Increases 2017 Full Year
GuidanceRecord Revenues of $63.3 million, up 37%
YOYDiluted Earnings per Share of $0.30, up 20%
YOYAdjusted Earnings per Share of $0.46, up 39%
YOYPolicies in Force totaled approximately
347,900, up 38% YOY
Health Insurance Innovations, Inc. (NASDAQ:HIIQ), a leading
developer, distributor, and cloud-based administrator of affordable
health insurance and supplemental plans, today announced financial
results for the third quarter ended September 30, 2017. The
Company will host a live conference call on Thursday, November 2,
2017 at 8:30 A.M. EST.
Third Quarter 2017 Consolidated Financial
Highlights
- Record revenue was $63.3 million, compared to $46.1 million in
the third quarter of 2016, an increase of 37.4%.
- Record total collections from members (premium equivalents)
of $99.4 million, compared to $78.5 million in the third
quarter of 2016, an increase of 26.6%.
- Net income was $6.0 million, compared to $5.1 million in the
third quarter of 2016, an increase of 17.6%.
- Record adjusted EBITDA (earnings before interest, taxes,
depreciation and amortization) was $12.8 million, compared to $8.1
million in the third quarter of 2016, an increase of 58.0%.
- GAAP diluted earnings per share was $0.30, compared to $0.25 in
the third quarter of 2016, an increase of 20.0%.
- Adjusted earnings per share, also referred to as adjusted net
income per share or adjusted EPS, was $0.46 compared to $0.33 in
the third quarter of 2016, an increase of 39.4%.
- Policies in force as of September 30, 2017, totaled
approximately 347,900, compared to 252,100 as of September 30,
2016, an increase of 38.0%.
Premium equivalents, adjusted EBITDA, and adjusted EPS are
non-GAAP financial measures. See the reconciliations of these
measures to their respective most directly comparable GAAP measure
below in this press release.
Increasing 2017 Full Year Guidance
Given the record financial performance and long-term prospects,
the Company is increasing its guidance for the full year 2017.
The Company expects revenue to grow 27% to 30% year-over-year
(with expected revenue of $235 million to $240 million), adjusted
EBITDA to grow 48% to 58% year-over-year (with expected adjusted
EBITDA of $41 million to $44 million) and adjusted EPS to grow 34%
to 43% (with expected adjusted EPS of $1.50 to $1.60). The Company
previously guided to full year revenue of $225 million to $230
million, adjusted EBITDA of $39 million to $42 million and adjusted
EPS of $1.45 to $1.55.
"We are pleased to continue to deliver record results, which
exceeded our revenue and profitability targets, reflecting the
strength of our business and the successful execution of our
strategy. We believe we are well positioned to continue to
succeed and grow in the dynamic individual health insurance
marketplace through our differentiated services. We are
confident that we can deliver strong results and shareholder value
through our successful expansion of innovative products, expansion
of our distribution networks - including existing and new
distributors, driving revenue growth and margins,” said Gavin
Southwell, HIIQ's Chief Executive Officer and President.
Third Quarter 2017 Financial Discussion
Third quarter revenues of $63.3 million increased 37.4%,
compared to the third quarter of 2016, driven primarily by an
increase in policies in force. Further, a sales mix shift to more
Health Benefit Plans and favorable carrier negotiations have
decreased risk premiums.
Total selling, general & administrative expense (SG&A)
was $15.5 million (24.5% of revenues) in the third quarter of 2017,
compared to $11.9 million (25.7% of revenues) in the same period in
2016. Core SG&A, defined as total SG&A adjusted for
stock-based compensation, transaction costs, severance,
restructuring and other costs, and marketing leads and advertising
expense, for the quarter was $10.3 million (16.3% of revenues) in
the third quarter of 2017, compared to $8.4 million (18.1% of
revenues) in the same period of 2016. A reconciliation of SG&A
to core SG&A for the three and nine months ended September 30,
2017 and 2016 is included within this press release.
Net income was $6.0 million in the third quarter of 2017,
compared to $5.1 million in the third quarter of 2016, an increase
of 17.6%. EBITDA was $9.9 million in the third quarter of
2017, compared to $7.4 million in the same period in 2016, an
increase of 33.2%.
