SelectQuote Inc.
08/21/2025 | Press release | Distributed by Public on 08/21/2025 15:11
Annual Report for Fiscal Year Ending June 30, 2025 (Form 10-K)
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 consolidated financial statements and footnotes included elsewhere in this Annual Report on Form 10-K. 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. 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 identified below, and those discussed in the section titled "Risk Factors" in Part I, Item 1A above.
Company Overview
SelectQuote, Inc. (together with its subsidiaries, "SelectQuote", the "Company", "we", "us") is a leading technology-enabled, direct-to-consumer ("DTC") distribution and engagement platform for selling insurance policies and healthcare services.
In recent years, we have increasingly focused on expanding our healthcare services platform as a natural extension of our core Senior distribution insurance business. This strategic shift reflects our prioritization of higher-growth opportunities in areas such as pharmacy services and chronic care management through offerings like SelectRx and SelectPatient Management ("SPM"). At the same time, we have de-emphasized production within our Auto & Home distribution insurance business, which no longer represents a core area of focus. Our strategy is focused on delivering more comprehensive and personalized healthcare solutions that meet the evolving needs of our senior customers.
Our insurance distribution business, which has operated continuously for over 40 years, allows consumers to transparently and conveniently shop for senior health, life, and automobile and home insurance policies from a curated panel of the nation's leading insurance carriers. 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. In return, we earn commissions from our insurance carrier partners for the policies we sell on their behalf. Our proprietary technology platform integrates artificial intelligence and data science based machine learning models to analyze and identify high-quality consumer leads from diverse online and offline channels, such as digital marketing, radio, television, and third-party partnerships. Leveraging over 40 years of accumulated data and advanced predictive analytics, our technology dynamically optimizes marketing spend in real-time. Our intelligent workflow system instantly evaluates each acquired lead, routing it efficiently to the most suitable sales agent based on consumer needs and agent expertise. Our platform then captures and utilizes our experience to further build upon the millions of data points that feed our marketing algorithms, further enhancing 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, a metric we refer to as " lifetime value of commissions" or "LTV", which is a key component to our overall profitability.
Our proprietary routing and workflow system is a key competitive advantage and driver of our business performance. Our systems analyze and intelligently route consumer leads to agents and allow us to monitor, segment, and enhance our agents' performance. This technological advantage also allows us to rapidly conduct a needs-based, tailored analysis for each consumer that maximizes sales, enhances customer retention, and ultimately maximizes LTVs. Our expertise and value add stems from the coupling of our technology with our skilled agents, which provides greater transparency in pricing and choiceand an overall better consumer experience. When customers are satisfied, their propensity to switch policies decreases, thereby improving retention rates ("persistency"), increasing LTVs and, ultimately, optimizing our financial performance and shareholder value.
SelectQuote has a long history of successful DTC product distribution and consumer engagement, and we bring this same capability to healthcare services. We saw a large opportunity to leverage our existing customer base and distribution model to improve education and access to healthcare services for our senior consumers and to create
value for our shareholders and insurance carrier partners. SelectQuote's value lies in our ability to engage the consumer, capture critical self-reported information in real-time, and then take action on that information to offer each consumer personalized solutions. Our healthcare services business seeks to provide consumers with a wide breadth of products supporting their needs, such as SelectRx, our Patient-Centered Pharmacy HomeTMaccredited pharmacy, which has already demonstrated SelectQuote's ability to leverage our strong consumer engagement to drive immediate value using our existing operational infrastructure. Whether through acquisitions or new partnerships, we continue to look for more opportunities to leverage our strengths to expand our healthcare services business.
We evaluate our business using the following three reportable segments:
Senior was launched in 2010 and provides unbiased comparison shopping for Medicare Advantage ("MA") and Medicare Supplement ("MS") insurance plans as well as prescription drug and dental, vision, and hearing ("DVH") plans, and critical illness products. We represent approximately 25 leading, nationally-recognized insurance carrier partners, including UHC, Humana, Aetna, and Wellcare. MA and MS plans accounted for 90%, 91%, and 89% of our approved Senior policies for the years ended June 30, 2025, 2024, and 2023, respectively, with other ancillary type policies accounting for the remainder.
Healthcare Services, launched in 2021, offers various health-related products and services through SelectRx, Healthcare Select, and most recently, SPM. SelectRx offers essential prescription medications, over-the-counter ("OTC") medications, customized medication packaging, and medication therapy management, providing long-term pharmacy care that enables patients to optimize medication adherence to drive positive health outcomes, while enabling patients managing polypharmacy and multiple chronic conditions to remain at home. Through Healthcare Select, we utilize our excellent consumer engagement capabilities to capture valuable self-reported information in real-time for our insurance carrier partners by completing health risk and lifestyle assessments. We then use that data to take a real-time, proactive, and personalized approach to offer various health-related products and services to the consumer, such as our pharmacy services from SelectRx. In 2024, we launched SPM, via a $4.0 million acquisition of an existing chronic care management platform, which offers providers, payers, and Accountable Care Organizations scalable, technology-enhanced services for patients living with chronic conditions. Through consistent, trust-based patient engagement, SPM helps patients navigate the care continuum, focusing on non-clinical factors so physicians can focus on the more critical needs of their patients. We believe that offering these services enables healthcare to be more accessible, convenient, and personalized for our members.
Life is one of the country's largest and most established DTC insurance distributors for term life insurance, having sold over 2.6 million policies nationwide since our founding in 1985. Our platform provides unbiased comparison shopping for life insurance products such as term life, final expense, and other ancillary products like critical illness, accidental death, and juvenile insurance. We represent approximately 20 leading, nationally-recognized insurance carrier partners, with many of these relationships exceeding 15 years. Term life policies accounted for 40%, 45%, and 47% of new premium within the Life segment for the years ended June 30, 2025, 2024, and 2023, respectively, with final expense policies accounting for 60%, 55%, and 53% for the years ended June 30, 2025, 2024, and 2023, respectively.
Our other operations which do not meet the criteria to be a separate reportable segment are consolidated and reported as "All other" which represents a shopping platform for auto, home, and specialty insurance lines.
Industry Trends
We estimate that the total addressable market for the insurance products we distribute is greater than $200 billion. Further, while these markets are already substantial, they are also growing, in part due to a number of highly attractive demographic trends.
Our Senior and Healthcare Services segments serve consumers predominantly in the over 65 age category. According to the United States Census Bureau, the over 65 age category grew from 13% of the total population in 2010 to 18% of the total population in 2023, and is expected to reach 21% in 2030. Based upon a research study, in
2025, on average, 11,400 "Baby Boomers" are expected to turn 65 every day, or nearly 4.2 million people will reach the traditional retirement age in a single year. As a result, Medicare Advantage enrollment has more than doubled since 2010 and is projected to grow from 54% of the eligible population in 2024 to 64% by 2034. According to the Congressional Budget Office's projections, Medicare enrollment is expected to rise from 60 million in 2023 to 74 million in 2034. Of this, Medicare Advantage plans are representing an increasing share of the Medicare market. According to the Kaiser Family Foundation, in 2024, Medicare Advantage enrollment held 54% market penetration, with nearly 33 million Medicare Advantage enrollees. Between 2023 and 2024, total Medicare Advantage enrollment grew by about 7%. The Congressional Budget Office projects that the share of all Medicare beneficiaries enrolled in Medicare Advantage plans will rise to 64% by 2034. The degree to which we will realize a corresponding increase in revenue will be determined by our ability to continue to successfully place new Medicare policies for this enlarged potential consumer base.
The U.S. life insurance market is mature and has experienced annual premium growth of 3% in 2024. Growth in the life insurance sector is driven by a number of macro-economic factors including population growth, general economic growth and individual wealth accumulation.
Technological innovations are changing the insurance distribution landscape. As the composition of the U.S. population gradually shifts to the mobile-first generation, consumers are becoming more tech-savvy and comfortable shopping online. We believe our proprietary technology platform, vast datasets and use of machine learning in all aspects of our business put us in an excellent position to take advantage of these consumer trends.
Factors Affecting Our Results of Operations
Our primary sources of revenue are commissions from selling policies in the senior health, life, and auto and home markets on behalf of our insurance carrier partners, the majority of which compensate us through first year and renewal commissions, and revenue from our pharmacy operations. We use our proprietary technology and processes to generate and obtain consumer leads and allocate those leads to agents who are best suited for those consumers. As a result, one of the primary factors affecting our growth is our total number of agents. We view agents as a critical component of helping consumers through the purchasing process to enable them to identify the most appropriate coverage that suits their needs. Through our years of experience, we have expanded and tailored our recruiting efforts and enhanced our training programs, both of which have allowed us to expand our agent force when necessary. We have also developed proprietary technologies and processes that enable us to expand our lead acquisition efforts to keep pace with our expanding sales force and maintain agent productivity.
