Health Insurance Innovations, Inc. (Nasdaq:HIIQ) ("HII" or
"Company"), a leading developer and administrator of affordable,
cloud-based individual health insurance plans and ancillary
products, today reported financial and operating results for the
second quarter and six months ended June 30, 2013. The Company will
host a conference call and webcast at 10:00 a.m. EDT, Wednesday,
August 14.
Company highlights for the second quarter of 2013
include the following:
- Record quarterly revenue of $13.6 million, representing 37.4%
growth from the second quarter of 2012
- Record quarterly premium equivalents of $24.2 million,
representing 34.4% growth from the second quarter of 2012
- Adjusted EBITDA of $1.7 million (see the Reconciliation of Net
Loss to Adjusted EBITDA contained within this release), compared to
$1.2 million of Adjusted EBITDA in the same period in 2012
- Record policies in force as of June 30, 2013, totaled 63,918, a
31.8% increase from 48,483 at June 30, 2012
- Ancillary revenues rose to a record 19.7% of total revenues,
reflecting the success of our policy bundling strategy
- Selection as the recipient of Companion Life Insurance
Company's Specialty Markets Health Partner of the Year Award for
2012, an award recognizing the outstanding achievements of partners
who market innovative products underwritten by Companion
Recent Company highlights post second quarter of 2013
include the following:
- Acquisition of significant distributor – HII acquired the
Secured Health and Life companies ("Secured"), a group that
includes a call center and manager of down-line call centers, which
is a significant distributor of HII insurance products. Secured is
also a leading provider and manager of insurance sales leads that
uses its proprietary techniques to lower lead cost per policy sale,
and a call center-focused sales automation software developer
- Hiring of the principals of Secured in connection with the
acquisition
- Launch of a new short-term medical product in cooperation with
carrier HCC Life Insurance Company (NYSE:HCC), a leading provider
of medical stop loss, group-term and short-term medical insurance
to expand our short-term medical portfolio
"We are pleased with our results for the second quarter of 2013,
which are in line with the expectations range we discussed in May
2013, " said Michael Kosloske, Chairman, President and Chief
Executive Officer of HII. "In the last three months, we have
enhanced our core operations with the introduction of innovative
insurance solutions like our short-term medical product launched in
cooperation with carrier HCC Life Insurance Company and have
continued to grow higher-margin ancillary policy revenues through
ancillary product enhancements and bundling of core medical and
ancillary products. We have remained focused on executing against
our operating plan while adding significant new capabilities
through the recent acquisition of Secured. In addition, our
experienced team continues to identify and leverage strategic
partnerships and opportunities. Together, these initiatives have
produced operational traction in 2013 and we believe have
positioned us well for 2014, when the Affordable Care Act takes
effect, and beyond."
Q2 2013 Operational Highlights
Policies in force have expanded by 31.8% in the second quarter
of 2013 to 63,918 compared to 48,483 in the second quarter of 2012.
The growth in policy count was driven both by continuous
improvement of our products, based upon industry expertise and an
acute understanding of customer needs, and by the growth of HII's
distribution network. During the second quarter, HII added 25 call
centers and 133 licensed insurance brokers to its distribution
network.
Acquisition of Significant Distributor
The Company announced the acquisition of Secured on July 18,
2013. This transaction added significant additional captive
distribution of short-term medical and ancillary insurance policies
as well as proprietary sales leads management and sales automation
software development capabilities.
The Company paid $10.0 million cash for Secured and agreed to
pay contingent consideration of approximately $6.5 million based
upon the expected growth of Secured's business. This "earn-out"
consideration will be paid partially by issuance of up to $3.75
million in stock (with the number of shares issued determined in
2014 through 2016 when such consideration is earned) and partially
in cash determined under an adjustable promissory note with the
three selling shareholders, Messrs. Safina, Knaster and Saavedra
(the "Sellers"), that has an initial principal amount of $2.75
million.
Secured was acquired from its three founders, and, in
conjunction with the stock purchase, the Company entered into
employment agreements and non-competition agreements with each of
them. The Sellers bring HII very significant industry and technical
expertise from their backgrounds in corporate and business
development, insurance call center and sales lead management, and
innovative call center, sales and customer relationship management
software program development.