Adjusted EBITDA was $12.8 million in the third quarter of 2017,
an increase of 58.0% over $8.1 million in the same period in
2016. Adjusted EBITDA as a percentage of revenue was 20.3% in
the third quarter of 2017, compared to 17.6% in the same period in
2016. Adjusted EBITDA is calculated by taking EBITDA and
adjusting for items that are not part of regular operating
activities, including tax receivable adjustments, severance,
restructuring costs, and other non-cash items such as stock-based
compensation. A reconciliation of net income to EBITDA and
adjusted EBITDA for the three and nine months ended September 30,
2017 and 2016 is included within this press release.
GAAP diluted earnings per share for the third quarter was $0.30,
compared to $0.25 in the third quarter of 2016.
Adjusted EPS for the third quarter of 2017 was $0.46, compared
to $0.33 in the prior year. A reconciliation of net income to
adjusted net income per share is included within this press
release.
The Company continued to make short-term loans to distributors,
based on actual sales, that we refer to as advanced commissions.
These advanced commissions assist distributors with working
capital. We recover these short-term loans on an ongoing basis from
future commissions earned on premiums, which are collected over the
period in which policies renew. The third quarter advanced
commission balance of $27.0 million is a decrease of $10.0 million
from December 31, 2016 and a decrease of $3.7 million
sequentially.
Cash and cash equivalents totaled $43.1 million at September 30,
2017, an increase of $30.8 million from December 31, 2016 and
an increase of $15.5 million sequentially.
Customer Service and Compliance
Since 2016, HIIQ has invested more than $9 million in enhancing
and upholding the highest standards in customer service and
compliance. The Company has expanded its customer service
team from 26 representatives in 2015 to more than 220 at its peak
in response to seasonality in volume from the open enrollment
period.
Highlights of Customer Service Investment Results
The Company has arranged insurance for more than a million
people thus far in 2017, experienced a 13.2% growth in member calls
over the prior year, and despite this increase in volume,
maintained an Average Speed of Answer (ASA) of two seconds in the
most recent quarter. This compares to an ASA of 1 minute and
55 second over the same time period last year and an ASA of 1
minute 17 seconds in 2015. Service levels, defined as the
percentage of calls answered within 30 seconds, have also shown
significant improvement. Service levels have averaged 99.4% in the
third quarter, compared to 55.4% and 63.6% for the same periods in
the prior two years.
Compliance
In 2016, HIIQ launched the Call Center Quality (CCQ) team and a
distributor-performance scorecard. The CCQ team visits
third-party distributors to provide on-site training as well as
online and webinar training. The CCQ team is also responsible for
secret shopping to ensure adherence to HIIQ’s best-in-class process
and procedures. The distributor scorecard measures key
metrics such as member complaints, escalations and chargebacks
monthly. HIIQ has improved in these key metrics and continues to
enforce the Company’s policies and procedures with third-party
distributors. In 2016, the Company terminated two
distributors for not meeting compliance metrics and benchmarks. At
the time of termination, these distributors represented
approximately 16% of IFP sales.
Retaining Prominent Regulatory Experts
Reinforcing the Company’s compliance department are Ben Nelson,
former U.S. Senator (D-NE) and Governor of Nebraska as well as the
former Nebraska Director of Insurance and former Chief Executive
Officer of the National Association of Insurance Commissioners
(NAIC), as well as Wayne Goodwin, the former Commissioner of
Insurance for North Carolina. Both joined the Company’s team in
January to help HIIQ navigate today’s complex regulatory
environment.
Improved Customer Experience
This investment in compliance has generated a measuredly
stronger customer experience. Complaints, specific to HIIQ, upheld
by the Department of Insurance as a percentage of policies in force
was 0.00% in Q3 2017, down from 0.01% in Q3 2016. Additionally,
HIIQ-specific Better Business Bureau complaints have reduced by 90%
since Q1 2016. In Q3 2017, HIIQ-specific complaints were
effectively 0.00% of policies in force. Chargebacks as a percentage
of transactions have decreased by more than 50% from Q1 2016.
$50 Million Share Repurchase Authorization
As announced on October 16, 2017, the HIIQ Board of Directors
has authorized up to $50 million in a new share repurchase program
through October 2019.
