Revenue Up 10.3% over Q3
2014
Record Policies in Force
Health Insurance Innovations, Inc. (HII) (NASDAQ:HIIQ), a leading
developer, distributor, and virtual administrator of affordable
health plans today announced financial results for the third
quarter ended September 30, 2015. The Company will host a live
conference call today Monday, November 9, 2015 at 5:00 p.m.
EST.
Third Quarter 2015 Consolidated Financial
Highlights
- Revenue was $25.8 million, an increase of 10.3% over $23.4
million in the third quarter of 2014.
- Adjusted EBITDA was $1.9 million, compared to $1.8 million in
the third quarter of 2014.
- Adjusted EPS was $0.08, compared to $0.08 in the third quarter
of 2014.
- GAAP EPS (diluted) was net income of $0.10, compared to a net
loss of $(0.09) in the third quarter of 2014.
- Record policies in force as of September 30, 2015, totaled
approximately 137,000, a 32% increase from 104,000 as of September
30, 2014.
- After the end of 3Q15, Pat McNamee, HII President, was also
named CEO.
See the reconciliations for premium
equivalents, adjusted EBITDA, and adjusted EPS within this press
release.
"During the third quarter 2015, our total policies in-force
increased to a record 137,000 at the end of the third quarter, up
32% year-over-year and 21% sequentially. Growth occurred in our
individual and family plans as well as the supplemental products as
we continue to meet the consumer's needs," said Pat McNamee, HII
President and CEO. "Total submitted policies for the quarter were
up 55% year over year, providing visibility of future revenue in
the upcoming quarters. Approximately 75% of the submitted policies
from Q3 were from owned or exclusive distribution
channels."
HII's combination of unique technology, cost-effective products
and expanded distribution channels is driving sales
growth. Mr. McNamee noted, "We opened our Agile eCommerce
store in mid-May and Agile is now our largest distributor of STM
products and our second largest distributor across all product
categories. Agile sold 1,300 STM policies in July and sold
more than 5,800 STM policies during the full third
quarter. And our 4th quarter Agile online sales are off to a
very exciting start. Our vision for Agile is to be the online
leader in the STM and related ancillary product categories. We
expect Agile to attain scale and become profitable over the next 12
to 18 months."
2015 Full Year Guidance
For the full year 2015 we expect revenue between $97 million -
$103 million and adjusted earnings per share between $0.18 -
$0.25.
Third Quarter Financial Discussion
Third quarter revenues of $25.8 million increased by 10.3%, as
compared to the third 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 27.6% of premium equivalents for
the third quarter of 2015, compared to 27.3% of premium equivalents
in the same period in 2014. A reconciliation of premium
equivalents to revenues and adjusted gross margin for the three and
nine months ended September 30, 2015 and 2014 is included within
this press release.
Selling, general and administrative ("SG&A") expenses were
$10.8 million in the third quarter of 2015, compared to $11.4
million in 2014. During the quarter, we capitalized
approximately $370,000 in Internally Developed Software at our
consumer division, further enhancing our technology
advantage. Our owned call centers in particular improved
efficiencies in operations primarily through improved lead
management.
EBITDA was $1.5 million in the third quarter of 2015, compared
to a loss of $0.2 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 $1.9
million in the third quarter of 2015, compared to $1.8 million in
the same period in 2014. A reconciliation of net (loss) income
to EBITDA and adjusted EBITDA for the three and nine months ended
September 30, 2015 and 2014 is included within this press
release.
Adjusted earnings per share were $0.08 compared with $0.08 last
year. GAAP EPS were $0.10 compared with a loss of $0.09 last
year.
Cash and short-term investments totaled $7.9 million at the end
of the third quarter of 2015. Cash decreased by $0.9 million during
the quarter, primarily due to a $4.5 million increase in advanced
commissions during the quarter that we provide to our distributors.
As of the end of the third quarter 2015, our advanced commissions
to our distributors totaled about $14.5 million. We borrowed
$2.5 million on our bank line of credit in the third quarter,
primarily to fund the advance commissions.
