- Fourth quarter revenue of
$117 million, down 6% year over year; Full year revenue of$388 million , down 15% year over year - Fourth quarter Transaction Value of
$165 million, down 2% year over year; Full year Transaction Value of$593 million , down 20% year over year- Fourth quarter Transaction Value from Property & Casualty down 4% year over year to
$54 million ; Full year Transaction Value from Property & Casualty down 31% year over year to$278 million - Fourth quarter Transaction Value from Health flat year over year at
$98 million ; Full year Transaction Value from Health up 3% year over year to$260 million
- Fourth quarter Transaction Value from Property & Casualty down 4% year over year to
“Our fourth quarter results exceeded expectations, driven primarily by improving conditions in our Property & Casualty (P&C) insurance vertical,” said
Fourth Quarter 2023 Financial Results
- Revenue of
$117.2 million , a decrease of 6% year over year; - Transaction Value of
$165.3 million , a decrease of 2% year over year; - Gross margin of 19.0%, compared with 16.2% in the fourth quarter of 2022;
- Contribution Margin(1) of 21.4%, compared with 18.5% in the fourth quarter of 2022;
- Net loss of
$(3.3) million , compared with$(28.4) million in the fourth quarter of 2022; and - Adjusted EBITDA(1) of 12.7 million, compared with 9.0 million in the fourth quarter of 2022.
Full Year 2023 Financial Results
- Revenue of
$388.1 million , a decrease of 15% year over year; - Transaction Value of
$593.4 million , a decrease of 20% year over year; - Gross margin of 17.2%, compared with 15.3% in 2022;
- Contribution Margin(1) of 20.1%, compared with 17.6% in 2022;
- Net loss of
$(56.6) million , compared with$(72.4) million in 2022; and - Adjusted EBITDA(1) of
$27 .1 million, compared with$22 .9 million in 2022.
(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
Our guidance for Q1 2024 reflects an improvement in market conditions in our P&C insurance vertical compared with Q4 2023. In our Health vertical, we expect mid- to high-single digit year-over-year growth in Transaction Value. In our Life and Other verticals, we expect Transaction Value to be slightly down year over year. Due to the uncertainty around the timing and slope of the P&C market recovery, we are not providing full year 2024 guidance.
For the first quarter of 2024,
- Transaction Value between
$175 million -$190 million , representing a 6% year-over-year decline at the midpoint of the guidance range. We expect P&C Transaction Value to nearly double in Q1 2024 compared with Q4 2023, driven by both an accelerating recovery in carrier marketing spending and normal seasonality; - Revenue between
$105 million -$115 million , representing a 1% year-over-year decline at the midpoint of the guidance range; - Adjusted EBITDA between
$9.5 million -$11.5 million , representing a 45% year-over-year increase at the midpoint of the guidance range. We expect Adjusted EBITDA to grow at a greater rate than Transaction Value, Revenue and Contribution in Q1 2024 due to our primarily fixed operating expense profile. We expect Contribution less Adjusted EBITDA in Q1 2024 to be approximately$0.5 -$1.0 million higher than Q4 2023.
With respect to the Company’s projections of Adjusted EBITDA and Contribution under “Financial Outlook,”
For a detailed explanation of the Company’s non-GAAP measures, please refer to the appendix section of this press release.
Conference Call Information
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 that Transaction Value in our P&C vertical will nearly double in the first quarter on a sequential basis; our expectation that our growth will accelerate as more auto insurance carriers restore profitability and increase their marketing investments; and our financial outlook for the first quarter of 2024. 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
Non-GAAP Financial Measures and Operating Metrics
This press release includes Adjusted EBITDA 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 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, we believe that Transaction Value, Adjusted EBITDA and Contribution Margin provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team and board of directors. Each of Transaction Value, Adjusted EBITDA 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.