Conference Call and Webcast
The Company will host an earnings conference call on November 2,
2017 at 8:30 A.M. Eastern time. All interested parties can
join the call by dialing (877) 407-9039 or (201) 689-8470;
the conference ID is 13672449. A webcast of the call
may be accessed in the Investor Relations section of Health
Insurance Innovations’ website at
http://investor.hiiquote.com/events.cfm. An archive of the call
will be available for 30 days through the same website.
About Health Insurance Innovations, Inc.
(HIIQ)
HIIQ is a market leader in developing innovative health
insurance products that are affordable and meet the needs of health
insurance plan shoppers. HIIQ develops insurance products through
our relationships with best-in-class insurance companies and
markets them via its broad distribution network of licensed
insurance agents across the nation, its call center network and its
unique online capability. Additional information about HIIQ
can be found at HiiQuote.com. HIIQ’s Consumer Division includes
AgileHealthInsurance.com, a website for researching, comparing and
purchasing short-term health insurance products online and
HealthPocket.com, a free website that compares and ranks all health
insurance plans, and uses objective data to publish unbiased health
insurance market analyses and other consumer advocacy research.
Forward-Looking Statements
This press release contains "forward-looking statements" within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995. Forward-looking statements are statements other than
historical fact, and may include statements relating to goals,
plans and projections regarding new markets, products, services,
growth strategies, anticipated trends in our business and
anticipated changes and developments in the United States health
insurance system and laws. Forward-looking statements are based on
HIIQ’s current assumptions, expectations and beliefs are generally
identifiable by use of words “may,” “might,” “will,” “should,”
“expects,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “potential” or “continue,” or similar expressions and
involve significant risks and uncertainties that could cause actual
results, developments and business decisions to differ materially
from those contemplated by these statements. These risks and
uncertainties include, among other things, our ability to maintain
relationships and develop new relationships with health insurance
carriers and distributors, our ability to retain our members, the
demand for our products, state regulatory oversight and
examinations of us and our carriers and distributors, legal and
regulatory compliance by our carriers and distributors, the amount
of commissions paid to us or changes in health insurance plan
pricing practices, competition, changes and developments in the
United States health insurance system and laws, and HIIQ’s ability
to adapt to them, the ability to maintain and enhance our name
recognition, difficulties arising from acquisitions or other
strategic transactions, and our ability to build the necessary
infrastructure and processes to maintain effective controls over
financial reporting. These and other risk factors that could cause
actual results to differ materially from those expressed or implied
in our forward-looking statements are discussed in HIIQ's most
recent Annual Report on Form 10-K filed with the Securities and
Exchange Commission (SEC) as well as other documents that may be
filed by HIIQ from time to time with the Securities and Exchange
Commission, which are available at www.sec.gov. Any forward-looking
statement made by us in this press release is based only on
information currently available to us and speaks only as of the
date on which it is made. You should not rely on any
forward-looking statement as representing our views in the future.
We undertake no obligation to publicly update any forward-looking
statement, whether written or oral, that may be made from time to
time, whether as a result of new information, future developments
or otherwise.
Non-GAAP Financial Information
To supplement HIIQ’s financial information presented in
accordance with generally accepted accounting principles in the
United States of America, or GAAP, HIIQ presents certain financial
measures that are not prepared in accordance with GAAP, including
premium equivalents, adjusted EBITDA, and adjusted EPS. These
non-GAAP financial measures, which are defined below, should not be
considered in isolation from, or as a substitute for, financial
information prepared in accordance with GAAP. These non-GAAP
financial measures are not based on any standardized methodology
prescribed by GAAP and are not necessarily comparable to
similarly-titled measures presented by other companies.
HIIQ is presenting these non-GAAP financial measures to assist
investors in seeing HIIQ’s operating results through the eyes of
management and because HIIQ’s believes that these measures provide
a useful tool for investors to use in assessing HIIQ’s operating
performance against prior period operating results and against
business objectives. HIIQ uses the non-GAAP financial
measures in evaluating its operating results and for financial and
operational decision-making purposes.
