’s marketing and advertising costs associated with generating more leads for our larger agent base to consume. Marketingconsume during
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AEP and lower overall close rates which impacted our marketing efficiency. Life’s marketing and advertising costs also increased $19.4$12.9 million, in our Life segment driven by an increase in leads specifically for our final expense policies. Additionally, compensation costs related to our marketing personnel increased $26.2$6.3 million as we increased the number of people supporting our marketing organization to produce more leads to supportgrow the growth of the business.
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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 periods presented and the dollar and percentage changes from the prior year:

Three Months Ended March 31,Nine Months Ended March 31,Three Months Ended December 31,Percent ChangeSix Months Ended December 31,Percent Change
(dollars in thousands)(dollars in thousands)20212020$%20212020$%(dollars in thousands)202120202021 vs. 2020202120202021 vs. 2020
General and administrativeGeneral and administrative$19,251 $6,656 $12,595 189%$44,496 $25,779 $18,717 73%General and administrative$20,147 $13,043 54%$43,539 $25,245 72%
Percentage of total revenue%%%%

Three Months Ended MarchDecember 31, 2021 and 2020–General and administrative expenses increased $12.6$7.1 million, or 189%54%, for the three months ended MarchDecember 31, 2021, primarily due to $5.3$3.3 million in higher compensation costs due to additional headcount to support the growth ofin the business; $4.1business, $1.4 million in corporate development charges,costs primarily related to the FirstSecond Amendment, the recent acquisition of a lead distribution company, and the Secondary Offering;$1.4 million higher depreciation and $1.7 million in higher professional fees and insurance premiums.amortization expense.

NineSix Months Ended MarchDecember 31, 2021 and2020–General and administrative expenses increased $18.7$18.3 million, or 73%72%, for the ninesix months ended MarchDecember 31, 2021, primarily due to $5.6$10.4 million in higher professional fees and insurance premiums; $4.7 million higher compensation costs due to additional headcount to support the growth ofin the business; $4.2business, $1.8 million in corporate development charges,costs primarily related to the FirstSecond Amendment and recent acquisition of a lead distribution company,acquisitions, $2.5 million in higher professional fees, and the Secondary Offering; and $3.7$2.5 million in higher depreciation and amortization expenses.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.

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

Three Months Ended March 31,Nine Months Ended March 31,Three Months Ended December 31,Percent ChangeSix Months Ended December 31,Percent Change
(dollars in thousands)(dollars in thousands)20212020$%20212020$%(dollars in thousands)202120202021 vs. 2020202120202021 vs. 2020
Technical developmentTechnical development$4,860 $2,865 $1,995 70%$13,458 $9,088 $4,370 48%Technical development$6,386 $4,750 34%$12,239 $8,598 42%
Percentage of total revenue%%%%

Three Months Ended MarchDecember 31, 2021 and 2020–Technical development expenses increased $2.0$1.6 million, or 70%34%, for the three months ended MarchDecember 31, 2021, primarily due to a $2.1$0.7 million increase in compensation costs related to our technology personnel as we increased the number of people in our desktop support and development efforts to support the increase in total headcount. The increase in headcount and the growthalso drove increases in the business, offset by a $0.5allocations of $0.4 million decrease in professional fees as we decreased our cost of external application developers. for facilities, telecommunications, and software maintenance costs.

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Six Months Ended MarchDecember 31, 2021 and2020–Technical development expenses increased $4.4$3.6 million, or 48%42%, for the ninesix months ended MarchDecember 31, 2021, primarily due to a $5.8$2.2 million increase in compensation costs related to our technology personnel as we increased the number of people in our desktop support and development
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efforts to support the increase in total headcount. The increase in headcount and the growthalso drove increases in the business, partially offset by a $2.3allocations of $0.8 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 periods presented and the dollar and percentage changes from the prior year:

Three Months Ended March 31,Nine Months Ended March 31,Three Months Ended December 31,Percent ChangeSix Months Ended December 31,Percent Change
(dollars in thousands)(dollars in thousands)20212020$%20212020$%(dollars in thousands)202120202021 vs. 2020202120202021 vs. 2020
Interest expense, netInterest expense, net$(7,355)$(9,356)$2,001 (21)%$(20,898)$(16,239)$(4,659)29%Interest expense, net$(10,587)$(6,782)56%$(19,122)$(13,543)41%
Percentage of total revenue(3)%(6)%(3)%(4)%

Three Months Ended MarchDecember 31, 2021 and 2020–Interest expense decreased $2.0increased $3.8 million, or 21%56%, primarily as a result of decreasesthe increase in interest incurredour outstanding balance on the Term Loans, amortization of additional deferred financing costs associated with the amendments to the credit agreement, and the ticking fee interest related to our non-recourse debt, which was terminatedassessed on June 8, 2020.the DDTL Facility.

NineSix Months Ended MarchDecember 31, 2021 and2020–Interest expense increased $4.7$5.6 million, or 29%41%, primarily as a result of increasesthe increase in interest incurredour outstanding balance on the 2019 Term Loan priorLoans, amortization of additional deferred financing costs associated with the amendments to the First Amendment, partially offset bycredit agreement, and the ticking fee interest related to our non-recourse debt, which was terminatedassessed on June 8, 2020.the DDTL Facility.

Income Tax ExpenseTaxes

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

Three Months Ended March 31,Nine Months Ended March 31,Three Months Ended December 31,Percent ChangeSix Months Ended December 31,Percent Change
(dollars in thousands)(dollars in thousands)20212020$%20212020$%(dollars in thousands)202120202021 vs. 2020202120202021 vs. 2020
Income tax expense$7,183 $7,366 $(183)(2)%$32,619 $19,110 $13,509 71%
Income tax expense (benefit)Income tax expense (benefit)$(46,536)$26,391 (276)%$(62,580)$24,994 (350)%
Effective tax rateEffective tax rate16.5 %23.7 %20.3 %23.8 %Effective tax rate25.4 %22.7 %25.4 %21.8 %

Three Months Ended December 31, 2021 and 2020–For the three months ended MarchDecember 31, 2021 and 2020, we recognized income tax benefit of $46.5 million and income tax expense of $7.2 million and $7.4$26.4 million, respectively, representing an effective tax raterates of 16.5%25.4% and 23.7%22.7%, respectively. The differences from our federal statutory tax rate to the effective tax rate for the three months ended MarchDecember 31, 2021, were primarily related to state income taxes. The differences from our federal statutory tax rate to the effective tax rate for the three months ended December 31, 2020, were primarily related to state income taxes, partially offset by state tax credits such as HPIP and discrete items for the period primarily fromrelated to the exercise of non-qualified stock options. The differences from our federal statutory tax rate to the effective tax rate for the three months ended March 31, 2020, were primarily related to state income taxes, partially offset by state tax credits such as HPIP.