Submitted applications and policies in force for the three
months ended September 30, 2015 were as follows:
|
Submitted
Applications during Three Months Ended September 30, |
|
|
2015 |
2014 |
Change (%) |
IFP |
45,000 |
33,000 |
36% |
Supplemental products |
45,000 |
25,000 |
80% |
Total |
90,000 |
58,000 |
55% |
|
Policies in Force
As of September 30, |
|
|
2015 |
2014 |
Change (%) |
IFP |
61,000 |
52,000 |
17% |
Supplemental products |
76,000 |
52,000 |
46% |
Total |
137,000 |
104,000 |
32% |
Conference Call and Webcast
The company will host an earnings conference call today at 5:00
p.m. Eastern time. All interested parties can join the call
by dialing (877) 407-9039; or (201) 689-8470; the
conference ID is 13623035. A webcast of the call may
be accessed in the Investor Relations section of Health Insurance
Innovations' website at http://investor.hiiquote.com/events.com.
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, 2014 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) |
|
|
September 30,
2015 |
December 31,
2014 |
|
(unaudited) |
|
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 7,929 |
$ 16,154 |
Cash held on behalf of
others |
5,459 |
5,744 |
Short-term investments |
— |
461 |
Accounts receivable, net,
prepaid expenses and other current assets |
1,690 |
2,332 |
Advanced commissions |
14,510 |
5,973 |
Note receivable |
1,014 |
— |
Income taxes receivable |
568 |
12 |
Total current assets |
31,170 |
30,676 |
Property and equipment, net |
1,722 |
526 |
Goodwill |
41,076 |
41,076 |
Intangible assets, net |
11,502 |
13,565 |
Other assets |
782 |
329 |
Total assets |
$ 86,252 |
$ 86,172 |
Liabilities and stockholders'
equity |
|
|
Current liabilities: |
|
|
Accounts payable and accrued
expenses |
$ 11,823 |
$ 11,397 |
Deferred revenue |
153 |
64 |
Current portion of contingent
acquisition consideration |
1,246 |
2,647 |
Deferred tax liability |
13 |
13 |
Due to member |
229 |
229 |
Other current liabilities |
199 |
189 |
Total current liabilities |
13,663 |
14,539 |
Revolving line of credit |
2,500 |
— |
Contingent acquisition consideration |
— |
1,753 |
Deferred tax liability |
1,589 |
2,287 |
Due to member |
733 |
387 |
Other liabilities |
241 |
494 |
Total liabilities |
18,726 |
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 7,760,383 and 7,852,941 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 |
44,228 |
42,647 |
Treasury stock, at cost (149,702 and 47,144
shares, respectively) |
(1,536) |
(347) |
Accumulated deficit |
(3,236) |
(3,694) |
Total Health Insurance
Innovations, Inc. stockholders' equity |
39,471 |
38,621 |
Noncontrolling interests |
28,055 |
28,091 |
Total stockholders' equity |
67,526 |
66,712 |
Total liabilities and
stockholders' equity |
$ 86,252 |
$ 86,172 |
|
|
|
|
|
HEALTH INSURANCE
INNOVATIONS, INC.
Condensed Consolidated Statements of Operations
(Unaudited) ($ in thousands, except share and per
share data)
|
|
|
Three Months
Ended September 30, |
Nine Months Ended
September 30, |
|
2015 |
2014 |
2015 |
2014 |
Revenues (premium equivalents of $43,404 and
$42,240 for the three months ended September 30, 2015 and 2014,
respectively and $120,216 and $110,375 for the nine months ended
September 30, 2015 and 2014, respectively) |
$ 25,799 |
$ 23,364 |
$ 71,087 |
$ 62,228 |
Operating expenses: |
|
|
|
|
Third-party commissions |
13,243 |
11,377 |
35,337 |
30,577 |
Credit card and ACH fees |
569 |
534 |
1,581 |
1,367 |
Selling, general and
administrative |
10,845 |
11,387 |
32,360 |
27,875 |
Depreciation and
amortization |
687 |
907 |
2,255 |
1,723 |
Total operating expenses |
25,344 |