The accompanying tables provide more details on the GAAP
financial measures that are most directly comparable to the
non-GAAP financial measures described above and the related
reconciliations between these financial measures. HIIQ has
not reconciled adjusted EBITDA guidance or adjusted EPS guidance to
GAAP net income or GAAP net income per diluted share, respectively,
because HIIQ does not provide guidance for the reconciling items
between these measures and GAAP net income or GAAP net income per
diluted share, respectively. As certain of the items that
impact GAAP net income and/or GAAP net income per diluted share
cannot be reasonably predicted at this time, HIIQ is unable to
provide such guidance. Accordingly, a reconciliation to net income
is not available without unreasonable effort.
|
HEALTH INSURANCE INNOVATIONS,
INC. |
Condensed Consolidated Balance
Sheets |
($ in thousands, except share and per
share data) |
|
|
September 30, 2017 |
|
December 31, 2016 |
|
(unaudited) |
|
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
43,060 |
|
|
$ |
12,214 |
|
Restricted cash |
13,747 |
|
|
11,938 |
|
Accounts
receivable, net, prepaid expenses and other current assets |
$ |
2,585 |
|
|
2,815 |
|
Advanced
commissions, net |
27,010 |
|
|
37,001 |
|
Total
current assets |
86,402 |
|
|
63,968 |
|
Property and equipment,
net |
4,909 |
|
|
4,022 |
|
Goodwill |
41,076 |
|
|
41,076 |
|
Intangible assets,
net |
6,405 |
|
|
7,907 |
|
Deferred tax
assets |
27,834 |
|
|
8,181 |
|
Other assets |
110 |
|
|
193 |
|
Total
assets |
$ |
166,736 |
|
|
$ |
125,347 |
|
|
|
|
|
Liabilities and
stockholders’ equity |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable and accrued expenses |
$ |
31,516 |
|
|
$ |
29,680 |
|
Deferred
revenue |
257 |
|
|
430 |
|
Income
taxes payable |
1,186 |
|
|
2,121 |
|
Due to
member |
521 |
|
|
3,282 |
|
Other
current liabilities |
3 |
|
|
126 |
|
Total
current liabilities |
33,483 |
|
|
35,639 |
|
Due to member |
28,078 |
|
|
9,460 |
|
Other liabilities |
43 |
|
|
170 |
|
Total
liabilities |
61,604 |
|
|
45,269 |
|
Commitments and
contingencies |
|
|
|
Stockholders’
equity: |
|
|
|
Class A common
stock (par value $0.001 per share, 100,000,000 shares authorized;
12,700,986 and 8,156,249 shares issued as of September 30, 2017 and
December 31, 2016, respectively; and 12,559,552 and 8,036,705
shares outstanding as of September 30, 2017 and December 31, 2016,
respectively) |
13 |
|
|
8 |
|
Class B common stock
(par value $0.001 per share, 20,000,000 shares authorized;
3,841,667 and 6,841,667 shares issued and outstanding as of
September 30, 2017 and December 31, 2016, respectively) |
4 |
|
|
7 |
|
Preferred stock (par
value $0.001 per share, 5,000,000 shares authorized; no shares
issued and outstanding as of September 30, 2017 and December 31,
2016) |
— |
|
|
— |
|
Additional paid-in
capital |
68,802 |
|
|
47,849 |
|
Treasury stock, at cost
(141,434 and 119,544 shares as of September 30, 2017 and December
31, 2016, respectively) |
(1,570 |
) |
|
(1,122 |
) |
Retained earnings |
15,522 |
|
|
1,420 |
|
Total
Health Insurance Innovations, Inc. stockholders’ equity |
82,771 |
|
|
48,162 |
|
Noncontrolling
interests |
22,361 |
|
|
31,916 |
|
Total
stockholders’ equity |
105,132 |
|
|
80,078 |
|
Total
liabilities and stockholders' equity |
$ |
166,736 |
|
|
$ |
125,347 |
|
|
|
|
|
|
|
|
|
HEALTH INSURANCE INNOVATIONS,
INC. |
|
Condensed Consolidated Statements of Income
(unaudited) |
($ in thousands, except share and per share
data) |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Revenues (premium
equivalents of $99,407 and $78,548 for the three months ended
