MediaAlpha (MAX) 1 Nov 232023 Q3 Earnings call transcript

Thank you for standing by. My name is Christina, and I will be your conference operator today. At this time, I would like to welcome everyone to the MediaAlpha Q3 2023 Earnings Call. [Operator Instructions] I would now like to turn the floor over to Denise Garcia, Investor Relations. Denise, you may begin your conference.

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

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

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

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

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

Denise. earnings call. I'd Welcome Thank comments. the our over for Thompson, before his so a everyone. Pat turning third much, call to CFO, you Hi, to like make observations our few to quarter XXXX

well execute environment. to market continue a in difficult We

third in the range vertical. insurance our line due at Our came health results end our growth quarter of above strong profitability high or to in guidance and top

For health transaction Medicare the value be expect fourth segment vertical under strength continued our recent to as the offset in consistent maintained line changes. QX adapts since near-term is our quarter, our advertising our year-over-year results levels in have in P&C carriers flat industry spend roughly in to weakness regulatory by insurance of we June. as XX expectations as with were

P&C of we're expect broader to market levels by underwriting industry's we year, in advertising and improving profitability XXXX. at near the spend the the recovery or take current to While remainder to through remain continue encouraged expect a hold

insurance growth our our annual focus open opportunities forward, our remains significant presented current to years industry's in confident on capitalize the results come. With to call delivering to during the to and solid Longer on the Looking objective that, term, health customer in turn and enrollment top to is in vertical over significant acquisition, by the periods. remain immediate ability growth bottom ongoing drive digital line the and we I'll shift Pat. our

results for with market financial the third questions. guidance and recent quarter few financial other developments a fourth on up begin and Thanks, comments call and before quarter our reviewing business Steve. opening I'll our

line $XX value despite increasing growth the in in insurance with XX% continued quarter by our to P&C year-over-year, we new annual strong $X.X third vertical, insurance our discipline. Transaction on This million a our were of acquiring underwriting had our down earlier, carrier with line with expectations. at exceeded year-over-year, or mentioned million as end high the over customers. In has focus or growth Steve range. health quarter Adjusted profitability continued EBITDA expense expectations. results value above of transaction XX% guidance driven vertical grew year-over-year decline in another As restoring the was value, in XX% expectations, transaction

Moving quarter fourth guidance. to

similar impact seasonality with as We our roughly expect year-over-year the headwinds Health, margins noted to be to growth Steve dollars expect adjusted EBITDA positive we than transaction the of another In quarter of third discipline impact levels. offsets in impact gross muted we value more transaction P&C, expect reasons earlier. vertical. In quarter to and flat be P&C growth of expense the higher be continued the of to value for year-over-year

a the vertical health year full OEP. of typically timing our transaction value about represents quarter due in fourth reminder, and As XX% the AEP to of

a transaction midpoint. the As $XXX value to between and million decrease QX be of expect $XXX result, year-over-year a million, XX% at we

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

a $XXX,XXX due to EBITDA midpoint. million, increase adjusted million higher add of at to in operating EBITDA $X approximately between million to QX QX adjusted $X.X expect year-over-year after and seasonality. be than are expected expenses be to Lastly, we the $XX.X part backs XX% levels

other to noteworthy items. Moving

inquiry QX, incurred $X a legal to related with unrelated our the the were expenses, During the operations. to we of ongoing approximately majority legal settlement balance of million which core FTC from

FTC QX. inquiry to than $X lower million incur a during fees with bit QX, expect the We associated of

We compliant are continue believe have FTC to we regulations, inquiry. they the continue with as and cooperating and and with their been all we fully laws remain

sheet. balance the to Turning

our financial debt net We ready for using of hand, to cash the through growth. With continue operator, that, on leverage are reduction we question. of ended first to debt. and $XX net on reducing million excess a in flexibility with remains We EBITDA and adjusted combination the prioritize decrease focus financial cash quarter