Six Months Ended December 31, 2021 and 2020–For the ninesix months ended MarchDecember 31, 2021 and 2020, we recognized income tax benefit of $62.6 million and income tax expense of $32.6 million and $19.1$25.0 million, respectively, representing an effective tax raterates of 20.3%25.4% and 23.8%21.8%, respectively. The differences from our federal statutory tax rate to the effective tax rate for the ninesix months ended MarchDecember 31, 2021, were primarily related to state income taxes. The differences from our federal statutory tax rate to the effective tax rate for the six months ended December 31,
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2020, were primarily related to state income taxes, partially offset by state tax credits such as HPIP and discrete items for the period primarily fromrelated to the exercise of non-qualified stock options. The differences from our federal statutory tax rate to the effective tax rate for the nine months ended March 31, 2020, were primarily related to state income taxes and non-deductible meals and entertainment expenses, partially offset by state tax credits such as HPIP.

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.
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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.

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 MarchDecember 31, 20212021:

(in thousands)(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated
RevenueRevenue$215,600 $46,400 $6,973 $(2,050)$266,923 Revenue$157,967 $32,780 $6,135 $(1,901)$194,981 
Operating expensesOperating expenses(140,111)(43,225)(5,877)(12,507)(1)(201,720)Operating expenses(306,602)(30,930)(4,700)(15,979)(1)(358,211)
Other expenses, netOther expenses, net— — — (15)(15)Other expenses, net— — — (51)(51)
Adjusted EBITDAAdjusted EBITDA$75,489 $3,175 $1,096 $(14,572)65,188 Adjusted EBITDA$(148,635)$1,850 $1,435 $(17,931)(163,281)
Share-based compensation expenseShare-based compensation expense(1,429)Share-based compensation expense(1,894)
Non-recurring expenses (2)
Non-recurring expenses (2)
(4,667)
Non-recurring expenses (2)
(1,602)
Fair value adjustments to contingent earnout obligations(334)
Depreciation and amortizationDepreciation and amortization(4,323)Depreciation and amortization(6,175)
Loss on disposal of property, equipment, and softwareLoss on disposal of property, equipment, and software(101)Loss on disposal of property, equipment, and software(5)
Interest expense, netInterest expense, net(7,355)Interest expense, net(10,587)
Loss on extinguishment of debt(3,315)
Income tax expense(7,183)
Net income$36,481 
Income tax benefitIncome tax benefit46,536 
Net lossNet loss$(137,008)
(1) Operating expenses in the Corp & Elims division primarily include $9.8$11.2 million in salaries and benefits for certain general, administrative, and IT related departments and $3.2$4.3 million in professional services fees.

(2) These expenses primarily consist of debt issuance costs incurred for the Second Amendment.

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Three Months Ended December 31, 2020:

(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated
Revenue$315,510 $35,666 $7,241 $(852)$357,565 
Operating expenses(180,955)(29,961)(5,091)(12,746)(1)(228,753)
Other expenses, net— — — (21)(21)
Adjusted EBITDA$134,555 $5,705 $2,150 $(13,619)128,791 
Share-based compensation expense(1,336)
Non-recurring expenses (2)
(362)
Fair value adjustments to contingent earnout obligations(395)
Depreciation and amortization(3,590)
Loss on disposal of property, equipment, and software(79)
Interest expense, net(6,782)
Income tax expense(26,391)
Net income$89,856 
(1) Operating expenses in the Corp & Elims division primarily include $8.4 million in salaries and benefits for certain general, administrative, and IT related departments and $3.3 million in professional services fees.

(2) These expenses primarily consist of non-recurring compensation to a former executive and expenses related to business continuity in response to the COVID-19 pandemic.

Six Months Ended December 31, 2021

(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated
Revenue$264,287 $80,211 $13,604 $(5,594)$352,508 
Operating expenses(445,893)(76,058)(10,796)(29,330)(1)(562,077)
Other expenses, net— — — (153)(153)
Adjusted EBITDA$(181,606)$4,153 $2,808 $(35,077)(209,722)
Share-based compensation expense(4,109)
Non-recurring expenses (2)
(2,155)
Depreciation and amortization(11,278)
Loss on disposal of property, equipment, and software(355)
Interest expense, net(19,122)
Income tax benefit62,580 
Net loss$(184,161)
(1) Operating expenses in the Corp & Elims division primarily include $21.6 million in salaries and benefits for certain general, administrative, and IT related departments, and $9.0 million in professional services fees.

(2) These expenses primarily consist of costs incurred for the FirstSecond Amendment and costs related to the recent acquisitionacquisitions of a lead distribution company, re-designation of the hedge,Express Med Pharmaceuticals and the Secondary Offering.Simple Meds.




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ThreeSix Months Ended MarchDecember 31, 2020

(in thousands)(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated
RevenueRevenue$107,351 $30,956 $10,442 $(145)$148,604 Revenue$388,709 $77,094 $16,779 $(2,243)$480,339 
Operating expensesOperating expenses(61,169)(27,462)(8,856)(7,059)(1)(104,546)Operating expenses(245,252)(62,307)(11,012)(22,264)(1)(340,835)
Other expenses, netOther expenses, net— — — (4)(4)Other expenses, net— — — (43)(43)
Adjusted EBITDAAdjusted EBITDA$46,182 $3,494 $1,586 $(7,208)44,054 Adjusted EBITDA$143,457 $14,787 $5,767 $(24,550)139,461 
Share-based compensation expenseShare-based compensation expense(19)Share-based compensation expense(2,259)
Non-recurring expenses(2)
Non-recurring expenses(2)
(1,256)Non-recurring expenses (2)(822)
Fair value adjustments to contingent earnout obligationsFair value adjustments to contingent earnout obligations(1,153)
Depreciation and amortizationDepreciation and amortization(2,105)Depreciation and amortization(6,937)
Loss on disposal of property, equipment, and softwareLoss on disposal of property, equipment, and software(236)Loss on disposal of property, equipment, and software(162)
Interest expense, netInterest expense, net(9,356)Interest expense, net(13,543)
Income tax expenseIncome tax expense(7,366)Income tax expense(24,994)
Net incomeNet income$23,716 Net income$89,591 
(1) Operating expenses in the Corp & Elims division primarily include $4.3 million in salaries and benefits for certain general, administrative, and IT related departments and $2.0 million in professional services fees.