The amount of revenue we expect to recognize per policy is based on multiple factors, including our commission rates with our insurance carrier partners and the expected retention rates of different types of policies. The higher our retention rates, the more revenue we expect to generate pursuant to our carrier agreements, which generally entitle us to receive annual renewal commissions for so long as the policyholder renews their policy. Our goal is to maximize lifetime value by increasing retention rates, which starts by providing consumers with a transparent, valuable, and best-in-class consumer experience and making sure consumers are buying a policy that meets their specific needs.
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 revenue, evaluate our business performance, and facilitate our operations. In Senior, our primary product, Medicare Advantage, pays us flat commission rates based on the number of policies we sell on behalf of our insurance carrier partners. Therefore, we have determined that units and unit metrics are the most appropriate measures to evaluate the performance of Senior. For Healthcare Services, our primary source of revenue is pharmacy revenue from SelectRx, so the total number of SelectRx members and the prescriptions shipped per day are the most appropriate measures used to evaluate the performance of Healthcare Services as these metrics drive top-line revenue. In Life, 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 the segment. 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.
The following table shows the number of submitted policies for the years ended June 30:
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Medicare Advantage | 674,851 | 720,027 | 652,630 | |||||||||||||||||
|
All other (1)
|
87,413 | 72,906 | 87,559 | |||||||||||||||||
| Total | 762,264 | 792,933 | 740,189 | |||||||||||||||||
(1) Represents the submitted policies for medicare supplement, dental, vision and hearing, prescription drug plan and other.
2025compared to 2024-Total submitted policies for all products decreased 4%for the year ended June 30, 2025, compared to the year ended June 30, 2024. This was driven by a 26% decrease in the number of average productive agents, offset by a 11% increase in overall close rates and 24% increase in productivity per agent.
2024compared to 2023-Total submitted policies for all products increased 7% for the year ended June 30, 2024, compared to the year ended June 30, 2023. This was driven by an 11% increase in overall close rates, 7% increase in the number of average productive agents, and 9% increase in productivity per agent.
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 years ended June 30:
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Medicare Advantage | 592,874 | 625,245 | 577,567 | |||||||||||||||||
|
All other (1)
|
70,295 | 62,419 | 70,875 | |||||||||||||||||
| Total | 663,169 | 687,664 | 648,442 | |||||||||||||||||
(1) Represents the approved policies for medicare supplement, dental, vision and hearing, prescription drug plan and other.
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.
2025compared to 2024-Total approved policies for all products decreasedby 4%for the year ended June 30, 2025, compared to the year ended June 30, 2024, which correlates to the decrease in submitted policies.
2024 compared to 2023-Total approved policies for all products increased by 6% for the year ended June 30, 2024, compared to the year ended June 30, 2023. Fluctuations in approved policies are normally in direct correlation to submitted policies; however, primarily due to carrier mix, we experienced a slight decrease in the submitted-to-approved conversion rates for the year ended June 30, 2024, compared to the year ended June 30, 2023.
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, which does not include marketing development funds or production bonuses, constrained by a persistency-adjusted 10-year renewal period based on a combination of our historical experience and available insurance carrier historical experience to estimate renewal revenue only to the extent probable that a significant reversal in revenue would not be expected to occur. 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; it does not include any 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 years ended June 30:
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Medicare Advantage | $ | 884 | $ | 910 | $ | 877 | ||||||||||||||
|
All other (1)
|
134 | 146 | 138 | |||||||||||||||||
(1) Represents the weighted average LTV per approved policy.
2025compared to 2024-The LTV per MA approved policy decreased 3%for the year ended June 30, 2025, compared to the year ended June 30, 2024,primarily due to carrier mix and specific carriers shifting away from upfront payment contracts, combined with deterioration in persistency due to recent plan terminations.
2024 compared to 2023-The LTV per MA approved policy increased 4% for the year ended June 30, 2024, compared to the year ended June 30, 2023, primarily due to carrier mix.
Healthcare Services
The total number of SelectRx members represents the amount of active customers to which an order has been shipped and the prescriptions per day represents the total average prescriptions shipped per business day. These two metrics are the primary drivers of revenue for Healthcare Services.
SelectRx Members
The following table shows the total number of SelectRx members as of June 30:
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Total SelectRx Members | 108,018 | 82,385 | 49,044 | |||||||||||||||||
The total number of SelectRx members increasedby 31%as of June 30, 2025, compared to June 30, 2024, and 68% as of June 30, 2024, compared to June 30, 2023, due to our strategy to grow SelectRx membership.
Prescriptions Per Day
The following table shows the average prescriptions shipped per day for the years ended June 30:
| 2025 | 2024 | 2023 | ||||||||||||||||||
|
Prescriptions Per Day
|
27,867 | 18,935 | 10,657 | |||||||||||||||||
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 Life.
The following table shows term and final expense premiums for the years ended June 30:
| (in thousands): | 2025 | 2024 | 2023 | |||||||||||||||||
| Term Premiums | $ | 71,448 | $ | 70,450 | $ | 68,941 | ||||||||||||||
| Final Expense Premiums | 105,099 | 86,600 | 77,725 | |||||||||||||||||
| Total | $ | 176,547 | $ | 157,050 | $ | 146,666 | ||||||||||||||
2025compared to 2024-Total term premiums increased 1% for the year ended June 30, 2025, compared to the year ended June 30, 2024, due to a 4% increase in the average premium per policy sold, offset by a 3% decrease in the number of policies sold. Final expense premiums increased 21% for the year ended June 30, 2025, compared to the year ended June 30, 2024, due to a 2% increase in the average premium per policy sold and a 19% increase in the number of policies sold.
2024 compared to 2023-Total term premiums increased 2% for the year ended June 30, 2024, compared to the year ended June 30, 2023, due to a 5% increase in the average premium per policy sold, offset by a 3% decrease in the number of policies sold. Final expense premiums increased 11% for the year ended June 30, 2024, compared to the year ended June 30, 2023, due to a 3% increase in the average premium per policy sold and a 9% increase in the number of policies sold.
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:
| (in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||
|
Commissions and other services
|
$ | 797,841 | 52 | % | $ | 856,923 | 65 | % | $ | 763,301 | 76 | % | ||||||||||||||||||||||||||
| Pharmacy | 728,753 | 48 | % | 464,853 | 35 | % | 239,547 | 24 | % | |||||||||||||||||||||||||||||
| Total revenue | 1,526,594 | 100 | % | 1,321,776 | 100 | % | 1,002,848 | 100 | % | |||||||||||||||||||||||||||||
| Operating costs and expenses | ||||||||||||||||||||||||||||||||||||||
| Cost of commissions and other services revenue | 305,127 | 20 | % | 318,798 | 24 | % | 301,524 | 30 | % | |||||||||||||||||||||||||||||
| Cost of goods sold-pharmacy revenue | 630,340 | 41 | % | 405,004 | 31 | % | 225,963 | 23 | % | |||||||||||||||||||||||||||||
| Marketing and advertising | 319,505 | 21 | % | 358,858 | 27 | % | 301,245 | 29 | % | |||||||||||||||||||||||||||||
| Selling, general, and administrative | 164,442 | 11 | % | 141,042 | 11 | % | 136,518 | 14 | % | |||||||||||||||||||||||||||||
| Technical development | 38,681 | 3 | % | 33,524 | 3 | % | 26,015 | 3 | % | |||||||||||||||||||||||||||||
| Total operating costs and expenses | 1,458,095 | 96 | % | 1,257,226 | 96 | % | 991,265 | 99 | % | |||||||||||||||||||||||||||||
|
Income from operations
|
68,499 | 4 | % | 64,550 | 5 | % | 11,583 | 1 | % | |||||||||||||||||||||||||||||
| Interest expense, net | (79,385) | (4) | % | (93,551) | (7) | % | (80,606) | (8) | % | |||||||||||||||||||||||||||||
|
Change in fair value of warrant liabilities
|
59,525 | 4 | % | - | - | % | - | - | % | |||||||||||||||||||||||||||||
|
Other expense, net
|
(128) | - | % | (65) | - | % | (121) | - | % | |||||||||||||||||||||||||||||
|
Income (loss) before income tax expense (benefit)
|
48,511 | 4 | % | (29,066) | (2) | % | (69,144) | (7) | % | |||||||||||||||||||||||||||||
|
Income tax expense (benefit)
|
931 | - | % | 5,059 | - | % | (10,600) | (1) | % | |||||||||||||||||||||||||||||
|
Net income (loss)
|
$ | 47,580 | 4 | % | $ | (34,125) | (2) | % | $ | (58,544) | (6) | % | ||||||||||||||||||||||||||
Revenue
We earn revenue in the form of commission payments from our insurance carrier customers, for the initial year the insurance policy is in effect ("first year") and, where applicable, for each subsequent year the policy renews ("renewal year"), in addition to production bonuses and marketing development funds received from some insurance carriers. Production bonuses are based on attaining various predetermined target sales levels or other agreed upon objectives, whereas marketing development funds may or may not contain such predetermined targets and are used to purchase leads. These, along with other services revenue from Healthcare Services (excluding SelectRx revenue discussed below) and our lead generation business, InsideResponse (of which the majority is eliminated as intersegment revenue), are presented in our consolidated statements of comprehensive income (loss) as commissions and other services revenue. Pharmacy revenue on the consolidated statements of comprehensive income (loss) includes revenue from the sale of prescription and OTC medication products from SelectRx.
