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, 2015. The Company will host a live
conference call today, Wednesday, May 13, 2015 at 5:00 p.m.
EDT.
First Quarter 2015 Consolidated Financial
Highlights
- Revenue was $22.5 million, an increase of 25.7% over $17.9
million in the first quarter of 2014.
- Total collections from customers, which our industry refers to
as premium equivalents, was $38.3 million, an increase of 23.5%
over $31.0 million in the first quarter of 2014.
- EPS per diluted share was $0.01, compared to a net loss of
$0.01 in the first quarter of 2014.
- Adjusted EBITDA was $0.3 million, compared to $1.4 million in
the first quarter of 2014.
- Adjusted EPS was $0.01, compared to $0.06 in the first quarter
of 2014.
See Reconciliations for collections
from customers, Adjusted EBITDA and Adjusted EPS within this press
release.
"We are pleased with our year-over-year revenue growth of 25.7%
during the first quarter," said Michael Kosloske, HII's Chief
Executive Officer and President. "As expected, our short term
medical sales were unfavorably impacted during the first quarter by
the government's annual enrollment and the one-time special tax
enrollment period for ACA plans, which just ended on April 30th. We
are excited to have now entered our stronger selling season when
the vast majority of health insurance shoppers are locked out of
buying ACA plans. Looking forward, we believe that our leadership
position in the growing ACA alternative and supplement market, the
new term medical products we are bringing to market, as well as our
strategic assets of HealthPocket.com and AgileHealthInsurance.com,
all position us for sustained growth and market leadership."
HealthPocket.com and AgileHealthInsurance.com
Update
Headquartered in Mountain View, CA, HealthPocket, Inc. was
acquired by HII in July 2014. HealthPocket provides consumers with
access to its leading health insurance information as well as
search and comparison technology through www.healthpocket.com. This
free website allows consumers to easily compare and rank all health
insurance plans available.
HealthPocket's key metrics for the first quarter were as
follows:
- Health Plan Queries of approximately 667,000, representing 133%
growth in the number of queries over the first quarter of 2014.
A Health Plan Query is registered for each consumer that
receives a health insurance quote on healthpocket.com.
- Client Referrals of approximately 128,000, representing 146%
growth over the number of referrals in the first quarter of
2014. Client Referrals are targeted phone and online referrals
sold by HealthPocket to fulfillment partners or handled in-house by
one of HII's owned distributors.
- Referral Mix of approximately 87%. Referral Mix is the
percentage of Client Referrals that are core to HII's business and
available for purchase from HealthPocket by HII and its strategic
partners.
See HealthPocket key metrics, within
this press release.
"We were very pleased with HealthPocket's strong growth in user
adoption, which we measure by health plan queries and
referrals. We well exceeded our goal of fulfilling more
than 50% of HealthPocket's Client Referrals thru HII and its key
distribution partners, and we are making good progress leveraging
HealthPocket's data to bring to market new and affordable health
insurance options for consumers," said Bruce Telkamp, CEO of
HealthPocket, Inc. and HII's Direct to Consumer
Division. "During the first quarter, we also made substantial
technology and marketing investments into HII's new direct to
consumer business, AgileHealthInsurance.com, which we launched on
May 5th. We are very excited about Agile and believe
online sales will swiftly become a significant and incremental
sales channel for HII," continued Telkamp.
First Quarter Financial Discussion
Comparability between the quarters ended March 31, 2015 and 2014
is affected by two acquisitions made during the third quarter of
2014. For the quarter ended March 31, 2015, we operated as
two operating segments: 1) Insurance Plan Development and
Distribution ("IPD") and 2) HealthPocket. For the quarter
ended March 31, 2014, we operated as a single operating segment:
IPD. The IPD segment comprises our business activities in
designing, implementing and administering STM and other products
and the distribution of those products to consumers via our
distribution network or online purchases. The HealthPocket
segment comprises the business activities of HealthPocket,
including the development of HealthPocket.com and the generation of
referral-based and other revenues. The financial discussion
below is made at a consolidated level. Refer to the table
that shows the financial results of our operating segments for the
three months ended March 31, 2015 in this press release.
