- Fourth quarter revenue of $124 million, down 23% year over
year; Full year revenue of $459 million, down 29% year over
year
- Fourth quarter Transaction Value of $169 million, down 31%
year over year; Full year Transaction Value of $738 million, down
28% year over year
- Fourth quarter Transaction Value from Property &
Casualty down 53% year over year to $57 million; Full year
Transaction Value from Property & Casualty down 39% year over
year to $400 million
- Fourth quarter Transaction Value from Health flat year over
year at $99 million; Full year Transaction Value from Health up 3%
year over year to $251 million
MediaAlpha, Inc. (NYSE: MAX) today announced its financial
results for the fourth quarter and full year ended December 31,
2022.
“Our fourth quarter results exceeded expectations, driven
primarily by strong carrier spend in our Health insurance
vertical,” said MediaAlpha co-founder and CEO Steve Yi. “While our
Property & Casualty (P&C) insurance vertical continued to
be negatively impacted by the pullback in customer acquisition
spend, the tide has since turned, and we have seen a positive
inflection in auto insurance carrier spend in early 2023. As a
result, we expect Transaction Value in our P&C vertical to
nearly double in the first quarter on a sequential basis, which is
well above our normal seasonal pattern. While many carriers remain
on the sidelines, we are cautiously optimistic they will catch up
over the next several quarters, driving strong growth for
MediaAlpha.”
Fourth Quarter 2022 Financial Results
- Revenue of $124.0 million, a decrease of 23% year over
year;
- Transaction Value of $168.9 million, a decrease of 31% year
over year;
- Gross margin of 16.2%, compared with 15.7% in the fourth
quarter of 2021;
- Contribution Margin(1) of 18.5%, compared with 16.6% in the
fourth quarter of 2021;
- Net loss of $(28.4) million, compared with $(4.0) million in
the fourth quarter of 2021; and
- Adjusted EBITDA(1) of $9.0 million, compared with $13.2 million
in the fourth quarter of 2021.
Full Year 2022 Financial Results
- Revenue of $459.1 million, a decrease of 29% year over
year;
- Transaction Value of $737.5 million, a decrease of 28% year
over year;
- Gross margin of 15.3%, compared with 15.7% in 2021;
- Contribution Margin(1) of 17.6%, compared with 16.7% in
2021;
- Net loss of $(72.4) million, compared with $(8.5) million in
2021; and
- Adjusted EBITDA(1) of $22.9 million, compared with $58.2
million in 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 Q1 2023 reflects typical seasonality along with
an improvement in market conditions in our P&C vertical
compared with Q4 2022, although click pricing is expected to be
down on a year-over-year basis. In our Health vertical, we expect
modest year-over-year growth in Transaction Value as we continue
deepening our relationships with key carriers. For the Life and
Other verticals, we expect Transaction Value to decline year over
year at a similar rate as in Q4 2022. Due to the uncertainty around
the timing and slope of the P&C market recovery, we are not
providing full year 2023 guidance.
For the first quarter of 2023, MediaAlpha currently expects the
following:
- Transaction Value between $180 million - $195 million,
representing a 22% year-over-year decline at the midpoint of the
guidance range, driven primarily by our P&C vertical. We expect
P&C Transaction Value to nearly double in Q1 2023 compared with
Q4 2022, indicative of both the early stages of recovery from the
hard market and normal seasonality. Although we are encouraged by
these early signs of recovery, we still expect P&C Transaction
Value to be well below Q1 2022 levels.
- Revenue between $106 million - $116 million, representing a 22%
year-over-year decline at the midpoint of the guidance range.
- Adjusted EBITDA between $5.5 million - $7.5 million,
representing a 9% year-over-year decline at the midpoint of the
guidance range. We expect Adjusted EBITDA to decline at a lower
rate than Transaction Value, Revenue and Contribution in Q1 2023
due to our continued discipline in managing our expenses. We expect
our cash operating expenses to be in line with Q4 2022.
