v3.26.1
Debt
 9 Months Ended
Mar. 31, 2026
Debt Disclosure [Abstract]  
Debt DEBT
Debt consisted of the following:
(in thousands)March 31, 2026June 30, 2025
Term Loan
$325,000 $— 
Previous Term Loans
— 314,000 
Class A Notes
41,044 50,054 
Class B Notes
27,363 33,369 
Unamortized debt issuance costs and debt discount(17,624)(12,311)
Total debt375,783 385,112 
Less current portion of long-term debt:(22,457)(68,523)
Long-term debt$353,326 $316,589 
The combined aggregate amount of expected payments associated with the Notes and maturities associated with the Senior Secured Credit Facility as of March 31, 2026 are as follows:
(in thousands)
Remainder fiscal 2026
20272028202920302031Total
Term Loan
$2,031 $8,125 $14,219 $16,250 $16,250 $268,125 $325,000 
Class A Notes2,707 10,593 8,650 19,094 — — 41,044 
Class B Notes1,805 7,062 5,767 12,729 — — 27,363 
Total obligations$6,543 $25,780 $28,636 $48,073 $16,250 $268,125 $393,407 
Significant changes in the Company’s debt during the nine months ended March 31, 2026 were as follows:

Senior Secured Credit Facility

On January 8, 2026, the Company entered into a credit agreement with PLC Agent LLC, as administrative agent, UMB Bank, N.A. as lender and revolver agent, and the other lenders party thereto (the “Credit Agreement”). The Company’s obligations under the Credit Agreement are guaranteed by certain of the Company’s subsidiaries and secured by a first-priority lien on substantially all tangible and intangible assets of the Company and the subsidiary guarantors, subject to certain exceptions. The Credit Agreement provides for (i) a senior secured term loan in the aggregate principal amount of $325.0 million (the “Term Loan”) and (ii) a senior secured revolving credit facility with an aggregate commitment up to $90.0 million (the “Revolving Credit Facility” and, together with the Term Loan, the “Senior Secured Credit Facility”).

The Company utilized the gross proceeds from the Term Loan to repay the outstanding obligations under the previous credit agreement, dated November 5, 2019 (the “Previous Credit Facility”), including the repayment of all outstanding principal and interest under the previous term loans (the “Previous Term Loans”) and revolving credit facility. At the time of discharge, the outstanding principal balances under the Previous Term Loans and revolving credit facility were $304.4 million and $36.0 million, respectively. The repayment of the Company’s outstanding obligations under the Previous Term Loans was accounted for as a debt extinguishment in accordance with ASC 470, Debt (“ASC 470”). The Company recognized a one-time loss on extinguishment of $8.7 million during the three months ended March 31, 2026, representing the write-off of remaining unamortized costs from the Previous Term Loans and $0.1 million in fees paid on behalf of former lenders under the Previous Credit Facility.

The Credit Agreement contains customary affirmative and negative covenants, including requirements to maintain a minimum fixed charge coverage ratio and a minimum liquidity threshold. As of March 31, 2026, the Company was in compliance with these covenants.

Term Loan

The Term Loan matures on January 8, 2031, subject to certain acceleration features related to the Company’s Senior Non-Convertible Preferred Stock (as defined below in Note 7, “Senior Non-Convertible Preferred Stock”). Interest on the outstanding principal amount accrues at a rate per annum equal to the applicable SOFR rate (subject to a 3.00% floor) plus an applicable margin of 6.50%. The applicable margin is subject to a decrease after December 31, 2026, contingent upon the Company’s achievement of certain financial performance milestones.

The Term Loan requires quarterly principal repayments of 0.625% of the original principal amount through July 1, 2027, increasing to 1.25% thereafter, with the remaining balance due at maturity.

In connection with the Company’s entry into the Credit Agreement, the Company incurred $9.8 million in debt discounts, primarily comprised of an original issue discount and arrangement fees paid to the administrative agent. The Company also incurred $7.3 million in third-party issuance costs. These amounts are amortized to interest expense, net in the Company’s condensed consolidated statements of comprehensive income using the effective interest method. The effective interest rate for the Term Loan is approximately 10.2%.

The Term Loan is subject to mandatory prepayment in the event the aggregate loans outstanding under the Senior Secured Credit Facility exceed a specified borrowing base determined based on the aggregate balance of certain of the Company’s receivables, and in certain other circumstances set forth in the Credit Agreement. The Term Loan is subject to a prepayment premium on voluntary prepayments, certain mandatory prepayments, or upon acceleration of the obligations. For prepayments made on or prior to January 8, 2028, the prepayment premium is equal to the greater of (i) a make-whole premium payment equal to the aggregate amount of interest that would have accrued on such principal amount from the date of prepayment through January 8, 2028, or (ii) 3.00% of the
principal amount prepaid. For prepayments made from January 9, 2028 through January 8, 2029, the premium is equal to 2.00% of the principal amount prepaid. No prepayment premium is payable after January 8, 2029.

