- Revenue of $103 million, down 34% year over year
- Transaction Value of $183 million, down 29% year over
year
- Transaction Value from Property & Casualty down 37% year
over year to $112 million
- Transaction Value from Health down 2% year over year to $46
million
MediaAlpha, Inc. (NYSE: MAX) today announced its financial
results for the second quarter ended June 30, 2022.
“Our second quarter results reflect the resilience of our
platform and our focus on operating efficiencies amidst continued
challenging market conditions in our property & casualty
(P&C) vertical,” said MediaAlpha co-founder and CEO Steve Yi.
“P&C carrier utilization of our platform continued to increase
in the second quarter with double-digit year-over-year click volume
growth, though pricing remained under pressure. Looking ahead,
while we expect P&C insurance carriers to continue to
prioritize profitability over growth for the remainder of the year,
we remain confident that we will see a steep and significant
recovery when carriers resume their customer acquisition
spending.”
Second Quarter 2022 Financial Results
- Revenue of $103.4 million, a decrease of 34% year over
year;
- Transaction Value of $182.9 million, a decrease of 29% year
over year;
- Gross margin of 15.0%, compared with 15.9% in the second
quarter of 2021;
- Contribution Margin(1) of 18.1%, compared with 16.9% in the
second quarter of 2021;
- Net loss was $(13.0) million, compared with $(0.4) million in
the second quarter of 2021; and
- Adjusted EBITDA(1) was $4.5 million, compared with $14.7
million in the second quarter of 2021.
(1)
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
Our guidance for the third quarter of 2022 reflects a worsening
year-over-year trend in customer acquisition spending by our
P&C insurance carrier partners as we cross the first
anniversary of the start of this hard market cycle. In our Health
insurance vertical, we expect Transaction Value in the third
quarter of 2022 to be similar to the second quarter level.
For the third quarter of 2022, MediaAlpha currently expects the
following:
- Transaction Value between $130 million - $145 million,
representing a 46% year-over-year decline at the midpoint of the
guidance range. We expect Transaction Value in our P&C
insurance vertical to decline sequentially due to continued carrier
pullbacks in customer acquisition spending;
- Revenue between $77 million - $87 million, representing a 46%
year-over-year decline at the midpoint of the guidance range;
- Adjusted EBITDA between breakeven and $1.5 million,
representing a 95% year-over-year decline at the midpoint of the
guidance range. We expect Adjusted EBITDA to decline year over year
in the third quarter of 2022 at a greater rate than Transaction
Value, Revenue, and Contribution due to the increases in our
headcount and operating expenses over the last year. We are
projecting our operating expenses excluding non-cash items to be
approximately equal to the second quarter of 2022 levels.
With respect to the Company’s projection of Adjusted EBITDA
under “Financial Outlook,” MediaAlpha is not providing a
reconciliation of Adjusted EBITDA to net income (loss) because the
Company is unable to predict with reasonable certainty the
reconciling items that may affect net income (loss) 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
corresponding 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.
Conference Call Information
MediaAlpha will host a Q&A conference call today to discuss
the Company's second quarter 2022 results and its financial outlook
for the third quarter of 2022 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 (888)
330-2022 or (646) 960-0690, with passcode 3195092. 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, including without limitation statements regarding our
expectations regarding business levels in the P&C and Health
insurance markets for the remainder of this year, our expectation
of a steep and significant recovery when carriers resume their
customer acquisition spending; and our financial outlook for the
third quarter of 2022. 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 Form 10-K filed on February 28, 2022. 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 press
release.
Non-GAAP Financial Measures and Operating Metrics
This press release includes Adjusted EBITDA 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 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, we believe that Transaction Value, Adjusted EBITDA and
Contribution Margin provide useful information to investors and
others in understanding and evaluating our operating results in the
same manner as our management team and board of directors. Each of
Transaction Value, Adjusted EBITDA 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.
