What happened
SelectQuote (SLQT -3.12%) shareholders endured sharp losses this week, with the stock falling roughly 40% by early Friday morning, according to data provided by S&P Global Market Intelligence.
The slump was sparked by the insurance company's latest earnings announcement, which revealed new profit pressures and a cautious outlook by the management team for fiscal 2022.
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So what
Revenue for the fiscal fourth quarter landed at $188 million, which was right within management's forecast. Earnings were weaker than expected but were still within the low end of the company's late May prediction.
But investors weren't happy to hear about new challenges in areas like customer retention, even though management said the long-term trends were still strong. "Despite some persistency pressure compared to original expectations, we expect cohort-level [rates of return] to remain very attractive," CFO Raffaele Sadun said in a press release.
Now what
SelectQuote's outlook for the fiscal year ahead caught most investors by surprise. Sales might be pressured by higher cancellation rates, and earnings are being pinched by extra hiring and marketing spending. These issues don't threaten the wider growth picture, but they do imply that the small-cap business will take more time to reach key milestones like positive annual cash flow .