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 fourth quarter and full year 2022 results and its
financial outlook for the first quarter of 2023 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
expectation that Transaction Value in our P&C vertical will
nearly double in the first quarter on a sequential basis; our
expectation that carrier marketing spend will increase over the
next several quarters; and our financial outlook for the first
quarter of 2023. 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 as of and for the year ended
December 31, 2022 to be filed on or about February 27, 2023. 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
(In thousands, except share data
and per share amounts)
As of December 31,
2022
(unaudited)
2021
Assets
Current assets
Cash and cash equivalents
$
14,542
$
50,564
Accounts receivable, net of allowance for
credit losses of $575 and $609, respectively
59,998
76,094
Prepaid expenses and other current
assets
5,880
10,448
Total current assets
$
80,420
$
137,106
Intangible assets, net
32,932
12,567
Goodwill
47,739
18,402
Deferred tax assets
—
102,656
Other assets
8,990
19,073
Total assets
$
170,081
$
289,804
Liabilities and stockholders'
deficit
Current liabilities
Accounts payable
53,992
61,770
Accrued expenses
14,130
13,716
Current portion of long-term debt
8,770
8,730
Total current liabilities
$
76,892
$
84,216
Long-term debt, net of current portion
174,300
178,069
Liabilities under tax receivables
agreement, net of current portion
—
85,027
Other long-term liabilities
4,973
4,058
Total liabilities
$
256,165
$
351,370
Commitments and contingencies (Note 8)
Stockholders' (deficit):
Class A common stock, $0.01 par value -
1.0 billion shares authorized; 43.7 million and 41.0 million shares
issued and outstanding as of December 31, 2022 and December 31,
2021, respectively
437
410
Class B common stock, $0.01 par value -
100 million shares authorized; 18.9 million and 19.6 million shares
issued and outstanding as of December 31, 2022 and December 31,
2021, respectively
189
196
Preferred stock, $0.01 par value - 50
million shares authorized; 0 shares issued and outstanding as of
December 31, 2022 and December 31, 2021
—
—
Additional paid-in capital
465,523
419,533
Accumulated deficit
(482,142
)
(424,476
)
Total stockholders' (deficit) attributable
to MediaAlpha, Inc.
$
(15,993
)
$
(4,337
)
Non-controlling interests
(70,091
)
(57,229
)
Total stockholders' (deficit)
$
(86,084
)
$
(61,566
)
Total liabilities and stockholders'
deficit
$
170,081
$
289,804
MediaAlpha, Inc. and
subsidiaries
Consolidated Statements of
Operations
(In thousands, except share data
and per share amounts)
Year ended December
31,
2022
(unaudited)
2021
2020
Revenue
$
459,072
$
645,274
$
584,814
Costs and operating expenses
Cost of revenue
389,013
543,750
499,434
Sales and marketing
28,816
22,823
20,483
Product development
21,077
15,195
12,449
General and administrative
55,556
61,357
32,913
Total costs and operating expenses
494,462
643,125
565,279
(Loss) income from operations
(35,390
)
2,149
19,535
Other (income) expense, net
(75,094
)
3,841
2,302
Interest expense
9,245
7,830
7,938
Total other (income) expense, net
(65,849
)
11,671
10,240
Income (loss) before income taxes
30,459
(9,522
)
9,295
Income tax expense (benefit)
102,905
(1,047
)
(1,267
)
Net (loss) income
$
(72,446
)
$
(8,475
)
$
10,562
Net income attributable to QLH prior to
Reorganization Transactions
—
—
19,166
Net (loss) attributable to non-controlling
interest
(14,780
)
(3,200
)
(4,238
)
Net (loss) attributable to MediaAlpha,
Inc.