(2) These expenses primarily consist of non-recurring compensation to certain board members, non-restructuring severance expenses, costs incurred with respect to the acquisition of InsideResponse, and expenses related to business continuity in response to the COVID-19 pandemic.

Nine Months Ended March 31, 2021

(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated
Revenue$604,309 $125,598 $23,752 $(4,293)$749,366 
Operating expenses(385,363)(105,532)(16,889)(34,771)(1)(542,555)
Other expenses, net— — — (58)(58)
Adjusted EBITDA$218,946 $20,066 $6,863 $(39,122)206,753 
Share-based compensation expense(3,689)
Non-recurring expenses (2)
(5,490)
Fair value adjustments to contingent earnout obligations(1,487)
Depreciation and amortization(11,260)
Loss on disposal of property, equipment, and software(261)
Interest expense, net(20,898)
Loss on extinguishment of debt(3,315)
Income tax expense(32,619)
Net income$127,734 
(1) Operating expenses in the Corp & Elims division primarily include $24.8 million in salaries and benefits for certain general, administrative, and IT related departments and $9.5 million in professional services fees.
(2) These expenses primarily consist of costs incurred for the First Amendment, the recent acquisition of a lead distribution company, re-designation of the hedge, and the Secondary Offering as well as non-recurring compensation to a former executive, non-restructuring severance expenses, and expenses related to business continuity in response to the COVID-19 pandemic.

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Nine Months Ended March 31, 2020

(in thousands)SeniorLifeAuto & HomeCorp & ElimsConsolidated
Revenue$273,808 $87,543 $29,061 $(344)$390,068 
Operating expenses(161,456)(71,991)(23,467)(19,248)(1)(276,162)
Other expenses, net— — — (20)(20)
Adjusted EBITDA$112,352 $15,552 $5,594 $(19,612)113,886 
Share-based compensation expense(9,283)
Non-recurring expenses(2)
(2,648)
Depreciation and amortization(5,273)
Loss on disposal of property, equipment, and software(235)
Interest expense, net(16,239)
Income tax expense(19,110)
Net income$61,098 
(1) Operating expenses in the Corp & Elims division primarily include $10.7$15.0 million in salaries and benefits for certain general, administrative, and IT related departments and $6.3 million in professional services fees.

(2) These expenses primarily consist primarily of one-time consulting expenses associated with adopting ASC 606, non-recurring compensation to certain board members,a former executive, non-restructuring severance expenses, payroll costs related to the Distribution, costs incurred with respect to the acquisition of InsideResponse,our IPO, and expenses related to business continuity in response to the COVID-19 pandemic

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

Three Months Ended
March 31,
Nine Months Ended
March 31,
(dollars in thousands)20212020$%20212020$%
Senior:
Commission revenue:
Medicare advantage$181,040 $86,396 $94,644 110 %$493,745 $220,536 $273,209 124 %
Medicare supplement2,981 13,831 (10,850)(78)%23,716 27,284 (3,568)(13)%
Prescription drug plan449 355 94 26 %2,166 2,391 (225)(9)%
Dental, vision, and health4,671 2,450 2,221 91 %13,041 5,674 7,367 130 %
Other commission revenue619 221 398 180 %1,822 380 1,442 379 %
Total commission revenue189,760 103,253 86,507 84 %534,490 256,265 278,225 109 %
Production bonus and other revenue25,840 4,098 21,742 531 %69,819 17,543 52,276 298 %
Total Senior revenue215,600 107,351 108,249 101 %604,309 273,808 330,501 121 %
Life:
Commission revenue:
Core19,604 18,042 1,562 %58,771 55,745 3,026 %
Final expense20,625 6,596 14,029 213 %48,641 13,480 35,161 261 %
Ancillary1,213 604 609 101 %2,180 1,859 321 17 %
Total commission revenue41,442 25,242 16,200 64 %109,592 71,084 38,508 54 %
Production bonus and other revenue4,958 5,714 (756)(13)%16,006 16,459 (453)(3)%
Total Life revenue46,400 30,956 15,444 50 %125,598 87,543 38,055 43 %
Auto & Home:
Total commission revenue5,910 9,105 (3,195)(35)%21,014 26,921 (5,907)(22)%
Production bonus and other revenue1,063 1,337 (274)(20)%2,738 2,140 598 28 %
Total Auto & Home revenue6,973 10,442 (3,469)(33)%23,752 29,061 (5,309)(18)%
Eliminations:
Total commission revenue(319)(145)(174)120 %(784)(344)(440)128 %
Production bonus and other revenue(1,731)— (1,731)NM(1)(3,509)— (3,509)NM(1)
Total Elimination revenue(2,050)(145)(1,905)1314 %(4,293)(344)(3,949)1148 %
Total commission revenue236,793 137,455 99,338 72 %664,312 353,926 310,386 88 %
Total production bonus and other revenue30,130 11,149 18,981 170 %85,054 36,142 48,912 135 %
Total revenue$266,923 $148,604 $118,319 80 %$749,366 $390,068 $359,298 92 %
(1) Not meaningful
Three Months Ended December 31,Six Months Ended December 31,
(dollars in thousands)20212020$%20212020$%
Senior:
Commission revenue:
Medicare advantage$99,262 $263,975 $(164,713)(62)%$179,345 $312,705 $(133,360)(43)%
Medicare supplement2,332 12,743 (10,411)(82)%3,936 20,735 (16,799)(81)%
Prescription drug plan732 1,102 (370)(34)%1,001 1,717 (716)(42)%
Dental, vision, and health4,920 5,647 (727)(13)%8,136 8,370 (234)(3)%
Other commission revenue1,954 743 1,211 163 %2,854 1,203 1,651 137 %
Total commission revenue109,200 284,210 (175,010)(62)%195,272 344,730 (149,458)(43)%
Production bonus and other revenue48,767 31,300 17,467 56 %69,015 43,979 25,036 57 %
Total Senior revenue157,967 315,510 (157,543)(50)%264,287 388,709 (124,422)(32)%
Life:
Commission revenue:
Term16,126 20,028 (3,902)(19)%32,372 39,772 (7,400)(19)%
Final expense10,886 9,816 1,070 11 %35,473 26,274 9,199 35 %
Total commission revenue27,012 29,844 (2,832)(9)%67,845 66,046 1,799 %
Production bonus and other revenue5,768 5,822 (54)(1)%12,366 11,048 1,318 12 %
Total Life revenue32,780 35,666 (2,886)(8)%80,211 77,094 3,117 %
Auto & Home:
Total commission revenue5,657 6,491 (834)(13)%12,649 15,104 (2,455)(16)%
Production bonus and other revenue478 750 (272)(36)%955 1,675 (720)(43)%
Total Auto & Home revenue6,135 7,241 (1,106)(15)%13,604 16,779 (3,175)(19)%
Eliminations:
Total commission revenue(1,168)(280)(888)317 %(2,810)(465)(2,345)504 %
Production bonus and other revenue(733)(572)(161)28 %(2,784)(1,778)(1,006)57 %
Total Elimination revenue(1,901)(852)(1,049)123 %(5,594)(2,243)(3,351)149 %
Total commission revenue140,701 320,265 (179,564)(56)%272,956 425,415 (152,459)(36)%
Total production bonus and other revenue54,280 37,300 16,980 46 %79,552 54,924 24,628 45 %
Total revenue$194,981 $357,565 $(162,584)(45)%$352,508 $480,339 $(127,831)(27)%

