Record Q1 2016 Revenue of $42.5 million,
up 89% YOYQ1 2016 Adjusted Earnings per Share of
$0.17Record policies in force totaled
approximately 258,000, up 154% YOYRevised 2016
guidance upward
Health Insurance Innovations, Inc. (HII) (NASDAQ:HIIQ), a leading
developer, distributor, and virtual administrator of affordable
health plans today announced financial results for the first
quarter ended March 31, 2016. The Company will host a live
conference call on Tuesday, May 10, 2016 at 8:30 a.m. EDT.
First Quarter 2016 Consolidated Financial
Highlights
- Record revenue was $42.5 million, an increase of 88.5% over
$22.5 million in the first quarter of 2015.
- Record total collections from customers, which our industry
refers to as premium equivalents, of $70.7 million, an
increase of 84.8% over $38.3 million in the first quarter of
2015.
- Adjusted EBITDA (earnings before interest, taxes, depreciation
and amortization) was $4.2 million, compared to $0.3 million in the
first quarter of 2015.
- Adjusted EPS, also referred to as Adjusted Net Income per
Share, was $0.17 in the first quarter of 2016 compared to $0.01 in
the first quarter of 2015.
- GAAP Net Income per diluted share for the first quarter of 2016
was $0.12, compared to $0.01 in the first quarter of 2015.
- Record policies in force as of March 31, 2016, totaled
approximately 258,000, a 154% increase from 101,500 as of March 31,
2015.
See the reconciliations for premium equivalents, adjusted
EBITDA, and adjusted EPS within this press release.
Revised 2016 Full Year Guidance
For the full year 2016 we expect Revenue to grow between 30% and
40% year-over-year ($138 million to $144 million) and Adjusted EPS
to grow between 40% and 55% ($0.38 to $0.42).
Previously we guided to Revenue of $130 million to $136 million
and Adjusted EPS of $0.34 to $0.38.
"We executed on our plan to accelerate sales during the
Affordable Care Act open enrollment period while continuing to
improve scalability. We had record policies in force at the
end of Q1 2016 – 258,000 policies, representing a 154%
year-over-year increase. During the quarter, we also set a
new record for submitted policies – 192,000, representing a 236%
year-over-year increase.” said Patrick McNamee, HII's Chief
Executive Officer and President.
“AgileHealthInsurance.com continued to see the strongest growth
of all our channels in the first quarter. During the quarter,
Agile sold more than 23,000 Short Term Medical policies,
maintaining its number one rank among our distributors.” said
McNamee.
First Quarter Financial Discussion
First quarter revenues of $42.5 million increased by 88.5%, as
compared to the first quarter of 2015, driven primarily by an
increase in policies in force and continued strong sales in the
first quarter, including January which was the last month of the
ACA open enrollment period.
Adjusted gross margin, which is calculated starting with
revenues and then adjusted for third-party commissions, and credit
card and ACH fees, decreased to 22.1% of premium equivalents for
the first quarter of 2016, compared to 29.3% of premium equivalents
in the same period in 2015. The decrease was largely the result of
a revenue mix shift towards non-owned call centers and away from
owned call centers due to the restructuring of two of our call
centers in Q4 2015 and increased incentives provided to several
third-party distributors during the quarter.
Selling, general and administrative (“SG&A”) expenses were
$12.0 million (28.2% of revenues) in the first quarter of 2016,
compared to $11.2 million (49.5% of revenues) in the same period in
2015. Improvements in SG&A for the quarter as percentage
of revenue were realized due the restructuring of our owned call
centers in Q4 2015 as well as continued focus on operational
efficiencies.
EBITDA was $3.5 million in the first quarter of 2016, compared
to $0.7 million in the same period in 2015. Adjusted EBITDA
is calculated starting with EBITDA, which is then further adjusted
for items that are not part of regular operating activities,
including restructuring costs and other non-cash items such as
stock-based compensation. Adjusted EBITDA was $4.2 million in
the first quarter of 2016, compared to $0.3 million in the same
period in 2015. A reconciliation of net income to EBITDA and
adjusted EBITDA for the 3 months ending March 31, 2016 and 2015 is
included within this press release.
