Business Wire | Mar 11, 2021 04:06PM EST

MediaAlpha Announces Fourth Quarter and Full Year 2020 Financial Results

Mar. 11, 2021

LOS ANGELES--(BUSINESS WIRE)--Mar. 11, 2021--MediaAlpha, Inc. (NYSE: MAX), today announced its financial results for the fourth quarter and full year ended December 31, 2020.

"The resilience of our team amidst the challenges we all faced in 2020 was truly inspiring, and it was a key component of our success in Q4 and the year overall," said Steve Yi, MediaAlpha Co-founder and CEO. "Our Health insurance vertical delivered record-breaking performance, driven by increased demand from carriers and brokers during the strongest Open Enrollment Period and Annual Enrollment Period we've seen. Our Property & Casualty insurance vertical also continued to dominate the industry, as key carriers actually increased their budgets with us in what has historically been a seasonally soft quarter. We enter 2021 energized as to what we can accomplish."

Fourth Quarter 2020 Financial Results

* Revenue of $190.2 million, an increase of 51% year-over-year; * Transaction Value of $256.9 million, an increase of 51% year-over-year; * Gross margin of 13.9%, as compared to 16.1% from the same period in 2019; * Contribution Margin(1) of 16.2%, as compared to 17.0% from the same period in 2019; * Net income was $(13.2) million, as compared to $10.4 million in the fourth quarter of 2019; and * Adjusted EBITDA(1) was $18.2 million, compared to Adjusted EBITDA of $13.9 million in the fourth quarter of 2019

Full Year 2020 Financial Results

* Revenue of $584.8 million, an increase of 43% year-over-year; * Transaction Value of $815.7 million, an increase of 46% year-over-year; * Gross margin of 14.6%, as compared to 16.0% in 2019; * Contribution Margin of 15.8%, as compared to 17.0% in 2019; * Net income was $10.6 million, as compared to $17.8 million in 2019; and * Adjusted EBITDA was $58.1 million, compared to Adjusted EBITDA of $42.9 million in 2019

(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 first quarter of 2021, MediaAlpha currently expects the following:

* Transaction Value between $250 - $260 million, representing 54% year-over-year growth at the midpoint of the guidance range * Revenue between $170 - $175 million, representing 44% year-over-year growth at the midpoint of the guidance range * Contribution between $26 - $28 million, representing 37% year-over-year growth at the midpoint of the guidance range * Adjusted EBITDA between $16 - $17 million, representing 30% year-over-year growth at the midpoint of the guidance range

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

* Transaction Value between $1,000 - $1,050 million, representing 26% year-over-year growth at the midpoint of the guidance range * Revenue between $700 - $740 million, representing 23% year-over-year growth at the midpoint of the guidance range * Contribution between $108 - $117 million, representing 21% year-over-year growth at the midpoint of the guidance range * Adjusted EBITDA between $64 - $66 million, representing 12% year-over-year growth at the midpoint of the guidance range

We expect total shares outstanding to be 59.4 million and 64.4 million on a basic and fully diluted basis, respectively, at the end of Q1 2021.

With respect to the Company's projections of Contribution and Adjusted EBITDA under "Financial Discussion - Q1 and FY 2021 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 fourth quarter and full year 2020 results 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#2458015. 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 first 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 final prospectus filed with the SEC pursuant to Rule 424(b) promulgated under the Securities Act of 1933, as amended (the "Securities Act"), on October 29, 2020 and the Annual Report on Form 10-K that will be filed following this press release. 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.

Condensed Consolidated Balance Sheets

(In thousands)



As of December 31,

2020 2019



Assets

Current assets

Cash and cash equivalents $ 23,554 $ 10,028

Accounts receivable, net of allowance for doubtful 96,295 56,012 accounts

Prepaid expenses and other current assets 7,950 1,448

Total current assets $ 127,799 $ 67,488

Property and equipment, net 762 755

Intangible assets, net 15,551 18,752

Goodwill 18,402 18,402

Deferred tax assets 35,210 -

Other non-current assets 16,210

Total assets $ 213,934 $ 105,397

Liabilities, Redeemable Class A units and Stockholders'/Members' (Deficit)

Current liabilities

Accounts payable 98,249 40,455

Accrued expenses 9,206 6,584

Current portion of long-term debt - 873

Total current liabilities $ 107,455 $ 47,912

Long-term debt, net of current portion 182,668 96,665

Liabilities under tax receivable agreement 22,498 -

Other long-term liabilities 2,834 319

Total liabilities $ 315,455 $ 144,896

Redeemable Class A units - 74,097

Stockholders'/members' deficit $ (101,521 ) $ (113,596 )

