MediaAlpha Announces Second Quarter 2021 Financial Results

  • Revenue of $157 million, up 27% year over year
    • Revenue from Property & Casualty grew 23% year over year to $109 million
  • Transaction Value of $257 million, up 46% year over year

LOS ANGELES--()--MediaAlpha, Inc. (NYSE: MAX), today announced its financial results for the second quarter ended June 30, 2021.

“We had a strong second quarter, marking our eighth consecutive quarter of Transaction Value growth in excess of 40% year over year,” said Steve Yi, MediaAlpha Co-Founder and CEO. “Our focus on Transaction Value reflects our ability to successfully continue to capture market share and build our leadership as the industry moves online. We are well positioned to drive the industry’s transformation to digital advertising long-term as the most trusted customer acquisition partner to the insurance industry with the largest-scale and most transparent platform.”

Second Quarter 2021 Financial Results

  • Revenue of $157.4 million, an increase of 27% year over year;
  • Transaction Value of $256.5 million, an increase of 46% year over year;
  • Gross margin of 15.9%, compared with 15.7% in the second quarter of 2020;
  • Contribution Margin(1) of 16.9%, compared with 16.5% in the second quarter of 2020;
  • Net loss was $(0.4) million, compared with net income of $10.1 million in the second quarter of 2020; and
  • Adjusted EBITDA(1) was $14.7 million, compared with $13.2 million in the second 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 third quarter of 2021, MediaAlpha currently expects the following:

  • Transaction Value between $260 million - $270 million, representing 22% year-over-year growth at the midpoint of the guidance range;
  • Revenue between $158.0 million - $165.0 million, representing 7% year-over-year growth at the midpoint of the guidance range;
  • Contribution between $26.0 million - $28.0 million, representing 25% year-over-year growth at the midpoint of the guidance range; and
  • Adjusted EBITDA between $14.5 million - $15.5 million, representing 7% year-over-year growth at the midpoint of the guidance range.

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

  • Transaction Value between $1,050 million - $1,100 million, representing 32% year-over-year growth at the midpoint of the guidance range;
  • Revenue between $680 million - $710 million, representing 19% year-over-year growth at the midpoint of the guidance range;
  • Contribution between $114 million - $118 million, representing 25% year-over-year growth at the midpoint of the guidance range; and
  • Adjusted EBITDA between $65.0 million - $67.0 million, representing 14% year-over-year growth at the midpoint of the guidance range.

The Company expects total shares outstanding at the end of the third quarter of 2021 to be 60.3 million and 64.6 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 second quarter 2021 results and its financial outlook for the third 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 (833) 350-1346 or internationally at (236) 389-2445 with Conference ID 4065326. 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 statements regarding our financial outlook for the third 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, and the Form 10-Q as of and for the quarter ended June 30, 2021 to be filed on or about August 13, 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 shareholder letter.

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)

 

 

June 30,
2021

 

December 31,
2020

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

15,000

 

 

 

$

23,554

 

 

Accounts receivable, net of allowance for credit losses of $674 and $438, respectively

74,285

 

 

 

96,295

 

 

Prepaid expenses and other current assets

5,457

 

 

 

7,950

 

 

Total current assets

94,742

 

 

 

127,799

 

 

Property and equipment, net

1,060

 

 

 

762

 

 

Intangible assets, net

14,059

 

 

 

15,551

 

 

Goodwill

18,402

 

 

 

18,402

 

 

Deferred tax asset

92,240

 

 

 

31,613

 

 

Other assets

15,900

 

 

 

16,210

 

 

Total assets

$

236,403

 

 

 

$

210,337

 

 

Liabilities and stockholders' deficit

 

 

 

Current liabilities

 

 

 

Accounts payable

$

46,306

 

 

 

$

98,249

 

 

Accrued expenses

7,472

 

 

 

9,206

 

 

Total current liabilities

53,778

 

 

 

107,455

 

 

Long-term debt

183,344

 

 

 

182,668

 

 

Liabilities under tax receivable agreement, net of current portion

75,757

 

