Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MediaAlpha Inc (MAX, Financial) achieved record transaction value and adjusted EBITDA in the third quarter, exceeding the high end of their guidance.
- The company operates the largest insurance customer acquisition media marketplace, providing a competitive advantage and strong long-term partnerships.
- Momentum in the property and casualty vertical was a key driver of success, with a 52% sequential increase in transaction value.
- MediaAlpha Inc (MAX) executed a multi-year extension with Insurify, reflecting their market leadership position.
- The company expects high conversion rates of adjusted EBITDA into cash due to operating efficiencies, including minimal capital expenditures and low working capital needs.
Negative Points
- The upcoming TCPA 1 to 1 consent rules may limit the volume of shared leads sold, although the impact on MediaAlpha Inc (MAX) is expected to be minimal.
- Transaction value growth in the health vertical is expected to be down mid-single digits year over year due to headwinds in the Medicare payer space.
- Take rates were somewhat lower as the business continued to mix to property and casualty, which is more private exchange-based.
- Overhead is expected to increase sequentially by approximately $500,000 to $1 million as the company adds headcount to support growth.
- The Medicare payer space faces challenges such as higher service utilization and lower star ratings, leading to tightened marketing budgets by some carriers.
Q & A Highlights
Q: Can you provide more context on the "middle innings" comment regarding carrier participation and any impact from hurricanes in the southeast?
A: Steven Yi, CEO, explained that the "middle innings" comment refers to the recovery being driven by a few large carriers, with many still on the sidelines. Progress is being made, but several large carriers are not yet fully participating. Geographically, states like California, New York, and New Jersey are not at normal levels due to pending rate increases. Regarding hurricanes, these events are typically non-events for MediaAlpha's marketplace, as they are heavily skewed towards auto insurance, which sees minimal disruption.
Q: How might the health business be impacted by a Republican versus Democratic administration, particularly concerning ACA and under-65 business?
A: Steven Yi, CEO, noted that MediaAlpha has grown its health insurance business under both administrations. A Republican administration might marginally benefit Medicare Advantage due to bipartisan support, while a Democratic administration could boost under-65 plans due to more marketing emphasis. Overall, the company expects to continue growing regardless of the administration, as the impacts tend to balance out.
Q: Are the budgets of carriers who resumed spending early continuing to grow, or have they leveled off?
A: Steven Yi, CEO, indicated that there is strong momentum from these carriers, with pricing potentially leveling off as more carriers return. The sustainability of media investments is supported by carriers like Progressive, who maintain that their customer acquisition costs remain within target thresholds, suggesting continued investment levels.
Q: Can you explain the expectations for lower transaction value year-over-year in the upcoming AEP, despite an active season?
A: Patrick Thompson, CFO, explained that the health vertical is expected to see a mid-single-digit decline in transaction value due to challenges in the Medicare payer space, such as higher service utilization and lower star ratings. While some carriers are reducing marketing spend, increased consumer shopping due to plan changes could benefit brokers. Overall, pricing trends are weak, but volume trends are strong, leading to a slight decline.
Q: What are the implications of the upcoming TCPA 1 to 1 consent rules for MediaAlpha's business?
A: Steven Yi, CEO, stated that the new TCPA rules, effective January 2025, will limit shared lead volumes but are expected to have minimal impact on MediaAlpha. Shared leads constitute only 5-6% of their transaction value, and the marketplace's focus on clicks rather than leads mitigates potential effects.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