September 30, 2017 and 2016, respectively and $289,243 and $226,265
for the nine months ended September 30, 2017 and 2016,
respectively) |
$ |
63,335 |
|
|
$ |
46,108 |
|
|
$ |
180,986 |
|
|
$ |
133,092 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Third-party commissions |
36,603 |
|
|
25,860 |
|
|
103,146 |
|
|
77,709 |
|
Credit
card and ACH fees |
1,289 |
|
|
921 |
|
|
3,704 |
|
|
2,778 |
|
Selling,
general and administrative |
15,503 |
|
|
11,853 |
|
|
45,457 |
|
|
35,520 |
|
Depreciation and amortization |
1,028 |
|
|
835 |
|
|
2,958 |
|
|
2,367 |
|
Total
operating expenses |
54,423 |
|
|
39,469 |
|
|
155,265 |
|
|
118,374 |
|
Income
from operations |
8,912 |
|
|
6,639 |
|
|
25,721 |
|
|
14,718 |
|
|
|
|
|
|
|
|
|
Other expense: |
|
|
|
|
|
|
|
Interest
(income) expense |
(2 |
) |
|
(102 |
) |
|
(2 |
) |
|
53 |
|
Tax
Receivable Agreement expense |
— |
|
|
— |
|
|
— |
|
|
429 |
|
Fair
value adjustment to contingent acquisition consideration |
— |
|
|
— |
|
|
— |
|
|
15 |
|
Other
expense |
23 |
|
|
27 |
|
|
27 |
|
|
30 |
|
Income before income
taxes |
8,891 |
|
|
6,714 |
|
|
25,696 |
|
|
14,191 |
|
Provision
for income taxes |
2,889 |
|
|
1,580 |
|
|
4,220 |
|
|
2,501 |
|
Net income |
6,002 |
|
|
5,134 |
|
|
21,476 |
|
|
11,690 |
|
Net
income attributable to noncontrolling interests |
2,117 |
|
|
3,195 |
|
|
7,374 |
|
|
6,989 |
|
Net income attributable
to Health Insurance Innovations, Inc. |
$ |
3,885 |
|
|
$ |
1,939 |
|
|
$ |
14,102 |
|
|
$ |
4,701 |
|
|
|
|
|
|
|
|
|
Per share
data: |
|
|
|
|
|
|
|
Net income per
share attributable to Health Insurance Innovations,
Inc. |
|
|
|
|
|
|
|
Basic |
$ |
0.33 |
|
|
$ |
0.25 |
|
|
$ |
1.31 |
|
|
$ |
0.62 |
|
Diluted |
$ |
0.30 |
|
|
$ |
0.25 |
|
|
$ |
1.21 |
|
|
$ |
0.61 |
|
Weighted
average Class A common shares outstanding |
|
|
|
|
|
|
|
Basic |
11,700,941 |
|
|
7,614,252 |
|
|
10,724,750 |
|
|
7,590,347 |
|
Diluted |
12,742,952 |
|
|
7,723,196 |
|
|
11,692,755 |
|
|
7,724,168 |
|
HEALTH INSURANCE INNOVATIONS,
INC. |
|
Condensed Consolidated Statements of Cash Flows
(unaudited) |
($ in thousands, except share and per
share data) |
|
|
Three Months Ended September 30,
2017 |
|
Nine Months Ended September 30,
2017 |
Operating
activities: |
|
|
|
Net income |
$ |
6,002 |
|
|
$ |
21,476 |
|
Adjustments to
reconcile net income to net cash provided by (used in) operating
activities: |
|
|
|
Stock-based compensation |
2,682 |
|
|
4,437 |
|
Depreciation and amortization |
1,028 |
|
|
2,958 |
|
Deferred
income taxes |
317 |
|
|
1,079 |
|
Changes in operating
assets and liabilities: |
|
|
|
Decrease
(Increase) in restricted cash |
415 |
|
|
(1,809 |
) |
(Increase) Decrease in accounts receivable, prepaid expenses and
other assets |
(460 |
) |
|
313 |
|
Decrease
in advanced commissions |
3,696 |
|
|
9,991 |
|
Decrease
in income taxes receivable |
1,282 |
|
|
— |
|
Increase
(Decrease) in income taxes payable |
1,186 |
|
|
(935 |
) |
Increase
in accounts payable, accrued expenses and other liabilities |
1,385 |
|
|
1,682 |
|
Decrease
in deferred revenue |
(41 |
) |
|
(173 |
) |
Net cash provided by
operating activities |
17,492 |
|
|
39,019 |
|
Investing
activities: |
|
|
|
Capitalized internal-use software and website development
costs |
(694 |
) |
|
(2,104 |
) |
Purchases
of property and equipment |
(192 |
) |
|
(239 |
) |
Net cash used in
investing activities |
(886 |
) |
|
(2,343 |
) |
Financing
activities: |
|
|
|
Payments
for noncompete obligation |
— |
|
|
(96 |
) |
Class A
common stock withheld in treasury from restricted share
vesting |
(263 |
) |
|
(448 |
) |
Issuances