First quarter revenues of $22.5 million and premium equivalents
of $38.3 million increased by 25.7% and 23.5%,
respectively, over the same metrics for the first quarter of
2014. The increases were primarily due to the increase in the
total number of policies in force as a result of our continuing
expansion of our distribution network and attachment of ancillary
products to our core medical products. A reconciliation of
premium equivalents to revenues for the three months ended March
31, 2015, and 2014, is in the financial supplement included in this
press release. By policy type, the 2015 first quarter mix of
revenues was as follows: 54% short-term medical, 18% hospital
indemnity, and 28% ancillary products, compared to 61% short-term
medical, 17% hospital indemnity, and 22% ancillary products for the
first quarter of 2014.
Adjusted gross margin, which is calculated starting with
revenues and then adjusted for third party commissions, and credit
card and ACH fees, increased to $11.2 million or 29.2% of premium
equivalents for the first quarter of 2015, compared to $8.7 million
of adjusted gross margin and 28.1% of premium equivalents in the
same period in 2014. A reconciliation of premium equivalents
to revenues and adjusted gross margin for the three months ended
March 31, 2015 and 2014 is included within this press release.
Selling, general and administrative ("SG&A") expenses were
$11.2 million in the first quarter of 2015, compared to $7.9
million in 2014. The increase in SG&A expense was
primarily driven by the impact of acquisitions and investments in
growth initiatives to drive sustainable growth in 2015 and
beyond.
EBITDA was $0.7 million in the first quarter of 2015, compared
to $0.1 million in the same period in 2014. 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 and other non-cash items such as stock-based
compensation. Adjusted EBITDA was $0.3 million in the first
quarter of 2015, compared to $1.4 million in the same period in
2014. A reconciliation of net income (loss) to EBITDA and
Adjusted EBITDA for the first quarter of 2015 and 2014 is included
within this press release.
Cash and short term investments totaled $10.5 million at the end
of the first quarter of 2015, and the Company has no debt. In
December 2014, HII entered into a three year revolving line of
credit for $15 million with SunTrust Bank, N.A. The
establishment of this credit facility is consistent with the
Company's strategy of ensuring that the company has more than ample
liquidity to fund operations.
2015 Outlook
HII expects year-over-year revenue growth and
profitability in 2015
"We will continue our record of profitable growth, while making
key investments to capitalize on the large market opportunity
in front of us. Our top investment areas are launching
new affordable alternatives and supplements to ACA Marketplace
plans and a scalable online distribution platform for our
proprietary health plans. We expect substantial sales
contribution from these investments in the second half of this
year. Most importantly, we believe these investments
will drive market leadership, long term growth and value for HII,"
stated Kosloske.
Our focus for 2015 continues to build on our four key business
model strengths:
1) Affordable products that are
alternatives and supplements to ACA Marketplace plans
2) Year-round Product
Availability 3) Data-driven
Product Development 4) Our newly
launched Direct-to-Consumer Channel
Conference Call and Webcast
The company will host a live earnings conference call today at
5:00 p.m. Eastern time. All interested parties can join the
call by dialing (877) 312-8797; or (678) 825-8236; the
conference ID is 19884597. 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 millions 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. HII's data-centric, paperless
business model is facilitated by its Consumer Division that
provides real-time data used to identify opportunities and
underserved needs in the health insurance market. Additional
information about HII can be found at HiiQuote.com. HII's Consumer
Division includes AgileHealthInsurance.com, a website for
researching, comparing and purchasing Term Health insurance
products and HealthPocket.com, an independently managed 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 our current assumptions, expectations and belief
and 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 our 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, 2014 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 us 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.
