- Revenue of $85 million, down 18% year over year
- Transaction Value of $126 million, down 31% year over
year
- Transaction Value from Property & Casualty down 46% year
over year to $61 million
- Transaction Value from Health up 10% year over year to $51
million
MediaAlpha, Inc. (NYSE: MAX), today announced its financial
results for the second quarter ended June 30, 2023.
“Our second quarter results exceeded expectations, driven
primarily by strength in our Health insurance vertical,” said
MediaAlpha co-founder and CEO Steve Yi. “In our Property &
Casualty (P&C) insurance vertical, customer acquisition spend
remains at cyclically low levels as carriers are taking longer than
expected to restore underwriting profitability, and we expect this
to continue for the balance of the year. Our ability to operate
profitability in the current market environment is a tribute to the
efficiency of our business model and the agility of our team, which
we believe will enable us to capture outsized growth as the auto
insurance market recovers.”
Second Quarter 2023 Financial Results
- Revenue of $84.8 million, a decrease of 18% year over
year;
- Transaction Value of $125.9 million, a decrease of 31% year
over year;
- Gross margin of 16.2%, compared with 15.0% in the second
quarter of 2022;
- Contribution Margin(1) of 19.5%, compared with 18.1% in the
second quarter of 2022;
- Net loss was $(20.0) million, compared with $(13.0) million in
the second quarter of 2022; and
- Adjusted EBITDA(1) was $3.6 million, compared with $4.5 million
in the second quarter of 2022.
(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 2023 reflects a
continuation of low customer acquisition spend levels by P&C
carriers as they prioritize profitability over growth. As a result,
we expect third quarter Transaction Value in our P&C insurance
vertical to decline year over year by 40% to 50%. In addition, we
expect third quarter Transaction Value in our Health vertical to
grow year over year at a rate similar to the second quarter.
For the third quarter of 2023, MediaAlpha currently expects the
following:
- Transaction Value between $95 million - $110 million,
representing a 30% year-over-year decline at the midpoint of the
guidance range;
- Revenue between $65 million - $75 million, representing a 21%
year-over-year decline at the midpoint of the guidance range;
- Adjusted EBITDA between $1.5 million and $3.5 million,
representing a 15% year-over-year increase at the midpoint of the
guidance range. We are projecting our operating expenses, net of
Adjusted EBITDA addbacks, to be approximately $1.5 million lower
than Q2 2023 levels, driven primarily by a full quarter impact of
the workforce reductions we implemented in May 2023 and continued
expense discipline.
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 2023 results and its financial outlook
for the third 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 customer acquisition spend by carriers will remain
at cyclically low levels for the balance of this year, our belief
that we will capture outsized growth as the auto insurance market
recovers, and our financial outlook for the third 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 filed on 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
(Unaudited; in thousands, except
share data and per share amounts)
June 30, 2023
December 31,
2022
Assets
Current assets
Cash and cash equivalents
$
20,029
$
14,542
Accounts receivable, net of allowance for
credit losses of $325 and $575, respectively
32,589
59,998
Prepaid expenses and other current
assets
3,484
5,880
Total current assets
56,102
80,420
Intangible assets, net
29,474
32,932
Goodwill
47,739
47,739
Other assets
6,885
8,990
Total assets
$
140,200
$
170,081
Liabilities and stockholders'
deficit
Current liabilities
Accounts payable
$
37,815
$
53,992
Accrued expenses
13,241
14,130
Current portion of long-term debt
8,787
8,770
Total current liabilities
59,843
76,892
Long-term debt, net of current portion
169,899
174,300
Other long-term liabilities
4,852
4,973
Total liabilities
$
234,594
$
256,165
Commitments and contingencies (Note 7)
Stockholders' (deficit):
Class A common stock, $0.01 par value -
1.0 billion shares authorized; 45.9 million and 43.7 million shares
issued and outstanding as of June 30, 2023 and December 31, 2022,
respectively
459
437
Class B common stock, $0.01 par value -
100 million shares authorized; 18.1 million and 18.9 million shares
issued and outstanding as of June 30, 2023 and December 31, 2022,
respectively
181
189
Preferred stock, $0.01 par value - 50
million shares authorized; 0 shares issued and outstanding as of
June 30, 2023 and December 31, 2022
—
—
Additional paid-in capital
489,831
465,523
Accumulated deficit
(506,694
)
(482,142
)
Total stockholders' (deficit) attributable
to MediaAlpha, Inc.