Total liabilities and stockholders'/members' $ 213,934 $ 105,397 deficit

MediaAlpha, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data and per share amounts)

Year ended December 31,

2020

2019

Revenue

$

584,814

$

408,005

Cost and operating expenses

Cost of revenue

499,434

342,909

Sales and marketing

20,483

13,822

Product development

12,449

7,042

General and administrative

32,913

19,391

Total cost and operating expenses

565,279

383,164

Income from operations

19,535

24,841

Other expense

2,302

-

Interest expense

7,938

7,021

Total other expense

10,240

7,021

Income before income taxes

9,295

17,820

Income tax (benefit)

(1,267

)

-

Net income

$

10,562

$

17,820

Net income attributable to MediaAlpha, Inc.

$

(4,366

)

$

17,820

Net loss per share of Class A common stock - basic and

diluted (1)

$

(0.14

)

-

Weighted average shares of Class A common stock

outstanding - basic and diluted (1)

32,134,170

-

MediaAlpha, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data and per share amounts)



Year ended December 31,

2020 2019



Revenue $ 584,814 $ 408,005

Cost and operating expenses

Cost of revenue 499,434 342,909

Sales and marketing 20,483 13,822

Product development 12,449 7,042

General and administrative 32,913 19,391

Total cost and operating expenses 565,279 383,164

Income from operations 19,535 24,841

Other expense 2,302 -

Interest expense 7,938 7,021

Total other expense 10,240 7,021

Income before income taxes 9,295 17,820

Income tax (benefit) (1,267 ) -

Net income $ 10,562 $ 17,820

Net income attributable to MediaAlpha, Inc. $ (4,366 ) $ 17,820

Net loss per share of Class A common stock - basicand $ (0.14 ) -

diluted ^(1)

Weighted average shares of Class A common stock 32,134,170 -outstanding - basic and diluted ^(1)

(1)

Represents net loss per share of Class A common stock and weighted-average shares of Class A common stock outstanding for the portion of the period following the IPO and related pre-IPO reorganization transactions.

Represents net loss per share of Class A common stock and weighted-average(1) shares of Class A common stock outstanding for the portion of the period following the IPO and related pre-IPO reorganization transactions.

MediaAlpha, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

Year ended December 31,

2020

2019

Cash Flows from operating activities

Net income

10,562

$

17,820

Adjustments to reconcile net income to net cash provided by operating activities:

Non-cash equity-based compensation expense

24,745

2,308

Depreciation expense on property and equipment

289

272

Amortization of intangible assets

3,201

5,381

Amortization of deferred debt issuance costs

1,228

665

Loss on extinguishment of debt

1,998

-

Bad debt expense

526

354

Deferred taxes

(545

)

-

Tax receivable agreement liability adjustments

413

-

Changes in operating assets and liabilities:

Accounts receivable

(40,809

)

(19,216

)

Prepaid expenses and other current assets

(6,482

)

(162

)

Other assets

(4,375

)

-

Accounts payable

57,793

13,441

Accrued expenses

2,866

1,280

Net cash provided by operating activities

51,410

22,143

Cash flows from investing activities

Purchases of property and equipment

(296

)

(146

)

Acquisition of intangible assets

-

(148

)

Purchase of cost method investment

(10,000

)

-

Net cash (used in) investing activities

(10,296

)

(294

)

Cash flows from financing activities

Proceeds received from:

Proceeds from issuance of Class A and Class B common stock, net of underwriter commission

124,179

-

Issuance of long-term debt

210,000

100,000

Proceeds from revolving line of credit

7,500

-

Member contributions

-

62,806

Payments made for:

Repayments on revolving line of credit

(7,500

)

-

Repayments on long-term debt

(123,648

)

(15,073

)

Debt issuance costs

(4,467

)

(2,303

)

Redemption of Class B units up to fair value

(1,453

)

(4,467

)

Payment of IPO costs to third parties

(12,227

)

-

Shares withheld for taxes on vesting of restricted stock units

(4,235

)

-

Cash paid to retire Class B-1 units at QLH

(84,320

)

-

Redemption of Class A units

-

(62,806

)

Member distributions

(131,417

)

(95,640

)

Net cash (used in) financing activities

(27,588

)

(17,483

)

Net increase (decrease) in cash and cash equivalents

13,526

4,366

Cash and cash equivalents, beginning of period

10,028

5,662

Cash and cash equivalents, end of period

$

23,554

$

10,028

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 years ended December 31, 2020 and 2019.