 

 

22,498

 

 

Other long-term liabilities

2,750

 

 

 

2,834

 

 

Total liabilities

315,629

 

 

 

315,455

 

 

Commitments and contingencies (Note 7)

 

 

 

Stockholders' (deficit):

 

 

 

Class A common stock, $0.01 par value - 1.0 billion shares authorized; 38.7 million and 33.4 million shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

387

 

 

 

334

 

 

Class B common stock, $0.01 par value - 100 million shares authorized; 21.0 million and 25.5 million shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

210

 

 

 

255

 

 

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

 

 

 

 

 

Additional paid-in capital

397,710

 

 

 

384,611

 

 

Accumulated Deficit

(418,876

)

 

 

(418,973

)

 

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

$

(20,569

)

 

 

$

(33,773

)

 

Non-controlling interest

(58,657

)

 

 

(71,345

)

 

Total stockholders' (deficit)

$

(79,226

)

 

 

$

(105,118

)

 

Total liabilities and stockholders' deficit

$

236,403

 

 

 

$

210,337

 

 

 

MediaAlpha, Inc. and subsidiaries

Consolidated Statements of Operations

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

 

 

Three months ended

June 30,

 

Six Months Ended

June 30,

 

2021

 

2020

 

2021

 

2020

Revenue

$

157,353

 

 

 

$

123,616

 

 

$

330,941

 

 

 

$

243,061

 

Cost and operating expenses

 

 

 

 

 

 

 

Cost of revenue

132,304

 

 

 

104,193

 

 

279,483

 

 

 

204,862

 

Sales and marketing

5,717

 

 

 

2,814

 

 

11,101

 

 

 

5,950

 

Product development

3,835

 

 

 

1,873

 

 

7,150

 

 

 

3,716

 

General and administrative

13,582

 

 

 

3,055

 

 

29,328

 

 

 

6,302

 

Total cost and operating expenses

155,438

 

 

 

111,935

 

 

327,062

 

 

 

220,830

 

Income from operations

1,915

 

 

 

11,681

 

 

3,879

 

 

 

22,231

 

Other expenses, net

171

 

 

 

 

 

21

 

 

 

 

Interest expense

2,237

 

 

 

1,535

 

 

4,538

 

 

 

3,250

 

Total other expense

2,408

 

 

 

1,535

 

 

4,559

 

 

 

3,250

 

(Loss) income before income taxes

(493

)

 

 

10,146

 

 

(680

)

 

 

18,981

 

Income tax (benefit)

(125

)

 

 

 

 

(489

)

 

 

 

Net (loss) income

$

(368

)

 

 

$

10,146

 

 

$

(191

)

 

 

$

18,981

 

Net income attributable to QLH prior to Reorganization Transactions

 

 

 

10,146

 

 

 

 

 

18,981

 

Net (loss) attributable to non-controlling interest

(171

)

 

 

 

 

(288

)

 

 

 

Net (loss) income attributable to MediaAlpha, Inc.

$

(197

)

 

 

$

 

 

$

97

 

 

 

$

 

Net (loss) income per share of Class A common stock

 

 

 

 

 

 

 

-Basic and diluted

$

(0.01

)

 

 

$

 

 

$

0.00

 

 

 

$

 

Weighted average shares of Class A common stock outstanding

 

 

 

 

 

 

 

-Basic and diluted

37,667,432

 

 

 

 

 

35,414,548

 

 

 

 

 

MediaAlpha, Inc. and subsidiaries

Consolidated Statements of Cash Flows

(Unaudited; in thousands)

 

 

Six Months Ended

June 30,

 

2021

 

2020

Cash flows from operating activities

 

 

 

Net (loss) income

$

(191

)

 

 

$

18,981

 

 

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

 

 

 

Non-cash equity-based compensation expense

22,123

 

 

 

1,156

 

 

Depreciation expense on property and equipment

173

 

 

 

137

 

 

Amortization of intangible assets

1,492

 

 

 

1,603

 

 

