- Revenue of $143 million, down 18% year over year
- Transaction Value of $239 million, down 9% year over
year
- Transaction Value from Property & Casualty down 19% year
over year to $148 million
- Transaction Value from Health up 20% year over year to $60
million
MediaAlpha, Inc. (NYSE: MAX), today announced its financial
results for the first quarter ended March 31, 2022.
“In the first quarter, our Property & Casualty (P&C)
vertical continued to be affected by the cyclical decline in auto
insurance advertising spend, offsetting strong results in our
Health insurance vertical, which grew Transaction Value 20% year
over year,” said MediaAlpha co-founder and CEO Steve Yi. “Within
P&C, Transaction Value declined year over year, in line with
our expectations, as many carriers continued to work through
pricing and underwriting actions, and we have continued to see
additional pullbacks in marketing spend from a number of carriers
in early Q2 due to prolonged underwriting profitability issues.
While the exact timing of market recovery remains difficult to
predict, having seen these market cycles before, we know it is only
a matter of time until the P&C insurance market resumes its
focus on growth.”
First Quarter 2022 Financial Results
- Revenue of $142.6 million, a decrease of 18% year over
year;
- Transaction Value of $239.0 million, a decrease of 9% year over
year;
- Gross margin of 15.2%, equal to the first quarter of 2021;
- Contribution Margin(1) of 16.5%, compared with 16.1% in the
first quarter of 2021;
- Net loss was $9.8 million, compared with net income of $0.2
million in the first quarter of 2021; and
- Adjusted EBITDA(1) was $7.1 million, compared with $16.4
million in the first 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 second quarter of 2022 reflects a
continuing year-over-year reduction in customer acquisition
spending by our P&C insurance carrier partners. In our Health
insurance vertical, we expect year-over-year growth despite
unusually high volumes experienced due to the extended Open
Enrollment Period in 2021.
For the second quarter of 2022, MediaAlpha currently expects the
following:
- Transaction Value between $180 million - $195 million,
representing a 27% year-over-year decline at the midpoint of the
guidance range;
- Revenue between $110 million - $120 million, representing a 27%
year-over-year decline at the midpoint of the guidance range;
- Adjusted EBITDA between $2.5 million - $5.0 million,
representing a 75% year-over-year decline at the midpoint of the
guidance range. We expect Adjusted EBITDA to decline year over year
in Q2 2022 at a greater rate than Transaction Value, Revenue, and
Contribution due to the increases in our public company costs and
headcount over the last year. We are projecting a sequential
decline in our combined operating expenses less equity-based
compensation of approximately $1 million - $2 million compared with
Q1 2022, due primarily to reductions in professional fees.
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 first quarter 2022 results and its financial outlook
for the second 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 a resumption of growth in the P&C
insurance market and our financial outlook for the second 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, Contribution, and
Contribution Margin, which are non-GAAP financial measures. The
Company also presents Transaction Value, which is an operating
metric not presented in accordance with GAAP. See the appendix for
definitions of Adjusted EBITDA, Contribution, Contribution Margin
and Transaction Value, as well as reconciliations to the
corresponding GAAP financial metrics, as applicable.
We present Transaction Value, Adjusted EBITDA, Contribution, and
Contribution Margin because they are used extensively by our
management and board of directors to manage our operating
performance, including evaluating our operational performance
against budget and assessing our overall operating efficiency and
operating leverage. Accordingly, we believe that Transaction Value,
Adjusted EBITDA, Contribution, 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, Contribution, and Contribution Margin has
limitations as a financial measure and investors should not
consider it in isolation or as a substitute for analysis of our
results as reported under GAAP.