MediaAlpha, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)



Year ended December 31,

2020 2019



Cash Flows from operating activities

Net income 10,562 $ 17,820

Adjustments to reconcile net income to net cash provided by operating activities:

Non-cash equity-based compensation expense 24,745 2,308

Depreciation expense on property and equipment 289 272

Amortization of intangible assets 3,201 5,381

Amortization of deferred debt issuance costs 1,228 665

Loss on extinguishment of debt 1,998 -

Bad debt expense 526 354

Deferred taxes (545 ) -

Tax receivable agreement liability adjustments 413 -

Changes in operating assets and liabilities:

Accounts receivable (40,809 ) (19,216 )

Prepaid expenses and other current assets (6,482 ) (162 )

Other assets (4,375 ) -

Accounts payable 57,793 13,441

Accrued expenses 2,866 1,280

Net cash provided by operating activities 51,410 22,143



Cash flows from investing activities

Purchases of property and equipment (296 ) (146 )

Acquisition of intangible assets - (148 )

Purchase of cost method investment (10,000 ) -

Net cash (used in) investing activities (10,296 ) (294 )



Cash flows from financing activities

Proceeds received from:

Proceeds from issuance of Class A and Class B 124,179 - common stock, net of underwriter commission

Issuance of long-term debt 210,000 100,000

Proceeds from revolving line of credit 7,500 -

Member contributions - 62,806



Payments made for:

Repayments on revolving line of credit (7,500 ) -

Repayments on long-term debt (123,648 ) (15,073 )

Debt issuance costs (4,467 ) (2,303 )

Redemption of Class B units up to fair value (1,453 ) (4,467 )

Payment of IPO costs to third parties (12,227 ) -

Shares withheld for taxes on vesting of restricted (4,235 ) - stock units

Cash paid to retire Class B-1 units at QLH (84,320 ) -

Redemption of Class A units - (62,806 )

Member distributions (131,417 ) (95,640 )

Net cash (used in) financing activities (27,588 ) (17,483 )



Net increase (decrease) in cash and cash 13,526 4,366 equivalents

Cash and cash equivalents, beginning of period 10,028 5,662

Cash and cash equivalents, end of period $ 23,554 $ 10,028

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 years ended December 31, 2020 and 2019.

Year Ended December 31,

(in thousands) 2020 2019

Open platform transactions $ 573,242 $ 399,945

Percentage of total Transaction Value 70.3 % 71.4 %

Private platform transactions 242,470 160,181

Percentage of total Transaction Value 29.7 % 28.6 %

Total Transaction Value $ 815,712 $ 560,126

The following table presents Transaction Value by platform model for the three months ended December 31, 2020 and 2019.

Three Months Ended December 31,

(in thousands) 2020 2019

Open platform transactions $ 187,018 $ 123,954

Percentage of total Transaction Value 72.8 % 73.1 %

Private platform transactions 69,880 45,687

Percentage of total Transaction Value 27.2 % 26.9 %

Total Transaction Value $ 256,898 $ 169,641

The following table presents Transaction Value by vertical for the years ended December 31, 2020 and 2019:

Year Ended December 31,

2020 2019

(in thousands)

Property & casualty insurance $ 549,916 $ 322,817

Percentage of total Transaction Value 67.4 % 57.6 %

Health insurance 175,539 122,320

Percentage of total Transaction Value 21.5 % 21.8 %

Life insurance 42,206 34,884

Percentage of total Transaction Value 5.2 % 6.2 %

Other 48,051 80,105

Percentage of total Transaction Value 5.9 % 14.3 %

Total Transaction Value $ 815,712 $ 560,126

The following table presents Transaction Value by vertical for the three months ended December 31, 2020 and 2019:

Three Months Ended December 31,

2020 2019

(in thousands)

Property & casualty insurance $ 158,961 $ 89,071

Percentage of total Transaction Value 61.9 % 52.5 %

Health insurance 76,800 54,151

Percentage of total Transaction Value 29.9 % 31.9 %

Life insurance 10,489 8,043

Percentage of total Transaction Value 4.1 % 4.7 %

Other 10,648 18,376

Percentage of total Transaction Value 4.1 % 10.8 %

Total Transaction Value $ 256,898 $ 169,641

Contribution and Contribution Margin

The following table reconciles Contribution and Contribution Margin with gross profit, the most directly comparable financial measure calculated and presented in accordance with GAAP, for years ended December 31, 2020 and 2019:

Year Ended December 31,

(in thousands) 2020 2019

Revenue $ 584,814 $ 408,005

Less cost of revenue (499,434 ) (342,909 )

