MediaAlpha (MAX) 3 Nov 222022 Q3 Earnings call transcript

Good day, everyone. My name is Kellyanne and I will be your conference operator for today. At this time, I’d like to welcome everyone to the MediaAlpha Q3 2022 Earnings Conference Call. Today’s call is being recorded. [Operator Instructions] At this time, I’d like to turn the conference over to Ms. Relations. Investor of Garcia Denise Please go ma’am. ahead,

documents Thank a press Kellyanne. the our quarter XXXX. website After section will the announcing them the issued MediaAlpha third on These XX, September referring today, and closed ended available release of for in Investors market results you, are be and to we letter shareholder call. this

materially refer quarter of SEC future guidance Form XXXX uncertainties reports risks will our those based quarterly them. assumptions in its forecasts, business those statements filings, outlook and management. and fourth and Form revise based November are results for could explanation undertakes risks from about obligation for are the include financial and or on and the uncertainties as These to our statements financial on These to cause XXXX, limits statements. reflected future forward-looking today events including on to company’s discussion of on update expectations or fuller differ Our no currently X, results, which including those XX-K and today, forward-looking a Please of forward-looking the available that subject our assumptions, are information to to report annual statements. applicable forward-looking its statements the company and XX-Q for to

of non-GAAP directly to financial as a your a actual today’s In with measures considered to today. measures understanding for on be and This issued measures GAAP. financial included basis. of projected and our comparable letter certain order of adjusted we not to our are metrics present addition, GAAP superior accordance financial that most EBITDA, should to in press and in shareholder or supplement call, measures presented be Non-GAAP non-GAAP the on calculated referring which in these includes MediaAlpha are release will performance. Reconciliations substitute assessment we

made is will investors.mediaalpha.com. available link a this of recorded on to for I’d section being the at that be via like remind website everyone Investors and call Finally, replay company’s the

call introductory remarks before Steve turn Steve. Pat Go I’ll to to ahead, for the and Now over opening call questions. your the a few

everyone few to the turning Thanks, Pat to comments. about welcome our third quarter I’d a the make Hi, and Thompson, quarter to for like observations call call. before earnings Denise. over our CFO, his

the limit inflation by carriers ongoing from marketing have to investments losses, Hurricane pressures expect carriers Due spend underwriting in losses QX Ian, levels. profitability the to by P&C extremely insurance their normal and further in to insured auto lead depressed relative continue marketing on carriers large driven which QX. remains to pullback we spend that Recently, compounded been variable a in to

and improves. the them profitability their ultimately positive side, resume approval for which rate to gain to carriers On states, lead many will continue in as focus growth increases pursue

from As industry to performance a from P&C our them help In down expect market we turned spend emerge to anticipate offset once result, in from brokers. partners to begins year-over-year insurance the improved carrier value transaction our verticals their cycle we our to MediaAlpha growth as again spend be objectives. when hard meet carriers and is slightly lower health by robust the vertical, current

shopping in optimistic which very early for and vertical, about online shift long-term the growth the this the to be of enrollment. to continue outlook is innings We very

our P&C our marketing the of outgrow approach disciplined peers while coming Given expense to this market cycle. difficult continuing capacity maintaining to our environment, management we are hard out

and Our committed to outstanding remains mission. team our strongly engaged

across to our and remains our digital as its ever year, we challenging all conditions a in marketplace marketing and and direct-to-consumer The insurance regarding improve. scope of for been market our remain has continues scale, this bullish growth profitable prospects shift unparalleled long-term While as once capabilities. secular verticals, distribution

Pat to to With open that, over I call few your say the words before the questions. we a will to turn call

cash I’m a we Great. items EBITDA take Steve. out moment our forecast. and And a quarter. this regarding our expense await disciplined our flow excluding you, few positive and I’ll came quarter. Operating on non-cash free were point expenses, in that return guidance able as adjusted the to items, ranges during pleased to create a intensely vertical. we P&C below growth Thank remain to exceed in management we

relative annual In would vertical, to the the quarter and is our of Medicare approximately P&C our full of our for value transaction year. and business. Next, total. typically enrollment investors QX strongest like value with health QX ACA QX is usually to In our year the of the slowest seasonality plans of declines periods I timing to representing of transaction the vertical, due quarter XX% remind QX

Our fourth these reflects seasonal quarter trends. guidance

Turning and paid cash of to quarter down $XX.X of the during quarter equivalents. the million cash with balance debt we the ended and $XX million sheet,

covenants. Our EBITDA, term as of consolidated higher EBITDA, adjusted relative the credit we materially defined included which EBITDA. public as a loan based matures includes such are our XXXX to debt These costs than headroom number covenants add-backs not therefore adjusted July in is agreement, in of company have and on significant in significant and

of spend offset to our Looking anniversary be transaction value the ahead Within now as slightly to insurance similar spend carrier our QX, P&C health our lower cycle. by start brokers. year-over-year market robust we we transaction value for first quarter year-over-year in partners a crossed hard expect that from this down vertical, is of as guidance the the in decline reflects third have

As to the $XXX from year-over-year a a result, $XXX XX% to at range value transaction of million, we million expect midpoint. decrease

of million the decrease to to midpoint. year-over-year range revenue We from at XX% $XXX $XXX million, a expect

year-over-year from to XX% to decrease range of midpoint. the $X Lastly, adjusted $X at EBITDA expect million, million we a

excluding increases by our both QX projecting $X.X expenses, to operating $X.X driven than million expenses. higher We and items, non-headcount to are non-cash XXXX operating seasonal in temporary levels be million

we for ready operator, are that, first the With question.