HealthPocket Key Metrics
Health Plan Queries and Client Referrals are estimated metrics
for HealthPocket website and phone activity. HealthPocket
updates its tracking methodology periodically but does not apply or
change its new methodology for reporting periods that were
completed prior to the update.
Condensed Consolidated
Balance Sheets |
($ in thousands, except
share and per share data) |
|
|
|
|
March 31, 2015 |
December 31,
2014 |
|
(unaudited) |
|
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$10,517 |
$16,154 |
Cash held on behalf of
others |
4,756 |
5,744 |
Short-term investments |
— |
461 |
Accounts receivable, net,
prepaid expenses and other current assets |
1,887 |
2,332 |
Advanced commissions |
8,022 |
5,973 |
Note receivable |
1,014 |
— |
Income taxes receivable |
115 |
12 |
Total current assets |
26,311 |
30,676 |
Property and equipment, net |
996 |
526 |
Goodwill |
41,076 |
41,076 |
Intangible assets, net |
12,829 |
13,565 |
Other assets |
1,204 |
329 |
Total assets |
$82,416 |
$86,172 |
Liabilities and stockholders'
equity |
|
|
Current liabilities: |
|
|
Accounts payable and accrued
expenses |
$9,330 |
$11,397 |
Current portion of contingent
acquisition consideration |
2,254 |
2,647 |
Deferred revenue |
150 |
64 |
Deferred tax liability |
13 |
13 |
Due to member |
229 |
229 |
Other current liabilities |
192 |
189 |
Total current liabilities |
12,168 |
14,539 |
Contingent acquisition consideration |
1,205 |
1,753 |
Deferred tax liability |
1,896 |
2,287 |
Due to member |
512 |
387 |
Other liabilities |
442 |
494 |
Total liabilities |
16,223 |
19,460 |
Commitments and contingencies (Note 10) |
|
|
Stockholders' equity: |
|
|
Class A common stock (par value $0.001
per share, 100,000,000 shares authorized; 7,910,085 and 7,900,085
shares issued, respectively; and 7,640,356 and 7,852,941
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 |
44,637 |
42,647 |
Treasury stock, at cost (269,729 and 47,144
shares, respectively) |
(2,793) |
(347) |
Accumulated deficit |
(3,641) |
(3,694) |
Total Health Insurance
Innovations, Inc. stockholders' equity |
38,218 |
38,621 |
Noncontrolling interests |
27,975 |
28,091 |
Total stockholders' equity |
66,193 |
66,712 |
Total liabilities and
stockholders' equity |
$82,416 |
$86,172 |
|
Condensed Consolidated
Statements of Operations |
(Unaudited) |
($ in thousands, except
share and per share data) |
|
|
|
|
Three Months
Ended March 31, |
|
2015 |
2014 |
Revenues (premium equivalents of $38,281 and
$30,951 for the three months ended March 31, 2015 and 2014,
respectively) |
$22,541 |
$17,927 |
|
|
|
Operating expenses: |
|
|
Third-party commissions |
10,834 |
8,882 |
Credit card and ACH fees |
485 |
359 |
Selling, general and
administrative |
11,164 |
7,914 |
Depreciation and
amortization |
784 |
405 |
Total operating expenses |
23,267 |
17,560 |
(Loss) income from
operations |
(726) |
367 |
|
|
|
Other (income) expense: |
|
|
Interest income |
(7) |
(15) |
Fair value adjustment to
contingent acquisition consideration |
(491) |
722 |
Other income |
(148) |
(60) |
Net loss before income taxes |
(80) |
(280) |
Benefit for income taxes |
(336) |
(32) |
Net income (loss) |
256 |
(248) |
Net income (loss) attributable
to noncontrolling interests |
203 |
(174) |
Net income (loss) attributable to Health
Insurance Innovations, Inc. |
$53 |
$ (74) |
|
|
|
Per share data: |
|
|
Net income (loss) per share
attributable to Health Insurance Innovations, Inc. |
|
|
Basic |
$0.01 |
$(0.01) |
Diluted |
$0.01 |
$(0.01) |
Weighted average Class A shares
outstanding |
|
|
Basic |
7,515,053 |
5,025,669 |
Diluted |
7,714,339 |
5,025,669 |
|
Segment Operating
Results |
(Unaudited) |
($ in
thousands) |
|
|
|
|
|
For the three months ended March
31, 2015, we operated as two reportable segments: 1) Insurance Plan
