December 19, 2019
Tim Danker
Chief Executive Officer
SelectQuote, Inc.
6800 West 115th Street, Suite 2511
Overland Park, KS 66211
Re: SelectQuote, Inc.
Draft Registration Statement on Form S-1
Submitted November 27, 2019
CIK No. 0001794783
Dear Mr. Danker:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand your disclosure.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments.
Draft Registration Statement on Form S-1 submitted November 27, 2019
Prospectus Summary, page 1
1. Please revise the Prospectus Summary to clearly describe your business
and revenue
model. Please emphasize your role as insurance intermediary rather than
insurance
carrier, clarify the process of generating business and transferring it
to policy writers,
explain the reasons that you do not bear underwriting risks, and
highlight the fact that
your revenue is paid by your "insurance carrier partners," who act as
your customers for
this purpose. Finally, please clarify that insurance consumers with whom
you interact and
to whom you sell policies do not generate revenue for the company
directly.
2. Please add to the Prospectus Summary a description of your Senior
Secured Credit
Facility, including the outstanding balance, and the payments, in the
aggregate of $275
Tim Danker
FirstName LastNameTim Danker
SelectQuote, Inc.
Comapany19, 2019
December NameSelectQuote, Inc.
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million, that you made with funds from the facility to holders of your
stock and options on
November 20, 2019. In this regard, we note the information on page
F-17 of the financial
statements. In addition, please provide us with your analysis at to
whether any of these
payments triggered disclosure pursuant to Item 11 of Form S-1 and Item
404 of
Regulations S-K (Transactions with Related Persons . . . ).
3. Please disclose the date of the company's incorporation in Delaware.
4. Please revise the Prospectus Summary to explain each defined term at
first use. In
particular, define any terms that relate to your business model where
they first appear in
the prospectus, rather than later in the document.
5. In the second paragraph under "Our Company" on page 1, please revise
the reference to
"many years" of accumulated data to quantify the relevant period.
Also, please quantify
the number of years the company has been acting as an insurance
intermediary.
6. Regarding your agents, in the first paragraph on page 4, please
balance your retention rate
disclosure for your top performing agents by also providing such
information for all your
agents as a group.
7. Please expand your discussion of "data scientists" on page 4 to
explain what functions
these employees perform for the company and why they are integral to
your business. If
your technology and approach differ in significant ways from those of
your competitors,
please explain the differences in your prospectus.
8. On page 5, in the paragraphs discussing your Life and Auto & Home
segments, please
clarify that the references to percentages of new premiums refer to
percentages within the
segment.
9. In addition to the summary of risk factors that appears on page 12,
please add disclosure
to address the challenges your business faces, such as an evolving
healthcare regulatory
environment, potential changes in applicable technology and consumer
outreach
techniques, and systemic changes that your insurance partners may
undertake with respect
to how policies are sold.
Implications of Being an Emerging Growth Company, page 12
10. Please supplementally provide us with copies of all written
communications, as defined
in Rule 405 under the Securities Act, that you, or anyone authorized
to do so on your
behalf, present to potential investors in reliance on Section 5(d) of
the Securities Act,
whether or not they retain copies of the communications.
Risk Factors, page 18
11. We note that your forum selection provision identifies a state court
located within the
State of Delaware (or, if no state court located within the State of
Delaware has
jurisdiction, the federal district court for the District of Delaware)
as the exclusive forum
for certain litigation, including any "derivative action." Please
disclose whether this
Tim Danker
FirstName LastNameTim Danker
SelectQuote, Inc.
Comapany19, 2019
December NameSelectQuote, Inc.
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provision applies to actions arising under the Securities Act or
Exchange Act. If so, please
also state that there is uncertainty as to whether a court would
enforce such provision. If
the provision applies to Securities Act claims, please also state that
investors cannot waive
compliance with the federal securities laws and the rules and
regulations thereunder. In
that regard, we note that Section 22 of the Securities Act creates
concurrent jurisdiction
for federal and state courts over all suits brought to enforce any
duty or liability created by
the Securities Act or the rules and regulations thereunder. If this
provision does not apply
to actions arising under the Securities Act or Exchange Act, please
also ensure that the
exclusive forum provision in the governing documents states this
clearly, or tell us how
you will inform investors in future filings that the provision does
not apply to any actions
arising under the Securities Act or Exchange Act.
12. We note the risk factor disclosure on page 18 highlighting risks
associated with the
concentration of substantial portions of your revenues in your three
largest insurance
partners. Please revise to identify these partners, or identify the
partners in your response
and tell us why you do not believe this information is material to an
understanding of your
business. Please refer to Regulation S-K 101(c)(vii).
13. Please expand the risk factor on page 26 regarding indebtedness to
include the information
that the debt was entered into with an affiliate to the underwriters
for the IPO.
14. Please expand the risk factor at the bottom of page 29 to clarify what
intellectual property
rights the company owns and how it is protecting such rights. We note
in this regard that
the company does not currently have any patents or patent
applications.
Use of Proceeds, page 44
15. Please expand the discussion of repayment of outstanding borrowings to
include a
discussion of how you will complete this repayment in the event that
funds generated in
the offer are insufficient to address the amount owed.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Operating Costs and Expenses, page 54
16. Please expand your disclosure regarding CAGR to include an explanation
of how the
projected growth in the demographic impacts your business. In
addition, please balance
the disclosure by noting, if true, that these expectations may not be
met, and may not
translate to growth in your business.
