- Revenue of $152 million, growing 37% year-over-year
- Revenue from Property & Casualty grew 73%
year-over-year
- Transaction Value reaches a record $218 million, with 44%
growth year-over-year
MediaAlpha, Inc. (NYSE: MAX), today announced its financial
results for the third quarter ended September 30, 2020.
“We are pleased to announce a strong start to our journey as a
public company, with record Transaction Value surpassing $200
million, driven by continued growth in our Property & Casualty
insurance vertical,” said Steve Yi, Co-founder and CEO. “We
continue to benefit from positive secular trends in the insurance
industry, and our transparent, data science-based approach
continues to drive outstanding results for our demand and supply
partners. Customer acquisition investment from our Top 10 demand
partners increased 95% year-over-year, which enabled us to expand
our partnerships with existing suppliers as well as to attract new
supply partners. With a robust ecosystem, we confidently expect to
reach record revenue for the year, as reflected in our fourth
quarter and full year revenue guidance.”
Third Quarter 2020 Financial Results
- Revenue of $151.5 million, an increase of 37%
year-over-year;
- Transaction Value of $217.6 million, an increase of 44%
year-over-year;
- Gross margin of 13.7%, as compared to 16.0% from the same
period in 2019;
- Contribution Margin of 14.3%, as compared to 16.9% from the
same period in 2019;
- Net income was $4.8 million, as compared to $7.8 million in the
third quarter of 2019; and
- Adjusted EBITDA was $14.0 million, compared to Adjusted EBITDA
of $11.7 million in the third quarter of 2019
A reconciliation of GAAP to Non-GAAP financial measures has been
provided at the end of this press release. An explanation of these
measures is also included below under the heading “Non-GAAP
Financial Measures.”
Financial Outlook
For the fourth quarter of 2020, MediaAlpha currently expects the
following:
- Transaction Value between $223 - $225 million, representing 32%
year-over-year growth at the midpoint of the guidance range
- Revenue between $163 - $165 million, representing 30%
year-over-year growth at the midpoint of the guidance range
- Contribution between $24.5 - $25.5 million, representing 16%
year-over-year growth at the midpoint of the guidance range
- Adjusted EBITDA between $15.0 - $15.5 million, representing 9%
year-over-year growth at the midpoint of the guidance range
For the full year 2020, MediaAlpha currently expects the
following:
- Transaction Value between $782 - $784 million, representing 40%
year-over-year growth at the midpoint of the guidance range
- Revenue between $558 - $560 million, representing 37%
year-over-year growth at the midpoint of the guidance range
- Contribution between $86 - $87 million, representing 25%
year-over-year growth at the midpoint of the guidance range
- Adjusted EBITDA between $54.5 - $55.5 million, representing 28%
year-over-year growth at the midpoint of the guidance range
We expect total shares outstanding to be 58.5 million and 64.5
million on a common and fully diluted basis at the end of Q4
2020.
With respect to the Company’s projections of Contribution and
adjusted EBITDA under “Financial Discussion – Q4 and FY 2020
Outlook”, MediaAlpha is not providing a reconciliation of
Contribution or adjusted EBITDA to the respective GAAP measures
because the Company is unable to predict with reasonable certainty
the reconciling items that may affect gross profit and net income
without unreasonable effort, including equity-based compensation,
transaction expenses and income tax expense. These reconciling
items are uncertain, depend on various factors and could
significantly impact, either individually or in the aggregate, the
GAAP measures for the applicable period.
For a detailed explanation of the Company’s non-GAAP measures,
please refer to the appendix section of this press release.
As of and for the three and nine months ended September 30,
2020, the periods covered by this release, MediaAlpha, Inc. had
engaged solely in activities incidental to its formation. QL
Holdings LLC and its subsidiaries have been determined to represent
the predecessor entity to MediaAlpha, Inc. prior to the IPO. As
such, the interim unaudited condensed consolidated financial
statements and related notes of QL Holdings LLC and its
subsidiaries as of and for the three and nine months ended
September 30, 2020 and 2019 have been included in this release and
on the Form 10-Q.
Conference Call Information
MediaAlpha will host a Q&A conference call today to discuss
the Company's Q3 2020 results at 2:00 p.m. Pacific Time (5:00 p.m.
Eastern Time). A live audio webcast of the call will be available
on the MediaAlpha Investor Relations website at
https://investors.mediaalpha.com. To register for the webcast,
click here. Participants may also dial-in, toll-free, at (833)
350-1346 or internationally at (236) 389-2445 with Conference
ID#2271129. An audio replay of the conference call will be
available for two weeks following the call and available on the
MediaAlpha Investor Relations website at
https://investors.mediaalpha.com.