Development and Distribution ("IPD") and 2) HealthPocket. For the
three months ended March 31, 2014, we operated as a single
reportable segment, IPD. The IPD segment comprises our business
activities in designing, implementing and administering STM and
other products and the distribution of those products to consumers
via our call center distribution network and online purchasing. The
HealthPocket segment comprises the business activities of
HealthPocket, including the development of HealthPocket.com and
generation of referral-based and other revenues. Intercompany
revenues are based on contracted rates for services provided, which
generally are referrals provided by HealthPocket to IPD. |
|
|
|
|
|
The following table shows the
financial results of our operating segments for the three months
ended March 31, 2015 ($ in thousands). For the three months ended
March 31, 2014, we operated as a single reportable segment. |
|
|
|
|
|
|
IPD |
HP |
Inter-Segment
Eliminations |
Consolidated
Total |
Revenues |
$22,112 |
$664 |
$(235) |
$22,541 |
Other operating expenses |
21,413 |
1,305 |
(235) |
22,483 |
Depreciation and amortization |
464 |
320 |
— |
784 |
Total operating expenses |
21,877 |
1,625 |
(235) |
23,267 |
Other income |
(646) |
— |
— |
(646) |
Net income (loss) before income taxes |
881 |
(961) |
— |
(80) |
Provision (benefit) for income taxes |
54 |
(390) |
— |
(336) |
Net income (loss) |
827 |
(571) |
— |
256 |
Total assets as of March 31, 2015 |
$53,198 |
$29,953 |
$(735) |
$82,416 |
|
Reconciliation of Net
Income (Loss) to EBITDA and Adjusted EBITDA |
(Unaudited) |
($ in
thousands) |
|
|
|
|
Three months
ended March 31, |
|
2015 |
2014 |
Net income (loss) |
$256 |
$(248) |
Interest income |
(7) |
(15) |
Depreciation and amortization |
784 |
405 |
Benefit for income taxes |
(336) |
(32) |
EBITDA (1) |
697 |
110 |
Non-cash stock-based compensation |
61 |
405 |
Fair value adjustment to contingent
consideration |
(491) |
722 |
Transaction costs |
24 |
137 |
Tax receivable agreement liability
adjustment |
125 |
— |
Other non-recurring charges |
(70) |
— |
Adjusted EBITDA (2) |
$346 |
$1,374 |
|
|
|
(1) EBITDA is defined as
net income (loss) before interest expense, income taxes and
depreciation and amortization. We have included EBITDA in this
report because it is a key measure used by our management and Board
of Directors to understand and evaluate our core operating
performance and trends, to prepare and approve our annual budget
and to develop short- and long-term operational plans. In
particular, the exclusion of certain expenses in calculating EBITDA
can provide a useful measure for period-to-period comparisons of
our business. However, EBITDA does not represent, and should not be
considered as, an alternative to net income or cash flows from
operations, each as determined in accordance with GAAP. Other
companies may calculate EBITDA differently than we do. EBITDA has
limitations as an analytical tool, and you should not consider it
in isolation or as a substitute for analysis of our results as
reported under GAAP. |
|
|
|
(2) To calculate adjusted EBITDA,
we calculate EBITDA, which is then further adjusted for items that
are not part of regular operating activities, including acquisition
costs, contract termination costs, and other non-cash items such as
non-cash stock-based compensation. Adjusted EBITDA does not
represent, and should not be considered as, an alternative to net
income or cash flows from operations, each as determined in
accordance with GAAP. We have presented adjusted EBITDA because we
consider it an important supplemental measure of our performance
and believe that it is frequently used by analysts, investors and
other interested parties in the evaluation of companies. Other
companies may calculate adjusted EBITDA differently than we do.