MediaAlpha, Inc. and
subsidiaries
Consolidated Balance
Sheets
(Unaudited; in thousands, except
share data and per share amounts)
June 30, 2022
December 31,
2021
Assets
Current assets
Cash and cash equivalents
$
35,194
$
50,564
Accounts receivable, net of allowance for
credit losses of $374 and $609, respectively
38,856
76,094
Prepaid expenses and other current
assets
6,359
10,448
Total current assets
80,409
137,106
Intangible assets, net
36,327
12,567
Goodwill
47,739
18,402
Deferred tax asset
103,008
102,656
Other assets
18,395
19,073
Total assets
$
285,878
$
289,804
Liabilities and stockholders' equity
(deficit)
Current liabilities
Accounts payable
$
33,434
$
61,770
Accrued expenses
13,204
13,716
Current portion of long-term debt
8,749
8,730
Total current liabilities
55,387
84,216
Long-term debt, net of current portion
198,686
178,069
Liabilities under tax receivables
agreement, net of current portion
83,279
85,027
Other long-term liabilities
7,999
4,058
Total liabilities
$
345,351
$
351,370
Commitments and contingencies (Note 7)
Stockholders' equity (deficit):
Class A common stock, $0.01 par value -
1.0 billion shares authorized; 42.2 million and 41.0 million shares
issued and outstanding as of June 30, 2022 and December 31, 2021,
respectively
422
410
Class B common stock, $0.01 par value -
100 million shares authorized; 19.2 million and 19.6 million shares
issued and outstanding as of June 30, 2022 and December 31, 2021,
respectively
192
196
Preferred stock, $0.01 par value - 50
million shares authorized; 0 shares issued and outstanding as of
June 30, 2022 and December 31, 2021
—
—
Additional paid-in capital
443,514
419,533
Accumulated deficit
(440,691
)
(424,476
)
Total stockholders' equity (deficit)
attributable to MediaAlpha, Inc.
$
3,437
$
(4,337
)
Non-controlling interests
(62,910
)
(57,229
)
Total stockholders' (deficit)
$
(59,473
)
$
(61,566
)
Total liabilities and stockholders'
deficit
$
285,878
$
289,804
MediaAlpha, Inc. and
subsidiaries
Consolidated Statements of
Operations
(Unaudited; in thousands, except
share data and per share amounts)
Three months ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
Revenue
$
103,449
$
157,353
$
246,048
$
330,941
Costs and operating expenses
Cost of revenue
87,925
132,305
208,806
279,485
Sales and marketing
7,958
5,724
15,181
11,115
Product development
5,661
3,840
10,877
7,160
General and administrative
12,316
13,585
29,464
29,334
Total costs and operating expenses
113,860
155,454
264,328
327,094
(Loss) income from operations
(10,411
)
1,899
(18,280
)
3,847
Other expenses (income), net
44
171
(479
)
21
Interest expense
1,956
2,237
3,315
4,538
Total other expense, net
2,000
2,408
2,836
4,559
(Loss) before income taxes
(12,411
)
(509
)
(21,116
)
(712
)
Income tax expense (benefit)
611
(125
)
1,754
(489
)
Net (loss)
$
(13,022
)
$
(384
)
$
(22,870
)
$
(223
)
Net (loss) attributable to non-controlling
interest
(3,883
)
(177
)
(6,655
)
(301
)
Net (loss) income attributable to
MediaAlpha, Inc.
$
(9,139
)
$
(207
)
$
(16,215
)
$
78
Net (loss) income per share of Class A
common stock
-Basic and diluted
$
(0.22
)
$
(0.01
)
$
(0.39
)
$
0.00
Weighted average shares of Class A common
stock outstanding
-Basic and diluted
41,705,344
37,667,432
41,279,146
35,414,548
MediaAlpha, Inc. and
subsidiaries
Consolidated Statements of
Cash Flows
(Unaudited; in thousands)
Six Months Ended June
30,
2022
2021
Cash flows from operating
activities
Net (loss)
$
(22,870
)
$
(223
)
Adjustments to reconcile net (loss) to net
cash provided by (used in) operating activities:
Non-cash equity-based compensation
expense
29,616
22,123
Non-cash lease expense
357
246
Depreciation expense on property and
equipment
197
173
Amortization of intangible assets
2,360
1,492
Amortization of deferred debt issuance
costs
418
694
Change in fair value of contingent
consideration
(2,845
)
—
Credit losses
(127
)
235
Deferred taxes
1,630
(865
)
Tax receivable agreement liability
adjustments
(589
)
(156
)
Changes in operating assets and
liabilities:
Accounts receivable
38,691
21,775
Prepaid expenses and other current
assets
4,057
2,472
Other assets
198
310
Accounts payable
(28,354
)
(51,940
)
Accrued expenses
(2,845
)
(2,136
)
Net cash provided by (used in) operating
activities
$
19,894
$
(5,800
)
Cash flows from investing
activities
Purchases of property and equipment
(79
)
(470
)
Cash consideration paid in connection with
CHT acquisition
(49,677
)
—
Net cash (used in) investing
activities
$
(49,756
)
$
(470
)
Cash flows from financing
activities
Proceeds received from:
Revolving credit facility
25,000
—
Payments made for:
Term loan facility
(4,750
)
—
Repurchases of Class A common stock
(3,382
)
—
Distributions
(590
)
(110
)
Shares withheld for taxes on vesting of
restricted stock units
(1,786
)
(2,174
)
Net cash provided by (used in) financing
activities
$
14,492
$
(2,284
)
Net (decrease) in cash and cash
equivalents
(15,370
)
(8,554
)
Cash and cash equivalents, beginning of
period
50,564
23,554
Cash and cash equivalents, end of
period
$
35,194
$
15,000