Gross profit $ 85,380 $ 65,096

Adjusted to exclude the following (as relatedto

cost of revenue):

Equity-based compensation 2,809 181

Salaries, wages, and related 2,188 1,471

Internet and hosting 438 520

Amortization - 511

Depreciation 24 22

Other expenses 284 263

Other services 902 778

Merchant-related fees 585 452

Contribution $ 92,610 $ 69,294

Gross Margin 14.6 % 16.0 %

Contribution Margin 15.8 % 17.0 %

The following table reconciles Contribution and Contribution Margin with gross profit, the most directly comparable financial measure calculated and presented in accordance with GAAP, for three months ended December 31, 2020 and 2019:

Three Months Ended December 31,

(in thousands) 2020 2019

Revenue $ 190,205 $ 126,148

Less cost of revenue (163,742 ) (105,779 )

Gross profit $ 26,463 $ 20,369

Adjusted to exclude the following (as relatedto

cost of revenue):

Equity-based compensation 2,751 23

Salaries, wages, and related 1,013 444

Internet and hosting 110 127

Amortization - -

Depreciation 7 4

Other expenses 79 70

Other services 286 255

Merchant-related fees 138 179

Contribution $ 30,847 $ 21,471

Gross Margin 13.9 % 16.1 %

Contribution Margin 16.2 % 17.0 %

Adjusted EBITDA

The following table reconciles Adjusted EBITDA with net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, for the year ended December 31, 2020 and 2019.

Year ended December 31,

(in thousands) 2020 2019

Net income $ 10,562 $ 17,820

Equity-based compensation expense 25,536 3,594

Interest expense 7,938 7,021

Income tax (benefit) (1,267 ) -

Depreciation expense on property and equipment 289 272

Amortization of intangible assets 3,201 5,381

Transaction expenses^(1) 11,815 8,831

Adjusted EBITDA $ 58,074 $ 42,919

(1)For the twelve-months ended December 31, 2020, transaction expenses include $5.9 million in legal, and other consulting fees, $3.6 million in transaction bonus related to the IPO and related pre-IPO reorganization transactions, $2.0 million in loss on extinguishment of debt related to the termination of 2019 Credit Facilities, and $0.3 million related to reversal of tax indemnification receivable created in connection with the pre-IPO reorganization transaction. For the twelve-months ended December 31, 2019, transaction expenses included $7.2 million in legal, investment banking and other consulting fees and $1.6 million in transaction bonuses related to a transaction with Insignia in February 2019.

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 months ended December 31, 2020 and 2019.

For the twelve-months ended December 31, 2020, transaction expenses include $5.9 million in legal, and other consulting fees, $3.6 million in transaction bonus related to the IPO and related pre-IPO reorganization transactions, $2.0 million in loss on extinguishment of debt related to the termination of 2019 Credit Facilities, and $0.3 million related to(1) reversal of tax indemnification receivable created in connection with the pre-IPO reorganization transaction. For the twelve-months ended December 31, 2019, transaction expenses included $7.2 million in legal, investment banking and other consulting fees and $1.6 million in transaction bonuses related to a transaction with Insignia in February 2019.

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 months ended December 31, 2020 and 2019.

Three Months ended December 31,

(in thousands) 2020 2019

Net income $ (13,238 ) $ 10,377

Equity-based compensation expense 22,983 513

Interest expense 3,094 1,762

Income tax (benefit) (1,287 ) -

Depreciation expense on property and equipment 79 64

Amortization of intangible assets 799 1,223

Transaction expenses^(1) 5,767 -

Adjusted EBITDA $ 18,197 $ 13,939

(1)

For the three-months ended December 31, 2020, transaction expenses include $1.8 million in legal, and other consulting fees, $3.6 million in transaction bonus related to the IPO and related pre-IPO reorganization transactions, and $0.3 million related to reversal of tax indemnification receivable created in connection with the pre-IPO reorganization transaction.

Key business and operating metrics

"Transaction Value" represents 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. We utilize Transaction Value to assess revenue and to assess the overall level of transaction activity through our platform.

"Contribution" represents revenue less revenue share payments and online advertising costs, or, as reported in our consolidated statement of operations, revenue less cost of revenue, 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. 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 our online advertising, 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 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.

"Adjusted EBITDA" represents 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 transaction expenses. Adjusted EBITDA 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. In addition, presenting Adjusted EBITDA provides investors with a metric to evaluate the capital efficiency of our business.

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CONTACT: Investors Investor Relations IR@MediaAlpha.com

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