$
(57,666
)
$
(5,275
)
$
(4,366
)
Net (loss) per share of Class A common
stock
-Basic
$
(1.37
)
$
(0.14
)
$
(0.14
)
-Diluted
$
(1.37
)
$
(0.19
)
$
(0.14
)
Weighted average shares of Class A common
stock outstanding
-Basic
41,944,874
37,280,533
32,134,170
-Diluted
41,944,874
61,255,925
32,134,170
MediaAlpha, Inc. and
subsidiaries
Consolidated Statements of
Operations
(In thousands, except share data
and per share amounts)
Three months ended December
31,
2022
(unaudited)
2021
(unaudited)
Revenue
$
124,007
$
161,584
Costs and operating expenses
Cost of revenue
103,864
136,184
Sales and marketing
6,782
6,084
Product development
4,909
4,278
General and administrative
14,987
16,671
Total costs and operating expenses
130,542
163,217
(Loss) from operations
(6,535
)
(1,633
)
Other (income) expense, net
(83,217
)
3,504
Interest expense
3,337
1,527
Total other (income) expense, net
(79,880
)
5,031
Income (loss) before income taxes
73,345
(6,664
)
Income tax expense (benefit)
101,695
(2,683
)
Net (loss)
$
(28,350
)
$
(3,981
)
Net (loss) attributable to non-controlling
interest
(1,385
)
(2,162
)
Net (loss) attributable to MediaAlpha,
Inc.
$
(26,965
)
$
(1,819
)
Net (loss) per share of Class A common
stock
-Basic
$
(0.63
)
$
(0.05
)
-Diluted
$
(0.63
)
$
(0.10
)
Weighted average shares of Class A common
stock outstanding
-Basic
42,989,666
39,815,466
-Diluted
42,989,666
59,575,024
MediaAlpha, Inc. and
subsidiaries
Consolidated Statements of
Cash Flows
(In thousands)
Year ended December
31,
2022
(unaudited)
2021
2020
Cash Flows from operating
activities
Net (loss) income
$
(72,446
)
$
(8,475
)
$
10,562
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Non-cash equity-based compensation
expense
58,472
45,713
24,745
Non-cash lease expense
753
594
—
Depreciation expense on property and
equipment
392
369
289
Amortization of intangible assets
5,755
2,984
3,201
Amortization of deferred debt issuance
costs
832
1,182
1,228
Change in fair value of contingent
consideration
(7,007
)
—
—
Impairment of cost method investment
8,594
—
—
Loss on extinguishment of debt
—
—
1,998
Credit losses
136
143
526
Deferred taxes
102,656
919
(545
)
Tax receivables agreement liability
related adjustments
(83,832
)
911
413
Changes in operating assets and
liabilities:
Accounts receivable
17,335
20,058
(40,809
)
Prepaid expenses and other current
assets
4,507
(2,703
)
(6,482
)
Other assets
417
500
(4,375
)
Accounts payable
(7,796
)
(36,476
)
57,793
Accrued expenses
(494
)
2,902
2,866
Net cash provided by operating
activities
$
28,274
$
28,621
$
51,410
Cash flows from investing
activities
Purchases of property and equipment
(98
)
(650
)
(296
)
Cash consideration paid in connection with
CHT acquisition
(49,677
)
—
—
Purchase of cost method investment
—
—
(10,000
)
Net cash (used in) investing
activities
$
(49,775
)
$
(650
)
$
(10,296
)
Cash flows from financing
activities
Proceeds received from:
Proceeds from issuance of Class A common
stock, net of underwriter commission
—
—
124,179
Issuance of long-term debt
—
190,000
210,000
Revolving line of credit
25,000
—
7,500
Member contributions
—
—
—
Payments made for:
Repayments on revolving line of credit
(20,000
)
—
(7,500
)
Repayments on long-term debt
(9,500
)
(186,375
)
(123,648
)
Debt issuance costs
—
(866
)
(4,467
)
Repurchase of Class B units at QLH up to
fair value
—
—
(1,453
)
IPO costs to third parties
—
—
(12,227
)
Payments pursuant to tax receivable
agreement
(216
)
—
—
Shares withheld for taxes on vesting of
restricted stock units
(4,023
)
(3,382
)
(4,235
)
Repurchases of Class A common stock
(5,008
)
—
—
Repurchase of Class B common stock
—
—
(84,320
)
Contributions from QLH’s members
1,360
—
—
Distributions
(2,134
)
(338
)
(131,417
)