Revenue by Segment

Three Months Ended MarchDecember 31, 2021 and 2020–Revenue from our Senior segment was $215.6$158.0 million for the three months ended MarchDecember 31, 2021, a $108.2$157.5 million, or 101%50%, decrease compared to revenue of $315.5 million for the three months ended December 31, 2020. The decrease was due to a $164.7 million, or 62%, decrease in MA commission revenue from the $145.0 million adjustment from a change in estimate of cohort transaction prices discussed above, a $10.4 million decrease in MS commission revenue, and a reduction of $6.3 million of external
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lead generation revenue from InsideResponse, partially offset by $8.7 million of new pharmacy prescription revenue from SelectRx and a $12.6 million increase in marketing development funds received.

Revenue from Life was $32.8 million for the three months ended December 31, 2021, a $2.9 million, or 8%, decrease compared to revenue of $35.7 million for the three months ended December 31, 2020. The decrease was primarily due to a $3.9 million decrease in term life revenue, offset by a $1.1 million, or 11%, increase in final expense revenue.

Revenue from Auto & Home was $6.1 million for the three months ended December 31, 2021, a $1.1 million, or 15%, decrease compared to revenue of $7.2 million for the three months ended December 31, 2020, primarily due to our strategy to reduce the growth in Auto & Home.

Six Months Ended December 31, 2021 and 2020–Revenue from Senior was $264.3 million for the six months ended December 31, 2021, a $124.4 million, or 32%, decrease compared to revenue of $388.7 million for the six months ended December 31, 2020. The decrease was due to a $133.4 million, or 43%, decrease in MA commission revenue from the $145.0 million adjustment from the change in estimate of cohort transaction prices discussed above, a $16.8 million decrease in MS commission revenue, and a reduction of $8.6 million of external lead generation revenue from InsideResponse, partially offset by $13.2 million of new pharmacy prescription revenue from SelectRx and a $15.7 million increase in marketing development funds received.

Revenue from Life was $80.2 million for the six months ended December 31, 2021, a $3.1 million, or 4%, increase compared to revenue of $107.4$77.1 million for the threesix months ended MarchDecember 31, 2020. The increase was primarily due to a $94.6$9.2 million or 110%, increase in MA commission revenue, $10.8 million in marketing development funds received, and $8.4 million of advertising revenue associated with InsideResponse included in production bonus and other revenue, partially offset
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by a $10.9 million, or 78%, decrease in MS commission revenue that was primarily due to the recognition of $9.0 million of renewal year revenue from a certain MS carrier whose contract was amended during the three months ended March, 31, 2020.

Revenue from our Life segment was $46.4 million for the three months ended March 31, 2021, a $15.4 million, or 50%, increase compared to revenue of $31.0 million for the three months ended March 31, 2020. The increase was primarily due to a $14.0 million, or 213%, increase in final expense revenue, which was the result of our increased focus on selling final expense policies.offset by a $7.4 million decrease in term life revenue.

Revenue from our Auto & Home segment was $7.0$13.6 million for the threesix months ended MarchDecember 31, 2021, a $3.5$3.2 million, or 33%19%, decrease compared to revenue of $10.4$16.8 million for the threesix months ended MarchDecember 31, 2020. The decrease was2020, primarily due to a 29% decreaseour strategy to reduce the growth in premium sold.

Nine Months Ended March 31, 2021 and2020––Revenue from our Senior segment was $604.3 million for the nine months ended March 31, 2021, a $330.5 million, or 121%, increase compared to revenue of $273.8 million for the nine months ended March 31, 2020. The increase was primarily due to a $273.2 million, or 124%, increase in MA commission revenue, $19.0 million in marketing development funds received, and $28.9 million of advertising revenue associated with InsideResponse included in production bonus and other revenue, partially offset by a $3.6 million, or 13%, decrease in MS commission revenue.

Revenue from our Life segment was $125.6 million for the nine months ended March 31, 2021, a $38.1 million, or 43%, increase compared to revenue of $87.5 million for the nine months ended March 31, 2020. The increase was primarily due to a $35.2 million, or 261%, increase in final expense revenue which was the result of our increased focus on selling final expense policies.

Revenue from our Auto & Home segment was $23.8 million for the nine months ended March 31, 2021, a $5.3 million, or 18%, decrease compared to revenue of $29.1 million for the nine months ended March 31, 2020. The decrease was primarily due to a 14% decrease in premium sold.Home.

Adjusted EBITDA by Segment

Three Months Ended MarchDecember 31, 2021 and 2020–Adjusted EBITDA from our Senior segment was $75.5$(148.6) million for the three months ended MarchDecember 31, 2021,, a $29.3$283.2 million or 63%, increasedecrease compared to Adjusted EBITDA of $46.2$134.6 million for the three months ended MarchDecember 31, 2020.2020. The increasedecrease in Adjusted EBITDA was due to a $108.2$157.5 million increasedecrease in revenue partially offset byprimarily as a $78.9result of the $145.0 million adjustment from a change in estimate of cohort transaction prices discussed above, in addition to a $125.6 million increase in operating costs and expenses primarily attributable to an increase in variable marketing expenses andas the Company increased marketing spend to generate more leads for our larger agent base to consume during AEP, in addition to lower overall close rates which impacted our marketing efficiency. Senior also incurred increased personnel costs associated with higher headcount that was driven by a significant increase in policies submittedanticipation of AEP and approvedOEP, as well as higher fulfillment costs associated with scaling Population Health and an increase in the number of licensed agents.SelectRx.