We first with [Operator will Canaccord. hear Instructions] from Graham Michael today

carriers to space around wanted add I just your in the the ask mentioned rate any or rates. that can adequacy to of ask think the one maybe question. achieved one, just will again. to guys you first any are it in and that I percent And close first comment there do Is little ask had terms put you Hey. on carriers were big carrier general the for you, being and That’s depth a of player complete, more Thanks one working still like started wanted depth spending a follow-up. is in the a I that lot then done? to to you another

something mean Michael, it’s Hey for thought Okay. similar. we your question. Yes. I Steve. Thanks

And lean in that the at I increasing think we like back mode, continue into which we isn’t we the expect is XXXX. adequacy. we And I QX they the into marketing there. QX, in past, pullback to carriers. effects think alluded are increases have achieving seeing from stages growth are feel overall, to that about quarter-over-quarter a what the to are seen certainly, we get investments. what Ian different from marketing of from And The budgets as the there the are their very carriers rate that as notwithstanding Hurricane of we seeing and we certainly, here, them who of in see are carriers P&C lot different talked some results

rate process seeing very carriers, are that think the increase that that in are to of very of to I different their achieve And some in this still contrary think what are at adequacy. rates other we majority stages. of fair period getting the we to the of they it’s had I say the thoughts is though, early middle that

marketing and expecting on are to planning happen, XXXX we what basis, so carrier-specific And really is to on budgets return. a market recovery through

think lumpy, will through are specific based And adequacy. non-linear that because a it fair XXXX, be I on so to say each bit to but it’s achieving that start, expecting little be might carrier it rate we recovery

in Okay. vacuum, spending? happened quarters, that’s And with then major hurricanes, Thanks – Ian expect carrier for quarter hurricane you hurricane, if would had it a are like that thoughts typically or there? and impact if what happened your Is just experience long or a with how helpful. to a a two this

great think a that’s I Yes. question. Again,

– that largely the think I impact think so I And the near-term. is

it the ratios the think where combined their for overall with on I carriers depends are year.

carriers with rate Ian. back to and the you adequacy pulled Hurricane of seeing I effect have And due the to are think achieved so what QX in respect who

the hit their behind and in primary that for targets driver their combined think was line year. I ratios really to the get

well And as expecting on the reaction what normal overall it so as that are a see of combined isn’t I think unlike you for in what carriers again, market of And event, ratio year. the severity the terms in the would period. depends

carriers has that other with been will back XXXX. suit discussions hurricane don’t certainly, an in time But I can think the effect. marketing. lean how QX, carriers started that to think about back effect that that We as overall, continue the in who of the lead the Ian into and could effects achieved markets follow they Hurricane linger anticipate later the the year. certainly in and with early have recover, will we rate adequacy of had Hurricane Ian Ian into to feedback have The by and we

Steve. you, Thank Okay.

Citi. Instructions] next Daniel will Grosslight with [Operator from We hear

to Hi I bit. question. the little health on guys. want for taking focus a for the Thanks segment

business general you strength big are subsidies. seeing idea of is mentioned market extension a Can XX shareholder you us under the how You given your in the that letter, in give around thoughts Team your of focus? focus as acquisition an overall Helper transitioning XX Customer under more of business? any to recent a And from a your of the Medicare Advantage percent health of

mix Medicare XX, the number one not and that’s that this that Part healthy the disclose. other breakdown as The most like bought think for they acquisition, on was that on it’s blend under The areas, is the focused that two. on for about think XX-XX And when we had course heavily healthy extended relatively has been is the pretty the we – of is you challenged health. this – it’s Helper – not skewed be know, it’s to But of over business you the it. and Medicare Pat. question, is can under that two, tell year. between between Customer I in thing health chose And Team it’s Medicare in The the and you market, of we a deal for very a thesis of direction. I a investors was our Medicare it’s area Thank capabilities that vertical the could we the XX Dan.