MediaAlpha, Inc. and
subsidiaries
Consolidated Balance
Sheets
(Unaudited; in thousands, except
share data and per share amounts)
March 31, 2022
December 31,
2021
Assets
Current assets
Cash and cash equivalents
$
55,288
$
50,564
Accounts receivable, net of allowance for
credit losses of $464 and $609, respectively
61,163
76,094
Prepaid expenses and other current
assets
7,820
10,448
Total current assets
124,271
137,106
Intangible assets, net
11,884
12,567
Goodwill
18,402
18,402
Deferred tax asset
101,859
102,656
Other assets
18,805
19,073
Total assets
$
275,221
$
289,804
Liabilities and stockholders' equity
(deficit)
Current liabilities
Accounts payable
$
51,509
$
61,770
Accrued expenses
10,012
13,716
Current portion of long-term debt
8,740
8,730
Total current liabilities
70,261
84,216
Long-term debt, net of current portion
175,878
178,069
Liabilities under tax receivables
agreement, net of current portion
81,850
85,027
Other long-term liabilities
4,881
4,058
Total liabilities
$
332,870
$
351,370
Commitments and contingencies (Note 6)
Stockholders' equity (deficit):
Class A common stock, $0.01 par value -
1.0 billion shares authorized; 41.6 million and 41.0 million shares
issued and outstanding as of March 31, 2022 and December 31, 2021,
respectively
416
410
Class B common stock, $0.01 par value -
100 million shares authorized; 19.6 million and 19.6 million shares
issued and outstanding as of March 31, 2022 and December 31, 2021,
respectively
196
196
Preferred stock, $0.01 par value - 50
million shares authorized; 0 shares issued and outstanding as of
March 31, 2022 and December 31, 2021
—
—
Additional paid-in capital
433,157
419,533
Accumulated deficit
(431,552
)
(424,476
)
Total stockholders' equity (deficit)
attributable to MediaAlpha, Inc.
$
2,217
$
(4,337
)
Non-controlling interests
(59,866
)
(57,229
)
Total stockholders' (deficit)
$
(57,649
)
$
(61,566
)
Total liabilities and stockholders'
deficit
$
275,221
$
289,804
MediaAlpha, Inc. and
subsidiaries
Consolidated Statements of
Operations
(Unaudited; in thousands, except
share data and per share amounts)
Three months ended
March 31,
2022
2021
Revenue
$
142,599
$
173,588
Costs and operating expenses
Cost of revenue
120,881
147,180
Sales and marketing
7,223
5,391
Product development
5,216
3,320
General and administrative
17,148
15,749
Total costs and operating expenses
150,468
171,640
(Loss) income from operations
(7,869
)
1,948
Other (income), net
(523
)
(150
)
Interest expense
1,359
2,301
Total other expense, net
836
2,151
(Loss) before income taxes
(8,705
)
(203
)
Income tax expense (benefit)
1,143
(364
)
Net (loss) income
$
(9,848
)
$
161
Net (loss) attributable to non-controlling
interest
(2,772
)
(124
)
Net (loss) income attributable to
MediaAlpha, Inc.
$
(7,076
)
$
285
Net (loss) income per share of Class A
common stock
-Basic
$
(0.17
)
$
0.01
-Diluted
$
(0.17
)
$
0.00
Weighted average shares of Class A common
stock outstanding
-Basic
40,847,941
33,136,632
-Diluted
40,847,941
62,163,390
MediaAlpha, Inc. and
subsidiaries
Consolidated Statements of
Cash Flows
(Unaudited; in thousands)
Three Months Ended
March 31,
2022
2021
Cash flows from operating
activities
Net (loss) income
$
(9,848
)
$
161
Adjustments to reconcile net (loss) income
to net cash provided by (used in) operating activities:
Non-cash equity-based compensation
expense
13,773
10,602
Non-cash lease expense
177
116
Depreciation expense on property and
equipment
98
82
Amortization of intangible assets
683
746
Amortization of deferred debt issuance
costs
209
345
Credit losses
(88
)
157
Deferred taxes
1,110
(358
)
Tax receivable agreement liability
adjustments
(630
)
(156
)
Changes in operating assets and
liabilities:
Accounts receivable
15,019
15,870
Prepaid expenses and other current
assets
2,613
690
Other assets
47
125
Accounts payable
(10,261
)
(33,675
)
Accrued expenses
(4,813
)
(4,061
)
Net cash provided by (used in) operating
activities
$
8,089
$
(9,356
)
Cash flows from investing
activities
Purchases of property and equipment