Key business and operating metrics and Non-GAAP financial
measures
Transaction Value
We define “Transaction Value” as the total gross dollars
transacted by our partners on our platform. Transaction Value is a
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 Marketplace
transactions. In our Open Marketplace model, Transaction Value is
equal to revenue recognized and revenue share payments to our
supply partners represent costs of revenue. In our Private
Marketplace 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 and six months ended June 30, 2022 and 2021:
Three months ended June
30,
Six months ended June
30,
(dollars in thousands)
2022
2021
2022
2021
Open Marketplace transactions
$
99,633
$
152,522
$
237,729
$
321,870
Percentage of total Transaction Value
54.5
%
59.5
%
56.3
%
62.0
%
Private Marketplace transactions
83,237
104,005
184,154
197,119
Percentage of total Transaction Value
45.5
%
40.5
%
43.7
%
38.0
%
Total Transaction Value
$
182,870
$
256,527
$
421,883
$
518,989
The following table presents Transaction Value by vertical for
the three and six months ended June 30, 2022 and 2021:
Three months ended June
30,
Six months ended June
30,
(dollars in thousands)
2022
2021
2022
2021
Property & Casualty insurance
$
111,930
$
176,646
$
260,014
$
360,073
Percentage of total Transaction Value
61.2
%
68.9
%
61.6
%
69.4
%
Health insurance
46,394
47,240
106,649
97,583
Percentage of total Transaction Value
25.4
%
18.4
%
25.3
%
18.8
%
Life insurance
12,467
13,933
24,858
28,374
Percentage of total Transaction Value
6.8
%
5.4
%
5.9
%
5.5
%
Other (1)
12,079
18,708
30,362
32,959
Percentage of total Transaction Value
6.6
%
7.3
%
7.2
%
6.4
%
Total Transaction Value
$
182,870
$
256,527
$
421,883
$
518,989
(1)
Our other verticals include
Travel, Education and Consumer Finance.
Contribution and Contribution Margin
We define “Contribution” as revenue less revenue share payments
and online advertising costs, or, as reported in our consolidated
statements of operations, revenue less cost of revenue (i.e., gross
profit), as adjusted to exclude the following items from cost of
revenue: equity-based compensation; salaries, wages, and related
costs; internet and hosting costs; amortization; depreciation;
other services; and merchant-related fees. We define “Contribution
Margin” as Contribution expressed as a percentage of revenue for
the same period. Contribution and Contribution Margin are non-GAAP
financial measures that we present to supplement the financial
information we present on a GAAP basis. 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 and efficacy of our online advertising costs to drive
consumers to our proprietary websites, 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 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. For example,
if Contribution increases and our headcount costs and other
operating expenses remain steady, our Adjusted EBITDA and operating
leverage increase. If Contribution Margin decreases, we may choose
to re-evaluate and re-negotiate our revenue share agreements with
our supply partners, to make optimization and pricing changes with
respect to our bids for keywords from primary traffic acquisition
sources, or to change our overall cost structure with respect to
headcount, fixed costs and other costs. Other companies may
calculate Contribution and Contribution Margin differently than we
do. Contribution and Contribution Margin have their limitations as
analytical tools, and you should not consider them in isolation or
as substitutes for analysis of our results presented in accordance
with GAAP.
The following table reconciles Contribution with gross profit,
the most directly comparable financial measure calculated and
presented in accordance with GAAP, for the three and six months
ended June 30, 2022 and 2021:
Three months ended June
30,
Six months ended June
30,
(in thousands)
2022
2021
2022
2021
Revenue
$
103,449
$
157,353
$
246,048
$
330,941
Less cost of revenue
(87,925
)
(132,305
)
(208,806
)
(279,485
)
Gross profit
15,524
25,048
37,242
51,456
Adjusted to exclude the following (as
related to cost of revenue):
Equity-based compensation
1,240
442
1,638
842
Salaries, wages, and related
1,034
558
1,690
1,022
Internet and hosting
119
108
223
210
Other expenses
215
112
342
219
Depreciation
12
8
18
15
Other services
576
256
1,106
547
Merchant-related fees
44
139
59
230
Contribution
18,764
26,671
42,318
54,541
Gross margin
15.0
%
15.9
%
15.1
%
15.5
%
Contribution Margin
18.1
%
16.9
%
17.2
%
16.5
%
Adjusted EBITDA
We define “Adjusted EBITDA” as net income excluding interest
expense, income tax benefit (expense), depreciation expense on
property and equipment, amortization of intangible assets, as well
as equity-based compensation expense and certain other adjustments
as listed in the table below. Adjusted EBITDA is a non-GAAP
financial measure that we present to supplement the financial
information we present on a GAAP basis. We monitor and present
Adjusted EBITDA because it 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.