Adjusted EPS for Q1 2016 was $0.17 compared with $0.01 last
year.
The company makes short term loans to our distributors based on
actual sales that we refer to as “advance commissions”. The
advance commissions assist our distributors with cost of lead
acquisition and provide working capital. We recover the loans
from future commissions earned on premiums collected over the
period in which policies renew. The first quarter balance of
$36.6 million is an increase of $12.1 million from the fourth
quarter of 2015.
Cash and cash equivalents totaled $6.8 million at the end of the
first quarter of 2016. Cash in Q1 decreased by $0.9 million from Q4
2015. We borrowed an additional $7.5 million on our bank line of
credit in the first quarter of 2016, primarily to fund the increase
in advanced commissions.
Conference Call and Webcast
The company will host an earnings conference call on May 10,
2016 at 8:30 a.m. Eastern time. All interested parties can
join the call by dialing (877) 407-9039; or (201) 689-8470;
the conference ID is 13635378. A webcast of the call
may be accessed in the Investor Relations section of Health
Insurance Innovations’ website at
http://investor.hiiquote.com/events.cfm. An archive of
the call will be available for 30 days through the same
website.
About Health Insurance Innovations, Inc.
(HII)
HII is a market leader in developing innovative health insurance
products that are affordable and meet the needs of health insurance
plan shoppers. HII develops insurance products through partnerships
with best-in-class insurance companies and markets them via its
broad distribution network of licensed insurance agents across the
nation, its call center network and its unique online
capability. Additional information about HII can be found at
HiiQuote.com. HII’s Consumer Division includes
AgileHealthInsurance.com, a website for researching, comparing and
purchasing short-term health insurance products online and
HealthPocket.com, a free website that compares and ranks all health
insurance plans, and uses objective data to publish unbiased health
insurance market analyses and other consumer advocacy
research.
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
HII’s current assumptions, expectations and beliefs 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, our ability to
integrate our acquisitions (including our July 2014 acquisition of
HealthPocket, Inc.), 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, 2015 and
subsequent Quarterly Report 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.
Condensed Consolidated Balance
Sheets ($ in thousands, except share and per share
data)
|
March 31, 2016 |
|
December 31, 2015 |
|
(unaudited) |
|
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
6,845 |
|
|
$ |
7,695 |
|
Restricted cash |
|
12,051 |
|
|
|
7,906 |
|
Accounts receivable, net, prepaid
expenses and other current assets |
|
1,690 |
|
|
|
1,778 |
|
Advance commissions |
|
36,581 |
|
|
|
24,531 |
|
Income taxes receivable |
|
96 |
|
|
|
591 |
|
Total current
assets |
|
57,263 |
|
|
|
42,501 |
|
Property and equipment,
net |
|
2,576 |
|
|
|
2,004 |
|
Goodwill |
|
41,076 |
|
|
|
41,076 |
|
Intangible assets,
net |
|
9,504 |
|
|
|
10,061 |
|
Other assets |
|
139 |
|
|
|
142 |
|
Total assets |
$ |
110,558 |
|
|
$ |
95,784 |
|
Liabilities and
stockholders’ equity |
|
|
|
Current
liabilities: |
|
|
|
Accounts payable and accrued
expenses |
$ |
22,531 |
|
|
$ |
17,847 |
|
Deferred revenue |
|
451 |
|
|
|
384 |
|
Current portion of contingent
acquisition consideration |
|
259 |
|
|
|
532 |
|
Due to member |
|
535 |
|
|
|
342 |
|
Other current liabilities |
|
207 |
|
|
|
203 |
|
Total current
liabilities |
|
23,983 |
|
|
|
19,308 |
|
Revolving line of
credit |
|
15,000 |
|
|
|
7,500 |
|
Deferred tax
liability |
|
248 |
|
|
|
358 |
|
Due to member |
|
398 |
|
|
|
406 |
|
Other liabilities |
|
107 |
|
|
|
158 |
|
Total liabilities |
|
39,736 |
|
|
|
27,730 |
|
Commitments and
contingencies |
|
|
|
Stockholders’
equity: |
|
|
|
Class A common
stock (par value $0.001 per share, 100,000,000 shares authorized;
7,910,086 and 7,910,086 shares issued, respectively; and 7,768,617
and 7,759,092 shares outstanding, respectively) |
|
8 |
|
|
|
8 |
|
Class B common stock
(par value $0.001 per share, 20,000,000 shares authorized;
6,841,667 shares issued and outstanding, respectively) |
|
7 |
|
|
|
7 |
|
Preferred stock (par
value $0.001 per share, 5,000,000 shares authorized; no shares
issued and outstanding) |
— |
|
— |
Additional paid-in
capital |
|
44,953 |
|
|
|
44,591 |
|
Treasury stock, at cost
(141,468 and 150,993 shares, respectively) |
|
(1,429 |
) |
|
|
(1,542 |
) |
Accumulated
deficit |
|
(2,188 |
) |
|
|
(3,093 |
) |
Total Health Insurance Innovations,
Inc. stockholders’ equity |
|
41,351 |
|
|
|
39,971 |
|
Noncontrolling
interests |
|
29,471 |
|
|
|
28,083 |
|
Total stockholders’ equity |
|
70,822 |
|
|
|
68,054 |
|
Total liabilities and stockholders'
equity |
$ |
110,558 |
|
|
$ |
95,784 |
|
HEALTH INSURANCE INNOVATIONS,
INC.
Condensed Consolidated Statements of
Operations (unaudited)($ in thousands, except
share and per share data)
|
Three Months Ended March 31, |
|
|
2016 |
|
|
|
2015 |
|
Revenues (premium
equivalents of $70,740 and $38,281 for the three months ended March
31, 2016 and 2015, respectively) |
$ |
42,490 |
|
|
$ |
22,541 |
|
Operating
expenses: |
|
|
|
Third-party commissions |
|
25,990 |
|
|
|
10,834 |
|
Credit card and ACH fees |
|
883 |
|
|
|
485 |
|
Selling, general and
administrative |
|
11,970 |
|
|
|
11,164 |
|
Depreciation and amortization |
|
735 |
|
|
|
784 |
|
Total operating expenses |
|
39,578 |
|
|
|
23,267 |
|
Income (loss) from operations |
|
2,912 |
|
|
|
(726 |
) |
|
|
|
|
Other (income)
expense: |
|
|
|
Interest expense (income) |
|
55 |
|
|
|
(7 |
) |
Fair value adjustment to contingent
acquisition consideration |
— |
|
|
(491 |
) |
Other expense (income) |
|
187 |
|
|
|
(148 |
) |
Net income (loss)
before income taxes |
|
2,670 |
|
|
|
(80 |
) |
Provision (benefit) for income
taxes |
|
384 |
|
|
|
(336 |
) |
Net income |
|
2,286 |
|
|
|
256 |
|
Net income attributable to
noncontrolling interests |
|
1,381 |
|
|
|
203 |
|
Net income attributable
to Health Insurance Innovations, Inc. |
$ |
905 |
|
|
$ |
53 |
|
|
|
|
|
Per share
data: |
|
|
|
Net income per
share attributable to Health Insurance Innovations,
Inc. |
|
|
|
Basic |
$ |
0.12 |
|
|
$ |
0.01 |
|
Diluted |
$ |
0.12 |
|
|
$ |
0.01 |
|
Weighted
average Class A common shares outstanding |
|
|
|
Basic |
|
7,563,555 |
|
|
|
7,515,053 |
|
Diluted |
|
7,699,866 |
|
|
|
7,714,339 |
|
Reconciliation of Net Income to EBITDA
and Adjusted EBITDA(unaudited)($
in thousands)
|
|
|
Three Months EndedMarch 31, |
|
|
|
|
2016 |
|
|
2015 |
|
Net income |
|
|
$ |
2,286 |
|
|
$ |
256 |
|
Interest (income) expense |
|
|
|
55 |
|
|
|
(7 |
) |
Depreciation and amortization |
|
|
|
735 |
|
|
|
784 |
|
Provision (benefit) for income taxes |
|
|
|
384 |
|
|
|
(336 |
) |
EBITDA |
|
|
|
3,460 |
|
|
|
697 |
|
Non-cash stock-based compensation |
|
|
|
486 |
|
|
|
61 |
|
Fair value adjustment to contingent
consideration |
|
|
|
— |
|
|
|
(491 |
) |
Transaction costs |
|
|
|
— |
|
|
|
24 |
|
Tax receivable agreement liability
adjustment |
|
|
|
185 |
|
|
|
125 |
|
Other non-recurring charges (benefits) |
|
|
|
119 |
|
|
|
(70 |
) |
Adjusted EBITDA |
|
|
$ |
4,250 |
|
|
$ |
346 |
|
Reconciliation of Adjusted EBITDA to
Adjusted Net Income per
Share (Unaudited) ($
in thousands except per share data)
|
|
|
Three Months EndedMarch 31, |
|
|
|
|
2016 |
|
|
2015 |
|
Adjusted EBITDA |
|
|
$ |
4,250 |
|
|
$ |
346 |
|
Less depreciation |
|
|
|
(178 |
) |
|
|
(48 |
) |
Adjusted pre-tax income |
|
|
|
4,072 |
|
|
|
298 |
|
Less income tax
expense |
|
|
|
(1,547 |
) |
|
|
(113 |
) |
Adjusted net income |
|
|
$ |
2,525 |
|
|
$ |
185 |
|
Total weighted average
diluted share count |
|
|
|
14,542 |
|
|
|
14,556 |
|
Adjusted net income per
share |
|
|
$ |
0.17 |
|
|
$ |
0.01 |
|
(1) EBITDA is defined as net income before interest
expense, income taxes and depreciation and amortization. We have
included EBITDA in this report because it is a key measure used by
our management and Board of Directors to understand and evaluate
our core operating performance and trends, to prepare and approve
our annual budget and to develop short- and long-term operational
plans. In particular, the exclusion of certain expenses in
calculating EBITDA can provide a useful measure for
period-to-period comparisons of our business. However, 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 generally accepted accounting principles in the
United States of America (“GAAP”). 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
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, and
other non-cash items such as non-cash 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 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
GAAP.
(3) Adjusted net income is computed by subtracting
depreciation (but not amortization of intangible assets) from
adjusted EBITDA to determine adjusted pre-tax income, from which an
assumed tax expense calculated at the 38% federal statutory rate is
deducted. We have included adjusted net income in this report
because it is a key measure used by our management to understand
and evaluate our core operating performance and trends and because
we believe it is frequently used by analysts, investors and other
interested parties in the evaluation of companies. Other companies
may calculate this measure differently than we do. Adjusted net
income has limitations as an analytical tool, and you should not
consider it in isolation or substitution for earnings per share as
reported under GAAP.
(4) Adjusted net income per share is computed by dividing
adjusted net income by the total number of diluted Class A and
Class B shares of our common stock for each period. We have
included adjusted net income per share in this report because it is
a key measure used by our management to understand and evaluate our
core operating performance and trends and because we believe it is
frequently used by analysts, investors and other interested parties
in the evaluation of companies. Other companies may calculate this
measure differently than we do. Adjusted net income per share has
limitations as an analytical tool, and you should not consider it
in isolation or as a substitute for earnings per share as reported
under GAAP.
Reconciliation of
Premium Equivalents to Revenues & Adjusted Gross
Margin (unaudited) ($ in
thousands)
|
Three
months Ended March 31, |
|
|
2016 |
|
|
2015 |
|
Premium
equivalents |
|
|
$ |
70,740 |
|
|
$ |
38,281 |
|
Less risk premium |
|
|
|
26,882 |
|
|
|
14,906 |
|
Less amounts earned by third party
obligors |
|
|
|
1,368 |
|
|
|
834 |
|
Revenues |
|
|
|
42,490 |
|
|
|
22,541 |
|
Third-party commissions |
|
|
|
25,990 |
|
|
|
10,834 |
|
Credit card and ACH fees |
|
|
|
883 |
|
|
|
485 |
|
Adjusted gross
margin |
|
|
$ |
15,617 |
|
|
$ |
11,222 |
|
(1) Premium equivalents is defined as the combination of
premiums, fees for discount benefit plans (a non-insurance benefit
product that supplements or enhances an insurance product), fees
for distributors, our enrollment fees and third-party commissions
and referral fees. From premium equivalents, we remit risk premium
to carriers and amounts earned by discount benefit plan providers,
who we refer to as third-party obligors, such carriers and
third-party obligors being the ultimate parties responsible for
providing the insurance coverage or discount benefits to the
member. Our revenues consist of the balance of the premium
equivalents. We have included premium equivalents in this report
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- 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. This financial measurement is
considered a non-GAAP financial measure and is not recognized under
GAAP and should not be used as, and is not an alternative to,
revenues as a measure of our operating performance.
(2) Adjusted gross margin is defined as revenues less
third party commissions and credit card and ACH fees.
Adjusted gross margin does not represent, and should not be
considered as, an alternative to revenues, as determined in
accordance with GAAP. Adjusted gross margin 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, adjusted gross margin can provide a useful measure for
period-to-period comparisons of our business. Adjusted 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 GAAP.
Summary of selected
metrics(unaudited)($ in
thousands)
|
Submitted Applications duringThree Months
EndedMarch 31, |
|
|
|
|
|
|
|
2016 |
|
|
2015 |
|
Change (%) |
IFP |
|
95,400 |
|
|
|
30,700 |
|
|
210 |
% |
|
Supplemental products |
|
96,800 |
|
|
|
26,400 |
|
|
267 |
% |
|
Total |
|
192,200 |
|
|
|
57,100 |
|
|
236 |
% |
|
|
Policies in Force as ofMarch 31, |
|
|
|
2016 |
|
|
2015 |
|
Change (%) |
|
IFP |
|
115,300 |
|
|
|
45,800 |
|
|
|
152 |
% |
|
Supplemental
products |
|
142,700 |
|
|
|
55,700 |
|
|
|
156 |
% |
|
Total |
|
258,000 |
|
|
|
101,500 |
|
|
|
154 |
% |
|
|
Submitted IFP Applications by
Channel |
|
Q1'15 |
|
Q2'15 |
|
Q3'15 |
|
Q4'15 |
|
Q1’16 |
Agile |
- |
|
300 |
|
5,800 |
|
11,300 |
|
23,100 |
All Others
|
30,700 |
|
31,700 |
|
39,100 |
|
57,900 |
|
72,300 |
Total |
30,700 |
|
32,000 |
|
44,900 |
|
69,200 |
|
95,400 |
|
|
|
|
Core SG&A as a Percentage of Revenue |
|
Q1'15 |
|
Q2'15 |
|
Q3'15 |
|
Q4'15 |
|
Q1’16 |
Total SG&A |
$ |
11,165 |
|
|
$ |
10,350 |
|
|
$ |
10,845 |
|
|
$ |
14,964 |
|
|
$ |
11,970 |
|
Less: Stock-based compensation |
|
61 |
|
|
|
626 |
|
|
|
313 |
|
|
|
363 |
|
|
|
486 |
|
Less: Other non-recurring
charges |
|
(69 |
) |
|
|
468 |
|
|
|
273 |
|
|
|
2,952 |
|
|
|
119 |
|
Less: Marketing and
Advertising |
|
2,659 |
|
|
|
1,809 |
|
|
|
2,305 |
|
|
|
3,046 |
|
|
|
2,820 |
|
Core SG&A |
$ |
8,514 |
|
|
$ |
7,447 |
|
|
$ |
7,954 |
|
|
$ |
8,603 |
|
|
$ |
8,545 |
|
% of Revenue |
|
37.8 |
% |
|
|
32.7 |
% |
|
|
30.8 |
% |
|
|
25.6 |
% |
|
|
20.1 |
% |
Health Insurance Innovations, Inc.:
Michael Hershberger
Chief Financial Officer
(877) 376-5831 ext. 282
mhershberger@hiiquote.com
Investor Contact:
Investor Relations office
(813) 452-5221
IR@hiiquote.com
Media Contact for AgileHealthInsurance & HealthPocket.com:
Amy Fletcher
720-350-3144
info@afmcommunications.com
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