Revenue is recognized at different milestones for Senior and Life and is based on the contractual enforceable rights, our historical experience, and established customer business practices. Other services revenues from our Healthcare Services segment (excluding SelectRx revenue discussed below) is recognized when the performance obligation has been met, which is at different times for our various services (e.g. the health risk and lifestyle assessments has been performed, a transfer has been made to a health-related partner, or SPM has provided care management services to a member), the transaction price is known based on volume and contractual prices, and we have no further performance obligations. Lead generation revenue is recognized when the generated lead is accepted by our customers, which is the point of sale, and we have no performance obligation after the delivery. Revenues generated from SelectRx are recognized upon shipment. At the time of shipment, we have performed all of our performance obligations and control of the product has been transferred to the customer. There are no future
revenue streams, or material variable consideration with respect to the implicit price concession for co-pays, as the transaction price is fixed at time of shipment, and any subsequent new order is its own performance obligation.
The following table presents our revenue for the years ended June 30 and the percentage changes from the prior year:
| Percent Change | |||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2023 |
2025 vs. 2024
|
2024 vs. 2023
|
||||||||||||||||||||||||
|
Commissions and other services
|
$ | 797,841 | $ | 856,923 | $ | 763,301 | (7)% | 12% | |||||||||||||||||||||
| Pharmacy | 728,753 | 464,853 | 239,547 | 57% | 94% | ||||||||||||||||||||||||
| Total revenue | $ | 1,526,594 | $ | 1,321,776 | $ | 1,002,848 | 16% | 32% | |||||||||||||||||||||
2025compared to 2024-Pharmacy revenue increased $263.9 million, or 57%, primarily due to the 31% increase in members due to the expansion of the SelectRx business. Commission and other services revenue decreased $59.1 million, or 7%, for the year ended June 30, 2025, primarily due to a $51.5 million, and $18.2 million decrease in Senior commissions revenue, and other services revenue, respectively. The decrease was partially offset by a $15.0 million increase in Life revenue. The decrease in Senior revenue, was driven by a 4% decrease in approved policies. The increase in Life revenue was primarily driven by a $14.0 million increase in final expense revenue.
2024 compared to 2023-Pharmacy revenue increased $225.3 million, or 94%, due to the increase in members from the growth of the SelectRx business. Commissions and other services revenue increased $93.6 million, or 12%, primarily due to increases in Senior, Life, and Auto & Home of $65.7 million, $12.1 million, and $14.4 million, respectively. Senior's increase was primarily due to a $71.7 million increase in commissions revenue driven by a 6% increase in approved policies and a 6% increase in LTVs.Life's increase was driven by a $3.9 million increase in term revenue and a $7.7 million increase in final expense revenue.
Operating Costs and Expenses
Cost of Commissions and Other Services Revenue
Cost of commissions and other services revenue represents the direct costs associated with fulfilling our obligations to our customers in Senior, Life, and Healthcare Services (excluding SelectRx discussed below); primarily compensation, benefits, and licensing for sales agents, customer success agents, fulfillment specialists, and others directly engaged in serving customers. It also includes 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.
The following table presents our cost of commissions and other services revenue for the years ended June 30 and the percentage change from the prior year:
| Percent Change | |||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2023 | 2025 vs. 2024 | 2024 vs. 2023 | ||||||||||||||||||||||||
|
Cost of commissions and other services revenue
|
$ | 305,127 | $ | 318,798 | $ | 301,524 | (4)% | 6% | |||||||||||||||||||||
2025compared to 2024-Cost of commissions and other service revenue decreased $13.7 million, or 4%, in 2025 compared to 2024, primarily due to a $7.1 million decrease in compensation costs, a $3.4 million decrease in other operating expenses, and a $1.6 million decrease in licensing fees in Senior. The $7.1 million decrease in
compensation costs is primarily made up of a $10.3 million decrease in costs for our sales and customer care agents in Senior, offset by a $5.3 million increase in costs for sales and customer care agents in Life.
2024 compared to 2023-Cost of commissions and other service revenue increased $17.3 million, or 6%, in 2024 compared to 2023, primarily due to an $18.2 million increase in compensation costs related to a $4.8 million increase in costs for our sales and customer care agents in Senior, a $4.4 million increase for Healthcare Services related to the growth of SelectRx, and a $6.4 million increase for Life related to compensation structure changes for our final expense sales agents.
Cost of Goods Sold-Pharmacy Revenue
Cost of goods sold-pharmacy revenue represents the direct costs associated with fulfilling pharmacy patient orders for SelectRx. Such costs primarily consist of medication costs and compensation costs for licensed pharmacists, pharmacy technicians, and other employees directly associated with fulfilling orders such as packaging and shipping clerks. It also includes shipping, supplies, other order fulfillment costs including part of the one-time customer onboarding costs, and certain facilities overhead costs such as rent, maintenance, and depreciation related to the pharmacy production process.
The following table presents our cost of goods sold-pharmacy revenue for the years ended June 30 and the percentage change from the prior year:
| Percent Change | |||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2023 | 2025 vs. 2024 | 2024 vs. 2023 | ||||||||||||||||||||||||
| Cost of goods sold-pharmacy revenue | $ | 630,340 | $ | 405,004 | $ | 225,963 | 56% | 79% | |||||||||||||||||||||
2025compared to 2024-Cost of goods sold-pharmacy revenue increased $225.3 million, or 56%, in 2025 compared to 2024, primarily due to an $200.9 million increase in medication costs as the number of SelectRx members increased 31% over the prior year as well as a $15.4 million increase in compensation costs due to an increase in the number of employees directly associated with fulfilling pharmacy orders.
2024 compared to 2023-Cost of goods sold-pharmacy revenue increased $179.0 million, or 79%, in 2024 compared to 2023, primarily due to a $158.9 million increase in medication costs as the number of SelectRx members increased 68% over the prior year as well as a $11.0 million increase in compensation costs due to an increase in employees directly associated with fulfilling pharmacy orders.
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 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 years ended June 30 and the percentage changes from the prior year:
| Percent Change | |||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2023 | 2025 vs. 2024 | 2024 vs. 2023 | ||||||||||||||||||||||||
| Marketing and advertising | $ | 319,505 | $ | 358,858 | $ | 301,245 | (11)% | 19% | |||||||||||||||||||||
2025compared to 2024-Marketing and advertising expenses decreased $39.4 million, or 11%, in 2025 compared to 2024, due to a $31.5 million decrease in lead costs and a $5.1 million decrease in compensation costs. The decrease in lead costs was attributable to an increase in close rates of approximately 11% combined with a 4%decrease in the number of submitted policies for Senior during the period.
2024 compared to 2023-Marketing and advertising expenses increased $57.6 million, or 19%, in 2024 compared to 2023, primarily due to a $50.7 million increase in lead costs and a $5.8 million increase in compensation costs for marketing personnel. This increase can be attributed to the increase in MA submitted policies and an increase in customer acquisition costs on a per policy basis.
Selling, General, and Administrative
Selling, general, and administrative expenses include compensation and benefits costs for staff working in our executive, finance, accounting, recruiting, human resources, administrative, business intelligence, data science, and part of the SelectRx customer onboarding departments. 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 selling, general, and administrative expenses for the years ended June 30 and the percentage changes from the prior year:
| Percent Change | |||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2023 | 2025 vs. 2024 | 2024 vs. 2023 | ||||||||||||||||||||||||
|
Selling, general, and administrative
|
$ | 164,442 | $ | 141,042 | $ | 136,518 | 17% | 3% | |||||||||||||||||||||
2025compared to 2024-Selling, general, and administrative expenses increased $23.4 million, or 17%, in 2025 compared to 2024, primarily due to $18.2 million increase in compensation costs, a $4.2 million increase in impairment of long-lived assets, and a $3.0 million increase in corporate development costs. The increase in compensation costs was primarily related the growth of SelectRx. The increase in impairment of long-lived assets was due to the write-off of the InsideResponse customer relationship intangible asset. The increase in corporate development costs is a result of expenses incurred related to the securitization and Senior Non-Convertible Preferred Stock transactions.
