Health Insurance Innovations, Inc. (Nasdaq:HIIQ) ("HII" or
"Company"), a leading developer, administrator and private exchange
for affordable, cloud-based individual health insurance plans and
ancillary products, today reported financial and operating results
for the third quarter and nine months ended September 30, 2013. The
Company will host a conference call and webcast at 10:00 a.m. EST,
Tuesday, November 12.
Company highlights for the third quarter of 2013 include
the following:
* Record quarterly revenue of $14.7 million, representing 26.7%
growth from the third quarter of 2012
* Record quarterly premium equivalents of $26.0 million,
representing 24.9% growth from the third quarter of 2012
* Adjusted EBITDA of $1.8 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
* Net income of $0.5 million for the quarter, compared to net
income of $0.9 million for the third quarter of 2012
* Record policies in force as of September 30, 2013, totaled
67,597, a 26.8% increase from 53,297 at September 30, 2012
* Non-GAAP Gross Margin as a percentage of Premium Equivalents
of 25.1% for the quarter, compared to 17.9% for the third quarter
of 2012
* New product offerings including the Principle Advantage
Limited Medical plan; Foundation Vision, a comprehensive insured
vision program; a discount dental program designed in conjunction
with Cigna Dental; and the HealtheMed short term medical plan,
which is available in 45 states
* Acquisition of a significant distributor -- HII acquired
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 includes a call center-focused sales automation software
developer
Recent Company highlights post third quarter of 2013
include the following:
* Recruitment of senior management talent – HII enhanced its
industry and corporate capabilities recently by hiring or promoting
the following senior officers:
- Mia Erichson, who will focus on branding and internet marketing
as Chief Marketing Officer;
- Michael Petrizzo, an attorney with significant experience in
health insurance business development, as Executive Vice President
and General Counsel;
- James Dietz, an experienced public company CFO, that has
successfully directed all aspects of financial management
(including investor relations and capital market transactions) in
large, high-growth companies, as Executive Vice President and Chief
Financial Officer; and
- A top insurance industry sales executive to head HII's new
brokerage-focused sales initiatives.
Q3 2013 Operational Highlights
Policies in force have expanded by 26.8% in the third quarter of
2013 to 67,597 compared to 53,297 in the third quarter of 2012. The
growth in policy count was driven both by continuous improvement
and expansion of HII products, based upon an acute understanding of
customer needs, and by the growth of the Company's distribution
network. During the third quarter of 2013, HII added four call
centers and 680 licensed insurance brokers to its distribution
network. HII now has 83 call centers and 9,778 licensed insurance
brokers in its distribution network.
"We plan to expand the capabilities that Secured brings to HII,
especially its innovative call center management technology and the
ability to analyze and manage the purchase and use of sales leads
across our sales platform," said Michael Kosloske, Chairman,
President and Chief Executive Officer of HII. "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."
The four product launches accomplished this quarter are designed
to fill specific customer needs and were designed in collaboration
with best-in-class insurance carriers. The Company is keenly aware
of the range of health insurance and ancillary product needs among
its customers and, as was shown in the third quarter, pivots
quickly to provide new and innovative alternatives to its enrollees
as Obamacare takes effect. In addition, we provide real-time
guidance by thousands of experienced and licensed health insurance
agents to help consumers choose the best health plans and benefits,
whether through a public exchange (i.e., "Obamacare" plans) or the
private exchange plans that HII offers.
At the beginning of the fourth quarter of 2013, HII welcomed Mia
Erichson, a marketing executive with deep experience in company and
product branding, Internet marketing and related areas to the
Company as its Chief Marketing Officer. Together with Ms. Erichson
and a newly hired top insurance broker sales manager, the Company
is planning a number of initiatives designed to increase customer
awareness of the HII insurance brand and to make the sale of
Company products more efficient.
Mr. Kosloske continued, "we believe as Obamacare rolls out,
HII's products, senior management, and industry-leading technology
will position us for a significant increase in sales trajectory as
2014 matures. The addition of these capabilities, products and team
members will play a vital role in the ongoing expansion of HII. The
Company now boasts a fully integrated business model and
cloud-based delivery platform and private exchange combined with
leading product and functional expertise, all focused on exceeding
the expectations of our distributors and customers."