Adjusted EBITDA from our Life segment was $3.2$1.9 million for the three months ended MarchDecember 31, 2021, a $0.3$3.9 million, or 9%68%, decrease compared to Adjusted EBITDA of $3.5$5.7 million for the three months ended MarchDecember 31, 2020. The decrease in Adjusted EBITDA was primarily due to a $15.4$2.9 million increasedecrease in revenue offset byprimarily as a $15.8result of a decrease in term life revenue, as well as a $1.0 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. Adjusted EBITDA was also impacted by flexing a significant amount of our Life and Health Advisor ("LHA") agents that sell final expense policies into Senior to sell during AEP as we incurred expense to hire and train some of these agents but didn't realize the full benefit of revenue within our Life business for the quarter.

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Adjusted EBITDA from our Auto & Home segment was $1.1$1.4 million for the three months ended MarchDecember 31, 2021, a $0.5$0.7 million, or 31%33%, decrease compared to Adjusted EBITDA of $1.6$2.2 million for the three months ended MarchDecember 31, 2020. The decrease in Adjusted EBITDA was primarily due to a $3.0$1.1 million decrease in operating costs and expenses partially offset by a $3.5 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.
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NineSix Months Ended MarchDecember 31, 2021 and2020–Adjusted EBITDA from our Senior segment was $218.9$(181.6) million for the ninesix months ended MarchDecember 31, 2021,, a $106.6$325.1 million, or 95%, increase decrease compared to Adjusted EBITDA of $112.4$143.5 million for the ninesix months ended MarchDecember 31, 2020.2020. The increasedecrease in Adjusted EBITDA was due to a $330.5$124.4 million increasedecrease in revenue partially offset byprimarily as a $223.9result of the $145.0 million adjustment from a change in estimate of cohort transaction prices discussed above, in addition to a $200.6 million increase in operating costs and expenses primarily attributable to an increase in variable marketing expenses andas the Company increased marketing spend to generate more leads for our larger agent base to consume during AEP, in addition to lower overall close rates which impacted our marketing efficiency. Senior also incurred increased personnel costs associated with higher headcount that was driven by a significant increase in policies submittedanticipation of AEP and approvedOEP, as well as higher fulfillment costs associated with scaling Population Health and an increase in the number of licensed agents.SelectRx.

Adjusted EBITDA from our Life segment was $20.1$4.2 million for the ninesix months ended MarchDecember 31, 2021, a $4.5an $10.6 million, or 29%72%, increasedecrease compared to Adjusted EBITDA of $15.6$14.8 million for the ninesix months ended MarchDecember 31, 2020. The increasedecrease in Adjusted EBITDA was primarily due to a $38.1 million increase in revenue partially offset by a $33.5$13.8 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 ancillaryfinal expense policies, most notablyall of which was partially offset by a $3.1 million increase in revenue, primarily from final expense policies.

Adjusted EBITDA from our Auto & Home segment was $6.9$2.8 million for the ninesix months ended MarchDecember 31, 2021, a $1.3$3.0 million, or 23%51%, increasedecrease compared to Adjusted EBITDA of $5.6$5.8 million for the ninesix months ended MarchDecember 31, 2020. The increasedecrease in Adjusted EBITDA was primarily due to a $6.6$3.2 million decrease in operating costs and expenses partially offset by a $5.3 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 1812 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

To date, systemic economic disruptions related to the COVID-19 pandemic have not had a substantial effect on our financial standing; however, given the unpredictable nature of the virus and its effects on the global economy, both domestically and globally, the Company expects to maintain its financial flexibility under current market conditions. However, there is inherent difficulty in assessing the possibility of future changes that could materially alter this 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.needs in light of the ongoing pandemic as developments arise.

As of MarchDecember 31, 2021 and June 30, 2020,2021, our cash and cash equivalents and restricted cash totaled $369.0$193.4 million and $368.9$286.5 million, respectively. Additionally, the following table presents a summary of our cash flows for the periods presented below:

Nine Months Ended March 31,
(in thousands)20212020
Net cash used in operating activities$(60,947)$(42,032)
Net cash used in investing activities(36,206)(10,625)
Net cash provided by financing activities97,331 135,714 





Six Months Ended December 31,
(in thousands)20212020
Net cash used in operating activities$(305,741)$(103,148)
Net cash used in investing activities(31,062)(9,096)
Net cash provided by (used in) financing activities243,706 (10,719)
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Operating Activities

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

NineSix Months Ended MarchDecember 31, 2021—Cash used in operating activities was $60.9$305.7 million, consisting of net incomeloss of $127.7$184.2 million and adjustments for non-cash items of $57.1$42.2 million, offset by cash used in operating assets and liabilities of $245.8$79.4 million. Adjustments for non-cash items primarily consisted of $32.5$62.9 million in deferred income taxes, as the Company defers revenue related to certain commissions receivable into following years until it is collected, $11.3 million of depreciation and amortization related to additional fixed assets purchases to accommodate our growth in headcount and internally developed software in service, $3.7$4.1 million of share-based compensation expense, and $2.9$3.0 million of amortization of debt issuance costs and debt discount as a result of amendments to the Senior Secured Credit Facility. The cash decrease resulting from changes in net operating assets and liabilities primarily consisted of increases of $39.9 million in commissions receivable, $43.4 million in accounts receivable, and $5.6 million in other current assets, partially offset by increases of $15.1 million in accounts payable and accrued expenses, all driven by the increased marketing and personnel costs for AEP.

Six Months Ended December 31, 2020—Cash used in operating activities was $103.1 million, consisting of net income of $89.6 million and adjustments for non-cash items of $38.9 million, offset by cash used in operating assets and liabilities of $231.7 million. Adjustments for non-cash items primarily consisted of $24.9 million in deferred income taxes, $6.9 million of depreciation and amortization related to additional fixed assets purchases to accommodate our growth in headcount and internally developed software in service, $2.3 million of share-based compensation expense, and $1.9 million of non-cash lease expense. The cash decrease resulting from changes in net operating assets and liabilities primarily consisted of increases of $251.2$219.1 million in commissions receivable and $52.9$61.3 million in accounts receivable related to the increase in approved policies partially offset by increases of $26.2$15.7 million in accounts payable and accrued expenses and $30.4$32.4 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.

