MediaAlpha, Inc. Q1 FY2025 earnings call

• Q1 Performance: Record first quarter financial results exceeded guidance, driven by strength in P&C insurance vertical. Health insurance vertical performance in line with expectations, with strategic shift to Medicare Advantage.
• FTC Matter: Engaging in constructive dialogue with FTC staff, increased reserve related to matter by $5 million, total reserve at $12 million.
• Q2 Guidance: Anticipate P&C transaction value to grow ~65%-75% YOY. Consolidated Q2 transaction value expected between $470M-$495M, revenue $235M-$255M, adjusted EBITDA $25M-$27M. Overhead expected to increase sequentially by ~$500K-$1M. Generated $20M cash flow, ended quarter with ~$64M cash, net debt-to-adjusted EBITDA ratio <1x.
• Business Shifts: Exiting travel vertical by end of Q2; scaling back under-65 health business to focus on Medicare Advantage.

P&C Insurance Vertical: Q1 transaction value was up 200% year-over-year, driven by robust growth investments from carriers with solid underlying profitability in personal auto insurance. Health Insurance Vertical: Q1 transaction value was down 17% year-over-year. Strategic decision to scale back under-65 business, with focus shifting to Medicare Advantage. Q2 health vertical transaction value expected to be down 25%-30%, with Medicare expected to account for over 40% of the segment's transaction value. Financials: Q1 transaction value was $473 million, up 116% YOY. Adjusted EBITDA doubled YOY to $29.4 million, representing 67% of contribution. Exited travel vertical by end of Q2, which contributed ~$1 million in transaction value and $100,000 in profit in Q1.

• Q2 P&C transaction value expected to grow ~65%-75% YOY.
• Q2 health vertical transaction value expected down 25%-30%, with Medicare accounting for over 40% of segment's transaction value.
• Consolidated Q2 transaction value between $470M-$495M, revenue $235M-$255M, adjusted EBITDA $25M-$27M.
• Anticipate converting significant portion of adjusted EBITDA to unlevered free cash flow due to operating efficiencies.

• Automotive tariff development could pressure profitability as year progresses.
• Uncertainty around outcome of FTC Matter, with $12 million reserve recorded.
• Potential impact of macroeconomic conditions on carrier spending and market dynamics.

Q: Maria Ripps on carrier spend in second-half of year and tariffs A: Steve Yi discussed continued optimism in auto insurance marketplace due to strong underlying profitability, gradual market competition, and new carriers shifting to growth focus. Pat Thompson added on vertical mix impact on open vs private exchange.

Q: Cory Carpenter on P&C pricing in March and scaling back under-65 health business A: Steve Yi said March showed strong demand from carriers due to greater budget access. Pat Thompson explained scaling back under-65 business is part of strategic shift to Medicare Advantage, not directly related to FTC changes.

Q: Tommy McJoynt on health business scaling back and Medicare Advantage market A: Pat Thompson explained scaling back under-65 business is rebaselining, with Medicare Advantage market in temporary hard cycle but long-term opportunity. Steve Yi added bipartisan support and favorable payment rates for Medicare Advantage.

Q: Mike Zaremski on contribution margin ratio decline A: Pat Thompson said factors include take rate decline, P&C becoming larger portion of business, and compression from larger publishers.

Q: Andrew Kligerman on private vs open exchange and CHT write-down A: Steve Yi explained more transactions to flow to open exchange as recovery gains momentum. Pat Thompson discussed CHT write-down due to underperformance and sunsetting of social marketing activities.

Q: Eric Sheridan on investments and macroeconomic variability A: Pat Thompson discussed lean operations, past belt-tightening during hard markets, and readiness to adjust investments based on market conditions.

Q: Ben Hendrix on Medicare Advantage carrier actions A: Steve Yi and Pat Thompson discussed temporary nature of hard market cycle in Medicare Advantage, carriers adjusting for profitability, and long-term opportunity for growth online.