2024 compared to 2023-Selling, general, and administrative expenses increased $4.5 million, or 3%, in 2024 compared to 2023, primarily due to an $11.2 million increase in compensation costs related to the growth of SelectRx, a $6.2 million increase for both financing transaction costs and SelectRx bad debt expense, offset by a $2.0 million decrease in depreciation and amortization and a $17.3 million decrease in long-lived asset impairment 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 years ended June 30 and the percentage changes from the prior year:
| Percent Change | |||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2023 | 2025 vs. 2024 | 2024 vs. 2023 | ||||||||||||||||||||||||
| Technical development | $ | 38,681 | $ | 33,524 | $ | 26,015 | 15% | 29% | |||||||||||||||||||||
2025compared to 2024-Technical development expenses increased $5.2 million, or 15%, in 2025 compared to 2024, primarily due to a $5.1 million increase in compensation costs due to an increase in headcount for technology personnel.
2024 compared to 2023-Technical development expenses increased $7.5 million, or 29%, in 2024 compared to 2023, primarily due to a $7.3 million increase in compensation costs due to an increase in headcount for technology personnel.
Interest Expense, Net
The following table presents our interest expense, net for the years ended June 30 and the percentage changes from the prior year:
| Percent Change | |||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2023 | 2025 vs. 2024 | 2024 vs. 2023 | ||||||||||||||||||||||||
| Interest expense, net | $ | 79,385 | $ | 93,551 | $ | 80,606 | (15)% | 16% | |||||||||||||||||||||
2025compared to 2024-Interest expense decreased $14.2 million, or 15%, in 2025 compared to 2024, as a result of the Company's lower cost of capital after completing the securitization transaction and utilizing the proceeds from the Senior Non-Convertible Preferred Stock transaction to repay $260.0 million of the Company's outstanding Term Loan balance.
2024 compared to 2023-Interest expense increased $12.9 million, or 16%, in 2024 compared to 2023, as a result of higher interest rates during the period. The increase was partially offset by $2.6 million of interest received on our money market account during the period.
Income Taxes
The following table presents our provision for income taxes for the years ended June 30 and the percentage changes from the prior year:
| Percent Change | |||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2023 | 2025 vs. 2024 | 2024 vs. 2023 | ||||||||||||||||||||||||
|
Income tax expense (benefit)
|
$ | 931 | $ | 5,059 | $ | (10,600) | (82)% | (148)% | |||||||||||||||||||||
| Effective tax rate | 1.9% | (17.4)% | 15.3% | ||||||||||||||||||||||||||
2025compared to 2024-Income tax expense (benefit) decreased $4.1 million, or 82%, in 2025 compared to 2024. For the year ended June 30, 2025, the Company recognized an income tax expense of $0.9 million, representing an effective tax rate of 1.9%. The differences from the federal statutory tax rate to the effective tax rate for the year ended June 30, 2025, were primarily related to state income taxes and the recording of a valuation allowance for federal and state tax attributes that the Company does not expect to utilize prior to expiration, non-deductible warrant mark-to-market adjustment, excess officer and stock-based compensation and general business credits. For the year ended June 30, 2024, we recognized an income tax expense of $5.1 million, representing an effective tax rate of 17.4%. The differences from our federal statutory tax rate to the effective tax rate were primarily related to state income taxes and the recording of a valuation allowance for federal and state tax attributes that the Company does not expect to utilize prior to expiration.
2024 compared to 2023-Income tax expense (benefit) increased $15.7 million, or 148%, in 2024 compared to 2023. For the year ended June 30, 2024, we recognized an income tax expense of $5.1 million, representing an effective tax rate of 17.4%. The differences from our federal statutory tax rate to the effective tax rate were primarily related to state income taxes and the recording of a valuation allowance for federal and state tax attributes that the Company does not expect to utilize prior to expiration. For the year ended June 30, 2023, we
recognized an income tax benefit of $10.6 million, representing an effective tax rate of 15.3%. The differences from our federal statutory tax rate to the effective tax rate were primarily related to state income taxes, RSU vestings, executive officer compensation, and the recording of a valuation allowance for state tax attributes that the Company does not expect to utilize prior to expiration.
Segment Information
As of July 1, 2024, the Company realigned its reportable segments for fiscal year 2025. The Auto & Home business does not meet the quantitative thresholds to be required to continue to be separately disclosed as a reportable segment in accordance with ASC 280, Segment Reporting ("ASC 280"). As a result, the Auto & Home business will be included in an "All Other" category. Prior period information has been recast to conform to the current presentation.
The Company's operating segments have been determined in accordance with ASC 280. We currently have three reportable segments: i) Senior, ii) Healthcare Services, and iii) Life. Senior primarily sells senior Medicare-related health insurance products. Healthcare Services includes SelectRx, Healthcare Select, and SPM. Healthcare Services provides products and services to our Medicare policyholders, which are focused on improving patient health outcomes. Life primarily sells term life and final expense products. The All Other category is reflective of the revenue generated from selling individual automobile and homeowners' insurance. Additionally, the Company accounts for non-operating activity, share-based compensation expense, depreciation and amortization, goodwill, long-lived asset and intangible asset impairments, certain intersegment eliminations, and the costs of providing corporate and other administrative services in our administrative division, Corporate & Eliminations. We have not aggregated any operating segments together to represent a reportable segment.
Our operating segments are determined based on how our chief executive officer, who also serves as our CODM, manages our business, regularly accesses information, and evaluates performance for operating decision-making purposes, including allocation of resources. Adjusted EBITDA is our segment profit measure and a key measure used by our CODM and Board of Directors to understand and evaluate the operating performance of our business and on which internal budgets and forecasts are based and approved. We define Adjusted EBITDA as income (loss) before income tax expense (benefit) plus: (i) interest expense, net; (ii) depreciation and amortization (iii) share-based compensation; (iv) goodwill, long-lived asset, and intangible assets impairments (v) transaction costs; (vi) loss on disposal of property, equipment and software, net; (vii) other non-recurring expenses and income; and (viii) changes in fair value of warrant liabilities.
Our segment disclosure includes intersegment revenues, which consist of affiliate marketing fees for services provided by our Senior segment to our Healthcare Services and Life segments as well as services provided by Life to other segments. These intersegment transactions are recorded by each segment at amounts that we believe approximate fair value as if the transactions were between third parties and, therefore, impact segment performance. However, the revenue and corresponding expense are eliminated in consolidation. The elimination of such intersegment transactions is included within the "Eliminations of intersegment revenues" in the tables below. Apart from these intersegment transactions, the accounting policies of the reportable segments are the same as the Company's described Note 1 to the consolidated financial statements.
The following tables present information about the reportable segments for the periods presented. The significant expense categories align with the segment-level information that is regularly provided to the CODM. Segment Cost of commissions and other services revenue, Cost of goods sold - pharmacy revenue, Segment marketing expenses, Segment technical development expenses, and Segment general and administrative expenses were adjusted to exclude certain items, as reflected in the Reconciliation of total segment Adjusted EBITDAsections below, that are not included in the Segment Adjusted EBITDA profitability.
We do not report total assets by segment as our CODM does not use this information to evaluate operating segment performance. Accordingly, we do not regularly provide such information by segment to our CODM.
Year Ended June 30, 2025:
| (in thousands) | Senior | Healthcare Services | Life |
Total
|
|||||||||||||||||||
| External revenue | $ | 593,335 | $ | 742,338 | $ | 172,895 | $ | 1,508,568 | |||||||||||||||
|
Intersegment revenue
|
7,058 | 367 | 83 | 7,508 | |||||||||||||||||||
|
Total revenue from reportable segments
|
$ | 600,393 | $ | 742,705 | $ | 172,978 | $ | 1,516,076 | |||||||||||||||
|
All other revenue
|
18,026 | ||||||||||||||||||||||
|
Eliminations of intersegment revenues
|
(7,508) | ||||||||||||||||||||||
|
Total consolidated revenue
|
$ | 1,526,594 | |||||||||||||||||||||
| (in thousands) | Senior | Healthcare Services | Life | Total | |||||||||||||||||||
|
Total revenue from reportable segments
|
$ | 600,393 | $ | 742,705 | $ | 172,978 | $ | 1,516,076 | |||||||||||||||
|
Less:
|
|||||||||||||||||||||||
|
Cost of commissions and other services revenue
|
(201,933) | (25,163) | (65,047) | ||||||||||||||||||||
|
Cost of goods sold - pharmacy revenue
|
- | (625,389) | - | ||||||||||||||||||||
|
Marketing expense (1)
|
(234,335) | (8,038) | (80,269) | ||||||||||||||||||||
|
Technical development (2)
|
- | (2,187) | - | ||||||||||||||||||||
|
Selling, general, and administrative (3)
|
(2,454) | (56,541) | (993) | ||||||||||||||||||||
| Adjusted Segment EBITDA | $ | 161,671 | $ | 25,387 | $ | 26,669 | $ | 213,727 | |||||||||||||||
|
Reconciliation of total segment Adjusted EBITDA
|
|||||||||||||||||||||||
|
All other Adjusted EBITDA (4)
|
10,597 | ||||||||||||||||||||||
|
Corporate (5)
|
(98,070) | ||||||||||||||||||||||
| Share-based compensation expense | (18,357) | ||||||||||||||||||||||
|
Transaction costs (6)
|
(14,617) | ||||||||||||||||||||||
| Depreciation and amortization | (20,460) | ||||||||||||||||||||||
| Loss on disposal of property, equipment, and software, net | (240) | ||||||||||||||||||||||
|
Impairment of long-lived assets
|
(4,209) | ||||||||||||||||||||||
| Change in fair value of warrants | 59,525 | ||||||||||||||||||||||
| Interest expense, net | (79,385) | ||||||||||||||||||||||
| Income before income tax expense (benefit) | $ | 48,511 | |||||||||||||||||||||
(1) Primarily consists of direct advertising and lead generation costs across various marketing channels.