Net cash (used in) financing
activities
$
(14,521
)
$
(961
)
$
(27,588
)
Net (decrease) increase in cash and cash
equivalents
(36,022
)
27,010
13,526
Cash and cash equivalents, beginning of
period
50,564
23,554
10,028
Cash and cash equivalents, end of
period
$
14,542
$
50,564
$
23,554
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 full years ended December 31, 2022 and 2021:
Full year ended December
31,
(dollars in thousands)
2022
2021
Open Marketplace transactions
$
445,950
$
627,705
Percentage of total Transaction Value
60.5
%
61.6
%
Private Marketplace transactions
291,564
391,265
Percentage of total Transaction Value
39.5
%
38.4
%
Total Transaction Value
$
737,514
$
1,018,970
The following table presents Transaction Value by platform model
for the three months ended December 31, 2022 and 2021:
Three months ended
December 31,
(dollars in thousands)
2022
2021
Open Marketplace transactions
$
121,942
$
158,035
Percentage of total Transaction Value
72.2
%
64.5
%
Private Marketplace transactions
46,972
86,855
Percentage of total Transaction Value
27.8
%
35.5
%
Total Transaction Value
$
168,914
$
244,890
The following table presents Transaction Value by vertical for
the full years ended December 31, 2022 and 2021:
Full year ended December
31,
(dollars in thousands)
2022
2021
Property & Casualty insurance
$
399,861
$
655,591
Percentage of total Transaction Value
54.2
%
64.3
%
Health insurance
251,400
245,221
Percentage of total Transaction Value
34.1
%
24.1
%
Life insurance
44,619
52,302
Percentage of total Transaction Value
6.0
%
5.1
%
Other(1)
41,634
65,856
Percentage of total Transaction Value
5.6
%
6.5
%
Total Transaction Value
$
737,514
$
1,018,970
The following table presents Transaction Value by vertical for
the three months ended December 31, 2022 and 2021:
Three months ended
December 31,
(dollars in thousands)
2022
2021
Property & Casualty insurance
$
56,682
$
120,143
Percentage of total Transaction Value
33.6
%
49.1
%
Health insurance
98,561
98,946
Percentage of total Transaction Value
58.3
%
40.4
%
Life insurance
8,181
10,566
Percentage of total Transaction Value
4.8
%
4.3
%
Other(1)
5,490
15,235
Percentage of total Transaction Value
3.3
%
6.2
%
Total Transaction Value
$
168,914
$
244,890
(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
statement 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 full years ended
December 31, 2022 and 2021:
Full year ended December
31,
(in thousands)
2022
2021
Revenue
$
459,072
$
645,274
Less cost of revenue
(389,013
)
(543,750
)
Gross profit
70,059
101,524
Adjusted to exclude the following (as
related to cost of revenue):
Equity-based compensation
3,634
1,665
Salaries, wages, and related
3,556
2,004
Internet and hosting
496
419
Depreciation
41
29
Other expenses
720
451
Other services
2,171
1,213
Merchant-related fees
109
309
Contribution
80,786
107,614
Gross Margin
15.3
%
15.7
%
Contribution Margin
17.6
%
16.7
%
The following table reconciles Contribution with gross profit,
the most directly comparable financial measure calculated and
presented in accordance with GAAP, for the three months ended
December 31, 2022 and 2021:
Three months ended
December 31,
(in thousands)
2022
2021
Revenue
$
124,007
$
161,584
Less cost of revenue
(103,864
)
(136,184
)
Gross profit
20,143
25,400
Adjusted to exclude the following (as
related to cost of revenue):
Equity-based compensation
997
376
Salaries, wages, and related
877
481
Internet and hosting
147
104
Depreciation
11
7
Other expenses
189
128
Other services
573
366
Merchant-related fees
10
23
Contribution
22,947
26,885
Gross Margin
16.2
%
15.7
%
Contribution Margin
18.5
%
16.6
%
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 full years ended
December 31, 2022 and 2021.