$
(16,223
)
$
(15,993
)
Non-controlling interests
(78,171
)
(70,091
)
Total stockholders' (deficit)
$
(94,394
)
$
(86,084
)
Total liabilities and stockholders'
deficit
$
140,200
$
170,081
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,
2023
2022
2023
2022
Revenue
$
84,772
$
103,449
$
196,402
$
246,048
Costs and operating expenses
Cost of revenue
71,006
87,925
164,268
208,806
Sales and marketing
6,707
7,958
13,701
15,181
Product development
5,061
5,661
10,229
10,877
General and administrative
18,070
12,316
33,825
29,464
Total costs and operating expenses
100,844
113,860
222,023
264,328
(Loss) from operations
(16,072
)
(10,411
)
(25,621
)
(18,280
)
Other (income) expense, net
(116
)
44
1,265
(479
)
Interest expense
3,874
1,956
7,450
3,315
Total other expense, net
3,758
2,000
8,715
2,836
(Loss) before income taxes
(19,830
)
(12,411
)
(34,336
)
(21,116
)
Income tax expense
150
611
228
1,754
Net (loss)
$
(19,980
)
$
(13,022
)
$
(34,564
)
$
(22,870
)
Net (loss) attributable to non-controlling
interest
(5,694
)
(3,883
)
(10,012
)
(6,655
)
Net (loss) attributable to MediaAlpha,
Inc.
$
(14,286
)
$
(9,139
)
$
(24,552
)
$
(16,215
)
Net (loss) per share of Class A common
stock
-Basic and diluted
$
(0.32
)
$
(0.22
)
$
(0.55
)
$
(0.39
)
Weighted average shares of Class A common
stock outstanding
-Basic and diluted
45,160,646
41,705,344
44,518,890
41,279,146
MediaAlpha, Inc. and
subsidiaries
Consolidated Statements of
Cash Flows
(Unaudited; in thousands)
Six Months Ended
June 30,
2023
2022
Cash flows from operating
activities
Net (loss)
$
(34,564
)
$
(22,870
)
Adjustments to reconcile net (loss) to net
cash provided by operating activities:
Non-cash equity-based compensation
expense
29,489
29,616
Non-cash lease expense
337
357
Depreciation expense on property and
equipment
188
197
Amortization of intangible assets
3,458
2,360
Amortization of deferred debt issuance
costs
398
418
Change in fair value of contingent
consideration
—
(2,845
)
Impairment of cost method investment
1,406
—
Credit losses
(250
)
(127
)
Deferred taxes
—
1,630
Tax receivable agreement liability
adjustments
6
(589
)
Changes in operating assets and
liabilities:
Accounts receivable
27,659
38,691
Prepaid expenses and other current
assets
2,364
4,057
Other assets
250
198
Accounts payable
(16,177
)
(28,354
)
Accrued expenses
1,777
(2,629
)
Net cash provided by operating
activities
$
16,341
$
20,110
Cash flows from investing
activities
Purchases of property and equipment
(47
)
(79
)
Cash consideration paid in connection with
CHT acquisition
—
(49,677
)
Net cash (used in) investing
activities
$
(47
)
$
(49,756
)
Cash flows from financing
activities
Proceeds received from:
Revolving credit facility
—
25,000
Payments made for:
Repayments on long-term debt
(4,750
)
(4,750
)
Repurchases of Class A common stock
—
(3,382
)
Distributions
(1,296
)
(590
)
Payments pursuant to tax receivable
agreement
(2,822
)
(216
)
Shares withheld for taxes on vesting of
restricted stock units
(1,939
)
(1,786
)
Net cash (used in) provided by financing
activities
$
(10,807
)
$
14,276
Net increase (decrease) in cash and cash
equivalents
5,487
(15,370
)
Cash and cash equivalents, beginning of
period
14,542
50,564
Cash and cash equivalents, end of
period
$
20,029
$
35,194
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, 2023 and 2022:
Three Months Ended
June 30,
Six Months Ended
June 30,
(dollars in thousands)
2023
2022
2023
2022
Open Marketplace transactions
$
82,856
$
99,633
$
190,515
$
237,729
Percentage of total Transaction Value
65.8
%
54.5
%
59.7
%
56.3
%
Private Marketplace transactions
43,055
83,237
128,561
184,154
Percentage of total Transaction Value
34.2
%
45.5
%
40.3
%
43.7
%
Total Transaction Value
$
125,911
$
182,870
$
319,076
$
421,883
The following table presents Transaction Value by vertical for
the three and six months ended June 30, 2023 and 2022:
Three Months Ended
June 30,
Six Months Ended
June 30,
(dollars in thousands)
2023
2022
2023
2022
Property & Casualty insurance
$
60,666
$
111,930
$
178,590
$
260,014
Percentage of total Transaction Value
48.2
%
61.2
%
56.0
%
61.6
%
Health insurance
50,828
46,394
110,240
106,649
Percentage of total Transaction Value
40.4
%
25.4
%
34.5
%
25.3
%
Life insurance
8,359
12,467
18,476
24,858
Percentage of total Transaction Value
6.6
%
6.8
%
5.8
%
5.9
%
Other(1)
6,058
12,079
11,770
30,362
Percentage of total Transaction Value
4.8
%
6.6
%
3.7
%
7.2
%
Total Transaction Value
$
125,911
$
182,870
$
319,076
$
421,883