of Class A common stock under equity compensation plans |
12 |
|
|
32 |
|
Distributions to member |
(824 |
) |
|
(5,318 |
) |
Net cash used in
provided by financing activities |
(1,075 |
) |
|
(5,830 |
) |
Net increase in cash
and cash equivalents |
15,531 |
|
|
30,846 |
|
Cash and cash
equivalents at beginning of period |
27,529 |
|
|
12,214 |
|
Cash and cash
equivalents at end of period |
$ |
43,060 |
|
|
$ |
43,060 |
|
|
|
|
|
Supplemental
disclosure of non-cash financing activities: |
|
|
|
Change in
due to member related to Exchange Agreement |
$ |
18,619 |
|
|
$ |
18,619 |
|
Change in
deferred tax asset related to Exchange Agreement |
(20,732 |
) |
|
(20,732 |
) |
Issuance
of Class A common stock in a private offering related to Exchange
Agreement |
16,487 |
|
|
16,487 |
|
Exchange
of Class B membership interests related to Exchange Agreement |
(14,374 |
) |
|
(14,374 |
) |
Declared
but unpaid distribution to member of Health Plan Intermediaries
Holdings, LLC |
— |
|
|
|
Reconciliation of Net Income to EBITDA and
Adjusted EBITDA |
(unaudited) |
($ in
thousands) |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net income |
$ |
6,002 |
|
|
$ |
5,134 |
|
|
$ |
21,476 |
|
|
$ |
11,690 |
|
Interest (income)
expense |
(2 |
) |
|
(102 |
) |
|
(2 |
) |
|
53 |
|
Depreciation and
amortization |
1,028 |
|
|
835 |
|
|
2,958 |
|
|
2,367 |
|
Provision for income
taxes |
2,889 |
|
|
1,580 |
|
|
4,220 |
|
|
2,501 |
|
EBITDA
(1) |
9,917 |
|
|
7,447 |
|
|
28,652 |
|
|
16,611 |
|
Non-cash stock-based
compensation |
2,682 |
|
|
393 |
|
|
4,437 |
|
|
1,362 |
|
Fair value adjustment
to contingent consideration |
— |
|
|
— |
|
|
— |
|
|
15 |
|
Transaction costs |
5 |
|
|
— |
|
|
761 |
|
|
— |
|
Tax receivable
agreement liability adjustment |
— |
|
|
29 |
|
|
— |
|
|
458 |
|
Severance,
restructuring and other charges |
238 |
|
|
224 |
|
|
1,133 |
|
|
446 |
|
Adjusted
EBITDA (2) |
$ |
12,842 |
|
|
$ |
8,093 |
|
|
$ |
34,983 |
|
|
$ |
18,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income to Adjusted Net
Income per Share |
(unaudited) |
($ in thousands except per share
data) |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net income |
$ |
6,002 |
|
|
$ |
5,134 |
|
|
$ |
21,476 |
|
|
$ |
11,690 |
|
Interest (income)
expense |
(2 |
) |
|
(102 |
) |
|
(2 |
) |
|
53 |
|
Amortization |
479 |
|
|
527 |
|
|
1,502 |
|
|
1,642 |
|
Provision for income
taxes |
2,889 |
|
|
1,580 |
|
|
4,220 |
|
|
2,501 |
|
Non-cash stock-based
compensation |
2,682 |
|
|
393 |
|
|
4,437 |
|
|
1,362 |
|
Fair value adjustment
to contingent consideration |
— |
|
|
— |
|
|
— |
|
|
15 |
|
Transaction costs |
5 |
|
|
— |
|
|
761 |
|
|
— |
|
Tax receivable
agreement liability adjustment |
— |
|
|
29 |
|
|
— |
|
|
458 |
|
Severance,
restructuring and other charges |
238 |
|
|
224 |
|
|
1,133 |
|
|
446 |
|
Adjusted
pre-tax income |
12,293 |
|
|
7,785 |
|
|
33,527 |
|
|
18,167 |
|
Pro forma income
taxes |
(4,671 |
) |
|
(2,958 |
) |
|
(12,740 |
) |
|
(6,903 |
) |
Adjusted
net income (3) |
$ |
7,622 |
|
|
$ |
4,827 |
|
|
$ |
20,787 |
|
|
$ |
11,264 |
|
Total weighted average
diluted share count |
16,585 |
|
|
14,565 |
|
|
16,260 |
|
|
14,566 |
|
Adjusted net income per
share (4) |
$ |
0.46 |
|
|
$ |
0.33 |
|
|
$ |
1.28 |
|
|
$ |
0.77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) EBITDA is defined as net income before interest expense,
income taxes and depreciation and amortization. We have included
EBITDA in this report because it is a key measure used by our
management and Board of Directors to understand and evaluate our
core operating performance and trends, to prepare and approve our
annual budget and to develop short- and long-term operational