(2) Primarily comprised of payroll and related benefits for dedicated Healthcare Services IT personnel.
(3) For Senior and Life, these costs are primarily comprised of allocations from corporate related to payroll and related benefits for administrative support functions and facilities. Within Healthcare Services, it primarily consists of payroll and related benefit costs for licensed pharmacists and pharmacy technicians performing one-time customer onboarding work for enrollments that don't actually become members.
(4) Represents adjusted EBITDA from SQAH, a non-reportable segment.
(5) Corporate is not an operating segment and consists primarily of unallocated corporate overhead costs, such as payroll and related benefits ($65.1 million), professional services ($17.2 million), and facilities ($5.7 million).
(6) These expenses primarily consist of non-restructuring severance expenses ($0.8 million) and financing transaction costs ($13.8 million).
Year Ended June 30, 2024
| (in thousands) | Senior | Healthcare Services | Life |
Total
|
|||||||||||||||||||
| External revenue | $ | 649,232 | $ | 478,491 | $ | 157,826 | $ | 1,285,549 | |||||||||||||||
|
Intersegment revenue
|
6,617 | 17 | 104 | 6,738 | |||||||||||||||||||
|
Total revenue from reportable segments
|
$ | 655,849 | $ | 478,508 | $ | 157,930 | $ | 1,292,287 | |||||||||||||||
|
All other revenue (1)
|
36,228 | ||||||||||||||||||||||
|
Eliminations of intersegment revenues
|
(6,739) | ||||||||||||||||||||||
|
Total consolidated revenue
|
$ | 1,321,776 | |||||||||||||||||||||
| (in thousands) | Senior | Healthcare Services | Life |
Total
|
|||||||||||||||||||
|
Total revenue from reportable segments
|
$ | 655,849 | $ | 478,508 | $ | 157,930 | $ | 1,292,287 | |||||||||||||||
|
Less:
|
|||||||||||||||||||||||
|
Cost of commissions and other services revenue
|
(216,348) | (17,438) | (60,017) | ||||||||||||||||||||
|
Cost of goods sold - pharmacy revenue
|
- | (400,821) | - | ||||||||||||||||||||
|
Marketing expense (1)
|
(269,867) | (6,260) | (76,513) | ||||||||||||||||||||
|
Technical development (2)
|
- | (915) | - | ||||||||||||||||||||
|
Selling, general, and administrative (3)
|
(2,890) | (45,253) | (1,236) | ||||||||||||||||||||
| Adjusted Segment EBITDA | $ | 166,744 | $ | 7,821 | $ | 20,164 | $ | 194,729 | |||||||||||||||
|
Reconciliation of total segment Adjusted EBITDA
|
|||||||||||||||||||||||
|
All other Adjusted EBITDA (4)
|
14,127 | ||||||||||||||||||||||
|
Corporate (5)
|
(91,863) | ||||||||||||||||||||||
| Share-based compensation expense | (13,816) | ||||||||||||||||||||||
|
Transaction costs (6)
|
(13,158) | ||||||||||||||||||||||
| Depreciation and amortization | (24,998) | ||||||||||||||||||||||
| Loss on disposal of property, equipment, and software, net | (536) | ||||||||||||||||||||||
|
Interest expense, net
|
(93,551) | ||||||||||||||||||||||
| Loss before income tax expense (benefit) | $ | (29,066) | |||||||||||||||||||||
(1) Primarily consists of direct advertising and lead generation costs across various marketing channels.
(2) Primarily comprised of payroll and related benefits for dedicated Healthcare Services IT personnel.
(3) For Senior and Life, these costs are primarily comprised of allocations from corporate related to payroll and related benefits for administrative support functions and facilities. Within Healthcare Services, it primarily consists of payroll and related benefit costs for licensed pharmacists and pharmacy technicians performing one-time customer onboarding work for enrollments that don't actually become members.
(4) Represents adjusted EBITDA from SQAH, a non-reportable segment.
(5) Corporate is not an operating segment and consists primarily of unallocated corporate overhead costs, such as payroll and related benefits ($61.7 million), professional services ($17.8 million), and facilities ($4.2 million).
(6) These expenses primarily consist of financing transaction costs.
Year Ended June 30, 2023
| (in thousands) | Senior | Healthcare Services | Life |
Total
|
|||||||||||||||||||
| External revenue | $ | 583,271 | $ | 252,075 | $ | 145,640 | $ | 980,986 | |||||||||||||||
|
Intersegment revenue
|
6,860 | - | 192 | 7,052 | |||||||||||||||||||
|
Total revenue from reportable segments
|
$ | 590,131 | $ | 252,075 | $ | 145,832 | $ | 988,038 | |||||||||||||||
|
All other revenue (1)
|
21,862 | ||||||||||||||||||||||
|
Eliminations of intersegment revenues
|
(7,052) | ||||||||||||||||||||||
|
Total consolidated revenue
|
$ | 1,002,848 | |||||||||||||||||||||
| (in thousands) | Senior | Healthcare Services | Life |
Total
|
|||||||||||||||||||
|
Total revenue from reportable segments
|
$ | 590,131 | $ | 252,075 | $ | 145,832 | $ | 988,038 | |||||||||||||||
|
Less:
|
|||||||||||||||||||||||
|
Cost of commissions and other services revenue
|
(210,229) | (13,363) | (53,666) | ||||||||||||||||||||
|
Cost of goods sold - pharmacy revenue
|
- | (222,347) | - | ||||||||||||||||||||
|
Marketing expense (1)
|
(221,579) | (5,035) | (67,895) | ||||||||||||||||||||
|
Technical development (2)
|
- | (274) | - | ||||||||||||||||||||
|
Selling, general, and administrative (3)
|
(3,246) | (33,825) | (1,198) | ||||||||||||||||||||
| Adjusted Segment EBITDA | $ | 155,077 | $ | (22,769) | $ | 23,073 | $ | 155,381 | |||||||||||||||
|
Reconciliation of total segment Adjusted EBITDA
|
|||||||||||||||||||||||
|
All other Adjusted EBITDA (4)
|
81 | ||||||||||||||||||||||
|
Corporate (5)
|
(81,159) | ||||||||||||||||||||||
| Share-based compensation expense | (11,310) | ||||||||||||||||||||||
|
Transaction costs (6)
|
(5,569) | ||||||||||||||||||||||
| Depreciation and amortization | (27,881) | ||||||||||||||||||||||
| Loss on disposal of property, equipment, and software, net | (749) | ||||||||||||||||||||||
|
Impairment of long-lived assets
|
(17,332) | ||||||||||||||||||||||
|
Interest expense, net
|
(80,606) | ||||||||||||||||||||||
| Loss before income tax expense (benefit) | (69,144) | ||||||||||||||||||||||
(1) Primarily consists of direct advertising and lead generation costs across various marketing channels.
(2) Primarily comprised of payroll and related benefits for dedicated Healthcare Services IT personnel.
(3) For Senior and Life, these costs are primarily comprised of allocations from corporate related to payroll and related benefits for administrative support functions and facilities. Within Healthcare Services, it primarily consists of payroll and related benefit costs for licensed pharmacists and pharmacy technicians performing one-time customer onboarding work for enrollments that don't actually become members.
(4) Represents adjusted EBITDA from SQAH, a non-reportable segment.
(5) Corporate is not an operating segment and consists primarily of unallocated corporate overhead costs, such as payroll and related benefits ($51.4 million), professional services ($19.4 million), and facilities ($5.4 million).
(6) These expenses primarily consist of financing transaction costs.