Nine Months Ended March 31, 2020—Cash used in operating activities was $42.0 million, consisting of net income of $61.1 million and adjustments for non-cash items of $35.3 million, offset by cash used in operating assets and liabilities of $138.5 million. Adjustments for non-cash items primarily consisted of $19.1 million of deferred income taxes as the Company defers revenue related to certain commissions receivable into following years until it is collected, $9.3 million of share-based compensation expense primarily related to the Distribution, and $5.3 million of depreciation and amortization related to the additional fixed assets purchased to accommodate our growth in headcount. The cash decrease resulting from changes in net operating assets and liabilities primarily consisted of increases of $142.5 million in commissions receivable and $17.1 million in accounts receivable related to the increase in approved policies, partially offset by increases of $12.9 million in accounts payable and accrued expenses, and $6.7 million in other liabilities, primarily accrued compensation and benefits, all driven by the increased marketing and personnel costs required to produce our increased revenue.

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.

NineSix Months Ended MarchDecember 31, 2021—Net cash used in investing activities of $36.2$31.1 million was due to $6.5$17.9 million of purchases of property and equipment primarily to support AEP and $5.8 million in purchasesthe growth of software and capitalized internal-use software spent to develop new programs and systems to efficiently accommodate our increased volumes. Additionally, we used $24.0 million of cash related to the acquisition of a lead distribution company.SelectRx
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infrastructure, $5.2 million in purchases of software and capitalized internal-use software, $6.9 million of net cash paid to acquire Simple Meds, and a $1.0 million non-controlling interest equity investment.

NineSix Months Ended MarchDecember 31, 2020—Net cash used in investing activities of $10.6$9.1 million was due to $6.2$5.8 million of purchases of property and equipment and $4.4$3.4 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 proceeds from the issuance of debt and equity and proceeds and payments related to stock-based compensation.

NineSix Months Ended MarchDecember 31, 2021—Net cash provided by financing activities of $243.7 million was primarily due to $242.0 million in net proceeds from the DDTL Facility and $2.3 million in proceeds from common stock options exercised and the employee stock purchase plan, partially offset by $0.3 million in debt issuance costs related to the Second Amendment and Third Amendment to the Senior Secured Credit Facility.

Six Months Ended December 31, 2020—Net cash used in financing activities of $97.3$10.7 million was primarily due to $228.8$5.3 million in net proceeds from the 2021 Term Loan as a result of the First Amendment, partially offset by payments of $84.1 million related to the partial extinguishment of the 2019 Term Loan, $32.3 million of earnout for the InsideResponse acquisition, and $10.0 million for withholding taxes related to net share settlements of employee stock option awards.

Nine Months Ended March 31, 2020—Net cash provided by financing activities of $135.7 million was primarily due to $416.5awards, $3.9 million in net proceeds frompayments for costs incurred in the 2019 Term LoanIPO, and $12.1$1.8 million gross proceeds from non-recourse debt, and $5.4in payments for costs incurred in connection with our private placement, partially offset by $0.4 million inof proceeds from common stock options exercised, partially offset by $275.0 million for the Distribution, $11.0 million in net payments for our revolving line of credit, which was used to fund working capital, mostly due to our seasonality around AEP, and $7.7 million and $2.1 million in debt and equity issuance costs, respectively, incurred for the 2019 Term Loan and our IPO.exercises.

Senior Secured Credit FacilitiesFacility

On February 24, 2021, the CompanyWe entered into the First Amendment with certainSenior Secured Credit Facility to provide access to cash, in a variety of its existing lenders and Morgan Stanley as administrative agent. Refermethods, when necessary to Note 8 tofund the condensed consolidated financial statements for further details.operations of the business. There were no amounts drawnoutstanding under the Revolving Credit Facility or DDTL Facility as of MarchDecember 31, 2021. As of MarchDecember 31, 2021, there was $471.9 million outstanding under the Term Loans.Loans and $245.0 million outstanding under the DDTL Facility. Refer to Note 7 to the condensed consolidated financial statements for further details.

Our risk management strategy includes entering into interest rate swap agreements to protect against unfavorable interest rate changes relating to forecasted debt transactions. The Company's Amended Interest Rate Swap is designated as a cash flow hedge of the interest payments on $325$325.0 million in principal of the Term Loans. Refer to Note 67 to the condensed consolidated financial statements for further details.

Contractual Obligations

AsOther than the discussion in Note 7 to the condensed consolidated financial statements, as of MarchDecember 31, 2021, there have been no material changes to our contractual obligations as previously described in our annual report on Form 10-K for the year ended June 30, 2020.2021 Annual Report.

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Off-Balance Sheet Arrangements

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

Recent Accounting Pronouncements

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

We are primarily exposed to the market risk associated with unfavorable movements in interest rates. The risk inherent in our market risk-sensitive instruments and positions is the potential loss or increased expense arising 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.our 2021 Annual Report.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Our Disclosure Controls and Procedures

As of March 31, 2021,The Company completed an evaluation of the effectiveness of our “disclosuredisclosure 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) wasAct), carried out by our management, with the participation of our principalchief executive officer (principal executive officer) and principalour chief financial officer.officer (principal financial and accounting officer). Based upon thatour 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 arewere not effective as of December 31, 2021, because of a material weakness in our internal controls over financial reporting described below. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, an error was identified relative to ensurethe Life first year commission revenue provision for certain final expense policies. As a result of the error, management concluded that our controls addressing the completeness and accuracy of carrier and policy information requiredutilized to be disclosed by usdetermine the first year provision were not designed effectively. This material weakness resulted in reports thatthe correction of an error in the Company’s interim financial statements for the quarters ended December 31, 2020, for which we file or submit under the Exchange Acthave concluded such error is (i) recorded, processed, summarized andnot material to those previously 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.statements.

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.

Management’s Plan to Remediate the Material Weakness

As a result of this material weakness, we have initiated and will continue to implement remediation measures including, but not limited to, obtaining complete and accurate carrier information feeds to support first year provision for final expense policies, reviewing policies as applicable to ensure additional risk mitigation, and enhancing procedures to assess the ongoing completeness and accuracy of carrier information utilized in supporting provisioning control activities. We are still in the process of assessing our remediation plan, and the initiatives we are implementing to remediate the material weakness are subject to continued management review supported by confirmation and testing, as well as audit committee oversight. However, we cannot be certain that the measures we
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have taken or may take in the future will ensure that we will establish and maintain adequate controls over our financial processes and reporting in the future. Notwithstanding the material weakness, our management has concluded that the financial statements included elsewhere in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows in conformity with GAAP. The material weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that the Company’s controls are operating effectively.

Changes in Internal Control over Financial Reporting

ThereExcept for the material weakness noted above, 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 1934Act) 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.