Q3 2013 Financial Highlights
Revenue increased 26.7% to $14.7 million during the third
quarter of 2013, compared to $11.6 million in the same period in
2012, and increased 35.6% to $40.8 million for the nine months
ended September 30, 2013, compared to $30.1 million in the same
period in 2012. Premium equivalents increased 24.9% to $26.0
million in the third quarter of 2013, compared to $20.8 million in
the same period in 2012. For the first nine months of 2013, premium
equivalents increased 32.5% to $72.3 million, compared to $54.5
million in the same period in 2012. A reconciliation of premium
equivalents to revenues for the three and nine months ended
September 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: 61.4% short-term medical, 20.4%
hospital indemnity, and 18.2% ancillary products for the three
month period; and 58.8% short-term medical, 22.5% hospital
indemnity, and 18.7% ancillary products for the nine month period
ended September 30, 2013.
During the third quarter of 2013, the Company incurred a loss of
$309,000 on a pre-tax basis in comparison to pre-tax income of
$894,000 in the third quarter of 2012. The primary driver for this
difference was $1.6 million of non-cash stock-based compensation
expense. During the first nine months of 2013, the Company reported
a pre-tax loss of $7.4 million in comparison to pre-tax income of
$2.6 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 $4.3 million of non-cash stock-based compensation
expense recorded during the nine month period.
EBITDA (earnings before interest, taxes, depreciation and
amortization) was $0.1 million for the three months ended September
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 nine months ended September 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 $1.8 million for the three months
ended September 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 nine months ended
September 30, 2013 and 2012 is included within this press
release.
Non-GAAP Gross Margin, which is calculated starting with revenue
and then adjusted for third party commissions, and credit card and
ACH fees, increased to $6.5 million or 25.1% of Premium Equivalents
for the three months ended September 30, 2013, compared to $3.7
million of non-GAAP Gross Margin and 17.9% of Premium Equivalents
in the same period in 2012. A reconciliation of Premium Equivalents
to revenue and non-GAAP Gross Margin for the three and nine months
ended September 30, 2013 and 2012 is included within this press
release.
Cash used in operations during the nine months ended September
30, 2013 was $3.4 million, compared to cash provided by operations
of $4.6 million in the nine months ended September 30, 2012. The
net cash outflow in the nine 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.
Planned Registration Statement
In order to administer its existing contractual obligations, HII
expects to file a registration statement with the SEC relating to
shares of Class A common stock that could be issued in the
future in exchange for shares of Class B common stock (and an
equivalent number of Series B membership interests in its
subsidiary, Health Plan Intermediaries Holdings, LLC ("HPIH")) held
by a group controlled by Michael Kosloske, the Company's Chief
Executive Officer. Any sales of Class A common stock by Mr.
Kosloske's group would be subject to Company policies and
applicable law. This press release is neither an offer to
sell nor a solicitation of an offer to buy any of the Company's
securities.
In connection with any exchange, the delivered Series B
membership interests and Class B common stock would cease to be
outstanding, and HPIH would issue to HII Series A membership
interests on a one-for-one basis. As Series B membership
interests are exchanged for Series A membership interests,
HII's interest in HPIH would increase, and Class A common
shareholders' interests in the Company's economics would not be
diluted. In connection with future exchanges, a liability
will be recognized under the Company's tax receivable
agreement. Under this agreement, the Company has
agreed to pay 85% of actual tax savings to that arise from the
exchanges to Mr. Kosloske's group when savings are
realized. The interests in HPIH held by HII and the group
controlled by Mr. Kosloske and the tax receivable agreement are
described in detail in HII's filings with the SEC.
Conference Call and Webcast
The Company will host a conference call and webcast to discuss
its results at 10:00 a.m. EST, Tuesday, November 12. 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 94599120. 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.