We have also posted to our investor relations website a letter
to shareholders. We have used, and intend to continue to use, our
investor relations website at https://investors.mediaalpha.com as a
means of disclosing material nonpublic information and for
complying with our disclosure obligations under Regulation FD.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements reflect our current views
with respect to, among other things, future events and our
financial performance. These statements are often, but not always,
made through the use of words or phrases such as “may,” “should,”
“could,” “predict,” “potential,” “believe,” “will likely result,”
“expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,”
“intend,” “plan,” “projection,” “would,” and “outlook,” or the
negative version of those words or other comparable words or
phrases of a future or forward-looking nature. These
forward-looking statements are not historical facts, and are based
on current expectations, estimates and projections about our
industry, management’s beliefs and certain assumptions made by
management, many of which, by their nature, are inherently
uncertain and beyond our control. Accordingly, we caution you that
any such forward-looking statements are not guarantees of future
performance and are subject to risks, assumptions and uncertainties
that are difficult to predict. Although we believe that the
expectations reflected in these forward-looking statements are
reasonable as of the date made, actual results may prove to be
materially different from the results expressed or implied by the
forward-looking statements.
There are or will be important factors that could cause our
actual results to differ materially from those indicated in these
forward-looking statements, including those more fully described in
MediaAlpha’s filings with the Securities and Exchange Commission
(“SEC”), including the final prospectus filed with the SEC pursuant
to Rule 424(b) promulgated under the Securities Act of 1933, as
amended (the “Securities Act”), on October 29, 2020 and the
Quarterly Report on Form 10-Q that will be filed following this
earnings release. These factors should not be construed as
exhaustive. MediaAlpha disclaims any obligation to update any
forward-looking statements to reflect events or circumstances that
occur after the date of this release.
Non-GAAP Financial Measures and Operating Metrics
This press release includes Adjusted EBITDA, Contribution, and
Contribution Margin, which are non-GAAP financial measures. The
Company also presents Transaction Value, which is an operating
metric not presented in accordance with GAAP. See the appendix for
definitions of Adjusted EBITDA, Contribution, Contribution Margin
and Transaction Value, as well as reconciliations to the
corresponding GAAP financial metrics, as applicable.
We present Transaction Value, Adjusted EBITDA, Contribution, and
Contribution Margin because they are used extensively by our
management and board of directors to manage our operating
performance, including evaluating our operational performance
against budget and assessing our overall operating efficiency and
operating leverage. Accordingly, the Company believes that
Transaction Value, Adjusted EBITDA, Contribution, and Contribution
Margin provide useful information to investors and others in
understanding and evaluating its operating results in the same
manner as its management team and board of directors. Each of
Transaction Value, Adjusted EBITDA, Contribution, and Contribution
Margin has limitations as a financial measure and investors should
not consider it in isolation or as a substitute for analysis of our
results as reported under GAAP.
QL Holdings LLC and
subsidiaries
Unaudited condensed
consolidated balance sheets
(In thousands, except unit and
per unit data)
September 30,
December 31,
2020
2019
Assets
Current assets
Cash and cash equivalents
$
12,005
$
10,028
Accounts receivable, net of allowance for
doubtful accounts
63,084
56,012
Prepaid expenses and other current
assets
1,623
1,448
Total current assets
76,712
67,488
Property and equipment, net
701
755
Intangible assets, net
16,350
18,752
Goodwill
18,402
18,402
Other assets
21,665
—
Total assets
$
133,830
$
105,397
Liabilities, redeemable Class A units
and Members’ Deficit
Current liabilities
Accounts payable
$
61,697
$
40,455
Accrued expenses
12,651
6,532
Current portion of long-term debt
6,262
873
Current portion of deferred rent
71
52
Total current liabilities
80,681
47,912
Long-term debt, net of current portion
199,146
96,665
Deferred rent, net of current portion
331
319