Amortization of deferred debt issuance costs

694

 

 

 

226

 

 

Bad debt expense

235

 

 

 

219

 

 

Deferred taxes

(865

)

 

 

 

 

Tax receivable agreement liability adjustments

(156

)

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

21,775

(974

)

Prepaid expenses and other current assets

2,472

 

 

 

(261

)

 

Other assets

310

 

 

 

(4,625

)

 

Accounts payable

(51,940

)

 

 

25,167

 

 

Accrued expenses

(1,922

)

 

 

(2,344

)

 

Net cash (used in) provided by operating activities

(5,800

)

 

 

39,285

 

 

Cash flows from investing activities

 

 

 

Purchases of property and equipment

(470

)

 

 

(92

)

 

Purchase of cost method investment

 

 

 

(10,000

)

 

Net cash (used in) investing activities

(470

)

 

 

(10,092

)

 

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

)

 

Repayments on long-term debt

 

 

 

(812

)

 

Repurchase of Class B units at QLH up to fair value

 

 

 

(1,453

)

 

Distributions

(110

)

 

 

(10,527

)

 

Shares withheld for taxes on vesting of restricted stock units

(2,174

)

 

 

 

 

Net cash (used in) financing activities

(2,284

)

 

 

(12,792

)

 

Net (decrease) increase in cash and cash equivalents

(8,554

)

 

 

16,401

 

 

Cash and cash equivalents, beginning of period

23,554

 

 

 

10,028

 

 

Cash and cash equivalents, end of period

$

15,000

 

 

 

$

26,429

 

 

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 direct driver of revenue, with differing revenue recognition based on the economic relationship we have with our partners. Our partners use our platform to transact via open and private platform transactions. In our open platform model, revenue recognized represents the Transaction Value and revenue share payments to our supply partners represent costs of revenue. In our private platform 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 six months ended June 30, 2021 and 2020:

 

 

Three months ended

June 30,

 

Six months ended

June 30,

(dollars in thousands)

 

2021

 

2020

 

2021

 

2020

Open platform transactions

 

$

152,522

 

 

$

120,962

 

 

$

321,870

 

 

$

237,984

 

Percentage of total Transaction Value

 

59.5

%

 

69.0

%

 

62.0

%

 

69.7

%

Private platform transactions

 

104,005

 

 

54,245

 

 

197,119

 

 

103,271

 

Percentage of total Transaction Value

 

40.5

%

 

31.0

%

 

38.0

%

 

30.3

%

Total Transaction Value

 

$

256,527

 

 

$

175,207

 

 

$

518,989

 

 

$

341,255

 

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

 

 

Three months ended

June 30,

 

Six months ended

June 30,

(dollars in thousands)

 

2021

 

2020

 

2021

 

2020

Property & Casualty insurance

 

$

176,646

 

 

$

124,772

 

 

$

360,073

 

 

$

229,632

 

Percentage of total Transaction Value

 

68.9

%

 

71.2

%

 

69.4

%

 

67.3

%

Health insurance

 

47,240

 

 

31,743

 

 

97,583

 

 

65,089

 

Percentage of total Transaction Value

 

18.4

%

 

18.1

%

 

18.8

%

 

19.1

%

Life insurance

 

13,933

 

 

9,774

 

 

28,374

 

 

20,089

 

Percentage of total Transaction Value

 

5.4

%

 

5.6

%

 

5.5

%

 

5.9

%

Other (1)

 

18,708

 

 

8,918

 

 

32,959

 

 

26,445

 

Percentage of total Transaction Value

 

7.3

%

 

5.1

%

 

6.4

%

 

7.7

%

Total Transaction Value

 

$

256,527

 

 

$

175,207

 

 

$

518,989

 

 

$

341,255

 

(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 statement 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. “Contribution Margin” represents 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 six months ended June 30, 2021 and 2020:

 

 

Three months ended

June 30,

 

Six months ended

June 30,

(in thousands)

 

2021

 

2020

 

2021

 

2020

Revenue

 

$

157,353

 

 