Headquartered in Tampa, Florida, Health Insurance Innovations,
Inc. creates customizable and affordable, high-quality health
insurance products and supplemental services through partnerships
with best-in-class carriers. We are an industry leader in the sale
of 12-month short-term medical insurance plans, which provide an
economical alternative to Individual Major Medical plans. HII
pioneered and engineered its next-generation, cloud-based
technology platform to provide licensed agents, brokers, and call
centers 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
the Company's current assumptions, expectations and belief are
generally identifiable by use of words "may," "might," "will,"
"should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential" or "continue," or similar
expressions 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, and HII's ability to adapt
to them, the ability to maintain and enhance our name recognition,
difficulties arising from acquisitions or other strategic
transactions, 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 Annual Report on
Form 10-K for the year ended December 31, 2012 and subsequent
Quarterly Reports on Form 10-Q, all as 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 any
forward-looking 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 |
($ in 000's, except
share amounts) |
|
|
|
|
September 30, 2013 |
December 31, 2012 |
Assets |
(unaudited) |
|
Current assets: |
|
|
Cash and cash equivalents |
$ 19,444 |
$ 750 |
Cash held on behalf of others |
4,072 |
3,839 |
Short-term investments |
21,414 |
— |
Accounts receivable |
974 |
861 |
Advanced commissions |
1,397 |
297 |
Prepaid expenses and other current
assets |
429 |
217 |
Total current assets |
47,730 |
5,964 |
Property and equipment, net of accumulated
depreciation |
383 |
213 |
Capitalized offering costs |
— |
1,819 |
Goodwill |
18,014 |
5,906 |
Intangible assets, net of accumulated
amortization |
5,656 |
3,959 |
Other assets |
30 |
100 |
Total assets |
$ 71,813 |
$ 17,961 |
Liabilities and
stockholders'/member's equity |
|
|
Current liabilities: |
|
|
Accounts payable and accrued
expenses |
$ 1,537 |
$ 2,062 |
Carriers and vendors payable |
2,877 |
2,790 |
Commissions payable |
1,166 |
1,533 |
Current portion of long-term debt |
— |
813 |
Current portion of noncompete
obligation |
161 |
155 |
Deferred revenue |
863 |
268 |
Contingent acquisition consideration |
2,062 |
— |
Income taxes payable |
74 |
— |
Due to member of Health Plan
Intermediaries, LLC |
— |
773 |
Other current liabilities |
13 |
77 |
Total current liabilities |
8,753 |
8,471 |
Long-term debt, less current portion |
— |
2,481 |
Contingent acquisition consideration |
2,874 |
— |
Noncompete obligation |
504 |
626 |
Due to related parties pursuant to tax
receivable agreement |
374 |
— |
Other liabilities |
60 |
45 |
Total liabilities |
12,565 |
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 5,277,117 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 |
26,837 |
— |
Treasury stock, at cost (32,477 shares) |
(377) |
|
Accumulated deficit |
(3,684) |
— |
Member's equity of Health Plan
Intermediaries, LLC |
— |
6,335 |
Noncontrolling interests |
36,458 |
3 |
Total stockholders'/member's equity |
59,248 |
6,338 |
Total liabilities and stockholders'/member's
equity |
$ 71,813 |
$ 17,961 |
|
|
|
|
|
|
|
|
HEALTH INSURANCE
INNOVATIONS, INC. |
(Prior to February 13,
2013 Health Plan Intermediaries, LLC and
Subsidiaries) |
CONSOLIDATED STATEMENTS
OF OPERATIONS |
($ in 000's, except per
share data) |
|
|
|
|
|
|
Three months ended |
Nine months ended |
|
September
30, |
September
30, |
|
2013 |
2012 |
2013 |
2012 |
|
(unaudited) |
(unaudited) |
(unaudited) |
|
Revenues (premium equivalents of $25,977 and
$20,792 for the three months ended September 30, 2013 and 2012,
respectively and $72,256 and $54,549 for the nine months ended
September 30, 2013 and 2012, respectively) |
$ 14,749 |