The following table depicts the disaggregation of revenue by segment and product for the years ended June 30:
| (dollars in thousands) | 2025 | $ | % | 2024 | $ | % | 2023 | ||||||||||||||||||||||||||||||||||
| Senior: | |||||||||||||||||||||||||||||||||||||||||
| Medicare advantage commissions | $ | 518,031 | $ | (51,617) | (9) | % | $ | 569,648 | $ | 69,147 | 14 | % | $ | 500,501 | |||||||||||||||||||||||||||
|
Other Senior commissions
|
11,397 | 160 | 1 | % | 11,237 | 2,504 | 29 | % | 8,733 | ||||||||||||||||||||||||||||||||
| Other services | 70,965 | (3,999) | (5) | % | 74,964 | (5,933) | (7) | % | 80,897 | ||||||||||||||||||||||||||||||||
| Total Senior revenue | 600,393 | (55,456) | (8) | % | 655,849 | 65,718 | 11 | % | 590,131 | ||||||||||||||||||||||||||||||||
| Healthcare Services: | |||||||||||||||||||||||||||||||||||||||||
| Pharmacy | 728,753 | 263,900 | 57 | % | 464,853 | 225,306 | 94 | % | 239,547 | ||||||||||||||||||||||||||||||||
| Other services | 13,952 | 297 | 2 | % | 13,655 | 1,127 | 9 | % | 12,528 | ||||||||||||||||||||||||||||||||
| Total Healthcare Services revenue | 742,705 | 264,197 | 55 | % | 478,508 | 226,433 | 90 | % | 252,075 | ||||||||||||||||||||||||||||||||
| Life: | |||||||||||||||||||||||||||||||||||||||||
| Term commissions | 74,685 | 705 | 1 | % | 73,980 | 3,886 | 6 | % | 70,094 | ||||||||||||||||||||||||||||||||
| Final expense commissions | 78,175 | 14,037 | 22 | % | 64,138 | 7,650 | 14 | % | 56,488 | ||||||||||||||||||||||||||||||||
| Other services | 20,118 | 306 | 2 | % | 19,812 | 562 | 3 | % | 19,250 | ||||||||||||||||||||||||||||||||
| Total Life revenue | 172,978 | 15,048 | 10 | % | 157,930 | 12,098 | 8 | % | 145,832 | ||||||||||||||||||||||||||||||||
|
All other:
|
|||||||||||||||||||||||||||||||||||||||||
| Commissions | 17,308 | (17,936) | (51) | % | 35,244 | 14,794 | 72 | % | 20,450 | ||||||||||||||||||||||||||||||||
| Other services | 718 | (266) | (27) | % | 984 | (428) | (30) | % | 1,412 | ||||||||||||||||||||||||||||||||
|
Total All other revenue
|
18,026 | (18,202) | (50) | % | 36,228 | 14,366 | 66 | % | 21,862 | ||||||||||||||||||||||||||||||||
| Eliminations: | |||||||||||||||||||||||||||||||||||||||||
| Commissions | (3,339) | (772) | 30 | % | (2,567) | 229 | (8) | % | (2,796) | ||||||||||||||||||||||||||||||||
| Other services | (4,169) | 3 | - | % | (4,172) | 84 | (2) | % | (4,256) | ||||||||||||||||||||||||||||||||
| Total Elimination revenue | (7,508) | (769) | 11 | % | (6,739) | 313 | (4) | % | (7,052) | ||||||||||||||||||||||||||||||||
| Total Commissions and other services revenue | 797,841 | (59,082) | (7) | % | 856,923 | 93,622 | 12 | % | 763,301 | ||||||||||||||||||||||||||||||||
| Total Pharmacy revenue | 728,753 | 263,900 | 57 | % | 464,853 | 225,306 | 94 | % | 239,547 | ||||||||||||||||||||||||||||||||
| Total Revenue | $ | 1,526,594 | $ | 204,818 | 16 | % | $ | 1,321,776 | $ | 318,928 | 32 | % | $ | 1,002,848 | |||||||||||||||||||||||||||
Revenue by Segment
2025compared to 2024-Revenue from Senior was $600.4 million for the year ended June 30, 2025, a $55.5 million, or 8%, decrease compared to revenue of $655.8 million for the year ended June 30, 2024. The decrease was due to a $51.5 million decrease in commissions revenue, due to a 4% decrease in approved policies, and a $4.0 million decrease in other revenue.
Revenue from Healthcare Services was $742.7 million for the year ended June 30, 2025, a $264.2 million, or 55%, increase compared to revenue of $478.5 million for the year ended June 30, 2024, primarily due to a $263.9 million increase in SelectRx pharmacy revenue due to a 31% increase in members from the growth of the SelectRx business.
Revenue from Life was $173.0 million for the year ended June 30, 2025, a $15.0 million, or 10%, increase compared to revenue of $157.9 million for the year ended June 30, 2024, primarily due to a $14.0 million increase in final expense revenue due to an increase in the number of policies sold.
2024 compared to 2023-Revenue from our Senior segment was $655.8 million for the year ended June 30, 2024, a $65.7 million, or 11%, increase compared to revenue of $590.1 million for the year ended June 30, 2023. The increase was due to a $71.7 million, or 14%, increase in commissions revenue, offset by a $5.9 million decrease in other services revenue.
Revenue from Healthcare Services was $478.5 million for the year ended June 30, 2024, a $226.4 million, or 90%, increase compared to revenue of $252.1 million for the year ended June 30, 2023, primarily due to a $225.3 million increase in SelectRx pharmacy revenue.
Revenue from our Life segment was $157.9 million for the year ended June 30, 2024, a $12.1 million, or 8%, increase compared to revenue of $145.8 million for the year ended June 30, 2023, primarily due to an $11.5 million increase in commissions revenue and a $0.6 million increase in other services revenue.
Adjusted EBITDA by Segment
2025compared to 2024-Adjusted EBITDA from Senior was $161.7 million for the year ended June 30, 2025, a $5.1 million decrease compared to Adjusted EBITDA of $166.7 million for the year ended June 30, 2024. The decrease was primarily due to a $55.5 million decrease in revenue as discussed above, offset by a $35.5 million decrease in marketing expenses, and a $14.4 million decrease in cost of commissions and other services revenue. The decrease in cost of commissions and other services revenue was primarily due to a $10.0 million decrease in compensation costs. The decrease in marketing expenses was primarily due to $30.6 million decrease in lead costs.
Adjusted EBITDA from Healthcare Services was $25.4 million for the year ended June 30, 2025, a $17.6 million increase compared to Adjusted EBITDA of $7.8 million for the year ended June 30, 2024. The increase was due to a $264.2 million increase in revenue as discussed above, partially offset by a $224.6 million increase in cost of goods sold - pharmacy revenue, and $11.3 million increase in selling, general and administrative expenses. Cost of goods sold - pharmacy revenue increased primarily as a result of a $200.9 million increase in medication costs and a $22.7 million increase in compensation costs. Selling, general and administrative expenses increased primarily due to a $13.3 million increase in compensation costs, offset by a decrease of $6.1 million in other operating expenses.
Adjusted EBITDA from Life was $26.7 million for the year ended June 30, 2025, a $6.5 million increase compared to Adjusted EBITDA of $20.2 million for the year ended June 30, 2024. The increase was due to a $15.0 million increase in revenue as discussed above, partially offset by a $5.0 million increase in cost of commissions and other services revenue and a $3.8 million increase in marketing expenses. The increase in cost of commissions and other services revenue was due to a $4.8 million increase in compensation costs. The increase in marketing expenses was due to a $3.1 million increase in lead costs.
2024 compared to 2023--Adjusted EBITDA from our Senior segment was $166.7 million for the year ended June 30, 2024, a $11.7 million, or 8%, increase compared to Adjusted EBITDA of $155.1 million for the year ended June 30, 2023. The increase was due to a $65.7 million increase in revenue, offset by a $48.3 million increase in marketing expenses. The increase in marketing expenses was primarily due to a $42.1 million increase in lead costs.
Adjusted EBITDA from Healthcare Services was $7.8 million for the year ended June 30, 2024, a $30.6 million increase compared to Adjusted EBITDA of $(22.8) million for the year ended June 30, 2023. The increase was due to a $226.4 million increase in revenue, offset by a $178.5 million increase in cost of goods sold - pharmacy revenue, and $11.4 million increase in selling, general and administrative expenses. Cost of goods sold - pharmacy revenue increased primarily as a result of a $158.9 million increase in medication costs and a $13.9 million increase in compensation costs. Selling, general and administrative expenses increased primarily due to a $6.2 million increase in bad debt expense, and a $4.4 million increase in compensation costs.