Contacts:
Investors
Denise@HayflowerPartners.com
Consolidated Balance Sheets (In thousands, except share data and per share amounts) | |||||||
As of | |||||||
2023 (unaudited) | 2022 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 17,271 | $ | 14,542 | |||
Accounts receivable, net of allowance for credit losses of | 53,773 | 59,998 | |||||
Prepaid expenses and other current assets | 3,529 | 5,880 | |||||
Total current assets | $ | 74,573 | $ | 80,420 | |||
Intangible assets, net | 26,015 | 32,932 | |||||
47,739 | 47,739 | ||||||
Other assets | 5,598 | 8,990 | |||||
Total assets | $ | 153,925 | $ | 170,081 | |||
Liabilities and stockholders' deficit | |||||||
Current liabilities | |||||||
Accounts payable | 56,279 | 53,992 | |||||
Accrued expenses | 11,588 | 14,130 | |||||
Current portion of long-term debt | 11,854 | 8,770 | |||||
Total current liabilities | $ | 79,721 | $ | 76,892 | |||
Long-term debt, net of current portion | 162,445 | 174,300 | |||||
Other long-term liabilities | 6,184 | 4,973 | |||||
Total liabilities | $ | 248,350 | $ | 256,165 | |||
Commitments and contingencies (Note 8) | |||||||
Stockholders' (deficit): | |||||||
Class A common stock, | 474 | 437 | |||||
Class B common stock, | 181 | 189 | |||||
Preferred stock, | — | — | |||||
Additional paid-in capital | 511,613 | 465,523 | |||||
Accumulated deficit | (522,562 | ) | (482,142 | ) | |||
Total stockholders' (deficit) attributable to | $ | (10,294 | ) | $ | (15,993 | ) | |
Non-controlling interests | (84,131 | ) | (70,091 | ) | |||
Total stockholders' (deficit) | $ | (94,425 | ) | $ | (86,084 | ) | |
Total liabilities and stockholders' deficit | $ | 153,925 | $ | 170,081 |
Consolidated Statements of Operations (In thousands, except share data and per share amounts) | |||||||
Year ended | |||||||
2023 (unaudited) | 2022 | ||||||
Revenue | $ | 388,149 | $ | 459,072 | |||
Costs and operating expenses | |||||||
Cost of revenue | 321,437 | 389,013 | |||||
Sales and marketing | 25,432 | 28,816 | |||||
Product development | 18,458 | 21,077 | |||||
General and administrative | 62,746 | 55,556 | |||||
Total costs and operating expenses | 428,073 | 494,462 | |||||
(Loss) from operations | (39,924 | ) | (35,390 | ) | |||
Other expense (income), net | 1,779 | (75,094 | ) | ||||
Interest expense | 15,315 | 9,245 | |||||
Total other expense (income), net | 17,094 | (65,849 | ) | ||||
(Loss) income before income taxes | (57,018 | ) | 30,459 | ||||
Income tax (benefit) expense | (463 | ) | 102,905 | ||||
Net (loss) | $ | (56,555 | ) | $ | (72,446 | ) | |
Net (loss) attributable to non-controlling interest | (16,135 | ) | (14,780 | ) | |||
Net (loss) attributable to | $ | (40,420 | ) | $ | (57,666 | ) | |
Net (loss) per share of Class A common stock | |||||||
-Basic and diluted | $ | (0.89 | ) | $ | (1.37 | ) | |
Weighted average shares of Class A common stock outstanding | |||||||
-Basic and diluted | 45,573,416 | 41,944,874 |
Consolidated Statements of Operations (In thousands, except share data and per share amounts) | |||||||
Three months ended | |||||||
2023 (unaudited) | 2022 (unaudited) | ||||||
Revenue | $ | 117,174 | $ | 124,007 | |||
Costs and operating expenses | |||||||
Cost of revenue | 94,892 | 103,864 | |||||
Sales and marketing | 5,630 | 6,782 | |||||
Product development | 3,933 | 4,909 | |||||
General and administrative | 12,273 | 14,987 | |||||
Total costs and operating expenses | 116,728 | 130,542 | |||||
Income (loss) from operations | 446 | (6,535 | ) | ||||
Other expense (income), net | 614 | (83,217 | ) | ||||
Interest expense | 3,918 | 3,337 | |||||
Total other expense (income), net | 4,532 | (79,880 | ) | ||||
(Loss) income before income taxes | (4,086 | ) | 73,345 | ||||
Income tax (benefit) expense | (793 | ) | 101,695 | ||||
Net (loss) | $ | (3,293 | ) | $ | (28,350 | ) | |
Net (loss) attributable to non-controlling interest | (927 | ) | (1,385 | ) | |||
Net (loss) attributable to | $ | (2,366 | ) | $ | (26,965 | ) | |
Net (loss) per share of Class A common stock | |||||||
-Basic and diluted | $ | (0.05 | ) | $ | (0.63 | ) | |
Weighted average shares of Class A common stock outstanding | |||||||
-Basic and diluted | 46,991,824 | 42,989,666 |
Consolidated Statements of Cash Flows (In thousands) | |||||||
Year ended | |||||||
2023 (unaudited) | 2022 | ||||||
Cash Flows from operating activities | |||||||
Net (loss) | $ | (56,555 | ) | $ | (72,446 | ) | |
Adjustments to reconcile net (loss) to net cash provided by operating activities: | |||||||
Equity-based compensation expense | 53,321 | 58,472 | |||||
Non-cash lease expense | 695 | 753 | |||||
Depreciation expense on property and equipment | 353 | 392 | |||||
Amortization of intangible assets | 6,917 | 5,755 | |||||
