Business Wire | Nov 10, 2021 04:06PM EST

MediaAlpha Announces Third Quarter 2021 Financial Results

Nov. 10, 2021

LOS ANGELES--(BUSINESS WIRE)--Nov. 10, 2021--MediaAlpha, Inc. (NYSE: MAX), today announced its financial results for the third quarter ended September 30, 2021.

"We faced headwinds in the third quarter. While our Transaction Value grew 17% year over year, we underperformed relative to expectations due to market challenges in our property and casualty (P&C) insurance vertical," said Steve Yi, CEO of MediaAlpha. "Many of our P&C carrier partners are experiencing higher than expected insurance losses, driven by a post-pandemic increase in accident frequency and severity, as well as elevated catastrophe losses. These carriers are taking actions to restore profitability and have temporarily scaled back their marketing investments, and we are reducing our full year guidance accordingly. But the secular shift to direct, online customer acquisition remains powerful, and we are confident that growth in the auto insurance advertising market, and our results, will bounce back as underwriting profitability is restored. Importantly, our other verticals are unaffected by these trends, and our Health insurance vertical, in particular, continued its robust growth and is expected to have a strong fourth quarter."

Third Quarter 2021 Financial Results

* Revenue of $152.7 million, an increase of 1% year over year; * Transaction Value of $255.1 million, an increase of 17% year over year; * Gross margin of 16.2%, compared with 13.7% in the third quarter of 2020; * Contribution Margin(1) of 17.1%, compared with 14.3% in the third quarter of 2020; * Net loss was $(4.3) million, compared with net income of $4.8 million in the third quarter of 2020; and * Adjusted EBITDA(1) was $13.8 million, compared with $14.0 million in the third 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 fourth quarter of 2021, MediaAlpha currently expects the following:

* Transaction Value between $241 million - $256 million, representing a 3% year-over-year decline at the midpoint of the guidance range; * Revenue between $151 million - $161 million, representing an 18% year-over-year decline at the midpoint of the guidance range; * Contribution between $25 million - $28 million, representing a 13% year-over-year decline at the midpoint of the guidance range; and * Adjusted EBITDA between $13 million - $15 million, representing a 23% year-over-year decline at the midpoint of the guidance range.

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

* Transaction Value between $1,015 million - $1,030 million, representing 25% year-over-year growth at the midpoint of the guidance range; * Revenue between $635 million - $645 million, representing 9% year-over-year growth at the midpoint of the guidance range; * Contribution between $106 million - $109 million, representing 16% year-over-year growth at the midpoint of the guidance range; and * Adjusted EBITDA between $58 million - $60 million, representing 2% year-over-year growth at the midpoint of the guidance range.

The Company expects total shares outstanding at the end of the fourth quarter of 2021 to be 60.6 million and 64.4 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 third quarter 2021 results and its financial outlook for the fourth 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 (888) 330-2022 or (646) 960-0690, with passcode 3195092. 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 without limitation statements regarding our expectation of growth once the P&C insurance market recovers, and our financial outlook for the fourth 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, the Form 10-Q filed on August 13, 2021, and the Form 10-Q as of and for the quarter ended September 30, 2021 to be filed on or about November 12, 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 press release.

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)

September December 31, 30, 2020 2021

Assets

Current assets

Cash and cash equivalents $ 29,301 $ 23,554

Accounts receivable, net of allowance for credit 71,305 96,295 losses of $602 and $438, respectively

Prepaid expenses and other current assets 3,959 7,950

Total current assets 104,565 127,799

Property and equipment, net 1,060 762

Intangible assets, net 13,313 15,551

Goodwill 18,402 18,402

Deferred tax asset 92,348 31,613

Other assets 15,819 16,210

Total assets $ 245,507 $ 210,337

Liabilities and stockholders' deficit

Current liabilities

Accounts payable $ 44,213 $ 98,249

Accrued expenses 7,437 9,206

Current portion of long-term debt 6,345 -

Total current liabilities 57,995 107,455

Long-term debt, net of current portion 180,254 182,668

Liabilities under tax receivable agreement, net of 77,272 22,498 current portion

Other long-term liabilities 2,907 2,834

Total liabilities 318,428 315,455

Commitments and contingencies (Note 7)

Stockholders' (deficit):

Class A common stock, $0.01 par value - 1.0 billionshares authorized; 39.4 million and 33.4 million 394 334 shares issued and outstanding as of September 30,2021 and December 31, 2020, respectively

Class B common stock, $0.01 par value - 100 millionshares authorized; 20.8 million and 25.5 million 208 255 shares issued and outstanding as of September 30,2021 and December 31, 2020, respectively

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

Additional paid-in capital 407,745 384,611

Accumulated Deficit (422,631 ) (418,973 )

Total stockholders' (deficit) attributable to $ (14,284 ) $ (33,773 )MediaAlpha, Inc.

Non-controlling interest (58,637 ) (71,345 )

Total stockholders' (deficit) $ (72,921 ) $ (105,118 )

Total liabilities and stockholders' deficit $ 245,507 $ 210,337

MediaAlpha, Inc. and subsidiaries

Consolidated Statements of Operations

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

Three months ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Revenue

$

152,749

$

151,548

$

483,690

$

394,609

Cost and operating expenses

Cost of revenue

128,080

130,830

407,563

335,692

Sales and marketing

5,620

2,916

16,721

8,866

Product development

3,754

1,766

10,904

5,482

General and administrative

15,349

7,605

44,677

13,907

Total cost and operating expenses

152,803

143,117

479,865

363,947

(Loss) income from operations

(54

)

8,431

3,825

30,662

Other expenses, net

316

1,998

337

1,998

Interest expense

1,765

1,594

6,303

4,844

Total other expense

2,081

3,592

6,640

6,842

(Loss) income before income taxes

(2,135

)

4,839

(2,815

)

23,820

Income tax expense

2,125

20

1,636

20

Net (loss) income

$

(4,260

)

$

4,819

$

(4,451

)

$

23,800

Net income attributable to QLH prior to Reorganization Transactions

-

4,819

-

23,800

Net (loss) attributable to non-controlling interest

(733

)

-

(1,021

)

-

Net (loss) attributable to MediaAlpha, Inc.