Genuity. first line Michael question [Operator Instructions] Canaccord Your comes the of Graham with from

tough all appreciate I here. information had this the hopefully, questions P&C of the to getting to end value. and related I transaction X we're period

we advance was of in any long just P&C of in just value you? to year turn million you're $XX right, If When like start QX back if to leave better of it a and takes and wondering might that they high? And we're million. into? on how a how long back to peak lead you I'm Do have in -- growing you on, is $XXX to that want we in or previous ready are quarter one just how is is again. transaction high-level have to related a get tend notify you in first fortunate time spending year have far to kind visibility thoughts the question carriers enough do The get historically practically this and you had next XXXX,

down and turn carriers that tunnel the has see difficult in I we're the starting get Michael, them of get first, say not But getting in spend start is question discussion would on historically to or if -- at which engaging several weeks, the amount right the it of of we're been spend. Certainly, lead of time because period caveats. of notice just a the think say market. turn from we before time. carriers I'll last mean, answer at this I'd what's a couple we're I as least hard a end lot in right? plenty yes, now, I light lead differs, to of that we months

I'd to claims mean everyone positive to I'd the certainly, Higher moderating XXXX. that at say And earning so are far that earnings looking through your and original else signs costs. than I now -- right? we're that's rate to question, seeing we're back actually go forward just rates say, through is, what a higher

it digging up industry really And of good. that so the over hole years. profitability the its dug the for That's been that's out couple of last way had

ratio And target enough will combined annual advertising good should profitability you'll in the see renew spend when or line so industry combined budget be I at sight which in year, reaching the means should profitability what we year beginning increased in of it fairly of benefit as think is and a advertising I because of cycles that either material from to beginning in in XXXX, think target the that, carriers spend next have whole see as well increase rate QX. the next see --

Now year. simply, past, increase in the unpredictable we've upcoming as been. as say that it's likely seen concession has to I I be think, how a last the cycle not the the in QX to will namely And strong is what

their over And mean shopping impossible think this recovery But get in I it's going that level, expect years. And next heard the to And is to isn't I X.X think, for we to levels it's to earnings growth to that gain that that us, to carriers to the comfortable rates. answer to And back see do right? just things 'XX, momentum elevated the with discussions think so more exactly seeing come. see I X that steam and XX and increasingly gain to of we in when get extend I your the had say. years you be what XX a to this carriers. this the years expect months, earlier with of strong we the into through specific then get we to is X market going to really softening Progressive level to question starting until think this is beyond from we with will call XXXX our expect steam over as really what more today. But

question, hope So I that Michael. answers your

Bank of Mike Montreal. comes question next of your And from of the line Zaremski

on is health of I'm actually. the P&C my side question so a more guy,

on which, outer pricing volumes insurance cost your should ago, revenue think a So right, has guess, of the system, side, XX-plus into we transaction I few just just I inflation come the about kind percent, policy versus help feel the much like how when P&C in years. up essentially of right is years auto

the inflationary health On the type what you can of health remind are the side levels us impacting business? of side,

Yes. I different the P&C pretty the and the can of are that is house. would health here. Pat I this question. inflationary And address trends say And side between trends the Mike, --

call caused it the rate where P&C contrast XX a digits that the which has inflation think was to better for hard is been. anywhere now. high the was -- the P&C, from fact think years been which is fast kind been of would So really, mid-single just double take able resolving claims the X the in the how of given I it was to lot cost they of running And the severity, inflation on claims and kind it market before has in a that, of low that enough of I part for while there is digits. what's cost haven't industry And stark to

of the than side, more it health care has has health for consistent also kind auto predictable. it's claims insurance, for I long-term On been but inflation run more think higher and

or point side, that X above on of about coming big seen above people's Medicare where you've may above XX XXXX P&C, And That's think the claims some have talk to been the medical contrast so for a expectations. In in stark expectations. and it I sense, points expectations. players XXXX,

the of noise And particularly normally it health there's the think side, range that, operates. big but so yes, a in about that's which bit a not of our been given just mind, issue in I kind

Yes, Okay. a ticking we've points Got about inflation health and it. bit. seeing been up hearing data

Okay.

the On P&C my last vertical, question.

there that about you they seeing past, in still -- Just you've trying early do just some your the to that through be you past. the weren't maybe -- larger to weren't players are in marketplace so, tell? players carriers or the Are year the in larger marketplace talked in big enter it's carriers the are direct-to-consumer that too some sense Or carriers marketplace? bigger that coming

No Steve. we're think trend. -- see I that this to is continuing Mike, No,

look I they're weight P&C to and largest varying when that punching according our at degrees think the the their marketplace. within of think list you I carriers,

on various actually looking of direct-to-consumer or are who relied certainly they're have captive capabilities. investing those who at carriers and be to agents large invest have And agents capabilities, invested whether in there are agent-based and traditionally it's so distribution, independent in stages

the thesis, and And to marketplace top top invest to direct changing needs carriers, within upcoming the large league that last in so distribution or XX But come the direct-to-consumer agent-based the XX relevant certainly certainly is because the we distribution which top landscape in table go and top isn't success really, X years, the more become to marketplace XX our really to continue carrier the last years. to every that over has going the model into over away. had expect of according players carriers years X in the and X start to

see to continue that so And we trend.