(40
)
(69
)
Net cash (used in) investing
activities
$
(40
)
$
(69
)
Cash flows from financing
activities
Payments made for:
Repayments on long-term debt
(2,375
)
—
Distributions
(130
)
—
Shares withheld for taxes on vesting of
restricted stock units
(820
)
(1,276
)
Net cash (used in) financing
activities
$
(3,325
)
$
(1,276
)
Net increase (decrease) in cash and cash
equivalents
4,724
(10,701
)
Cash and cash equivalents, beginning of
period
50,564
23,554
Cash and cash equivalents, end of
period
$
55,288
$
12,853
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 months ended March 31, 2022 and 2021:
Three months ended
March 31,
(dollars in thousands)
2022
2021
Open Marketplace transactions
$
138,096
$
169,348
Percentage of total Transaction Value
57.8
%
64.5
%
Private Marketplace transactions
100,916
93,114
Percentage of total Transaction Value
42.2
%
35.5
%
Total Transaction Value
$
239,012
$
262,462
The following table presents Transaction Value by vertical for
the three months ended March 31, 2022 and 2021:
Three months ended
March 31,
(dollars in thousands)
2022
2021
Property & Casualty insurance
$
148,083
$
183,426
Percentage of total Transaction Value
62.0
%
69.9
%
Health insurance
60,255
50,342
Percentage of total Transaction Value
25.2
%
19.2
%
Life insurance
12,392
14,442
Percentage of total Transaction Value
5.2
%
5.5
%
Other (1)
18,282
14,252
Percentage of total Transaction Value
7.6
%
5.4
%
Total Transaction Value
$
239,012
$
262,462
(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 months ended March
31, 2022 and 2021:
Three months ended
March 31,
(in thousands)
2022
2021
Revenue
$
142,599
$
173,588
Less cost of revenue
(120,881
)
(147,180
)
Gross profit
21,718
26,408
Adjusted to exclude the following (as
related to cost of revenue):
Equity-based compensation
398
400
Salaries, wages, and related
656
464
Internet and hosting
104
102
Other expenses
127
107
Depreciation
6
7
Other services
530
291
Merchant-related fees
15
90
Contribution
23,554
27,869
Gross margin
15.2
%
15.2
%
Contribution Margin
16.5
%
16.1
%
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 months ended March
31, 2022 and 2021.
Three months ended
March 31,
(in thousands)
2022
2021
Net (loss) income
$
(9,848
)
$
161
Equity-based compensation expense
13,773
10,602
Interest expense
1,359
2,301
Income tax expense (benefit)
1,143
(364
)
Depreciation expense on property and
equipment
98
82
Amortization of intangible assets
683
746
Transaction expenses(1)
380
2,665
Employee-related costs(2)
—
250
SOX implementation costs(3)
110
152
Changes in TRA related liability(4)
(630
)
(156
)
Settlement of federal and state income tax
refunds(5)
74
—
Adjusted EBITDA
$
7,142
$
16,439
(1)
Transaction expenses consist of $0.4
million of expenses incurred by us for the three months ended March
31, 2022 in connection with the acquisition of CHT. For the three
months ended March 31, 2021 transaction expenses consist of $2.7
million for legal, accounting, and other consulting fees in
connection with the Secondary Offering.
(2)
Employee-related costs include $0.3
million of expenses incurred by us for the three months ended March
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.
(3)
SOX implementation costs consist of $0.1
million and $0.2 million of expenses incurred by us for the three
months ended March 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) for 2021.
(4)
Changes in TRA related liability consist
of $0.6 million and $0.2 million of income for the three months
ended March 31, 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.
(5)
Settlement of federal and state tax
refunds consist of $0.1 million of expense incurred by us for the
three months ended March 31, 2022 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/20220505005727/en/
Investors Denise Garcia Hayflower Partners
Denise@HayflowerPartners.com
Press DiGennaro Communications
MediaAlpha-Digennaro@digennaro-usa.com
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