Other long-term liabilities
276
—
Total liabilities
280,434
144,896
Commitments and contingencies (Note 9)
Redeemable Class A units, 284,211 at
redemption value of approximately
$637.08 and $260.71 per unit as of
September 30, 2020 and
December 31, 2019, respectively
181,066
74,097
Members’ (deficit) equity
Class A units, 1,136,842 units authorized;
852,631 units issued
and outstanding (excluding 284,211 units
subject to possible
redemption) as of September 30, 2020 and
December 31,
2019, respectively
73,003
73,003
Class B units, 177,300 units authorized;
177,300 and 163,800
issued and outstanding as of September 30,
2020 and
December 31, 2019, respectively
9,097
6,544
Accumulated deficit
(409,770
)
(193,143
)
Total members’ deficit
(327,670
)
(113,596
)
Total liabilities, redeemable Class A
units and members’ deficit
$
133,830
$
105,397
QL Holdings LLC and
subsidiaries
Unaudited condensed
consolidated statements of operations
(In thousands)
Three months ended
September 30,
Nine months ended
September 30,
2020
2019
2020
2019
Revenue
$
151,548
$
110,397
$
394,609
$
281,857
Cost and operating expenses
Cost of revenue
130,830
92,707
335,692
237,130
Sales and marketing
2,916
3,227
8,866
10,586
Product development
1,766
1,609
5,482
5,174
General and administrative
7,595
3,171
13,897
16,265
Total cost and operating expenses
143,107
100,714
363,937
269,155
Income from operations
8,441
9,683
30,672
12,702
Other expense
1,998
—
1,998
—
Interest expense
1,594
1,920
4,844
5,259
Total other expense
3,592
1,920
6,842
5,259
Provision for income taxes
20
—
20
—
Net income
$
4,829
$
7,763
$
23,810
$
7,443
QL Holdings LLC and
subsidiaries
Unaudited condensed
consolidated statements of cash flows
(In thousands)
Nine months ended
September 30,
2020
2019
Cash flows from operating
activities
Net income
$
23,810
$
7,443
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Non-cash equity-based compensation
expense
1,762
1,795
Depreciation expense on property and
equipment
210
208
Amortization of intangible assets
2,402
4,158
Amortization of deferred debt issuance
costs
334
551
Loss on extinguishment of debt
1,998
—
Bad debt expense
356
263
Changes in operating assets and
liabilities:
Accounts receivable
(7,428
)
(16,799
)
Prepaid expenses and other current
assets
(147
)
47
Other assets
(11,665
)
—
Accounts payable
21,242
14,038
Accrued expenses
6,395
(341
)
Deferred rent
31
(70
)
Net cash provided by operating
activities
39,300
11,293
Cash flows from investing
activities
Purchases of property and equipment
(156
)
(109
)
Purchase of cost method investment
(10,000
)
—
Net cash used in investing activities
(10,156
)
(109
)
Cash flows from financing
activities
Proceeds from revolving line of credit
7,500
—
Repayments on revolving line of credit
(7,500
)
—
Proceeds from issuance of long-term
debt
210,000
100,000
Repayments on long-term debt
(100,023
)
(14,823
)
Payments of debt issuance costs
(4,467
)
(2,303
)
Cash paid to repurchase Class B units up
to fair value
(1,453
)
(4,467
)
Cash paid for repurchases of Class A
units
—
(62,806
)
Member contributions
—
62,806
Member distributions
(131,224
)
(88,934
)
Net cash used in financing activities
(27,167
)
(10,527
)
Net increase in cash and cash
equivalents
1,977
657
Cash and cash equivalents, beginning of
period
10,028
5,662
Cash and cash equivalents, end of
period
$
12,005
$
6,319
Supplemental disclosures of cash flow
information
Cash paid for interest
$
4,503
$
4,750
Cash paid for repurchase of Class B units
in excess of fair value
$
791
$
1,286
Transaction Value
We define “Transaction Value” as the total gross dollars
transacted by our partners on our platform. Transaction Value is a
direct driver of revenue, with differing revenue recognition based
on the economic relationship we have with our partners. Our
partners use our platform to transact via open and private platform
transactions. In our open platform model, revenue recognized
represents the Transaction Value and revenue share payments to our
supply partners represent costs of revenue. In our private platform
model, revenue recognized represents a platform fee billed to the
demand partner or supply partner based on an agreed-upon percentage
of the Transaction Value for the Consumer Referrals transacted, and
accordingly there are no associated costs of revenue. We utilize
Transaction Value to assess revenue and to assess the overall level
of transaction activity through our platform. We believe it is
useful to investors to assess the overall level of activity on our
platform and to better understand the sources of our revenue across
our different transaction models and verticals.