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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 forthexcept as disclosed in our Annual Report onthe Company’s Form 10-K10-K/A for the year ended June 30, 2020, as2021 filed with the SECSecurities and Exchange Commission on September 10, 2020. 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 Factors.”February 14, 2022. 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.Immaterial Correction of Prior Period Financial Statements

As discussed in Note 1 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, the Company discovered that the provision for first year commission revenue for certain final expense policies offered by one of its insurance carrier partners should have been accrued based on a higher lapse rate. The error in the lapse rate resulted in commission revenues being misstated by $6.1 million, $2.0 million, and $2.4 million for the years ended June 30, 2021 and 2020, and for the three months ended September 30, 2021, respectively. Accounts receivable was misstated by $8.1 million and $2.0 million, as of June 30, 2021 and 2020, respectively. The impact of the error on net income for the year ended June 30, 2021 was a decrease of $4.8 million. Management has evaluated this misstatement and concluded it was not material to prior periods, individually or in aggregate. However, correcting the cumulative effect of the error in the second quarter of 2022 would have a significant effect on the results of the operations. Therefore the Company plans to correct the consolidated financial statements for the prior periods that will be presented in the Form 10-K filing for the year ended June 30, 2022. The
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Company also plans to correct the comparable Q3 2021 and Q1 2022 condensed consolidated financial statements that will be presented in the Q3 2022 and Q1 2023 Form 10-Q filings, respectively.

The following tables reflect the effects of the correction on all affected line items of the Company’s previously reported condensed consolidated financial statements to be presented as comparative in the Form 10-Q for the three months ended September 30, 2022:

CORRECTED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (unaudited)
Three Months Ended September 30, 2021
(in thousands)As Previously ReportedAdjustmentAs Corrected
Commission revenue$134,651 (2,397)$132,254 
Total revenue159,923 (2,397)157,526 
Loss from operations(52,164)(2,397)(54,561)
Loss before income tax benefit(60,801)(2,397)(63,198)
Income tax benefit(15,436)(609)(16,045)
Net loss(45,365)(1,788)(47,153)
Net loss per share:
Basic(0.28)(0.01)(0.29)
Diluted(0.28)(0.01)(0.29)
Comprehensive loss$(45,371)$(1,788)$(47,159)

CORRECTED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
Three Months Ended September 30, 2021
(in thousands)(Accumulated Deficit)/Retained EarningsTotal
Shareholders'
Equity
As Previously Reported
BALANCES-June 30, 2021$128,254 $674,889 
Net loss(45,365)(45,365)
BALANCES-September 30, 202182,889 633,785 
Adjustments
BALANCES-June 30, 2021(6,329)(6,329)
Net loss(1,788)(1,788)
BALANCES-September 30, 2021(8,117)(8,117)
As Corrected
BALANCES-June 30, 2021121,925 668,560 
Net loss(47,153)(47,153)
BALANCES-September 30, 2021$74,772 $625,668 

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CORRECTED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Three Months Ended September 30, 2021
(in thousands)As Previously ReportedAdjustmentAs Corrected
Net loss$(45,365)$(1,788)$(47,153)
Deferred income taxes(15,807)(609)(16,416)
Accounts receivable17,336 2,397 19,733 
Net cash used in operating activities$(87,075)$— $(87,075)

The following tables reflect the effects of the correction on all affected line items of the Company’s previously reported consolidated financial statements as of and for the year ended June 30, 2021 to be presented as comparative in the Form 10-K for the year ended June 30, 2022:

CORRECTED CONSOLIDATED BALANCE SHEET (unaudited)
June 30, 2021
(in thousands)As Previously ReportedAdjustmentAs Corrected
Accounts receivable$113,375 $(8,077)$105,298 
Total current assets493,435 (8,077)485,358 
Total assets1,433,872 (8,077)1,425,795 
Deferred income taxes140,988 (1,748)139,240 
Total liabilities758,983 (1,748)757,235 
Retained earnings (accumulated deficit)128,254 (6,329)121,925 
Total shareholders’ equity674,889 (6,329)668,560 
Total liabilities and shareholders’ equity$1,433,872 $(8,077)$1,425,795 

CORRECTED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (unaudited)
Year Ended June 30, 2021
(in thousands)As Previously ReportedAdjustmentAs Corrected
Commission revenue$826,606 $(6,110)$820,496 
Total revenue937,815 (6,110)931,705 
Income (loss) from operations200,072 (6,110)193,962 
Income (loss) before income tax expense (benefit)165,849 (6,110)159,739 
Income tax expense (benefit)34,803 (1,284)33,519 
Net income (loss)131,046 (4,826)126,220 
Net income (loss) per share:
Basic0.80 (0.03)0.77 
Diluted0.79 (0.03)0.76 
Comprehensive income (loss)$132,529 (4,826)$127,703 

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CORRECTED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
Year Ended June 30, 2021
(in thousands)(Accumulated Deficit)/Retained EarningsTotal
Shareholders'
Equity
As Previously Reported
BALANCES-June 30, 2020$(2,792)$545,689 
Net income131,046 131,046 
BALANCES-June 30, 2021128,254 674,889 
Adjustments
BALANCES-June 30, 2020(1,503)(1,503)
Net loss(4,826)(4,826)
BALANCES-June 30, 2021(6,329)(6,329)
As Corrected
BALANCES-June 30, 2020(4,295)544,186 
Net income126,220 126,220 
BALANCES-June 30, 2021$121,925 $668,560 

CORRECTED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Year Ended June 30, 2021
(in thousands)As Previously ReportedAdjustmentAs Corrected
Net income (loss)$131,046 $(4,826)$126,220 
Deferred income taxes34,654 (1,284)33,370 
Accounts receivable(27,827)6,110 (21,717)
Net cash used in operating activities$(115,442)$— $(115,442)

The following tables reflect the effects of the correction on all affected line items of the Company’s previously reported condensed consolidated financial statements to be presented as comparative in the Form 10-Q for the three and nine months ended March 31, 2022:

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CORRECTED CONDENSED CONSOLIDATED BALANCE SHEET (unaudited)
June 30, 2021
(in thousands)As Previously ReportedAdjustmentAs Corrected
Accounts receivable$113,375 $(8,077)$105,298 
Total current assets493,435 (8,077)485,358 
Total assets1,433,872 (8,077)1,425,795 
Deferred income taxes140,988 (1,748)139,240 
Total liabilities758,983 (1,748)757,235 
Retained earnings (accumulated deficit)128,254 (6,329)121,925 
Total shareholders’ equity674,889 (6,329)668,560 
Total liabilities and shareholders’ equity$1,433,872 $(8,077)$1,425,795 