Adjusted EBITDA has limitations as an analytical tool, and you
should not consider it in isolation or as a substitute for analysis
of our results as reported under GAAP. |
|
Reconciliation of
Premium Equivalents to Revenues & Adjusted Gross
Margin |
(Unaudited) |
($ in
thousands) |
|
|
|
|
Three months
ended March 31, |
|
2015 |
2014 |
Premium equivalents |
$38,281 |
$30,951 |
Less risk premium |
14,906 |
12,340 |
Less amounts earned by third
party obligors |
834 |
684 |
Revenues |
22,541 |
17,927 |
Third-party commissions |
10,834 |
8,882 |
Credit card and ACH fees |
485 |
359 |
Adjusted gross margin |
$11,222 |
$8,686 |
|
|
|
(1) Premium equivalents is
defined as the combination of premiums, fees for discount benefit
plans, and enrollment fees. All amounts not paid out as risk
premium to carriers or paid out to other third-party obligors are
considered to be revenues for financial reporting purposes. We have
included premium equivalents in this report because it is a key
measure used by our management to understand and evaluate our core
operating performance and trends, to prepare and approve our annual
budget and to develop short- and long-term operational plans. In
particular, the inclusion of premium equivalents can provide a
useful measure for period-to-period comparisons of our business.
This financial measurement is considered a non-GAAP financial
measure and is not recognized under generally accepted accounting
principles in the United States of America ("GAAP") and should not
be used as, and is not an alternative to, revenues as a measure of
our operating performance. |
|
|
|
(2) Adjusted gross margin is
defined as revenue less third party commissions and credit card and
ACH fees. Adjusted gross margin does not represent, and should
not be considered as, an alternative to revenues, as determined in
accordance with GAAP. Adjusted gross margin is a key measure used
by our management to understand and evaluate our core operating
performance and trends, to prepare and approve our annual budget
and to develop short-term and long-term operational plans. In
particular, adjusted gross margin can provide a useful measure for
period-to-period comparisons of our business. Adjusted gross margin
has limitations as an analytical tool, and you should not consider
it in isolation or as a substitute for analysis of our results as
reported under GAAP. |
Reconciliation of
Adjusted EBITDA to Adjusted Net Income per Share |
(Unaudited) |
($ in thousands except
per share data) |
|
|
|
|
Three months
ended March 31, |
|
2015 |
2014 |
Adjusted EBITDA (1) |
$346 |
$1,374 |
Depreciation |
(48) |
(30) |
Adjusted pre-tax income |
298 |
1,344 |
Provision for income taxes |
(113) |
(511) |
Adjusted net income (2) |
$185 |
$833 |
Total diluted share count |
14,556 |
13,593 |
Adjusted net income per share (3) |
$0.01 |
$0.06 |
|
|
|
(1) Adjusted EBITDA is
calculated as set forth above under Reconciliation of Net Income
(Loss) to EBITDA and Adjusted EBITDA. |
|
|
|
(2) 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. |
|
|
|
(3) 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. |
CONTACT: Health Insurance Innovations, Inc.:
Michael Hershberger
Interim Chief Financial Officer
(877) 376-5831 ext. 282
mhershberger@hiiquote.com
Investor Contact:
Susan Noonan
S.A. Noonan Communications, LLC
(212) 966-3650
susan@sanoonan.com
Media Contact for HealthPocket.com:
Kevin McVicker
Shirley & Banister Public Affairs
(703) 739-5920 or (800) 536-5920
kmcvicker@sbpublicaffairs.com
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