SelectQuote (SLQT) has filed proposed terms for its $450 million IPO of its common stock, per an amended registration statement.

The company provides lead generation services for insurance providers in the U.S.

SLQT is a strong competitor to EverQuote  (EVER) - Get Report, its revenue growth is accelerating and the firm is producing positive pro forma earnings.

My opinion on the IPO is a BUY at up to $18.00 per share.


Overland Park, Kansas-based SelectQuote was founded to provide insurance companies of many types with leads for consumers interested in purchasing various types of insurance coverage.The company generates revenue via commissions through first year and renewal commission agreements with insurance carriers.

Management is led by Chief Executive Officer Mr. Tim Danker, who has been with the firm since 2012 and was previously founder and CEO of Spring Venture Group, a senior healthcare insurance distribution site.

Below is a brief overview video of a customer testimonial:

Source: SelectQuote Insurance

SelectQuote has received at least $86 million from investors including Brookside Equity Partners, a middle market private equity firm.

The company markets its online service via online and offline marketing channels primarily in a direct-to-consumer [DTC] approach.

It's primary channels include, television, radio, third-party marketing services and search engine placement.

Marketing & advertising expenses as a percentage of total revenue have been uneven but trending lower as revenues have increased.

The marketing & advertising efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of marketing & advertising spend, grew slightly to 1.0x in the most recent reporting period.

According to a 2018 market research report by IBISWorld, the market for online insurance brokering in the U.S. is estimated to rise to $18.1 billion by 2024.

This represents a forecast 9.3% from 2019 to 2024.

The main drivers for this expected growth are improvement in online-based lead generation, capitalization and risk management technologies.Additionally, disposable income growth will also add to consumer demand as will increased awareness of efficiencies to be gained by buyers and sellers operating in an online environment.

SelectQuote’s recent financial results can be summarized as follows:

  • Growing topline revenue
  • Increased gross profit and uneven gross margin
  • Growing operating profit but uneven operating margin
  • A swing to sharply negative cash flow from operations

Below are the firm's recent operating results:

Source: SelectQuote S-1/A Filing

Source: SelectQuote S-1/A Filing

As of March 31, 2020, SelectQuote had $158.0 million in cash and $598.0 million in total liabilities.

Free cash flow during the twelve months ended March 31, 2020, was a negative ($57.0 million).

SelectQuote intends to raise $450 million in gross proceeds from an IPO of its common stock; the company is selling 18 million shares and shareholders are selling 7 million shares at a midpoint price of $18.00 per share.

Assuming a successful IPO at the midpoint of the proposed price range, the company’s enterprise value at IPO would approximate $3.2 billion.

Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 15.37%.

Management says it will use the net proceeds from the IPO to pay down its Senior Secured Credit Facilities which ‘require that at least 25% of the net proceeds to the Company from this offering (up to $150.0 million) be applied to the prepayment of the Term Loan, which otherwise matures in November 2024.’

Management’s presentation of the company roadshow is available here.

Listed bookrunners of the IPO are Credit Suisse, Morgan Stanley, Evercore ISI, RBC Capital Markets, Barclays, Citigroup, Jefferies, Cantor, Keefe Bruyette & Woods, Piper Sandler and Drexel Hamilton.


SelectQuote intends to raise public investment capital to pay down debt, provide capital to selling shareholders and have some left over for its growth initiatives.

The company’s financials show strong revenue growth in the most recent reporting period, net profit growth but a significant swing to cash used in operations.

Marketing & advertising expenses as a percentage of total revenue have been bouncing around 33% and the efficiency rate is relatively stable at 1.0x.

The market opportunity for a new entrant into providing sales leads to insurance companies is significant and SLQT is proving to be a worthy competitor to Everquote (EVER).

Credit Suisse is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 1.3% since their IPO. This is a mid-tier performance for all major underwriters during the period.

As a comparable-based valuation, SLQT is asking investors to pay a higher EV/Revenue multiple than for publicly held EverQuote.

However, SLQT has positive earnings per share on a pro forma basis and revenue growth is within range and accelerating, so the proposed valuation at IPO appears to be comparatively justified.

My opinion on the IPO is a BUY at up to $18.00 per share.


Expected IPO Pricing Date: May 21, 2020.

(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. Information provided is for educational purposes only, may be incomplete or out of date, and does not constitute financial, legal, or investment advice.)