SelectQuote shares are down 40% on Thursday morning: here’s why

SelectQuote Inc (NYSE: SLQT) said late on Wednesday its sales topped forecasts in the fiscal fourth quarter. Shares of the company, however, tanked about 40% this morning as investors focused on lower-than-expected earnings.

Q4 financial results

SelectQuote generated $188.45 million of revenue in its fourth quarter, representing a 33% growth from last year’s $141.45 million. But its net income and adjusted EBITDA in Q4 tanked more than 80% and 47%, respectively.

Adjusted for non-recurring items, the insurance company earned 2 cents per share – a significant decline from last year’s 13 cents a share. In comparison, analysts had called for 5 cents of adjusted EPS on about $181 million in revenue.

Revenue from the three business segments

SelectQuote’s ‘senior’ and ‘life’ insurance segments noted an annualised growth of 42% and 41%, respectively. This was partially offset by the ‘auto & home’ unit that posted a 41% decline in fourth-quarter revenue.

Full-year financial performance

For the full year, SelectQuote reported $131 million in net income that translates to 79 cents a share. The NYSE-listed company swung to a profit in its recently concluded financial year on the back of $937.8 million in revenue.   

CEO Tim Danker’s remarks

Commenting on the financial update, CEO Tim Danker said in the earnings press release: