MAXR Maxar Technologies Inc

• Revenue of $153 million, up 1% year over year
  • Revenue from Property & Casualty down 8% year over year to $105 million
  • Revenue from Health up 25% year over year to $34 million
• Transaction Value of $255 million, up 17% year over year

MediaAlpha, Inc. (NYSE: MAX), today announced its financial results for the third quarter ended September 30, 2021.

“We faced headwinds in the third quarter. While our Transaction Value grew 17% year over year, we underperformed relative to expectations due to market challenges in our property and casualty (P&C) insurance vertical,” said Steve Yi, CEO of MediaAlpha. “Many of our P&C carrier partners are experiencing higher than expected insurance losses, driven by a post-pandemic increase in accident frequency and severity, as well as elevated catastrophe losses. These carriers are taking actions to restore profitability and have temporarily scaled back their marketing investments, and we are reducing our full year guidance accordingly. But the secular shift to direct, online customer acquisition remains powerful, and we are confident that growth in the auto insurance advertising market, and our results, will bounce back as underwriting profitability is restored. Importantly, our other verticals are unaffected by these trends, and our Health insurance vertical, in particular, continued its robust growth and is expected to have a strong fourth quarter.”

Third Quarter 2021 Financial Results

• Revenue of $152.7 million, an increase of 1% year over year;
• Transaction Value of $255.1 million, an increase of 17% year over year;
• Gross margin of 16.2%, compared with 13.7% in the third quarter of 2020;
• Contribution Margin(1) of 17.1%, compared with 14.3% in the third quarter of 2020;
• Net loss was $(4.3) million, compared with net income of $4.8 million in the third quarter of 2020; and
• Adjusted EBITDA(1) was $13.8 million, compared with $14.0 million in the third quarter of 2020.

(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

For the fourth quarter of 2021, MediaAlpha currently expects the following:

• Transaction Value between $241 million - $256 million, representing a 3% year-over-year decline at the midpoint of the guidance range;
• Revenue between $151 million - $161 million, representing an 18% year-over-year decline at the midpoint of the guidance range;
• Contribution between $25 million - $28 million, representing a 13% year-over-year decline at the midpoint of the guidance range; and
• Adjusted EBITDA between $13 million - $15 million, representing a 23% year-over-year decline at the midpoint of the guidance range.

For the full year 2021, MediaAlpha currently expects the following:

• Transaction Value between $1,015 million - $1,030 million, representing 25% year-over-year growth at the midpoint of the guidance range;
• Revenue between $635 million - $645 million, representing 9% year-over-year growth at the midpoint of the guidance range;
• Contribution between $106 million - $109 million, representing 16% year-over-year growth at the midpoint of the guidance range; and
• Adjusted EBITDA between $58 million - $60 million, representing 2% year-over-year growth at the midpoint of the guidance range.

The Company expects total shares outstanding at the end of the fourth quarter of 2021 to be 60.6 million and 64.4 million on a basic and fully diluted basis, respectively.

With respect to the Company’s projections of Contribution and Adjusted EBITDA under “Financial Outlook,” MediaAlpha is not providing a reconciliation of Contribution or Adjusted EBITDA to the respective GAAP measures because the Company is unable to predict with reasonable certainty the reconciling items that may affect gross profit and net income 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 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 third quarter 2021 results and its financial outlook for the fourth quarter and full year of 2021 at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). A live audio webcast of the call will be available on the MediaAlpha Investor Relations website at https://investors.mediaalpha.com. To register for the webcast, click here. Participants may also dial-in, toll-free, at (888) 330-2022 or (646) 960-0690, with passcode 3195092. An audio replay of the conference call will be available for two weeks following the call and available on the MediaAlpha Investor Relations website at https://investors.mediaalpha.com.

We have also posted to our investor relations website a letter to shareholders. We have used, and intend to continue to use, our investor relations website at https://investors.mediaalpha.com as a means of disclosing material nonpublic information and for complying with our disclosure obligations under Regulation FD.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation statements regarding our expectation of growth once the P&C insurance market recovers, and our financial outlook for the fourth quarter and full year 2021. 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 March 15, 2021, the Form 10-Q filed on May 14, 2021, the Form 10-Q filed on August 13, 2021, and the Form 10-Q as of and for the quarter ended September 30, 2021 to be filed on or about November 12, 2021. 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, the Company believes that Transaction Value, Adjusted EBITDA, Contribution, and Contribution Margin provide useful information to investors and others in understanding and evaluating its operating results in the same manner as its 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)

 

 

September 30, 2021

 

December 31, 2020

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

29,301

 

 

$

23,554

 

Accounts receivable, net of allowance for credit losses of $602 and $438, respectively

71,305

 

 

96,295

 

Prepaid expenses and other current assets

3,959

 

 

7,950

 

Total current assets

104,565

 

 

127,799

 

Property and equipment, net

1,060

 

 

762

 

Intangible assets, net

13,313

 

 

15,551

 

Goodwill

18,402

 

 

18,402

 

Deferred tax asset

92,348

 

 

31,613

 

Other assets

15,819

 

 

16,210

 

Total assets

$

245,507

 

 

$

210,337

 

Liabilities and stockholders' deficit

 

 

 

Current liabilities

 

 

 

Accounts payable

$

44,213

 

 

$

98,249

 

Accrued expenses

7,437

 

 

9,206

 

Current portion of long-term debt

6,345

 

 

—

 

Total current liabilities

57,995

 

 

107,455

 

Long-term debt, net of current portion

180,254

 

 

182,668

 

Liabilities under tax receivable agreement, net of current portion

77,272

 

 

22,498

 

Other long-term liabilities

2,907

 

 

2,834

 

Total liabilities

318,428

 

 

315,455

 

Commitments and contingencies (Note 7)

 

 

 

Stockholders' (deficit):

 

 

 

Class A common stock, $0.01 par value - 1.0 billion shares authorized; 39.4 million and 33.4 million shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

394

 

 

334

 

Class B common stock, $0.01 par value - 100 million shares authorized; 20.8 million and 25.5 million shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

208

 

 

255

 

Preferred stock, $0.01 par value - 50 million shares authorized; 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020

—

 

 

—

 

Additional paid-in capital

407,745

 

 

384,611

 

Accumulated Deficit

(422,631

)

 

(418,973

)

Total stockholders' (deficit) attributable to MediaAlpha, Inc.

$

(14,284

)

 

$

(33,773

)

Non-controlling interest

(58,637

)

 

(71,345

)

Total stockholders' (deficit)

$

(72,921

)

 

$

(105,118

)

Total liabilities and stockholders' deficit

$

245,507

 

 

$

210,337

 

MediaAlpha, Inc. and subsidiaries

Consolidated Statements of Operations

(Unaudited; in thousands, except share data and per share amounts)

 

 

Three months ended September 30,

 

Nine Months Ended September 30,

 

2021

 

2020

 

2021

 

2020

Revenue

$

152,749

 

 

$

151,548

 

 

$

483,690

 

 

$

394,609

 

Cost and operating expenses

 

 

 

 

 

 

 

Cost of revenue

128,080

 

 

130,830

 

 

407,563

 

 

335,692

 

Sales and marketing

5,620

 

 

2,916

 

 

16,721

 

 

8,866

 

Product development

3,754

 

 

1,766

 

 

10,904

 

 

5,482

 

General and administrative

15,349

 

 

7,605

 

 

44,677

 

 

13,907

 

Total cost and operating expenses

152,803

 

 

143,117

 

 

479,865

 

 

363,947

 

(Loss) income from operations

(54

)

 

8,431

 

 

3,825

 

 

30,662

 

Other expenses, net

316

 

 

1,998

 

 

337

 

 

1,998

 

Interest expense

1,765

 

 

1,594

 

 

6,303

 

 

4,844

 

Total other expense

2,081

 

 

3,592

 

 

6,640

 

 

6,842

 

(Loss) income before income taxes

(2,135

)

 

4,839

 

 

(2,815

)

 

23,820

 

Income tax expense

2,125

 

 

20

 

 

1,636

 

 

20

 

Net (loss) income

$

(4,260

)

 

$

4,819

 

 

$

(4,451

)

 

$

23,800

 

Net income attributable to QLH prior to Reorganization Transactions

—

 

 

4,819

 

 

—

 

 

23,800

 

Net (loss) attributable to non-controlling interest

(733

)

 

—

 

 

(1,021

)

 

—

 

Net (loss) attributable to MediaAlpha, Inc.

$

(3,527

)

 

$

—

 

 

$

(3,430

)

 

$

—

 

Net (loss) per share of Class A common stock

 

 

 

 

 

 

 

-Basic

$

(0.09

)

 

$

—

 

 

$

(0.09

)

 

$

—

 

-Diluted

$

(0.10

)

 

$

—

 

 

$

(0.09

)

 

$

—

 

Weighted average shares of Class A common stock outstanding

 

 

 

 

 

 

 

-Basic

38,416,723

 

 

—

 

 

36,426,270

 

 

—

 

-Diluted

61,190,185

 

 

—

 

 

36,426,270

 

 

—

 

MediaAlpha, Inc. and subsidiaries

Consolidated Statements of Cash Flows

(Unaudited; in thousands)

 

 

Nine Months Ended September 30,

 

2021

 

2020

Cash flows from operating activities

 

 

 

Net (loss) income

$

(4,451

)

 

$

23,800

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

Non-cash equity-based compensation expense

33,321

 

 

1,762

 

Depreciation expense on property and equipment

272

 

 

210

 

Amortization of intangible assets

2,238

 

 

2,402

 

Amortization of deferred debt issuance costs

966

 

 

334

 

Loss on extinguishment of debt

—

 

 

1,998

 

Credit losses

136

 

 

356

 

Deferred taxes

1,195

 

 

—

 

Tax receivable agreement liability adjustments

(604

)

 

—

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

24,854

 

 

(7,428

)

Prepaid expenses and other current assets

4,191

 

 

(147

)

Other assets

391

 

 

(11,665

)

Accounts payable

(54,033

)

 

21,242

 

Accrued expenses

(1,800

)

 

6,436

 

Net cash provided by operating activities

6,676

 

 

39,300

 

Cash flows from investing activities

 

 

 

Purchases of property and equipment

(568

)

 

(156

)

Purchase of cost method investment

—

 

 

(10,000

)

Net cash (used in) investing activities

(568

)

 

(10,156

)

Cash flows from financing activities

 

 

 

Proceeds received from:

 

 

 

Revolving line of credit

—

 

 

7,500

 

Payments made for:

 

 

 

Repayments on revolving line of credit

—

 

 

(7,500

)

Proceeds from issuance of long-term debt

190,000

 

 

210,000

 

Repayments on long-term debt

(186,375

)

 

(100,023

)

Payments of debt issuance costs

(866

)

 

(4,467

)

Repurchase of Class B units at QLH up to fair value

—

 

 

(1,453

)

Distributions

(338

)

 

(131,224

)

Shares withheld for taxes on vesting of restricted stock units

(2,782

)

 

—

 

Net cash (used in) financing activities

(361

)

 

(27,167

)

Net increase in cash and cash equivalents

5,747

 

 

1,977

 

Cash and cash equivalents, beginning of period

23,554

 

 

10,028

 

Cash and cash equivalents, end of period

$

29,301

 

 

$

12,005

 

Key business and operating metrics

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 relationships 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 the revenue recognized and revenue share payments to our supply partners represent costs of revenue. In our Private Marketplace model, revenue recognized represents a platform fee billed to the demand partner or supply partner based on an agreed-upon percentage of the Transaction Value for the Consumer Referrals transacted, and accordingly there are no associated costs of revenue. We utilize Transaction Value to assess revenue and to assess the overall level of transaction activity through our platform. We believe it is useful to investors to assess the overall level of activity on our platform and to better understand the sources of our revenue across our different transaction models and verticals.

The following table presents Transaction Value by platform model for the three and nine months ended September 30, 2021 and 2020:

 

 

Three months ended September 30,

 

Nine months ended September 30,

(dollars in thousands)

 

2021

 

2020

 

2021

 

2020

Open Marketplace transactions

 

$

147,800

 

 

$

148,240

 

 

$

469,670

 

 

$

386,224

 

Percentage of total Transaction Value

 

57.9

%

 

68.1

%

 

60.7

%

 

69.1

%

Private Marketplace transactions

 

107,290

 

 

69,320

 

 

304,410

 

 

172,590

 

Percentage of total Transaction Value

 

42.1

%

 

31.9

%

 

39.3

%

 

30.9

%

Total Transaction Value

 

$

255,090

 

 

$

217,560

 

 

$

774,080

 

 

$

558,814

 

The following table presents Transaction Value by vertical for the three and nine months ended September 30, 2021 and 2020:

 

 

Three months ended September 30,

 

Nine months ended September 30,

(dollars in thousands)

 

2021

 

2020

 

2021

 

2020

Property & Casualty insurance

 

$

175,375

 

 

$

161,323

 

 

$

535,448

 

 

$

390,955

 

Percentage of total Transaction Value

 

68.8

%

 

74.2

%

 

69.2

%

 

70.0

%

Health insurance

 

48,692

 

 

33,650

 

 

146,275

 

 

98,739

 

Percentage of total Transaction Value

 

19.1

%

 

15.5

%

 

18.9

%

 

17.7

%

Life insurance

 

13,361

 

 

11,628

 

 

41,736

 

 

31,717

 

Percentage of total Transaction Value

 

5.2

%

 

5.3

%

 

5.4

%

 

5.7

%

Other (1)

 

17,662

 

 

10,959

 

 

50,621

 

 

37,403

 

Percentage of total Transaction Value

 

6.9

%

 

5.0

%

 

6.5

%

 

6.7

%

Total Transaction Value

 

$

255,090

 

 

$

217,560

 

 

$

774,080

 

 

$

558,814

 

(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; internet and hosting; 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.

The following table reconciles Contribution with gross profit, the most directly comparable financial measure calculated and presented in accordance with GAAP, for the three and nine months ended September 30, 2021 and 2020:

 

 

Three months ended September 30,

 

Nine months ended September 30,

(in thousands)

 

2021

 

2020

 

2021

 

2020

Revenue

 

$

152,749

 

 

$

151,548

 

 

$

483,690

 

 

$

394,609

 

Less cost of revenue

 

(128,080

)

 

(130,830

)

 

(407,563

)

 

(335,692

)

Gross profit

 

24,669

 

 

20,718

 

 

76,127

 

 

58,917

 

Adjusted to exclude the following (as related to cost of revenue):

 

 

 

 

 

 

 

 

Equity-based compensation

 

447

 

 

18

 

 

1,289

 

 

58

 

Salaries, wages, and related

 

501

 

 

434

 

 

1,523

 

 

1,175

 

Internet and hosting

 

105

 

 

107

 

 

315

 

 

328

 

Other expenses

 

103

 

 

69

 

 

320

 

 

205

 

Depreciation

 

7

 

 

6

 

 

22

 

 

17

 

Other services

 

300

 

 

189

 

 

847

 

 

616

 

Merchant-related fees

 

56

 

 

130

 

 

286

 

 

447

 

Contribution

 

26,188

 

 

21,671

 

 

80,729

 

 

61,763

 

Gross margin

 

16.2

%

 

13.7

%

 

15.7

%

 

14.9

%

Contribution Margin

 

17.1

%

 

14.3

%

 

16.7

%

 

15.7

%

Adjusted EBITDA

We define “Adjusted EBITDA” as net income excluding interest expense, income tax benefit (expense), depreciation expense on property and equipment, and 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.

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 and nine months ended September 30, 2021 and 2020.

 

 

Three months ended September 30,

 

Nine months ended September 30,

(in thousands)

 

2021

 

2020

 

2021

 

2020

Net (loss) income

 

$

(4,260

)

 

$

4,819

 

 

$

(4,451

)

 

$

23,800

 

Equity-based compensation expense

 

11,198

 

 

606

 

 

33,321

 

 

2,553

 

Interest expense

 

1,765

 

 

1,594

 

 

6,303

 

 

4,844

 

Income tax expense

 

2,125

 

 

20

 

 

1,636

 

 

20

 

Depreciation expense on property and equipment

 

99

 

 

73

 

 

272

 

 

210

 

Amortization of intangible assets

 

746

 

 

799

 

 

2,238

 

 

2,402

 

Transaction expenses(1)

 

1,152

 

 

6,049

 

 

3,883

 

 

6,049

 

Employee-related costs(2)

 

270

 

 

—

 

 

619

 

 

—

 

SOX implementation costs(3)

 

348

 

 

—

 

 

797

 

 

—

 

Settlement costs(4)

 

800

 

 

—

 

 

800

 

 

—

 

Changes in TRA related liability(5)

 

(448

)

 

—

 

 

(604

)

 

—

 

Reduction in Tax Indemnification Receivable(6)

 

—

 

 

—

 

 

147

 

 

—

 

Adjusted EBITDA

 

$

13,795

 

 

$

13,960

 

 

$

44,961

 

 

$

39,878

 

(1)

Transaction expenses include $1.2 million and $3.9 million of expenses incurred by us for the three and nine months ended September 30, 2021, respectively, for legal and accounting fees and other costs in connection with the Secondary Offering, and other registration statements, and the refinancing of our 2020 Credit Facilities. Transaction expenses of $6.0 million for the three and nine months ended September 30, 2020, include $4.0 million in legal, accounting, and professional fees in connection with the Reorganization Transaction and IPO and $2.0 million in loss on extinguishment of debt related to the termination of the 2019 Credit Facilities.

 

(2)

Employee-related costs include $0.3 million and $0.5 million of expenses incurred by us for the three and nine months ended September 30, 2021, respectively, 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 include $0.3 million and $0.8 million of expenses incurred by us for the three and nine months ended September 30, 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). During the three months ended June 30, 2021, we updated our Adjusted EBITDA definition to exclude these costs and accordingly determined that it was appropriate to recast our Adjusted EBITDA calculation for the three months ended March 31, 2021 to exclude these costs of $0.2 million.

 

(4)

Settlement costs include $0.8 million of expenses incurred by us for the three and nine months ended September 30, 2021, to settle certain claims made by the Attorney General's Office of the State of Washington.

 

(5)

Changes in TRA related liability includes $0.4 million and $0.6 million of income for the three and nine months ended September 30, 2021, respectively, due to a change in the estimated future state tax benefits and other changes in the estimate resulting in reduction of the TRA liability created in connection with the Reorganization Transactions.

 

(6)

Reduction in Tax Indemnification Receivable includes $0.1 million of expenses incurred by us for the nine months ended September 30, 2021 related to a reduction in the tax indemnification receivable recorded in connection with the Reorganization Transactions.

 

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Investors Denise Garcia Hayflower Partners Denise@HayflowerPartners.com

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