Revolving Credit Facility

The Revolving Credit Facility provides for a $71.7 million revolving line of credit, which increases to $90.0 million during the months of December and January. Borrowings under the Revolving Credit Facility bear interest at a rate equal to SOFR (subject to a 3.00% floor) plus 4.00%. As the Senior Secured Credit Facility provides for increased borrowing capacity under the Revolving Credit Facility, $0.2 million in new issuance costs and $0.2 million in remaining unamortized costs were recorded as non-current assets on the Company’s condensed consolidated balance sheets. The costs are being amortized as interest expense, net in the Company’s condensed consolidated statements of comprehensive income using the straight-line method over the term of the facility.

As of March 31, 2026, the Company had no outstanding borrowings under the Revolving Credit Facility.

Securitization and Indenture

On October 15, 2024, the Company and certain of its subsidiaries, including SQ ABS Issuer, LLC (the “Issuer”), a special purpose entity and wholly-owned subsidiary of the Company, entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with the purchasers party thereto (the “Purchasers”). Pursuant to the Note Purchase Agreement, the Issuer issued $60.0 million of senior secured 7.80% Class A Notes and $40.0 million of senior secured 9.65% Class B Notes (together the “Notes”) to the Purchasers. The Notes are governed by an Indenture, dated as of October 15, 2024, with UMB Bank, N.A. as indenture trustee (the “Indenture”). The Notes have a final legal maturity of October 20, 2039 and an anticipated repayment date of September 20, 2028. The Indenture was entered into in conjunction with the eleventh amendment to the Company’s Previous Credit Facility on October 15, 2024 (the “Eleventh Amendment”). The Company used the proceeds obtained from the issuance of the Notes to repay a portion of the balance outstanding on the Previous Term Loans.

The Notes are secured by a specified pool of renewal commissions that include both accounts receivable for policy renewals as well as commissions receivable for estimated future policy renewals (collectively, the “Subject Renewal Commissions”). The Subject Renewal Commissions are associated with underlying Medicare Advantage policies effective prior to January 1, 2024 and active as of August 31, 2024. As of March 31, 2026, there were $25.9 million of Subject Renewal Commissions included on the condensed consolidated balance sheets.

Under the terms of the Indenture, the Company services the transferred Subject Renewal Commissions, and the related collections are remitted to a segregated bank account. The funds in the segregated account are used only to fund payments related to the Indenture and is considered restricted cash. The Company’s restricted cash balance totaled $6.4 million as of March 31, 2026, of which $5.4 million was included within cash, cash equivalents, and restricted cash and $1.0 million was classified as long-term and included within other assets on the Company’s condensed consolidated balance sheets.

The Notes contain covenants that, among other things, limit the ability of the Issuer to: (i) sell, transfer, or dispose of assets without the consent of a majority of the noteholders, (ii) create or permit liens on its assets (other than certain permitted liens) and (iii) incur indebtedness (other than permitted indebtedness).

The Notes issued in connection with the Indenture bear interest on the unpaid principal amount at 7.80% and 9.65% for Class A and Class B Notes, respectively. The Notes amortize based on a target loan-to-value calculation, and if any Notes remain outstanding after September 2028, then all available funds of the Issuer will be swept to pay down the Notes. After September 2028 and October 2030, interest will increase an additional 2.00% and 4.00% per annum, respectively, on any Notes outstanding. The effective interest rate for the Class A and Class B Notes as of March 31, 2026 was 9.11% and 11.02%, respectively.

As the Indenture was entered into in conjunction with the Eleventh Amendment, the Company performed an analysis under ASC 470 and determined that debt modification accounting was appropriate for the Previous Term
Loans and Notes. The additional debt discount costs incurred in connection with the Eleventh Amendment and Indenture include the fair value of the Eleventh Amendment Warrants (as defined below in Note 8, “Warrants to Purchase Shares of Common Stock”), fees paid on behalf of lenders, and original issue discount on the Notes. The Company incurred a total of $3.7 million in debt issuance costs and $2.7 million in debt discount related to the Indenture, of which none of the debt issuance costs were capitalized and $2.7 million in debt discount were deferred. The costs associated with the Notes are being amortized to interest expense, net in the Company’s condensed consolidated statements of comprehensive income over the respective term using the effective interest method.

During the nine months ended March 31, 2026, the Company repaid $15.0 million of the outstanding balance on the Notes.

The carrying amounts of the Term Loan and the Notes approximate fair value. This is due to the Term Loan’s variable interest rates and the recent issuance of the Notes at prevailing market terms, with no significant changes in the Company’s credit quality or market spreads.

Variable Interest Entity

The Issuer was formed on July 24, 2023 as a bankruptcy remote and separate legal entity with its own creditors who will be entitled, prior to and upon the liquidation of the Issuer, to be satisfied out of the Issuer’s assets prior to any assets becoming available to the Company. Accordingly, the assets of the Issuer are not available to pay creditors of the Company or any of its subsidiaries.

The Issuer, as described above, meets the definition of a variable interest entity (“VIE”) for which the Company is the primary beneficiary because it has the power over the significant activities of the VIE in its capacity as the servicer of the Subject Renewal Commissions. As such, the Issuer’s assets, liabilities, and financial results of operations are consolidated in the Company’s condensed consolidated financial statements. As of March 31, 2026, the Issuer’s liabilities included in the condensed consolidated balance sheets primarily consisted of the borrowings under the Indenture of $68.4 million.