you'll I see a the back the soft is think trend. think really into I a from in that secular in get carriers essentially a you've seen mindset, growth pause market But market what and that. market hard into emerges continuation as a of

then so their different methods marketplace carriers players on really direct-to-consumer you larger distribution start should as resume other to bigger types have investments of and And result. a to again focused see our who traditionally in become

RBC. question the next from Ben line of And our comes Hendrix from

I stating changes, that a model less expected your on to and thus just could degradation was to morning they point Medicare degree management get planned risk year than progressed update AEP. this thoughts this to a design that lesser expected. quick from amid has heard shopping We far perhaps initially maybe hoping in had behavior than Humana broadly

any Just trending you're the wanted this to year? to see the so your if how perspective way activity change thinking things there's are from transaction far about and value

question. This thanks Ben, here. the Pat Great. for is

of run issues: new say to are some first, Others carriers, we've CMS; us. And there to place of maybe I of from than calls a the kind a been think, partners what marketing public So in been have and slower would at start say approved least have that few is rules hoped. have really, doing to that to adapt that challenges Would more have having timely are seen start have put I and told has would some partners manner marketing X the able gotten well. for a say in other by from I they've that from what we gleaned have delays struggling been into primary we getting say the would have that AEP off be some AEP. we to creative quickly that would

the bullish it been And hoped. But it's seen ever that, going to be, to and Americans and a one carriers and slower a the It's we they through that things frankly, but we that's carriers. whether we've and over think said Advantage. going be that adapt try in the publishers trend win-win-win. Medicare product or AEP years half right, in partners, so It's having keeps to come to this up a the to get where as new adjustments potential working into. quite to should and long-term number world opt regarding consumers of to chosen looks we've us they're than order to a that we're to the That continue benefit and like need benefit as will and --

of And Thomas McJoynt our KBW. next the from from question line comes

advertising the on growth ago? premium it I kind after, the potential was And the is it year The year, in getting appropriate to auto think pretty the asked spend, a once could robust perhaps just few to premiums it the next percentage in perhaps normalize. first the one back years as opportunity years the is side, revenue P&C of of that of out personal given tremendous does a carrier same pool, overall because suggest as

sense was it on So as get it your just of want if premium, where to percentage years to think ago? revert a you a back few should

Thomas, good question. a yes, it's

of on the lifetime advertising measure benchmark their their fund spend So the of the expected customer. value effectiveness to typically carriers advertising based

they're policy of acquiring. course, And the that so,

there's are think their that just And of all go in effectiveness of of on value advertising that dollar that return rough inflation the amount can I to going sold, up to spend they're you to. their I a the based been that pegging customer so being the ad proportion spend spend the think continue of policies expect significant of advertising percentage lifetime assuming value on to the measure that the to they're on extent

of natural pushing have because need that rate we're of concern pay that are the light sense. books really out just switching high that kind carriers velocity feel of seeing behavior means then so shopping the to of as much the the leads carriers have in the Yes, that just my any that to won't of for is Okay. increases the in much as there's And question, there through amount they second in past makes there and turnover already? kind

environment a going Well, we've think also That's X in what been of of hearing Yes. shopping better a ambient is bit I rates in years. or of because terms slowdown an little for part organic the where about have good been you're up behavior very question.

years, that do desire with so drive that carriers to is for and going And really grow. this spend upcoming the to going proportion I our the advertising that for growth to case whenever what's I belief follow desire think think the be market that in in have. is in the are there's desire a And growth, and will

you're sat going sidelines really their is to for policies see years, of X force. not what -- see largely the are have what you're And the X.X in who so better carriers going on to growing part to

think you behavior these amount will the the invest growth is profitability in the to of attained the or think they in carriers, I advertising. think, to is pressures behavior see shopping going organic expect I the to I start growth build. And growth. really target of that way marketplace, so lot of, I once through in by invest And And carriers a regardless think are

[Operator Instructions] conclude day, great everyone thank This And QX Earnings XXXX we disconnect. you with no MediaAlpha does for do further a joining. may everyone. Call, now today's Have and questions,