plans. In particular, the exclusion of certain expenses in
calculating EBITDA can provide a useful measure for
period-to-period comparisons of our business. However, EBITDA does
not represent, and should not be considered as, an alternative to
net income or cash flows from operations, each as determined in
accordance with generally accepted accounting principles in the
United States of America (“GAAP”). Other companies may calculate
EBITDA differently than we do. EBITDA has limitations as an
analytical tool, and you should not consider it in isolation or as
a substitute for analysis of our results as reported under
GAAP.
(2) To calculate adjusted EBITDA, we calculate EBITDA,
which is then further adjusted for items that are not part of
regular operating activities, including acquisition costs, and
other non-cash items such as non-cash stock-based compensation.
Adjusted EBITDA does not represent, and should not be considered
as, an alternative to net income or cash flows from operations,
each as determined in accordance with GAAP. We have presented
adjusted EBITDA because we consider it an important supplemental
measure of our performance and believe that it is frequently used
by analysts, investors and other interested parties in the
evaluation of companies. Other companies may calculate adjusted
EBITDA differently than we do. Adjusted EBITDA has limitations as
an analytical tool, and you should not consider it in isolation or
as a substitute for analysis of our results as reported under
GAAP.
(3) To calculate adjusted net income, we calculate net
income then add back amortization (but not depreciation), interest,
tax expense and other items that are not part of regular operating
activities, including acquisition costs, restructuring costs,
contract termination costs, tax receivable agreement liability
adjustments, and other non-cash items such as non-cash stock-based
compensation and fair value adjustment to contingent consideration.
From adjusted pre-tax net income we apply a pro forma tax expense
calculated at an assumed rate of 38%. We believe that when
measuring Company and executive performance against the adjusted
net income measure, applying a pro forma tax rate better reflects
the performance of the Company without regard to the Company’s
organizational tax structure. We have included adjusted net income
in this report because it is a key performance measure used by our
management to understand and evaluate our core operating
performance and trends and because we believe it is frequently used
by analysts, investors and other interested parties in their
evaluation of our company. Other companies may calculate this
measure differently than we do. Adjusted net income has limitations
as an analytical tool, and you should not consider it in isolation
or substitution for earnings per share as reported under
GAAP.
(4) Adjusted net income per share is computed by dividing
adjusted net income by the total number of diluted Class A and
Class B shares of our common stock for each period. We have
included adjusted net income per share in this report because it is
a key measure used by our management to understand and evaluate our
core operating performance and trends and because we believe it is
frequently used by analysts, investors and other interested parties
in the evaluation of companies. Other companies may calculate this
measure differently than we do. Adjusted net income per share has
limitations as an analytical tool, and you should not consider it
in isolation or as a substitute for earnings per share as reported
under GAAP.