Full year ended December
31,
(in thousands)
2022
2021
Net (loss)
$
(72,446
)
$
(8,475
)
Equity-based compensation expense
58,472
45,713
Interest expense
9,245
7,830
Income tax expense (benefit)(1)
102,905
(1,047
)
Depreciation expense on property and
equipment
392
369
Amortization of intangible assets
5,755
2,984
Transaction expenses(2)
636
4,128
Employee-related costs(3)
—
674
SOX implementation costs(4)
110
1,168
Fair value adjustment to contingent
consideration(5)
(7,007
)
—
Impairment of cost method investment
8,594
—
Settlement costs(6)
—
859
Changes in TRA related liability(7)
(83,832
)
911
Changes in Tax Indemnification
Receivable(8)
(58
)
1,360
Non-cash compensation(9)
—
880
Employee retention credits(10)
—
(1,303
)
Settlement of federal and state income tax
refunds(11)
92
2,116
Adjusted EBITDA
$
22,858
$
58,167
(1)
Income tax expense (benefit) for the year
ended December 31, 2022, consists primarily of $84.5 million of tax
expense related to recording a valuation allowance on our deferred
tax assets as we determined that the negative evidence outweighs
the positive evidence and so it is more likely than not that our
deferred tax assets will not be utilized.
(2)
Transaction expenses consist of $0.6
million of legal, accounting and other consulting fees incurred by
us for the year ended December 31, 2022 in connection with the
acquisition of CHT. For the year ended December 31, 2021,
transaction expenses consist of $4.1 million of expenses for legal
and accounting fees and other costs in connection with the
Secondary Offering and other registration statements, and the
refinancing of our 2020 Credit Facilities.
(3)
Employee-related costs include $0.6
million of expenses incurred by us for the year ended December 31,
2021 for amounts payable to recruiting firms in connection with the
hiring of certain executive officers to support our operation as a
publicly-reporting company.
(4)
SOX implementation costs consist of $0.1
million and $1.2 million of expenses incurred by us for the year
ended December 31, 2022 and 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).
(5)
Fair value adjustment to contingent
consideration consists of $7.0 million of gain for the year ended
December 31, 2022 in connection with the remeasurement of the
contingent consideration for the acquisition of CHT as of December
31, 2022.
(6)
Settlement costs consist of $0.9 million
of expenses incurred by us for the year ended December 31, 2021 to
settle certain claims made by the Attorney General's Office of the
State of Washington.
(7)
Changes in TRA related liability for the
year ended December 31, 2022 consist of $83.3 million of gain on
reduction of liability pursuant to the TRA resulting from
remeasuring of the non-current portion of liability to zero as we
no longer consider the payments under the agreement to be probable.
Changes in TRA related liability for the year ended December 31,
2021 consist of $0.9 million of expense due to a change in the
estimated future state tax benefits and other changes in the
estimate, resulting in changes to the TRA liability created in
connection with the Reorganization Transactions.
(8)
Changes in Tax Indemnification Receivable
consists of $0.1 million of income and $1.4 million of expense
incurred by us for the years ended December 31, 2022 and 2021,
respectively, related to changes in the tax indemnification
receivable recorded in connection with the Reorganization
Transactions. The change also resulted in an expense/benefit of the
same amount which has been recorded within income tax expense
(benefit).
(9)
Non-cash compensation consists of $0.9
million of expenses incurred by us for the year ended December 31,
2021 for payment of annual bonuses to certain of our executive
officers in the form of grants of restricted stock units, rather
than in cash.
(10)
Employee retention credits consist of $1.3
million of benefit for the year ended December 31, 2021 as a result
of our receipt of employee retention credits under the provisions
of the CARES Act.
(11)
Settlement of federal and state tax
refunds consist of $0.1 million and $2.1 million of expenses
incurred by us for the year ended December 31, 2022 and 2021,
respectively, related to reimbursement to White Mountains for
federal and state tax refunds for the period prior to the
Reorganization Transaction related to 2020 federal and state tax
returns. The settlement also resulted in a benefit of the same
amount which has been recorded within income tax (benefit).