(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, 2023 and 2022:
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)
2023
2022
2023
2022
Revenue
$
84,772
$
103,449
$
196,402
$
246,048
Less cost of revenue
(71,006
)
(87,925
)
(164,268
)
(208,806
)
Gross profit
13,766
15,524
32,134
37,242
Adjusted to exclude the following (as
related to cost of revenue):
Equity-based compensation
981
1,240
1,947
1,638
Salaries, wages, and related
907
1,034
1,954
1,690
Internet and hosting
130
119
280
223
Other expenses
162
215
334
342
Depreciation
10
12
21
18
Other services
566
576
1,281
1,106
Merchant-related fees
7
44
3
59
Contribution
16,529
18,764
37,954
42,318
Gross margin
16.2
%
15.0
%
16.4
%
15.1
%
Contribution Margin
19.5
%
18.1
%
19.3
%
17.2
%
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 (loss),
the most directly comparable financial measure calculated and
presented in accordance with GAAP, for the three and six months
ended June 30, 2023 and 2022:
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)
2023
2022
2023
2022
Net (loss)
$
(19,980
)
$
(13,022
)
$
(34,564
)
$
(22,870
)
Equity-based compensation expense
15,148
15,843
29,489
29,616
Interest expense
3,874
1,956
7,450
3,315
Income tax expense
150
611
228
1,754
Depreciation expense on property and
equipment
92
99
188
197
Amortization of intangible assets
1,729
1,677
3,458
2,360
Transaction expenses(1)
254
150
548
530
SOX implementation costs(2)
—
—
—
110
Fair value adjustment to contingent
consideration(3)
—
(2,845
)
—
(2,845
)
Impairment of cost method investment
—
—
1,406
—
Changes in TRA related liability(4)
—
40
6
(590
)
Changes in Tax Indemnification
Receivable(5)
(14
)
(15
)
(28
)
(29
)
Settlement of federal and state income tax
refunds(6)
—
4
3
92
Legal expenses(7)
1,106
—
1,439
—
Reduction in force costs (8)
1,233
—
$
1,233
$
—
Adjusted EBITDA
$
3,592
$
4,498
$
10,856
$
11,640
(1)
Transaction expenses consist of $0.3
million and $0.5 million of legal, and accounting fees incurred by
us for the three and six months ended June 30, 2023, respectively,
in connection with the amendment to the 2021 Credit Facilities, the
tender offer filed by the Company's largest shareholder in May
2023, and a resale registration statement filed with the SEC. For
the three and six months ended June 30, 2022, transaction expenses
consist of $0.2 million and $0.5 million of expenses, respectively,
incurred by us in connection with our acquisition of CHT.
(2)
SOX implementation costs consist of $0.1
million of expenses for the six months ended June 30, 2022 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
fiscal 2021.
(3)
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.
(4)
Changes in TRA related liability consist
of immaterial expenses for the six months ended June 30, 2023, and
immaterial expenses and $0.6 million of income for the three and
six months ended June 30, 2022, 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.
(5)
Changes in Tax Indemnification Receivable
consists of immaterial income for the three and six months ended
June 30, 2023 and 2022, 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 expense.
(6)
Settlement of federal and state tax
refunds consist of immaterial expenses incurred by us for the six
months ended June 30, 2023, and immaterial expenses and $0.1
million of expense incurred by us for the three and six months
ended June 30, 2022, respectively, related to a payment to White
Mountains for state tax refunds for the period prior to the
Reorganization Transactions related to 2020 tax returns. The
settlement also resulted in a benefit of the same amount which has
been recorded within income tax expense.
(7)
Legal expenses of $1.1 million and $1.4
million for the three and six months ended June 30, 2023,
respectively, consist of legal fees incurred in connection with a
civil investigative demand received from the Federal Trade
Commission (FTC) in February 2023.
(8)
Reduction in force costs for the three and
six months ended June 30, 2023 consist of $1.2 million of severance
benefits provided to the terminated employees in connection with
the plan to reduce our workforce implemented in May 2023.
Additionally, equity-based compensation expense includes $0.3
million of charges related to the plan for the three and six months
ended June 30, 2023.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230802832026/en/
Investors Denise Garcia Hayflower Partners
Denise@HayflowerPartners.com
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