|
|
Reconciliation of Premium Equivalents to
Revenues |
(unaudited) |
($ in thousands) |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Premium equivalents
(1) |
$ |
99,407 |
|
|
$ |
78,548 |
|
|
$ |
289,243 |
|
|
$ |
226,265 |
|
Less risk premium |
34,502 |
|
|
31,056 |
|
|
103,545 |
|
|
88,880 |
|
Less amounts earned by
third party obligors |
1,570 |
|
|
1,384 |
|
|
4,712 |
|
|
4,293 |
|
Revenues |
$ |
63,335 |
|
|
$ |
46,108 |
|
|
$ |
180,986 |
|
|
$ |
133,092 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Premium equivalents is defined as our total collections,
including the combination of premiums, fees for discount benefit
plans, enrollment fees, and third-party commissions and referral
fees. All amounts not paid out as risk premium to carriers or paid
out to other third-party obligors are considered to be revenues for
financial reporting purposes. We have included premium equivalents
in this report because it is a key measure used by our management
to understand and evaluate our core operating performance and
trends, to prepare and approve our annual budget and to develop
short- and long-term operational plans. In particular, the
inclusion of premium equivalents can provide a useful measure for
period-to-period comparisons of our business. This financial
measurement is considered a non-GAAP financial measure and is not
recognized under generally accepted accounting principles in the
United States of America (“GAAP”) and should not be used as, and is
not an alternative to, revenues as a measure of our operating
performance.
|
|
Summary of Selected Metrics |
(unaudited) |
($ in thousands) |
|
|
Submitted Applications |
|
|
|
Three Months Ended September 30, |
|
|
|
2017 |
|
2016 |
|
Change (%) |
IFP |
93,100 |
|
66,800 |
|
39.4 |
% |
Supplemental
products |
60,800 |
|
59,500 |
|
2.2 |
% |
Total |
153,900 |
|
126,300 |
|
21.9 |
% |
|
|
|
|
|
|
|
|
Policies in Force |
|
|
|
|
As of September 30, |
|
|
|
2017 |
|
2016 |
|
Change (%) |
IFP |
176,088 |
|
|
120,901 |
|
|
45.6 |
% |
Supplemental
products |
171,838 |
|
|
131,241 |
|
|
30.9 |
% |
Total |
347,926 |
|
|
252,142 |
|
|
38.0 |
% |
|
|
|
|
|
|
|
|
|
|
Submitted IFP Applications by
Channel |
|
Q3’16 |
|
Q4’16 |
|
Q1’17 |
|
Q2’17 |
|
Q3’17 |
Agile |
21,100 |
|
22,400 |
|
31,800 |
|
13,500 |
|
20,600 |
All Others |
45,700 |
|
62,900 |
|
85,300 |
|
82,400 |
|
72,500 |
Total |
66,800 |
|
85,300 |
|
117,100 |
|
95,900 |
|
93,100 |
|
|
|
|
|
|
|
|
|
|
|
Core SG&A as a Percentage of
Revenue |
|
Q3’16 |
|
Q4’16 |
|
Q1’17 |
|
Q2’17 |
|
Q3’17 |
Total SG&A |
$ |
11,853 |
|
|
$ |
16,007 |
|
|
$ |
15,257 |
|
|
$ |
14,697 |
|
|
$ |
15,503 |
|
Less: Stock-based
compensation |
|
393 |
|
|
|
2,430 |
|
|
|
821 |
|
|
|
934 |
|
|
|
2,682 |
|
Less: Transaction
costs |
|
— |
|
|
|
— |
|
|
|
306 |
|
|
|
450 |
|
|
|
5 |
|
Less: Severance,
restructuring and other charges |
|
224 |
|
|
|
2,163 |
|
|
|
533 |
|
|
|
363 |
|
|
|
238 |
|
Less: Marketing and
Advertising |
|
2,875 |
|
|
|
2,912 |
|
|
|
3,787 |
|
|
|
1,800 |
|
|
|
2,249 |
|
Core SG&A (1) |
$ |
8,361 |
|
|
$ |
8,502 |
|
|
$ |
9,810 |
|
|
$ |
11,150 |
|
|
$ |
10,329 |
|
% of Revenue |
|
18.1 |
% |
|
|
16.5 |
% |
|
|
17.6 |
% |
|
|
18.0 |
% |
|
|
16.3 |
% |
(1) Core SG&A is defined as total SG&A adjusted
for stock-based compensation, transaction costs, severance,
restructuring and other costs, and marketing leads and advertising
expense.
Contacts:
Health Insurance Innovations, Inc.:Michael HershbergerChief
Financial Officer(813) 397-1187mhershberger@hiiquote.com
Investor Contact:John EvansPIR Communications(415)
309-0230IR@hiiquote.com
Media Contact for AgileHealthInsurance.com &
HealthPocket.com:Amy Fletcher(720)
350-3144info@afmcommunications.com
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