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
December 31, 2022 and 2021.
Three months ended
December 31,
(in thousands)
2022
2021
Net loss
$
(28,350
)
$
(3,981
)
Equity-based compensation expense
14,256
12,392
Interest expense
3,337
1,527
Income tax expense (benefit)(1)
101,695
(2,683
)
Depreciation expense on property and
equipment
97
97
Amortization of intangible assets
1,691
746
Transaction expenses(2)
—
245
Employee-related costs(3)
—
55
SOX implementation costs(4)
—
371
Fair value adjustment to contingent
consideration(5)
(416
)
—
Settlement costs(6)
—
59
Changes in TRA related liability(7)
(83,255
)
1,515
Changes in Tax Indemnification
Receivable(8)
(14
)
1,213
Non-cash compensation(9)
—
880
Employee retention credits(10)
—
(1,303
)
Settlement of federal and state income tax
refunds(11)
—
2,116
Adjusted EBITDA
$
9,041
$
13,249
(1)
Income tax expense (benefit) for the three
months ended December 31, 2022, consists primarily of $86.4 million
of tax expense related to recording a valuation allowance on our
deferred tax assets as we determined that the negative evidence
outweighs the positive evidence and so it is more likely than not
that our deferred tax assets will not be utilized.
(2)
Transaction expenses consist of $0.2
million of expenses incurred by us for the three months ended
December 31, 2021 for legal and accounting fees and other costs in
connection with the filing of registration statements.
(3)
Employee-related costs include $0.1
million of expenses incurred by us for the three months ended
December 31, 2021 for amounts payable to recruiting firms in
connection with the hiring of certain executive officers to support
our operation as a publicly-reporting company.
(4)
SOX implementation costs consist of $0.4
million of expenses incurred by us for the three months ended
December 31, 2021 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).
(5)
Fair value adjustment to contingent
consideration consists of $0.4 million of gain for the three months
ended December 31, 2022 in connection with the remeasurement of the
contingent consideration for the acquisition of CHT as of December
31, 2022.
(6)
Settlement costs consist of $0.1 million
of expenses incurred by us for the three months ended December 31,
2021 to settle certain claims made by the Attorney General's Office
of the State of Washington.
(7)
Changes in TRA related liability for the
three months ended December 31, 2022 consist of $83.3 million of
gain on reduction of liability pursuant to the TRA resulting from
remeasuring of the non-current portion of liability to zero as we
no longer consider the payments under the agreement to be probable.
Changes in TRA related liability for three months ended December
31, 2021 consist of $1.5 million of expense due to a change in the
estimated future state tax benefits and other changes in the
estimate, resulting in changes to the TRA liability created in
connection with the Reorganization Transactions.
(8)
Changes in Tax Indemnification Receivable
consist of immaterial income and $1.2 million of expense incurred
by us for the three months ended December 31, 2022 and 2021,
respectively, related to changes in the tax indemnification
receivable recorded in connection with the Reorganization
Transactions. The change also resulted in an expense/benefit of the
same amount which has been recorded within income tax expense
(benefit).
(9)
Non-cash compensation consists of $0.9
million of expenses incurred by us for the three months ended
December 31, 2021 for payment of annual bonuses to certain of our
executive officers in the form of grants of restricted stock units,
rather than in cash.
(10)
Employee retention credits consist of $1.3
million of benefit for the three months ended December 31, 2021 as
a result of our receipt of employee retention credits under the
provisions of the CARES Act.
(11)
Settlement of federal and state tax
refunds consist of $2.1 million of expenses incurred by us for the
three months ended December 31, 2021 related to reimbursement to
White Mountains for federal and state tax refunds for the period
prior to the Reorganization Transaction related to 2020 federal and
state tax returns. The settlement also resulted in a benefit of the
same amount which has been recorded within income tax
(benefit).
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230223005654/en/
Investors Denise Garcia Hayflower Partners
Denise@HayflowerPartners.com
Press Joel Samen Joel@MediaAlpha.com
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