This transaction is expected to produce a number of compelling
benefits:
- Vertical integration with our largest distributor leading to
incremental profits which are expected to be immediately accretive
and grow significantly from the approximately $3 million of
earnings before tax attained by Secured on an estimated proforma
basis in 2012 (excluding purchase price amortization)
- Reduced enterprise risk from enhanced control over the
Company's sales function
- Addition of sales lead management expertise that is designed to
lower the cost of each insurance policy sale
- Upside opportunities through technological and cost saving
synergies
"We plan to extend the capabilities that Secured brings to HII,
and in particular, its innovative call center management technology
and the ability to manage the purchase and use of sales leads
across our sales platform," added Mr. Kosloske. "In doing so, we
expect to not only make our captive distribution more productive,
but also to enhance relationships with independent licensed call
centers and agents that sell our products."
Mr. Kosloske concluded, "The addition of these capabilities
completes our vertical business model, which starts with
best-in-class carriers, designs innovative and cost-effective
insurance programs that are delivered by an efficient cloud-based
sales platform, and now will employ leads management techniques
designed to lower the cost of each policy sold within our
distribution channels. In summary, we believe these
capabilities position us to maximize opportunities in 2013, 2014
and beyond."
Q2 2013 Financial Highlights
Revenue increased 37.4% to $13.6 million during the second
quarter ended June 30, 2013, compared to $9.9 million in the same
period in 2012 and increased 41.1% to $26.1 million for the six
month period compared to $18.5 million in the same period in
2012. Premium equivalents increased 34.4% to $24.2 million in
the second quarter of 2013, compared to $18.0 million in the same
period in 2012. For the six month period, premium equivalents
increased 37.0% to $46.3 million, compared to $33.8 million in the
same period in 2012. A reconciliation of premium equivalents
to revenues for the three and six months ended June 30, 2013, and
2012 is included in the financial supplement included in this press
release. By policy type, the make-up of revenues was as
follows: 57.5% short-term medical, 22.8% hospital indemnity,
and 19.7% ancillary products for the three month period; and 57.4%
short-term medical, 23.6% hospital indemnity, and 19.0% ancillary
products for the six month period ended June 30, 2013.
During the second quarter of 2013, the Company reported a
pre-tax loss of $0.7 million in comparison to pre-tax income of
$0.9 million in the second quarter of 2012. The primary driver
of this quarter's loss was share-based compensation expense of $1.9
million. During the first six months of
2013, the Company reported a pre-tax loss of $7.0 million in
comparison to pre-tax income of $1.7 million for the same period in
2012. The primary drivers of this loss were the
$5.5 million expense recorded in the first quarter related to
termination of certain contract rights with TSG Agency, LLC and
$2.7 million of stock-based compensation recorded during the six
month period.
EBITDA (earnings before interest, taxes, depreciation and
amortization) was a loss of $0.5 million for the three months ended
June 30, 2013, compared to $1.2 million of EBITDA in the same
period in 2012. A reconciliation of net (loss) income to
EBITDA for the three and six months ended June 30, 2013, and 2012
is included within this press release.
Adjusted EBITDA is calculated starting with EBITDA, which is
then further adjusted for items that are not part of regular
operating activities, including acquisition costs, contract
termination costs, and other non-cash items such as stock-based
compensation. Adjusted EBITDA was $1.7 million for the
three months ended June 30, 2013, compared to $1.2 million of
Adjusted EBITDA in the same period in 2012. A reconciliation
of net (loss) income to Adjusted EBITDA for the three and six
months ended June 30, 2013, and 2012 is included within this press
release.
Cash used in operations during the six months ended June 30,
2013 was $6.2 million, compared to cash provided by operations of
$2.8 million in the six months ended June 30, 2012. The net cash
outflow in the six months ended 2013 was primarily due to the $5.5
million paid to terminate certain contract rights with TSG Agency,
LLC during the first quarter and the continued expansion of our
advanced commission program.
Conference Call and Webcast
The Company will host a conference call and webcast to discuss
its results at 10:00 a.m. EDT, Wednesday, August 14. The conference
call may be accessed by dialing (877) 312-8797 for domestic callers
and (678) 825-8236 for international callers. The conference
passcode is 30539375. The conference call will also be
webcast live under the investor relations section of HII's website
at www.hiiquote.com. The webcast will be archived there for 30 days
following the call. Please visit HII's website 15 minutes prior to
the start of the broadcast to ensure adequate time for any software
download that may be necessary.