We believe that Adjusted EBITDA helps identify underlying trends in
our business that could otherwise be masked by the effect of the
expenses that we exclude in the calculations of Adjusted EBITDA.
Accordingly, we believe that Adjusted EBITDA provides useful
information to investors and others in understanding and evaluating
our operating results, enhancing the overall understanding of our
past performance and future prospects. In addition, presenting
Adjusted EBITDA provides investors with a metric to evaluate the
capital efficiency of our business.
Adjusted EBITDA is not presented in accordance with GAAP and
should not be considered in isolation of, or as an alternative to,
measures presented in accordance with GAAP. There are a number of
limitations related to the use of Adjusted EBITDA rather than net
income, which is the most directly comparable financial measure
calculated and presented in accordance with GAAP. These limitations
include the fact that Adjusted EBITDA excludes interest expense on
debt, income tax benefit (expense), equity-based compensation
expense, depreciation and amortization, and certain other
adjustments that we consider useful information to investors and
others in understanding and evaluating our operating results. In
addition, other companies may use other measures to evaluate their
performance, including different definitions of “Adjusted EBITDA,”
which could reduce the usefulness of our Adjusted EBITDA as a tool
for comparison.
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 and six months
ended June 30, 2022 and 2021.
Three months ended June
30,
Six months ended June
30,
(in thousands)
2022
2021
2022
2021
Net (loss)
$
(13,022
)
$
(384
)
$
(22,870
)
$
(223
)
Equity-based compensation expense
15,843
11,521
29,616
22,123
Interest expense
1,956
2,237
3,315
4,538
Income tax expense (benefit)
611
(125
)
1,754
(489
)
Depreciation expense on property and
equipment
99
91
197
173
Amortization of intangible assets
1,677
746
2,360
1,492
Transaction expenses(1)
150
66
530
2,731
Employee-related costs(2)
—
99
—
349
SOX implementation costs(3)
—
297
110
449
Fair value adjustment to contingent
consideration(4)
(2,845
)
—
(2,845
)
—
Changes in TRA related liability(5)
40
—
(590
)
(156
)
Changes in Tax Indemnification
Receivable(6)
(15
)
147
(29
)
147
Settlement of federal and state income tax
refunds(7)
4
—
92
—
Adjusted EBITDA
$
4,498
$
14,695
$
11,640
$
31,134
(1)
Transaction expenses consist of
$0.2 million and $0.5 million of legal, accounting and other
consulting fees incurred by us for the three and six months ended
June 30, 2022, respectively, in connection with the acquisition of
Customer Helper Team ("CHT"). For the three and six months ended
June 30, 2021, transaction expenses consist of $0.1 million and
$2.7 million for legal, accounting, and other consulting fees in
connection with the Secondary Offering, respectively.
(2)
Employee-related costs include
$0.1 million and $0.3 million of expenses incurred by us for the
three and six months ended June 30, 2021, respectively, for amounts
payable to recruiting firms in connection with the hiring of
certain executive officers to support our operation as a
publicly-reporting company.
(3)
SOX implementation costs consist
of $0.1 million of expenses incurred by us for the six months ended
June 30, 2022, and $0.3 million and $0.4 million of expenses for
the three and six months ended June 30, 2021, respectively, for
third-party consultants to assist us with the development,
implementation, and documentation of new and enhanced internal
controls and processes for compliance with SOX Section 404(b) for
2021.
(4)
Fair value adjustment to
contingent consideration consists of $2.8 million of gain for the
three and six months ended June 30, 2022, in connection with the
remeasurement of the contingent consideration for the acquisition
of CHT as of June 30, 2022.
(5)
Changes in TRA related liability
consist of immaterial expenses for the three months ended June 30,
2022, and $0.6 million and $0.2 million of income for the six
months ended June 30, 2022 and 2021, respectively, due to a change
in the estimated future state tax benefits and other changes in the
estimate resulting in reductions of the TRA liability.
(6)
Changes in Tax Indemnification
Receivable consists of immaterial income incurred by us for the
three and six months ended June 30, 2022, and $0.1 million of
expenses incurred by us for the three and six months ended June 30,
2021, related to a reduction in the tax indemnification receivable
recorded in connection with the Reorganization Transactions. The
reduction also resulted in a benefit of the same amount which has
been recorded within income tax (benefit).
(7)
Settlement of federal and state
tax refunds consist of immaterial expenses and $0.1 million of
expense incurred by us for the three and six months ended June 30,
2022, respectively, related to reimbursement to White Mountains for
state tax refunds for the period prior to the Reorganization
Transaction related to 2020 tax returns. The settlement also
resulted in a benefit of the same amount which has been recorded
within income tax expense (benefit).
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220804005294/en/
Investors Denise Garcia Hayflower Partners
Denise@HayflowerPartners.com Press Louise Rasho
Louise@MediaAlpha.com
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