Amortization of deferred debt issuance costs | 793 | 832 | |||||
Change in fair value of contingent consideration | — | (7,007 | ) | ||||
Impairment of cost method investment | 1,406 | 8,594 | |||||
Credit losses | 5 | 136 | |||||
Deferred taxes | — | 102,656 | |||||
Tax receivables agreement liability related adjustments | 6 | (83,832 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 6,220 | 17,335 | |||||
Prepaid expenses and other current assets | 2,287 | 4,507 | |||||
Other assets | 500 | 417 | |||||
Accounts payable | 2,287 | (7,796 | ) | ||||
Accrued expenses | 1,996 | (494 | ) | ||||
Net cash provided by operating activities | $ | 20,231 | $ | 28,274 | |||
Cash flows from investing activities | |||||||
Purchases of property and equipment | (73 | ) | (98 | ) | |||
Cash consideration paid in connection with CHT acquisition | — | (49,677 | ) | ||||
Net cash (used in) investing activities | $ | (73 | ) | $ | (49,775 | ) | |
Cash flows from financing activities | |||||||
Proceeds received from: | |||||||
Revolving line of credit | — | 25,000 | |||||
Payments made for: | |||||||
Repayments on revolving line of credit | — | (20,000 | ) | ||||
Repayments on long-term debt | (9,500 | ) | (9,500 | ) | |||
Payments pursuant to tax receivable agreement | (2,822 | ) | (216 | ) | |||
Shares withheld for taxes on vesting of restricted stock units | (3,721 | ) | (4,023 | ) | |||
Repurchases of Class A common stock | — | (5,008 | ) | ||||
Contributions from QLH’s members | 1,464 | 1,360 | |||||
Distributions | (2,850 | ) | (2,134 | ) | |||
Net cash (used in) financing activities | $ | (17,429 | ) | $ | (14,521 | ) | |
Net increase (decrease) in cash and cash equivalents | 2,729 | (36,022 | ) | ||||
Cash and cash equivalents, beginning of period | 14,542 | 50,564 | |||||
Cash and cash equivalents, end of period | $ | 17,271 | $ | 14,542 | |||
Key business and operating metrics and Non-GAAP financial measures
Transaction Value
We define “Transaction Value” as the total gross dollars transacted by our partners on our platform. Transaction Value is an operating metric not presented in accordance with GAAP, and is a driver of revenue based on the economic relationships we have with our partners. Our partners use our platform to transact via Open and
The following table presents Transaction Value by platform model for the three months and full years ended
Three months ended | Full year ended | |||||||||||||||
(dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
$ | 115,162 | $ | 121,942 | $ | 378,730 | $ | 445,950 | |||||||||
Percentage of total Transaction Value | 69.6 | % | 72.2 | % | 63.8 | % | 60.5 | % | ||||||||
50,184 | 46,972 | 214,708 | 291,564 | |||||||||||||
Percentage of total Transaction Value | 30.4 | % | 27.8 | % | 36.2 | % | 39.5 | % | ||||||||
Total Transaction Value | $ | 165,346 | $ | 168,914 | $ | 593,438 | $ | 737,514 | ||||||||
The following table presents Transaction Value by vertical for the three months and full years ended
Three months ended | Full year ended | |||||||||||||||
(dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Property & Casualty insurance | $ | 54,247 | $ | 56,682 | $ | 277,552 | $ | 399,861 | ||||||||
Percentage of total Transaction Value | 32.8 | % | 33.6 | % | 46.8 | % | 54.2 | % | ||||||||
Health insurance | 98,372 | 98,561 | 259,822 | 251,400 | ||||||||||||
Percentage of total Transaction Value | 59.5 | % | 58.3 | % | 43.8 | % | 34.1 | % | ||||||||
Life insurance | 8,015 | 8,181 | 34,057 | 44,619 | ||||||||||||
Percentage of total Transaction Value | 4.8 | % | 4.8 | % | 5.7 | % | 6.0 | % | ||||||||
Other(1) | 4,712 | 5,490 | 22,007 | 41,634 | ||||||||||||
Percentage of total Transaction Value | 2.9 | % | 3.3 | % | 3.7 | % | 5.6 | % | ||||||||
Total Transaction Value | $ | 165,346 | $ | 168,914 | $ | 593,438 | $ | 737,514 |
(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 costs; internet and hosting costs; 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. For example, if Contribution increases and our headcount costs and other operating expenses remain steady, our Adjusted EBITDA and operating leverage increase. If Contribution Margin decreases, we may choose to re-evaluate and re-negotiate our revenue share agreements with our supply partners, to make optimization and pricing changes with respect to our bids for keywords from primary traffic acquisition sources, or to change our overall cost structure with respect to headcount, fixed costs and other costs. Other companies may calculate Contribution and Contribution Margin differently than we do. Contribution and Contribution Margin have their limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results presented in accordance with GAAP.