About Health Insurance Innovations, Inc.
Health Insurance Innovations, Inc. creates customizable and
affordable, high-quality health insurance products and supplemental
services through partnerships with best-in-class carriers.
The Company utilizes its pioneering, next-generation
cloud-based technology platform to provide insurance agents with
real-time health insurance solutions, allowing them to tailor plans
to fit consumers' budgets and needs.
Additional information about HII can be found at
www.hiiquote.com. The reference to our website is
not intended to incorporate our website into this press
release.
Forward-Looking Statements
This press release contains "forward-looking statements" within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995. Forward-looking statements are statements other than
historical fact, and may include statements relating to goals,
plans and projections regarding new markets, products, services,
growth strategies, anticipated trends in our business and
anticipated changes and developments in the United States health
insurance system and laws. Forward-looking statements are based on
management's current expectations and beliefs and involve
significant risks and uncertainties that could cause actual
results, developments and business decisions to differ materially
from those contemplated by these statements. These risks and
uncertainties include, among other things, our ability to maintain
relationships and develop new relationships with health insurance
carriers and distributors, our ability to retain our members, the
demand for our products, the amount of commissions paid to us or
changes in health insurance plan pricing practices, competition,
changes and developments in the United States health insurance
system and laws, the ability to maintain and enhance our name
recognition and our ability to build the necessary infrastructure
and processes to maintain effective controls over financial
reporting. These and other risk factors that could cause actual
results to differ materially from those expressed or implied in our
forward-looking statements are discussed in HII's most recent
Annual Report on Form 10-K filed with the Securities and Exchange
Commission as well as other documents that may be filed by HII from
time to time with the Securities and Exchange Commission.
Any forward-looking statement made by us in this press release
is based only on information currently available to us and speaks
only as of the date on which it is made. You should not rely on the
statement as representing our views in the future. We undertake no
obligation to publicly update any forward-looking statement,
whether written or oral, that may be made from time to time,
whether as a result of new information, future developments or
otherwise.
|
|
|
HEALTH INSURANCE
INNOVATIONS, INC. |
(Prior to February 13,
2013 Health Plan Intermediaries, LLC and
Subsidiaries) |
Consolidated Balance
Sheets (unaudited) |
($ in 000's, except
share amounts) |
|
|
|
|
June 30, 2013 |
|
|
(1) |
December 31, 2012 |
Assets |
|
|
Current assets: |
|
|
Cash and cash
equivalents |
$27,979 |
$750 |
Cash held on behalf of
others |
4,213 |
3,839 |
Credit card transactions
receivable |
1,073 |
588 |
Short-term
investments |
20,491 |
— |
Accounts receivable |
196 |
273 |
Advanced commissions |
2,479 |
297 |
Prepaid expenses and other
current assets |
615 |
217 |
Total current assets |
57,046 |
5,964 |
|
|
|
Property and equipment, net of accumulated
depreciation |
268 |
213 |
Capitalized offering costs |
— |
1,819 |
Goodwill |
5,906 |
5,906 |
Intangible assets, net of accumulated
amortization |
3,508 |
3,959 |
Other assets |
28 |
100 |
Total assets |
$66,756 |
$17,961 |
|
|
|
Liabilities and
stockholders'/member's equity |
|
|
Current liabilities: |
|
|
Accounts payable and accrued
expenses |
$1,213 |
$2,062 |
Carriers and vendors
payable |
3,380 |
2,790 |
Commissions payable |
1,695 |
1,533 |
Current portion of long-term
debt |
— |
813 |
Current portion of noncompete
obligation |
129 |
155 |
Income taxes payable |
1,295 |
— |