The following table presents Transaction Value by platform model
for the three months ended September 30, 2020 and 2019, and the
nine months ended September 30, 2020 and 2019:
Three months ended
September 30,
Nine months ended
September 30,
(dollars in thousands)
2020
2019
2020
2019
Open platform transactions
$
148,240
$
108,146
$
386,224
$
275,991
Percentage of total Transaction Value
68.1
%
71.7
%
69.1
%
70.7
%
Private platform transactions
69,320
42,654
172,590
114,493
Percentage of total Transaction Value
31.9
%
28.3
%
30.9
%
29.3
%
Total Transaction Value
$
217,560
$
150,800
$
558,814
$
390,484
The following table presents Transaction Value by vertical for
the three months ended September 30, 2020 and 2019, and the nine
months ended September 30, 2020 and 2019:
Three months ended
September 30,
Nine months ended
September 30,
(dollars in thousands)
2020
2019
2020
2019
Property & casualty insurance
$
161,323
$
94,770
$
390,955
$
233,746
Percentage of total Transaction Value
74.2
%
62.8
%
70.0
%
59.9
%
Health insurance
33,650
25,683
98,739
68,168
Percentage of total Transaction Value
15.5
%
17.0
%
17.7
%
17.5
%
Life insurance
11,628
8,735
31,717
26,841
Percentage of total Transaction Value
5.3
%
5.8
%
5.7
%
6.9
%
Other(1)
10,959
21,612
37,403
61,729
Percentage of total Transaction Value
5.0
%
14.3
%
6.7
%
15.8
%
Total Transaction Value
$
217,560
$
150,800
$
558,814
$
390,484
Contribution and Contribution Margin
The following table reconciles Contribution and Contribution
Margin with gross profit, the most directly comparable financial
measure calculated and presented in accordance with GAAP, the three
months ended September 30, 2020 and 2019, and the nine months ended
September 30, 2020 and 2019:
Three months ended
September 30,
Nine months ended
September 30,
(in thousands)
2020
2019
2020
2019
Revenue
$
151,548
$
110,397
$
394,609
$
281,857
Less cost of revenue
(130,830
)
(92,707
)
(335,692
)
(237,130
)
Gross profit
20,718
17,690
58,917
44,727
Adjusted to exclude the following (as
related to cost of revenue):
Equity-based compensation
18
19
58
158
Salaries, wages, and related
434
302
1,175
1,027
Internet and hosting
107
116
328
393
Other expenses
69
66
205
194
Amortization
—
170
—
510
Depreciation
6
5
17
18
Other services
189
193
616
523
Merchant-related fees
130
105
447
273
Contribution
$
21,671
$
18,666
$
61,763
$
47,823
Gross margin
13.7
%
16.0
%
14.9
%
15.9
%
Contribution Margin
14.3
%
16.9
%
15.7
%
17.0
%
Adjusted EBITDA
The following table reconciles Adjusted EBITDA with net income,
the most directly comparable financial measure calculated and
presented in accordance with GAAP, for the three months ended
September 30, 2020 and 2019, and the nine months ended September
30, 2020 and 2019.
Three months ended
September 30,
Nine months ended
September 30,
(in thousands)
2020
2019
2020
2019
Net income
$
4,829
$
7,763
$
23,810
$
7,443
Equity-based compensation expense
606
520
2,553
3,081
Interest expense
1,594
1,920
4,844
5,259
Income tax expense
20
—
20
—
Depreciation expense on property and
equipment
73
65
210
208
Amortization of intangible assets
799
1,385
2,402
4,158
Transaction expenses(1)
6,049
—
6,049
8,831
Adjusted EBITDA
$
13,970
$
11,653
$
39,888
$
28,980
(1)
For the nine months ended September 30,
2019, transaction expenses included $7.2 million in legal,
investment banking and other consulting fees and $1.6 million in
transaction bonuses related to a transaction with Insignia in
February 2019. For the months ended September 30, 2020, transaction
expenses included $4.0 million in legal, and other consulting fees
and $2.0 million in loss on debt related to the termination of the
2019 Credit Facilities.
Key business and operating metrics
“Transaction Value” represents the total gross dollars
transacted by our partners on our platform. Transaction Value is a
direct driver of revenue, with differing revenue recognition based
on the economic relationship we have with our partners. We utilize
Transaction Value to assess revenue and to assess the overall level
of transaction activity through our platform.
“Contribution” represents revenue less revenue share payments
and online advertising costs, or, as reported in our consolidated
statement of operations, revenue less cost of revenue, as adjusted
to exclude the following items from cost of revenue: equity-based
compensation; salaries, wages, and related; internet and hosting;
amortization; depreciation; other services; and merchant-related
fees. “Contribution Margin” represents Contribution expressed as a
percentage of revenue for the same period. We use Contribution and
Contribution Margin to measure the return on our relationships with
our supply partners (excluding certain fixed costs), the financial
return on our online advertising, and our operating leverage. We do
not use Contribution and Contribution Margin as measures of overall
profitability. We present Contribution and Contribution Margin
because they are used extensively by our management and board of
directors to manage our operating performance, including evaluating
our operational performance against budget and assessing our
overall operating efficiency and operating leverage.
“Adjusted EBITDA” represents net income excluding interest
expense, income tax benefit (expense), depreciation expense on
property and equipment, and amortization of intangible assets, as
well as equity-based compensation expense and transaction expenses.
Adjusted EBITDA is a key measure used by our management to
understand and evaluate our operating performance, to establish
budgets and to develop operational goals for managing our business.
In addition, presenting Adjusted EBITDA provides investors with a
metric to evaluate the capital efficiency of our business.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201210005983/en/
Investors Denise Garcia Hayflower Partners
Denise@HayflowerPartners.com
Press SHIFT MediaAlpha@SHIFTComm.com
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