Key Business and Operating Metrics by Segment, page 57
17. We note disclosure of submitted and approved policies for your Senior
insurance
segment. Please revise your filing to provide similar disclosures for
your Life and Auto
& Home segments or tell us why such disclosure may not be meaningful
to an investor.
Additionally, since your revenues appear to be derived from approved
written policies,
please revise your filing to discuss any known reason(s) or trends
between approved
Tim Danker
FirstName LastNameTim Danker
SelectQuote, Inc.
Comapany19, 2019
December NameSelectQuote, Inc.
December 19, 2019 Page 4
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FirstName LastName
policy rates for all periods provided.
18. We note disclosure of your lifetime value of commissions per approved
policy for your
Senior insurance segment on page 58. Please revise to provide similar
disclosure for your
Life and Auto & Home segments and discuss any known factors or trends
between
periods that materially impact your computed lifetime value of
commissions for each
segment.
19. We note disclosure on page 58 of the significant factors that are
considered in estimating
the lifetime value of the commissions for your Senior segment. Please
revise your filing
to disclose the average time periods and the specific constraints for
each type of insurance
offered. Please refer to ASC 606-10-50-1(b).
20. We note the tabular presentation on page 59 of your per unit economics
for the sum of
Approved Medicare Advantage and Medicare Supplement policies. Please
tell us and
revise your filing to explain the importance of these metrics
includingaddressing the
following:
Explain why these metrics are presented combined for for both
Medicare Advantage
and Medicare Supplement policies as opposed to indivdually;
Explain how each of the amounts "per MA/MS policy" were derived;
and
Explain how the Revenue/CAC multiple is calculated based upon the
information
provided in the table.
21. As a related matter, please tell us why you have not provided similar
disclosure of your
Per Unit Economics tabular presentation for your Life and Auto & Home
segments or
revise your filing accordingly.
22. We note disclosure of the total premium values for your Life and Auto
& Home segments
in the tabular disclosures beginning on page 59, which is defined as
the total premium
value for all policies that were approved by the relevant insurance
carrier for each period
provided. Please revise your filing to clarify whether the premium
amounts disclosed
represent revenues earned, and if so, please clarify how these
disclosed amounts relate to
the disaggregated revenue disclosures on page 66.
Results of Operations, page 61
23. Please revise your filing to disclose your written policies
outstanding for each insurance
segment and for each period presented along with a balanced discussion
of how your
revenues and corresponding expenses incurred relate to both approved
written policies
during the year and outstanding written policies for which you
continue to recognize
commission revenues.
24. We note your production bonus and other revenue increased $14.4
million during fiscal
year 2019 primarily due to the increase in marketing development funds
received for your
Senior segment. Please tell us and consider revising your filing to
disclose the total
Tim Danker
FirstName LastNameTim Danker
SelectQuote, Inc.
Comapany19, 2019
December NameSelectQuote, Inc.
December 19, 2019 Page 5
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amount of marketing development funds received for each period and
your accounting for
both the revenues and corresponding expenses incurred with respect to
these marketing
development funds.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Operating Costs and Expenses, page 62
25. Please revise to provide an enhanced discussion of each of the
significant components of
your Cost of Revenues and Marketing and Advertising expenses.
Additionally, please
discuss the reason(s) for and the drivers behind noted variability in
these expenses for
each period presented as well as any know trends that impact
comparability between
periods. Please refer to Item 303(a)(3) of Regulation S-K.
Our Insurance Carriers, page 79
26. Please revise to disclose the names of the primary Insurance Carrier
Partners who
underwrite the insurance for each of the three markets you describe on
page 80, and the
approximate number of partners that you work with in each segment.
27. Please expand this section to include a discussion of what
underwriting tasks are
undertaken by the insurance partner and what tasks, if any, are
performed by the company
in the course of its price quotation activities. If this action is
subject to contractual
agreement, please disclose the substance of the related contract or
tell us why you do not
believe it to be material.
Our Market, page 79
28. Please revise the disclosure in this section to clarify that you
market the products provided
by your insurance partners to consumers, and are in turn paid
commissions by those
partners. Please clarify that the "market" for insurer's products is
separate from the
"market" for your services to those partners.
Competition, page 84
29. Please revise your disclosure to name any key competitors who are also
professional
insurance intermediaries and describe your position in the market in
relation to such key
competitors.
General
30. Please provide us mockups of any pages that include any additional
pictures or graphics to
be presented, including any accompanying captions. Please keep in
mind, in scheduling
your printing and distribution of the preliminary prospectus, that we
may have comments
after our review of these materials.
Tim Danker
SelectQuote, Inc.
December 19, 2019
Page 6
You may contact John Spitz at 202-551-3484 or Amit Pande at 202-551-3423
if you have
questions regarding comments on the financial statements and related matters.
Please contact
Julia Griffith at 202-551-3267 or Dietrich King at 202-551-8071 with any other
questions.
FirstName LastNameTim Danker Sincerely,
Comapany NameSelectQuote, Inc.
Division of
Corporation Finance
December 19, 2019 Page 6 Office of Finance
FirstName LastName