Due to member of Health Plan
Intermediaries, LLC |
— |
773 |
Other current
liabilities |
460 |
345 |
Total current liabilities |
8,172 |
8,471 |
|
|
|
Long-term debt, less current
portion |
— |
2,481 |
Noncompete obligation |
588 |
626 |
Due to related parties pursuant to tax
receivable agreement |
359 |
— |
Other liabilities |
57 |
45 |
Total liabilities |
9,176 |
11,623 |
|
|
|
Commitments and contingencies |
|
|
|
|
|
Stockholders'/member's equity: |
|
|
Class A common stock (par value $0.001
per share, 100,000,000 shares authorized; 5,309,594 shares issued
and outstanding) |
5 |
— |
Class B common stock (par value $0.001 per
share, 20,000,000 shares authorized; 8,566,667 shares issued and
outstanding) |
9 |
— |
Preferred stock (par value $0.001 per share,
5,000,000 shares authorized; 0 shares issued and
outstanding) |
— |
— |
Additional paid-in capital |
25,262 |
— |
Accumulated other comprehensive
income |
(15) |
— |
Accumulated deficit |
(4,092) |
— |
Member's equity of Health Plan
Intermediaries, LLC |
— |
6,335 |
Noncontrolling interests |
36,411 |
3 |
Total stockholders'/member's
equity |
57,580 |
6,338 |
Total liabilities and stockholders'/member's
equity |
$66,756 |
$17,961 |
|
|
|
(1) The balance sheet data as of June 30,
2013, includes the effects of restating our first quarter balance
sheet, as reflected in our Form 10-Q/A filed with the Securities
and Exchange Commission on August 13, 2013. |
|
|
|
|
|
HEALTH INSURANCE
INNOVATIONS, INC. |
(Prior to February 13,
2013 Health Plan Intermediaries, LLC and
Subsidiaries) |
CONSOLIDATED STATEMENTS
OF OPERATIONS (unaudited) |
($ in 000's, except per
share data) |
|
|
|
|
|
|
Three months ended |
Six months ended |
|
June
30, |
June
30, |
|
2013 |
2012 |
2013
(1) |
2012 |
Revenues (premium equivalents of $24,194 and
$18,024 for the three months ended June 30, 2013 and 2012,
respectively and $46,279 and $33,757 for the six months ended
June 30, 2013 and 2012, respectively) |
$13,598 |
$9,935 |
$26,069 |
$18,458 |
Third-party commissions |
8,473 |
6,710 |
16,510 |
12,450 |
Credit cards and ACH fees |
283 |
213 |
548 |
423 |
Contract termination expense |
— |
— |
5,500 |
— |
General and administrative
expenses |
5,354 |
1,811 |
9,662 |
3,234 |
Depreciation and amortization |
246 |
271 |
490 |
542 |
Total operating costs and
expenses |
14,356 |
9,005 |
32,710 |
16,649 |
(Loss) income
from operations |
(758) |
930 |
(6,641) |
1,809 |
Other expense (income): |
|
|
|
|
Interest (income)
expense |
(17) |
62 |
21 |
127 |
Other (income)
expense |
(44) |
(4) |
384 |
(10) |
Net (loss) income before income
taxes |
(697) |
872 |
(7,046) |
1,692 |
Provision for income
taxes |
128 |
— |
1,295 |
— |
Net (loss) income |
(825) |
872 |
(8,341) |
1,692 |
Net loss attributable to
noncontrolling interests |
(421) |
(20) |
(4,249) |
(20) |
Net (loss) income attributable to Health
Insurance Innovations, Inc. and Health Plan Intermediaries,
LLC |
(404) |
892 |
(4,092) |
1,712 |
|
|
|
|
|
Per Share data |
|
|
|
|
Net loss per share attributable to
Health Insurance Innovations, Inc. |
|
|
|
|
Basic |
$(0.08) |
|
$(.86) |
|
Diluted |
$(0.08) |
|
$(.86) |
|
Weighted average shares
outstanding |
|
|
|
|
Basic |
4,766,667 |
|
4,750,000 |
|
Diluted |
4,766,667 |
|
4,750,000 |
|
|
|
|
|
|
(1) Financial data for the six months ended
June 30, 2013, includes our second quarter results of operations
together with our restated first quarter results of operations, as
reflected in our Form 10-Q/A filed with the Securities and Exchange
Commission on August 13, 2013. |
|
|
|
|
|
Reconciliation of Net
(Loss) Income to EBITDA |
For the Three and Six
Months Ended June 30, 2013 and 2012 |
(in
thousands) |
Unaudited |
|
|
|
|
|
|
Three months ended |
Six months ended |
|
June
30, |
June
30, |
|
2013 |
2012 |
2013
(3) |
2012 |
|
|
|
|
|
Net (loss) income |
$ (825) |
$872 |
$ (8,341) |
$1,692 |
Interest (income) expense |
(17) |
62 |
21 |
127 |
Provision for income taxes |
128 |
— |
1,295 |
— |
Depreciation and amortization |
246 |
271 |
490 |
542 |
EBITDA (1) |
(468) |
1,205 |
(6,535) |
2,361 |