The following table reconciles Contribution with gross profit, the most directly comparable financial measure calculated and presented in accordance with GAAP, for the three months and full years ended
Three months ended | Full year ended | |||||||||||||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Revenue | $ | 117,174 | $ | 124,007 | $ | 388,149 | $ | 459,072 | ||||||||
Less cost of revenue | (94,892 | ) | (103,864 | ) | (321,437 | ) | (389,013 | ) | ||||||||
Gross profit | 22,282 | 20,143 | 66,712 | 70,059 | ||||||||||||
Adjusted to exclude the following (as related to cost of revenue): | ||||||||||||||||
Equity-based compensation | 916 | 997 | 3,875 | 3,634 | ||||||||||||
Salaries, wages, and related | 850 | 877 | 3,682 | 3,556 | ||||||||||||
Internet and hosting | 161 | 147 | 579 | 496 | ||||||||||||
Depreciation | 8 | 11 | 38 | 41 | ||||||||||||
Other expenses | 179 | 189 | 692 | 720 | ||||||||||||
Other services | 696 | 573 | 2,491 | 2,171 | ||||||||||||
Merchant-related fees | 18 | 10 | 32 | 109 | ||||||||||||
Contribution | 25,110 | 22,947 | 78,101 | 80,786 | ||||||||||||
Gross Margin | 19.0 | % | 16.2 | % | 17.2 | % | 15.3 | % | ||||||||
Contribution Margin | 21.4 | % | 18.5 | % | 20.1 | % | 17.6 | % | ||||||||
Adjusted EBITDA
We define “Adjusted EBITDA” as net income excluding interest expense, income tax benefit (expense), depreciation expense on property and equipment, 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.
Adjusted EBITDA is not presented in accordance with GAAP and should not be considered in isolation of, or as an alternative to, measures presented in accordance with GAAP. There are a number of limitations related to the use of Adjusted EBITDA rather than net income, which is the most directly comparable financial measure calculated and presented in accordance with GAAP. These limitations include the fact that Adjusted EBITDA excludes interest expense on debt, income tax benefit (expense), equity-based compensation expense, depreciation and amortization, and certain other adjustments that we consider to be useful to investors and others in understanding and evaluating our operating results. In addition, other companies may use other measures to evaluate their performance, including different definitions of “Adjusted EBITDA,” which could reduce the usefulness of our Adjusted EBITDA as a tool for comparison.
The following table reconciles Adjusted EBITDA with net (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, for the three months and full years ended
Three months ended | Full year ended | |||||||||||||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Net (loss) | $ | (3,293 | ) | $ | (28,350 | ) | $ | (56,555 | ) | $ | (72,446 | ) | ||||
Equity-based compensation expense | 9,378 | 14,256 | 53,321 | 58,472 | ||||||||||||
Interest expense | 3,918 | 3,337 | 15,315 | 9,245 | ||||||||||||
Income tax (benefit) expense (1) | (793 | ) | 101,695 | (463 | ) | 102,905 | ||||||||||
Depreciation expense on property and equipment | 78 | 97 | 353 | 392 | ||||||||||||
Amortization of intangible assets | 1,729 | 1,691 | 6,917 | 5,755 | ||||||||||||
Transaction expenses(2) | 88 | — | 641 | 636 | ||||||||||||
SOX implementation costs(3) | — | — | — | 110 | ||||||||||||
Fair value adjustment to contingent consideration(4) | — | (416 | ) | — | (7,007 | ) | ||||||||||
Impairment of cost method investment | — | — | 1,406 | 8,594 | ||||||||||||
Changes in TRA related liability(5) | — | (83,255 | ) | 6 | (83,832 | ) | ||||||||||
Changes in Tax Indemnification Receivable(6) | 687 | (14 | ) | 639 | (58 | ) | ||||||||||
Settlement of federal and state income tax refunds(7) | 2 | — | 5 | 92 | ||||||||||||
Legal expenses(8) | 885 | — | 4,303 | — | ||||||||||||
Reduction in force costs (9) | — | — | 1,233 | — | ||||||||||||
Adjusted EBITDA | $ | 12,679 | $ | 9,041 | $ | 27,121 | $ | 22,858 |
(1) | Income tax (benefit) expense for the three months and year ended |
(2) | Transaction expenses for the three months and year ended |
(3) | SOX implementation costs consist of |
(4) | Fair value adjustment to contingent consideration for the three months and year ended |
(5) | Changes in TRA related liability for the year ended |
(6) | Changes in Tax Indemnification Receivable consists of |
(7) | Settlement of federal and state tax refunds consist of immaterial expense incurred by us for the three months and year ended |
(8) | Legal expenses of |
(9) | Reduction in force costs for the year ended |
Source:
2024 GlobeNewswire, Inc., source