 

$

123,616

 

 

 

$

330,941

 

 

 

$

243,061

 

 

Less cost of revenue

 

(132,304

)

 

 

(104,193

)

 

 

(279,483

)

 

 

(204,862

)

 

Gross profit

 

25,049

 

 

 

19,423

 

 

 

51,458

 

 

 

38,199

 

 

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

 

 

 

 

 

 

 

 

Equity-based compensation

 

442

 

 

 

20

 

 

 

842

 

 

 

41

 

 

Salaries, wages, and related

 

558

 

 

 

385

 

 

 

1,022

 

 

 

741

 

 

Internet and hosting

 

108

 

 

 

98

 

 

 

211

 

 

 

221

 

 

Other expenses

 

111

 

 

 

68

 

 

 

216

 

 

 

136

 

 

Depreciation

 

8

 

 

 

6

 

 

 

15

 

 

 

11

 

 

Other services

 

256

 

 

 

209

 

 

 

547

 

 

 

428

 

 

Merchant-related fees

 

139

 

 

 

165

 

 

 

230

 

 

 

317

 

 

Contribution

 

26,671

 

 

 

20,374

 

 

 

54,541

 

 

 

40,094

 

 

Gross margin

 

15.9

 

%

 

15.7

 

%

 

15.5

 

%

 

15.7

 

%

Contribution Margin

 

16.9

 

%

 

16.5

 

%

 

16.5

 

%

 

16.5

 

%

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 expenses 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 six months ended June 30, 2021 and 2020.

 

 

Three months ended

June 30,

 

Six months ended

June 30,

(in thousands)

 

2021

 

2020

 

2021

 

2020

Net income

 

$

(368

)

 

 

$

10,146

 

 

$

(191

)

 

 

$

18,981

 

Equity-based compensation expense

 

11,521

 

 

 

681

 

 

22,123

 

 

 

1,947

 

Interest expense

 

2,237

 

 

 

1,535

 

 

4,538

 

 

 

3,250

 

Income tax (benefit)

 

(125

)

 

 

 

 

(489

)

 

 

 

Depreciation expense on property and equipment

 

91

 

 

 

70

 

 

173

 

 

 

137

 

Amortization of intangible assets

 

746

 

 

 

799

 

 

1,492

 

 

 

1,603

 

Transaction expenses(1)

 

66

 

 

 

 

 

2,731

 

 

 

 

Employee-related costs(2)

 

99

 

 

 

 

 

349

 

 

 

 

SOX implementation costs(3)

 

297

 

 

 

 

 

449

 

 

 

 

Changes in TRA related liability(4)

 

 

 

 

 

 

(156

)

 

 

 

Reduction in Tax Indemnification Receivable(5)

 

147

 

 

 

 

 

147

 

 

 

 

Adjusted EBITDA

 

$

14,711

 

 

 

$

13,231

 

 

$

31,166

 

 

 

$

25,918

 

(1)

Transaction expenses include $0.1 million and $2.7 million of expenses incurred by us for the three and six months ended June 30, 2021, respectively, for legal, accounting, and other consulting fees in connection with the Secondary Offering.
 

(2)

Employee-related costs include $0.1 million and $0.3 million of expenses incurred by us for the three and six months ended June 30, 2021, respectively, for amounts payable to recruiting firms in connection with the hiring of certain executive officers as we transition to being a publicly-reporting company.
 

(3)

SOX implementation costs include $0.3 million and $0.4 million of expenses incurred by us for the three and six months ended June 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). For 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)

Changes in TRA related liability include $0.2 million of income for the six months ended June 30, 2021 due to a change in the estimated future state tax benefits resulting in reduction of the TRA liability created in connection with the Reorganization Transactions.
 

(5)

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

 

Contacts

Investors
Investor Relations
IR@MediaAlpha.com

Press
SHIFT
MediaAlpha@SHIFTComm.com

Contacts

Investors
Investor Relations
IR@MediaAlpha.com

Press
SHIFT
MediaAlpha@SHIFTComm.com