24,205 |
71,533 |
61,542 |
Income (loss) from
operations |
455 |
(841) |
(446) |
686 |
|
|
|
|
|
Other (income) expense: |
|
|
|
|
Interest income |
(8) |
-- |
(25) |
(17) |
Fair value adjustment to
contingent acquisition consideration |
(438) |
131 |
(824) |
939 |
Other expense (income) |
83 |
144 |
(170) |
18 |
Net income (loss) before income taxes |
818 |
(1,116) |
573 |
(254) |
Benefit for income taxes |
(701) |
(332) |
(664) |
(205) |
Net income (loss) |
1,519 |
(784) |
1,237 |
(49) |
Net income (loss) attributable
to noncontrolling interests |
788 |
(172) |
779 |
364 |
Net income (loss) attributable to Health
Insurance Innovations, Inc. |
$ 731 |
$ (612) |
$ 458 |
$ (413) |
|
|
|
|
|
Per share data: |
|
|
|
|
Net income (loss) per share
attributable to Health Insurance Innovations, Inc. |
|
|
|
|
Basic |
$ 0.10 |
$ (0.09) |
$ 0.06 |
$ (0.07) |
Diluted |
$ 0.10 |
$ (0.09) |
$ 0.06 |
$ (0.07) |
Weighted average Class A common
shares outstanding |
|
|
|
|
Basic |
7,531,827 |
6,532,161 |
7,521,124 |
5,538,422 |
Diluted |
7,571,464 |
6,532,161 |
7,613,433 |
5,538,422 |
|
Reconciliation of Net
(Loss) Income to EBITDA and Adjusted EBITDA
(Unaudited) ($ in thousands) |
|
|
Three Months
Ended September 30, |
Nine Months Ended
September 30, |
|
2015 |
2014 |
2015 |
2014 |
Net income (loss) |
$ 1,519 |
$ (784) |
$ 1,237 |
$ (49) |
Interest income |
(8) |
— |
(25) |
(17) |
Depreciation and amortization |
687 |
907 |
2,255 |
1,723 |
Benefit for income taxes |
(701) |
(332) |
(664) |
(205) |
EBITDA |
1,497 |
(209) |
2,803 |
1,452 |
Non-cash stock-based compensation |
314 |
843 |
1,001 |
1,608 |
Fair value adjustment to contingent
consideration |
(438) |
130 |
(824) |
939 |
Transaction costs |
— |
523 |
24 |
753 |
Tax receivable agreement liability
adjustment |
239 |
194 |
345 |
194 |
Other non-recurring charges |
273 |
363 |
671 |
363 |
Adjusted EBITDA |
$ 1,885 |
$ 1,844 |
$ 4,020 |
$ 5,309 |
(1) EBITDA is defined as net (loss) 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, 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 September 30, |
Nine Months Ended
September 30, |
|
2015 |
2014 |
2015 |
2014 |
Premium equivalents |
$ 43,404 |
$ 42,240 |
$ 120,216 |
$ 110,375 |
|
Less risk premium |
16,728 |
17,901 |
46,596 |
45,711 |
|
Less amounts earned by third
party obligors |
877 |
975 |
2,533 |
2,436 |
|
Revenues |
25,799 |
23,364 |
71,087 |
62,228 |
|
Third-party commissions |
13,243 |
11,377 |
35,337 |
30,577 |
|
Credit card and ACH fees |
569 |
534 |
1,581 |
1,367 |
|
Adjusted gross margin |
$ 11,987 |
$ 11,453 |
$ 34,169 |
$ 30,284 |
|
(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 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 September 30, |
Nine Months Ended
September 30, |
|
2015 |
2014 |
2015 |
2014 |
Adjusted EBITDA |
$ 1,885 |
$ 1,844 |
$ 4,020 |
$ 5,309 |
Depreciation |
(96) |
(45) |
(191) |
(111) |
Adjusted pre-tax income |
1,789 |
1,799 |
3,829 |
5,198 |
Provision for income taxes |
(680) |
(684) |
(1,455) |
(1,975) |
Adjusted net income |
$ 1,109 |
$ 1,115 |
$ 2,374 |
$ 3,223 |
Total weighted average diluted share
count |
14,413 |
13,374 |
14,455 |
12,380 |
Adjusted net income per share |
$ 0.08 |
$ 0.08 |
$ 0.16 |
$ 0.26 |
(1) Adjusted EBITDA is calculated as set forth above under
Reconciliation of Net (Loss) Income 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
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 HealthPocket.com:
Kevin McVicker
Shirley & Banister Public Affairs
(703) 739-5920 or (800) 536-5920
kmcvicker@sbpublicaffairs.com
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