MediaAlpha, Inc. (NYSE:MAX) Q1 2024 Earnings Call Transcript May 4, 2024
MediaAlpha, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Hello and thank you for standing by. At this time, I would like to welcome everyone to the MediaAlpha, Inc. First Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Alex Liloia. Please go ahead.
Alex Liloia: Thank you, Jericho. After the market closed today, MediaAlpha issued a press release and shareholder letter announcing results for the first quarter ended March 31st, 2024. These documents are available in the Investors section of our website and we’ll be referring to them on this call. Our discussion today will include forward-looking statements about MediaAlpha’s business and outlook for future financial results, including its financial guidance for the second quarter of 2024, which are based on assumptions, forecasts, expectations, and information currently available to management. These forward-looking statements are subject to risks and uncertainties that could cause future results or events to differ materially from those reflected in those statements.
Please refer to the Company’s SEC filings, including its annual report on Form 10-K and its quarterly reports on Form 10-Q, for a fuller explanation of those risks and uncertainties, and the limits applicable to forward-looking statements. These forward-looking statements are based on assumptions as of today, May 1st, 2024, and the Company undertakes no obligation to revise or update them. In addition, on today’s call we will be referring to certain actual and projected financial metrics of MediaAlpha that are presented on a non-GAAP basis, including adjusted EBITDA and contribution, which we present in order to supplement your understanding and assessment of our financial performance. Non-GAAP measures should not be considered as a substitute for or superior to financial measures calculated in accordance with GAAP.
Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our press release and shareholder letter issued today. Finally, I would like to remind everyone that this call is being recorded and will be made available for replay via a link on the Investors section of the Company’s website at investors.mediaalpha.com. Now I’ll turn the call over to Steve and Pat for a few introductory remarks before opening the call to your questions.
Steve Yi: Hey, thanks, Alex. Hi, everyone. Welcome to our first quarter 2024 earnings call. I’d like to make a few comments before turning the call over to our CFO, Pat Thompson for his remarks. We’ve had an outstanding start to the year. Our first quarter results exceeded the high end of our guidance ranges across the board, as we saw increasingly strong step-ups in marketing investments by our P&C carrier partners during the back half of the quarter. We’re confident that we’re now firmly in the midst of an auto insurance market recovery, and we’re expecting strong year-over-year growth in our second quarter P&C transaction value. First quarter results in our health insurance vertical were also above expectations. This is driven by continued strength in our under-65 business as well as opportunistic carrier spend in Medicare.
We expect high-single to low-double-digit year-over-year transaction value growth in our health insurance business in the upcoming second quarter. As auto insurance carriers’ rate increases continue to significantly outpace moderating loss cost inflation, the P&C industry’s recovery from a period of unprecedented underwriting losses is quickly gaining momentum. We expect these favorable market conditions to be sustained for the remainder of this year and beyond, as an increasing number of carriers achieve rate adequacy and begin to reinvest in customer acquisition. We believe these positive trends will enable us to drive meaningful cash flow growth and shareholder value in the years to come. Finally, Eugene Nonko, my Co-Founder and the Company’s Chief Technology Officer, will be transitioning out of his current role at the end of the year and handing the reins to Amy Yeh, our SVP of Technology.
Amy has worked closely with Eugene during her nine years at MediaAlpha and will take over as our CTO in 2025. I would like to personally thank Eugene for all he has done over his 13 years with the Company. Without him, of course, we would not be where we are today. With that, I’ll turn the call over to Pat.
Patrick Thompson: Thanks, Steve. I’ll begin with a few comments on our first quarter financial results and other recent business and market developments, before reviewing our second quarter financial guidance and opening the call up for questions. As Steve mentioned earlier, our first quarter results exceeded the high end of our guidance ranges across all metrics, with year-over-year transaction value and adjusted EBITDA growth of 13% and 98%, respectively. Transaction value in our P&C insurance vertical was up 150% quarter-over-quarter, driven by strong step-ups in marketing spend during the back half of the first quarter by our carrier partners, especially our largest advertiser. Transaction value in our health vertical was also up 16% year-over-year, above expectations.
The adjusted EBITDA increase of $7.1 million year-over-year was driven by higher contribution and lower overhead. We are in a very different place now than where we were at this time last year, when carriers were significantly pulling back on marketing spend. We expect 60% to 70% sequential growth in P&C transaction value, driven by a continuation of the positive trends we’ve been seeing. In health, we expect transaction value to grow at a high-single to low-double-digit rate year-over-year. Moving to our consolidated financial guidance, we expect Q2 transaction value to be between $285 million and $300 million, a year-over-year increase of 132% at the midpoint. We expect revenue to be between $145 million and $155 million a year-over-year increase of 77% at the midpoint.
We expect adjusted EBITDA to be between $15.5 million and $17.5 million a year-over-year increase of 359% at the midpoint, driven by higher contribution. We expect overhead to be approximately $500,000 higher than Q1 2024, lastly Q2 legal costs associated with the ongoing FTC inquiry are expected to be approximately $1 million, similar to Q1. Finally, a few comments on expenses and profitability going forward. We continue to have measured hiring plans for 2024 and expect limited overhead growth for the full year. Given our lean team and capital efficient model, we expect to generate significant operating leverage and adjusted EBITDA as our top line growth accelerates. Cash flow is expected to follow suit and our near-term priority remains on using excess cash to reduce net debt.
To the extent attractive alternative capital deployment opportunities arise, we will reassess at that time. With that operator, we are ready for the first question.
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