at working So, there. CHT the been team has

health. are revenue kind the profit. we in opportunity XX of would real that and now, for of have seeing the about that verticals in day we area with like In the other you is in of remain We gross CHT, expected uplift QX, Medicare and And both kind in the see business third period. bullish real right long-term OEP in under

it. Got

seen of that you themselves commentary of any comments all year, lead to around heavily brokers in force ahead versus can but going am X that’s sales their carriers the And X this think to have not their the carriers and coming strength years? just are Okay. own if how shape have the I up, just made curious years and provide investing own over they acquisitions. you you

or that that trend this points in I that’s And a health carriers vertical reports us. look broker say in always And as think of known. your probably to than as again the on forward, well industry Yes. peers, a area Medicare we I The some particular, And generally, in is we some the is and will I is are one challenges Advantage it. for think would are in for them, is of thing looking five growth Advantage stronger our of spend probably be quite spend a from to Medicare is get I think general has that you big continue bullet bit four been having and carrier Medicare summary that the the Pat that broker growth. across

And it importance where brokers So, continue valuable heavily clearly, is customers. And their to gating the space it. to carriers want customer to continue over penetrated. that this focused to of where we over with in that carrier you importance they carriers before direct rise channel, kind they have an playbook, brokers relatively very, were that is will have acquisition in and we was the efforts And executed in benefit are believe time. end P&C have very P&C of the time, seen on we have I carriers. the relationships want the consumers And skew we will to be to very that although health expect think

Appreciate the Got color. it. Thanks guys.

Thanks Daniel.

hear now KBW. will Meyer We from with Shields

third third quarter, that worse auto the if the things in interest they demand what most of am course of Thanks. partners words you like sounds how recognition Good that we And was the the the it afternoon. going listen from I second them with corresponds this sequentially carriers to than guess other from are seeing quarter quarter? wondering thought. are the over I there from into

to progress Yes. But we state-by-state Referring see partners. are are increase, that getting think and Steve. rate as there who proving certainly, its Yes, And hearing that X approvals. overall, fair achieved with are think made in back to I Hey my generally has we carriers Meyer, continuing comments mean and carriers what feel this difficult our I But the us environment see that then it’s we earlier them the hearing comment, positive with carrier some resonates some they resonates that you prices I how are those that from from the carriers mean the California front, I of we and in carriers majority the with, through matches still signs. we first been. say I it. about are positive adequacy. I certainly we market have think think making working coming on I news the that car used that directly. insurance And it’s are It rate down, what believe auto seen us years. working

Okay. Perfect.

like basis sort on of just Was business wondering sort supply return is Florida for COVID it competition more Hurricane am And in your abstract but looks Florida. what Florida an I all of homeowners it actuarial before is underperformer chain? of in may a this force Second, that lower pricing to impact your question, marketplace? an Ian the – sense for was a

I to think that. say it’s safe

just million verticals the do $X.X have Okay. one to investments, Perfect. And I question, cost last guess closing? of the method does with we impairment that. will anything have that other

cost the was it Meyer, impairment? Sorry, basis

Yes.

investment ago, several we through And company partial value. of had were The equity investment. years in and some P&C made given that kind challenges investment have in exercise went industry, – at we it’s an and holding we of Yes. of that a kind we impairment that and we space, the the of a book the an

kind of down a something mark-to-market resembling that. on it So, wrote and we

interest. minority a nothing it’s So, investment. No, with to do

you. Thank

Thanks, Hey. Meyer.

[Operator Instructions] will now Hendrix hear We Ben with RBC. from

Hi guys. Thanks. Yes.

that Just one past a of get our to larger out coverage market going quarter, ACA healthcare under mix market footprint. side. companies, carriers This your altogether. the quick And overall we and your Has have XX heard expand we heard in kind of that Health the question their other exchange the have Thanks. back all for changed on of the client trajectory, market? Bright of your outlook

I Hey of have Steve. it’s Ben, hasn’t. mean some we seen that. It

have under within upward go transition like having carriers direct-to-consumer, the that think the I in we steady ours, space trajectory XX marketplaces invest a there. seen to

balance building I brokers, Again, capabilities. the space major agents building we into a as well space, think of leaning seen earlier comments good really within as this carriers. have and direct certainly distribution of with that based more Medicare Advantage through on

with work see ability way that’s overall going long-term, I continue a marketing to to as overall, transparent sentiment our respect Pat to with really I performance see and to help a continue house our the way. building capabilities. direct-to-consumers, interest with insurance, insurance to benefit their carriers that in mean broad in there health regard within with major those doing health to think will earlier, trends deploy the because, And really and companies having them the from we mentioned over super-efficient so just And we dollars that an increasingly insurance

to your your just loan term then with regards question with Thanks. XXXX. to – And last

for remind that? in of rates? increased kind guys hedges you on Do how place have that’s interest positioned can Just us you

debt. Yes. It’s floating rate

it’s be So, LIBOR presumably spread a effectively near will the to future. that transferring SOFR in

thus year. as floating up, – so on debt kind been we lock what rates the have go the far And is rates doing in of up this the rates go we rate typically quarter-by-quarter

going long-term in any So, of hedges up, course, have has place. we interest expense been and don’t

Thank you, guys.

Ben. you, Thank

participation. with may thank you this disconnect. at for do time, today’s And your you will now And conclude We all other questions that no conference.