Adjusted EBITDA from our Life segment was $20.2 million for the year ended June 30, 2024, a $2.9 million, or 13%, decrease compared to Adjusted EBITDA of $23.1 million for the year ended June 30, 2023. The decrease in Adjusted EBITDA was due to a $12.1 million increase in revenue as discussed above, offset by a $8.6 million increase in marketing expenses. The increase in marketing expenses was primarily due to a $7.8 million increase in marketing and advertising costs.
Liquidity and Capital Resources
Our liquidity needs primarily include working capital and debt service requirements. Additionally, we are required under the Senior Secured Credit Facility and Indenture to maintain compliance with certain debt covenants, as discussed further in Note 8 to the consolidated financial statements. Based on our financial projections, we believe we will remain in compliance with the debt covenants through the 12 months following the date of issuance of our consolidated financial statements.
Senior Non-Convertible Preferred Stock
On February 10, 2025, the Company completed a $350.0 million Senior Non-Convertible Preferred Stock transaction and received net proceeds of $337.9 million. Refer to Note 9 to the consolidated financial statements for further information.
Long-term Debt
Significant changes and activity related to our long-term debt during the year ended June 30, 2025, are discussed below. Refer to Note 8 to the consolidated financial statements for further discussion on our debt agreements and activity.
Securitization and Indenture
On October 15, 2024, the Company completed a $100.0 million securitization transaction to provide advanced financing against the expected collections for policies previously sold. The Company used the proceeds to pay down a portion of its outstanding term loans. During the year ended June 30, 2025, the Company received proceeds of $99.1 million, and as of June 30, 2025, had outstanding borrowings of $83.4 million. Refer to Note 8 for further information.
Senior Secured Credit Facility
During the year ended June 30, 2025, the Company repaid $388.2 million of the outstanding term loans, and as of June 30, 2025, had outstanding borrowings of $314.0 million related to the term loans. Refer to Note 8 to the consolidated financial statements for further information.
During the year ended June 30, 2025, the Company received proceeds of $166.9 million and repaid $166.9 million, and as of June 30, 2025, had no outstanding borrowings related to the revolving credit facility. Refer to Note 8 to the consolidated financial statements for further information.
Liquidity
As of June 30, 2025 and June 30, 2024, the Company had total debt obligations of $385.1 million and $683.3 million, respectively, under the Senior Secured Credit Facility and the Notes. Management expects that our existing cash, cash equivalents, funds available under the revolving credit facility and cash provided from operations will be sufficient to finance normal working capital needs, investments in properties, facilities and equipment and debt services.
As of June 30, 2025 and June 30, 2024, our cash, cash equivalents, and restricted cash totaled $37.1 million and $42.7 million, respectively. Additionally, the following table presents a summary of our cash flows for the years ended June 30:
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Net cash provided by (used in) operating activities | $ | (11,666) | $ | 15,236 | $ | (19,377) | |||||||||||
| Net cash used in investing activities | (11,314) | (14,846) | (9,125) | ||||||||||||||
| Net cash provided by (used in) financing activities | 17,356 | (40,856) | (29,339) | ||||||||||||||
Operating Activities
Net cash used in operating activities primarily consists of net income, adjusted for certain non-cash items including depreciation; amortization of intangible assets and internally developed software; deferred income taxes; share-based compensation expense; amortization of debt issuance costs and discount; accrued interest; non-cash lease expenses; change in fair value of warrant liabilities; 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.
Year Ended June 30, 2025-Net cash used in operating activities was $11.7 million, consisting of net income of $47.6 million, adjustments for non-cash items of $13.1 million, and cash used in operating assets and liabilities of $72.3 million. Adjustments for non-cash items primarily consisted of $20.5 million of depreciation and amortization, $18.4 million of share-based compensation expense, $14.0 million of accrued interest payable in kind on the term loans, $5.2 million of amortization of debt issuance costs and debt discount, $3.9 million of non-cash lease expense, $1.8 million in deferred income taxes, $4.2 million in bad debt expense, and $59.5 million in the change in fair value of warrant liabilities. The cash decrease resulting from changes in net operating assets and liabilities primarily consisted of an increase of $5.6 million in accounts receivable, an increase of $69.5 million in commissions receivable, a decrease of $5.5 million in other liabilities, primarily related to a $7.4 million decrease in our contract liability, a decrease of $4.7 million in operating lease liabilities and an increase of $6.3 million in other assets, primarily related to hedge activities, offset by an increase of $19.2 million in accounts payable and accrued expenses.
Year Ended June 30, 2024-Net cash provided by operating activities was $15.2 million, consisting of net loss of $34.1 million, adjustments for non-cash items of $68.9 million, and cash used in operating assets and liabilities of $19.5 million. Adjustments for non-cash items primarily consisted of $25.0 million of depreciation and amortization, $13.8 million of share-based compensation expense, $19.6 million of accrued interest payable in kind on the Term Loans, $6.1 million of amortization of debt issuance costs and debt discount, $2.3 million of non-cash lease expense, and $1.2 million in deferred income taxes. The cash decrease resulting from changes in net operating assets and liabilities primarily consisted of an increase of $40.8 million in commissions receivable, due to a 6% increase in approved policies for the year, a decrease of $4.9 million of operating lease liabilities and an increase of $2.0 million in other assets, all partially offset by an increase of $7.3 million in accounts payable and accrued expenses, related to an increase in revenue, an increase of $15.6 million in other liabilities, primarily related to an $6.4 million increase in our contract liability, and a $7.4 million increase in accrued compensation and benefits, related to our increased headcount, and a decrease of $5.2 million in accounts receivable, net, related to cash collections to date.
Year Ended June 30, 2023-Net cash used in operating activities was $19.4 million, consisting of net loss of $58.5 million, adjustments for non-cash items of $71.7 million, and cash used in operating assets and liabilities of $32.5 million. Adjustments for non-cash items primarily consisted of $27.9 million of depreciation and amortization, $17.3 million of charges for impairment of long-lived assets, $11.3 million of share-based compensation expense, $12.0 million of accrued interest payable in kind on the Term Loans, $8.7 million of amortization of debt issuance costs and debt discount, and $4.2 million of non-cash lease expense, offset by $11.2 million in deferred income taxes. The cash decrease resulting from changes in net operating assets and liabilities primarily consisted of an increase of $24.8 million in accounts receivable, net, an increase of $1.9 million in commissions receivable, and a decrease of $3.6 million in accounts payable and accrued expenses, partially offset by an increase of $3.3 million in other liabilities.
Investing Activities
Our investing activities primarily consist of purchases of property, equipment, and software and capitalized salaries related to the development of internal-use software.
Year Ended June 30, 2025-Net cash used in investing activities of $11.3 million was due to $9.1 million in purchases of software and capitalized internal-use software development costs and $2.2 million of purchases of property and equipment, primarily made up of machinery and equipment and leasehold improvements.
Year Ended June 30, 2024-Net cash used in investing activities of $14.8 million was due to $8.3 million in purchases of software and capitalized internal-use software development costs and $3.4 million of purchases of property and equipment, primarily equipment utilized in SelectRx operations to support its expansion, leasehold improvements, and computer equipment. Additionally, we spent $3.4 million to acquire an existing chronic care management platform, which was used to launch SPM.
Year Ended June 30, 2023-Net cash used in investing activities of $9.1 million was due to $1.4 million of purchases of property and equipment, primarily to support the growth of SelectRx infrastructure, and $7.7 million in purchases of software and capitalized internal-use software development costs.
Financing Activities
Our financing activities primarily consist of proceeds from the issuance of senior non-convertible preferred stock, payments on term loans, proceeds and payments related to the revolving credit facility, payments on notes issued in connection with the Indenture, payments for debt issuance costs, and proceeds and payments related to stock-based compensation.
Year Ended June 30, 2025-Net cash provided by financing activities of $17.4 million was primarily due to $337.9 million of proceeds from the issuance of senior non-convertible preferred stock, $166.9 million of proceeds from the revolving credit facility, and $99.1 million of proceeds on the notes issued in connection with the Indenture, offset by $388.2 million of principal payments on the term loans, $166.9 million of payments on the revolving credit facility, and $16.6 million of payments on the notes issued in connection with the Indenture.
Year Ended June 30, 2024-Net cash used in financing activities of $40.9 million was primarily due $38.9 million of principal payments on the Term Loans.
Year Ended June 30, 2023-Net cash used in financing activities of $29.3 million was primarily due to $10.1 million of debt issuance costs related to the Fourth Amendment, $17.8 million of principal payments on the Term Loans, and $2.4 million of holdback remitted as part of the Express Med acquisition, partially offset by $1.2 million in proceeds from common stock options exercised and the employee stock purchase plan.