CORRECTED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)
Three Months Ended March 31, 2021Nine Months Ended March 31, 2021
(in thousands)As Previously ReportedAdjustmentAs CorrectedAs Previously ReportedAdjustmentAs Corrected
Commission revenue$236,793 $(1,577)$235,216 $664,312 $(3,681)$660,631 
Total revenue266,923 (1,577)265,346 749,366 (3,681)745,685 
Income (loss) from operations54,683 (1,577)53,106 186,111 (3,681)182,430 
Income (loss) before income tax expense (benefit)43,664 (1,577)42,087 160,353 (3,681)156,672 
Income tax expense (benefit)7,183 (331)6,852 32,619 (773)31,846 
Net income (loss)36,481 (1,246)35,235 127,734 (2,908)124,826 
Net income (loss) per share:
Basic0.22 (0.01)0.21 0.79 (0.02)0.77 
Diluted0.22 (0.01)0.21 0.77 (0.02)0.75 
Comprehensive income (loss)$38,291 $(1,246)$37,045 $129,403 $(2,908)$126,495 

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CORRECTED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
Three Months Ended March 31, 2021
(in thousands)(Accumulated Deficit)/Retained EarningsTotal
Shareholders'
Equity
As Previously Reported
BALANCES-December 31, 2020$88,461 $634,135 
Net Income36,481 36,481 
BALANCES-March 31, 2021124,942 670,515 
Adjustments
BALANCES-December 31, 2020(3,165)(3,165)
Net Loss(1,246)(1,246)
BALANCES-March 31, 2021(4,411)(4,411)
As Corrected
BALANCES-December 31, 202085,296 630,970 
Net Income35,235 35,235 
BALANCES-March 31, 2021$120,531 $666,104 

CORRECTED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
Nine Months Ended March 31, 2021
(in thousands)(Accumulated Deficit)/Retained EarningsTotal
Shareholders'
Equity
As Previously Reported
BALANCES-June 30, 2020$(2,792)$545,689 
Net Income127,734 127,734 
BALANCES-March 31, 2021124,942 670,515 
Adjustments
BALANCES-June 30, 2020(1,503)(1,503)
Net Loss(2,908)(2,908)
BALANCES-March 31, 2021(4,411)(4,411)
As Corrected
BALANCES-June 30, 2020(4,295)544,186 
Net Income124,826 124,826 
BALANCES-March 31, 2021$120,531 $666,104 

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CORRECTED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Nine Months Ended March 31, 2021
(in thousands)As Previously ReportedAdjustmentAs Corrected
Net income (loss)$127,734 $(2,908)$124,826 
Deferred income taxes32,475 (773)31,702 
Accounts receivable(52,905)3,681 (49,224)
Net cash used in operating activities$(60,947)$— $(60,947)

The following tables reflect the effects of the correction on all affected line items of the Company’s previously reported consolidated financial statements to be presented as comparative in the Form 10-K for the year ended June 30, 2022:

CORRECTED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (unaudited)
Year Ended June 30, 2020
(in thousands)As Previously ReportedAdjustmentAs Corrected
Commission revenue$476,606 $(1,967)$474,639 
Total revenue531,515 (1,967)529,548 
Income (loss) from operations132,329 (1,967)130,362 
Income (loss) before income tax expense (benefit)106,163 (1,967)104,196 
Income tax expense (benefit)25,016 (464)24,552 
Net income (loss)81,147 (1,503)79,644 
Net income (loss) per share:
Basic(0.16)(0.02)(0.18)
Diluted(0.16)(0.02)(0.18)
Comprehensive income (loss)$79,893 $(1,503)$78,390 

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CORRECTED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
Year Ended June 30, 2020
(in thousands)Retained EarningsTotal
Shareholders'
Equity
As Previously Reported
BALANCES-June 30, 2019$200,446 $262,455 
Net Income81,147 81,147 
BALANCES-June 30, 2020(2,792)545,689 
Adjustments
BALANCES-June 30, 2019— — 
Net Loss(1,503)(1,503)
BALANCES-June 30, 2020(1,503)(1,503)
As Corrected
BALANCES-June 30, 2019200,446 262,455 
Net Income79,644 79,644 
BALANCES-June 30, 2020(4,295)544,186 

CORRECTED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Year Ended June 30, 2020
(in thousands)As Previously ReportedAdjustmentAs Corrected
Net income (loss)$81,147 $(1,503)$79,644 
Deferred income taxes25,007 (464)24,543 
Accounts receivable(15,585)1,967 (13,618)
Net cash used in operating activities$(61,776)$— $(61,776)

The following table reflects the impact of the error on all affected line items of the Company’s previously reported consolidated balance sheet as of June 30, 2020:

IF CORRECTED CONSOLIDATED BALANCE SHEET (unaudited)
June 30, 2020
(in thousands)As ReportedUncorrected MisstatementIf Corrected
Accounts receivable$83,634 $(1,967)$81,667 
Total current assets513,834 (1,967)511,867 
Total assets1,073,793 (1,967)1,071,826 
Deferred income taxes105,844 (464)105,380 
Total liabilities528,104 (464)527,640 
Retained earnings (accumulated deficit)(2,792)(1,503)(4,295)
Total shareholders’ equity545,689 (1,503)544,186 
Total liabilities and shareholders’ equity$1,073,793 $(1,967)$1,071,826 
63

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 NumberExhibit Description
FirstSecond Amendment to Credit Agreement, dated as of February 24,November 2, 2021, by and among SelectQuote, Inc., the lenders and other parties thereto, and Morgan Stanley Capital Administrators, Inc., as administrative agent (incorporated by reference to Exhibit 10.1 to SelectQuote, Inc.’s Current Report on Form 8-K (File No. 001-39295) filed with the SEC on February 24,November 4, 2021).
Third Amendment to Credit Agreement, dated as of December 23, 2021, by and among SelectQuote, Inc., the lenders and other parties thereto, Morgan Stanley Capital Administrators, Inc., as administrative agent and UMB Bank, N.A., as Revolver Agent for itself and the Revolving Lenders (incorporated by reference to Exhibit 10.1 to SelectQuote, Inc.’s Current Report on Form 8-K (File No. 001-39295) filed with the SEC on December 27, 2021).
Certification of Chief Executive Officer of SelectQuote, Inc. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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.INSXBRL 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.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.LABInline XBRL Taxonomy Extension Labels Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
104Cover 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.

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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.
May 12, 2021February 14, 2022By: /s/ Tim Danker
Name: Tim Danker
Title: Chief Executive Officer
By: /s/ Raffaele Sadun
Name: Raffaele Sadun
Title: Chief Financial Officer

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