$ 11,644 |
$ 40,818 |
$ 30,102 |
Third-party commissions |
7,928 |
7,643 |
24,438 |
20,093 |
Credit cards and ACH fees |
313 |
270 |
861 |
693 |
Contract termination expense |
— |
— |
5,500 |
— |
Selling general and administrative
expenses |
6,348 |
2,552 |
16,010 |
5,786 |
Depreciation and amortization |
423 |
229 |
913 |
771 |
Total operating costs and expenses |
15,012 |
10,694 |
47,722 |
27,343 |
(Loss) income from
operations |
(263) |
950 |
(6,904) |
2,759 |
Other expense (income): |
|
|
|
|
Interest (income) expense |
(7) |
67 |
14 |
194 |
Other expense (income) |
53 |
(11) |
437 |
(21) |
Net (loss) income before income taxes |
(309) |
894 |
(7,355) |
2,586 |
(Benefit) provision for income taxes |
(823) |
— |
472 |
— |
Net income (loss) |
514 |
894 |
(7,827) |
2,586 |
Net income (loss) attributable to
noncontrolling interests |
106 |
(43) |
(4,143) |
(63) |
Net income (loss) attributable to Health
Insurance Innovations, Inc. and Health Plan Intermediaries,
LLC |
$ 408 |
$ 937 |
$ (3,684) |
$ 2,649 |
Per share data |
|
|
|
|
Net income (loss) per share
attributable to Health Insurance Innovations, Inc. |
|
|
|
|
Basic |
$ 0.09 |
|
$ (0.77) |
|
Diluted |
$ 0.08 |
|
$ (0.77) |
|
Weighted average Class A shares
outstanding |
|
|
|
|
Basic |
4,795,736 |
|
4,768,294 |
|
Diluted |
4,861,336 |
|
4,768,294 |
|
|
|
|
|
|
Reconciliation of Net
(Loss) Income to EBITDA |
For the Three and Nine
Months Ended September 30, 2013 and 2012 |
(in
thousands) |
Unaudited |
|
|
|
|
|
|
Three months ended |
Nine months ended |
|
September
30, |
September
30, |
|
2013 |
2012 |
2013 |
2012 |
|
|
|
|
|
Net (loss) income |
$ 514 |
$ 894 |
$ (7,827) |
$ 2,586 |
Interest (income) expense |
(7) |
67 |
14 |
194 |
Provision for income taxes |
(823) |
— |
472 |
— |
Depreciation and amortization |
423 |
229 |
913 |
771 |
EBITDA (1) |
107 |
1,190 |
(6,428) |
3,551 |
Non-cash stock based compensation |
1,575 |
— |
4,276 |
— |
Contract termination expense |
— |
— |
5,500 |
— |
Acquisition costs |
107 |
— |
301 |
— |
|
|
|
|
|
Adjusted EBITDA (2) |
$ 1,789 |
$ 1,190 |
$ 3,649 |
$ 3,551 |
|
|
|
|
|
(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. |
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Premium Equivalents to Revenues |
For the Three and Nine
Months Ended September 30, 2013 and 2012 |
(in
thousands) |
Unaudited |
|
|
|
|
|
|
Three months ended |
Nine months ended |
|
September
30, |
September
30, |
|
2013 |
2012 |
2013 |
2012 |
|
|
|
|
|
Premium equivalents (1) |
$ 25,977 |
$ 20,792 |
$ 72,256 |
$ 54,549 |
Less risk premium |
(10,576) |
(8,685) |
(29,686) |
(23,296) |
Less amounts earned by third party
obligors |
(652) |
(463) |
(1,752) |
(1,151) |
|
|
|
|
|
Revenues |
14,749 |
11,644 |
40,818 |
30,102 |
Less Third-party commissions |
7,928 |
7,643 |
24,438 |
20,093 |
Less credit cards and ACH fees |
313 |
270 |
861 |
693 |
Non GAAP gross margin (2) |
$ 6,508 |
$ 3,731 |
$ 15,519 |
$ 9,316 |
|
|
|
|
|
(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. |
|
|
|
|
|
(2) "Non GAAP gross margin"
is defined as revenue less third party commissions and credit card
and ACH fees. Non GAAP gross margin does not represent, and
should not be considered as, an alternative to revenues, as
determined in accordance with U.S. GAAP. We have included non GAAP
gross margin 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 non GAAP gross margin can provide a
useful measure for period-to-period comparisons of our business.
Non GAAP gross margin 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. Non GAAP gross
margin may not accurately or fully reflect our costs of generating
revenues in the periods presented. |
|
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CONTACT: Health Insurance Innovations, Inc.:
James P. Dietz
Chief Financial Officer
(877) 376 5831 ext.292
jdietz@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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