Contractual Obligations
Our principal commitments consist of obligations under our outstanding operating leases for office facilities; our Senior Secured Credit Facility, which includes the Term Loans and Revolving Credit Facility (as defined in Note 8 to theconsolidated financial statements);and our senior secured Class A and Class B Notes (as defined in Note 8 to the consolidated financial statements). In addition, we have outstanding obligations related to the Senior Non-Convertible Preferred Stock, including the payment of the liquidating preference and certain dividends in accordance with the Non-Convertible Preferred Stock Purchase Agreements (as further detailed in Note 9 to the consolidated financial statements). Further, we have outstanding service and licensing agreements with various vendors for connectability, maintenance, and other services, including minimum purchase requirements for pharmaceuticals. As of June 30, 2025, the Company is obligated under a pharmaceutical supply agreement to make minimum monthly purchases of approximately $12.7 million through February 28, 2027. We believe that we will be able to fund these obligations through our existing cash, cash equivalents and restricted cash, and cash generated from operations.
Recent Accounting Pronouncements
For a discussion of new accounting pronouncements recently adopted and not yet adopted, see Note 1 of the consolidated financial statements.
Critical Accounting Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, and liabilities and disclosure of contingent assets and liabilities in our financial statements. We regularly assess these estimates; however, actual amounts could differ from those estimates. The impact of changes in estimates is recorded in the period in which they become known.
An accounting estimate is considered to be critical if the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and the effect of the estimates and assumptions on financial condition or operating performance. The accounting estimates we believe to reflect our more significant estimates, judgments and assumptions that are most critical to understanding and evaluating our reported financial results are: revenue recognition for commissions revenue, commissions receivable, accounting for income taxes, share-based compensation, the impairment of intangible assets and goodwill, and the fair value of the liability classified warrants.
Commission Revenue Recognition and Commissions Receivable
The estimate of renewal commission revenue is considered variable consideration and requires significant judgment to determine the renewal commission revenue to be recognized at the time the performance obligation is met and in the reassessment of the transaction price each reporting period. This includes determining the number of periods in which a renewal will occur and the value of those renewal commissions to be received if renewed, which includes estimating persistency, the renewal year provision, and an additional product specific constraint applied to account for trends such as industry volatility or uncertainty of consumer behavior patterns. Persistency is the estimate of policies expected to renew each year and renewal year provision is the estimate of policies expected to lapse during each renewal period. The estimated duration of expected renewals used in the calculation of LTV is ten years, prior to the application of persistency estimates. Effective for policies sold during the three months ended December 31, 2021, and thereafter, the Company increased the product specific constraint for our largest product, Medicare Advantage, from 6% to 15%. The assumptions used in the Company's calculation of renewal commission revenue are based on a combination of the Company's historical experience for renewals, lapses, and payment data; available insurance carrier data; other industry or consumer behavior patterns; and expectations for future retention rates. The estimate of variable consideration is recognized only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with future commissions receivables is subsequently resolved when the policy renews or lapses. The Company is continuously reviewing and monitoring the assumptions and inputs into the Company's calculation of renewal commission
revenue, including reviewing changes in the data used to estimate LTVs as well as monitoring the cash received for each cohort as compared to the original estimates at the time the policy was sold. The Company assesses the actual renewal data and historical data to identify trends and updates assumptions regarding expected future cash flows when a sufficient amount of evidence would suggest that the expectation underlying the assumption has changed and a change in estimate of the transaction price is warranted. The differences in actual cash received for current period renewals may result in an adjustment by cohort ("cohort adjustment") to revenue and commissions receivable. Cohort adjustments are recognized using actual experience from policy renewals. The Company analyzes cohort adjustments to determine if they are indicative of changes needed in our estimates of future renewal commissions ("tail adjustments") that remain unresolved as of the reporting period.
Commissions receivable are contract assets that represent estimated variable consideration for performance obligations that have been satisfied but payment is not due as the underlying policy has not renewed yet and are therefore subject to the same assumptions, judgements, and estimates used when recognizing revenue as noted above. The current portion of commissions receivable are future renewal commissions expected to be renewed and collected in cash within one year, while the non-current portion of commissions receivable are expected to be collected beyond one year. Contract assets are reclassified as accounts receivable, net when the rights to the renewal commissions become unconditional, which is primarily upon renewal of the underlying policy, typically on an annual basis.
Income Taxes
The Company applies ASC 740, Income Taxes("ASC 740"), in accounting for uncertainty in income taxes recognized in the Company's consolidated financial statements. ASC 740 requires a "more-likely-than-not" ("MLTN") threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. The Company records a liability for the difference between the benefit recognized and measured pursuant to ASC 740 and the tax position taken or expected to be taken on the Company's tax return. To the extent that the assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. We account for income taxes using an asset and liability approach. Deferred income tax assets and liabilities result from temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements that will result in taxable or deductible amounts in future years. The Company recognizes a significant deferred tax liability due to the timing of recognizing revenue when a policy is sold, while revenue for tax purposes is not recognized until future renewal commission payments are received. This deferred tax liability is an objective source of future income that can be used to support the realizability of the Company's deferred tax assets. The Company has established a valuation allowance on certain deferred tax assets associated with federal and state specific net operating losses ("NOL") and credits that are not more likely than not to be realized. The Company believes all other deferred tax assets outside of the certain deferred tax asset related to federal and state credits where a valuation allowance has been established are more likely than not to be recognized.
Share-Based Compensation
We recognize share-based compensation expense in the consolidated statements of comprehensive loss based on the fair value of our stock-based awards over their respective vesting periods, depending on the plan. The estimated grant date fair value of our stock options is determined using the Black-Scholes-Merton pricing model. The expected term for stock options granted is determined using the simplified method, which deems the expected term to be the midpoint between the vesting date and the contractual life of the stock-based awards. The dividend yield is determined by dividing the expected per share dividend during the coming year by the grant date stock price, however, we do not expect to pay any dividends in the foreseeable future. We base the risk-free interest rate on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term of our stock options. Expected volatility is determined using historical stock prices for a combination of publicly traded peer group companies and our stock price. The estimated grant date fair value of our price vested units are estimated using a Monte Carlo simulation valuation model that uses assumptions determined as of the date of the grant. These assumptions include estimating the volatility of the Company's common stock price over the expected term, 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, the cost of equity, and the dividend yield assumption which is based on the Company's dividend payment history and management's expectations of future dividend payments. The estimated attainment of performance-based awards and related expense is based on the expectations of target achievement. The assumptions used in calculating the fair value of stock-based payment awards and expected attainment of performance or market based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. We will continue to use judgment in evaluating the expected term and volatility related to our own stock-based awards on a prospective basis, and incorporating these factors into the model. Changes in key assumptions could significantly impact the valuation of such instruments.
Impairment of Long-Lived Assets and Goodwill
The Company accounts for long-lived assets in accordance with the provisions of ASC 360,Property, Plant and Equipment("ASC 360"). ASC 360 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to its expected future undiscounted cash flows. If the carrying amount exceeds its expected future undiscounted cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset or asset group exceeds its fair value. For purposes of this test, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.
For the year ended June 30, 2025, the Company recorded an impairment charge of $4.2 million in selling, general and administrative expense in the consolidated statements of comprehensive income (loss) related to write-offs of previously acquired definite-lived intangible assets from which the Company does not expect to receive future economic benefit. There were no long-lived asset impairment charges recorded for the years end June 30, 2024, and June 30, 2023. Refer to Note 5to the consolidated financial statementsfor additional details.
The Company has the option to perform a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit has declined below its carrying value. This assessment considers various financial, macroeconomic, industry and segment specific qualitative factors. If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, a quantitative test is then performed by estimating the fair value of the reporting unit and comparing it with its carrying value, including goodwill. If the carrying amount of a reporting unit is greater than its estimated fair value, goodwill is written down by the excess amount, limited to the total amount of goodwill allocated to that reporting unit.
The Company estimates the fair value of reporting units under ASC 350, Intangibles - Goodwill and Otherby using an income approach, a market approach, or a combination thereof, which involves the use of significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy of ASC 820, Fair Value Measurement, and require us to make various judgmental assumptions around future revenues and operating costs, growth rates, and discount rates which consider our budgets, business plans, and economic projections. As such, these estimates are uncertain and may vary from actual results. Under the income approach, we utilize the discounted cash flow method while under the market approach, we utilize a peer-based guideline public company method based on published multiples of earnings of comparable entities with similar operations and economic characteristics.
There were no goodwill impairment charges recorded for the years end June 30, 2025, June 30, 2024, and June 30, 2023, as the fair value of the reporting unit significantly exceeded the carrying value.
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant's specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity ("ASC 480"), and ASC 815, Derivatives and Hedging ("ASC 815"). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a
liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our own common shares and whether the warrant holders could potentially require "net cash settlement" in a circumstance outside of our control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent reporting period.
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