Non-cash stock based compensation |
1,927 |
— |
2,701 |
— |
Contract termination expense |
— |
— |
5,500 |
— |
Acquisition costs |
194 |
— |
194 |
— |
Adjusted EBITDA (2) |
$1,653 |
$1,205 |
$1,860 |
$2,361 |
|
|
|
|
|
(1) "EBITDA" is defined as net income before
interest expense, income tax expense and depreciation and
amortization. EBITDA does not represent, and should not be
considered as, an alternative to net income or cash flows from
operations, each as determined in accordance with U.S. generally
accepted accounting principles, or U.S. GAAP. We have presented
EBITDA because we consider it an important supplemental measure of
our performance and believe that it is frequently used by analysts,
investors and other interested parties in the evaluation of
companies. Other companies may calculate EBITDA differently than we
do. EBITDA has limitations as an analytical tool, and you should
not consider it in isolation or as a substitute for analysis of our
results as reported under U.S. GAAP. |
(2) To calculate Adjusted EBITDA, we
calculate EBITDA, which is then further adjusted for items that are
not part of regular operating activities, including acquisition
costs, contract termination costs, and other non-cash items such as
stock-based compensation. Adjusted EBITDA does not represent,
and should not be considered as, an alternative to net income or
cash flows from operations, each as determined in accordance with
U.S. generally accepted accounting principles, or U.S. GAAP. We
have presented Adjusted EBITDA because we consider it an important
supplemental measure of our performance and believe that it is
frequently used by analysts, investors and other interested parties
in the evaluation of companies. Other companies may calculate
Adjusted EBITDA differently than we do. Adjusted EBITDA has
limitations as an analytical tool, and you should not consider it
in isolation or as a substitute for analysis of our results as
reported under U.S. GAAP. |
(3) Financial data for the six months ended
June 30, 2013, includes our second quarter results of operations
together with our restated first quarter results of operations, as
reflected in our Form 10-Q/A filed with the Securities and Exchange
Commission on August 13, 2013. |
|
|
|
|
|
Reconciliation of
Premium Equivalents to Revenues |
For the Three and Six
Months Ended June 30, 2013 and 2012 |
(in
thousands) |
Unaudited |
|
|
|
|
|
|
Three months ended |
Six months ended |
|
June
30, |
June
30, |
|
2013 |
2012 |
2013 |
2012 |
|
|
|
|
|
Premium equivalents (1) |
$24,194 |
$18,024 |
$46,279 |
$33,757 |
Less risk premium |
(10,010) |
(7,722) |
(19,111) |
(14,611) |
Less amounts earned by third party
obligors |
(586) |
(367) |
(1,099) |
(688) |
|
|
|
|
|
Revenues |
$13,598 |
$9,935 |
$26,069 |
$18,458 |
|
|
|
|
|
(1) "Premium equivalents" is defined as the
combination of premiums, fees for discount benefit plans, fees for
distributors and our enrollment fees. Premium equivalents does not
represent, and should not be considered as, an alternative to
revenues, as determined in accordance with U.S. GAAP. We have
included premium equivalents in this press release because it is a
key measure used by our management to understand and evaluate our
core operating performance and trends, to prepare and approve our
annual budget and to develop short-term and long-term operational
plans. In particular, the inclusion of premium equivalents can
provide a useful measure for period-to-period comparisons of our
business. Premium equivalents has limitations as an analytical
tool, and you should not consider it in isolation or as a
substitute for analysis of our results as reported under U.S.
GAAP. |
CONTACT: Health Insurance Innovations, Inc.:
Michael Hershberger
Chief Financial Officer
(877) 376 5831 ext.313
mhershberger@hiiquote.com
Investor Contact:
Susan Noonan
S.A. Noonan Communications, LLC
(212) 966 3650
susan@sanoonan.com
Media Contact:
Andreas Marathovouniotis
Russo Partners, LLC
(212) 845-4235
andreas.marathis@russopartnersllc.com
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