$

(3,527

)

$

-

$

(3,430

)

$

-

Net (loss) per share of Class A common stock

-Basic

$

(0.09

)

$

-

$

(0.09

)

$

-

-Diluted

$

(0.10

)

$

-

$

(0.09

)

$

-

Weighted average shares of Class A common stock outstanding

-Basic

38,416,723

-

36,426,270

-

-Diluted

61,190,185

-

36,426,270

-

MediaAlpha, Inc. and subsidiaries

Consolidated Statements of Operations

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

Three months ended Nine Months Ended September 30, September 30,

2021 2020 2021 2020

Revenue $ 152,749 $ 151,548 $ 483,690 $ 394,609

Cost and operating expenses

Cost of revenue 128,080 130,830 407,563 335,692

Sales and marketing 5,620 2,916 16,721 8,866

Product development 3,754 1,766 10,904 5,482

General and 15,349 7,605 44,677 13,907 administrative

Total cost and 152,803 143,117 479,865 363,947 operating expenses

(Loss) income from (54 ) 8,431 3,825 30,662 operations

Other expenses, net 316 1,998 337 1,998

Interest expense 1,765 1,594 6,303 4,844

Total other expense 2,081 3,592 6,640 6,842

(Loss) income before (2,135 ) 4,839 (2,815 ) 23,820 income taxes

Income tax expense 2,125 20 1,636 20

Net (loss) income $ (4,260 ) $ 4,819 $ (4,451 ) $ 23,800

Net incomeattributable to QLHprior to - 4,819 - 23,800 ReorganizationTransactions

Net (loss)attributable to (733 ) - (1,021 ) - non-controllinginterest

Net (loss)attributable to $ (3,527 ) $ - $ (3,430 ) $ - MediaAlpha, Inc.

Net (loss) per shareof Class A common stock

-Basic $ (0.09 ) $ - $ (0.09 ) $ -

-Diluted $ (0.10 ) $ - $ (0.09 ) $ -

Weighted averageshares of Class A common stockoutstanding

-Basic 38,416,723 - 36,426,270 -

-Diluted 61,190,185 - 36,426,270 -

MediaAlpha, Inc. and subsidiaries

Consolidated Statements of Cash Flows

(Unaudited; in thousands)

Nine Months Ended September 30,

2021

2020

Cash flows from operating activities

Net (loss) income

$

(4,451

)

$

23,800

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

Non-cash equity-based compensation expense

33,321

1,762

Depreciation expense on property and equipment

272

210

Amortization of intangible assets

2,238

2,402

Amortization of deferred debt issuance costs

966

334

Loss on extinguishment of debt

-

1,998

Credit losses

136

356

Deferred taxes

1,195

-

Tax receivable agreement liability adjustments

(604

)

-

Changes in operating assets and liabilities:

Accounts receivable

24,854

(7,428

)

Prepaid expenses and other current assets

4,191

(147

)

Other assets

391

(11,665

)

Accounts payable

(54,033

)

21,242

Accrued expenses

(1,800

)

6,436

Net cash provided by operating activities

6,676

39,300

Cash flows from investing activities

Purchases of property and equipment

(568

)

(156

)

Purchase of cost method investment

-

(10,000

)

Net cash (used in) investing activities

(568

)

(10,156

)

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

)

Proceeds from issuance of long-term debt

190,000

210,000

Repayments on long-term debt

(186,375

)

(100,023

)

Payments of debt issuance costs

(866

)

(4,467

)

Repurchase of Class B units at QLH up to fair value

-

(1,453

)

Distributions

(338

)

(131,224

)

Shares withheld for taxes on vesting of restricted stock units

(2,782

)

-

Net cash (used in) financing activities

(361

)

(27,167

)

Net increase in cash and cash equivalents

5,747

1,977

Cash and cash equivalents, beginning of period

23,554

10,028

Cash and cash equivalents, end of period

$

29,301

$

12,005

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 driver of revenue, with differing revenue recognition based on the economic relationships we have with our partners. Our partners use our platform to transact via Open and Private Marketplace transactions. In our Open Marketplace model, Transaction Value is equal to the revenue recognized and revenue share payments to our supply partners represent costs of revenue. In our Private Marketplace 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 nine months ended September 30, 2021 and 2020:

MediaAlpha, Inc. and subsidiaries

Consolidated Statements of Cash Flows

(Unaudited; in thousands)

Nine Months Ended September 30,

2021 2020

Cash flows from operating activities

Net (loss) income $ (4,451 ) $ 23,800

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

Non-cash equity-based compensation expense 33,321 1,762

Depreciation expense on property and equipment 272 210

Amortization of intangible assets 2,238 2,402

Amortization of deferred debt issuance costs 966 334

Loss on extinguishment of debt - 1,998

Credit losses 136 356

Deferred taxes 1,195 -

Tax receivable agreement liability adjustments (604 ) -

Changes in operating assets and liabilities:

Accounts receivable 24,854 (7,428 )

Prepaid expenses and other current assets 4,191 (147 )

Other assets 391 (11,665 )

Accounts payable (54,033 ) 21,242

Accrued expenses (1,800 ) 6,436

Net cash provided by operating activities 6,676 39,300

Cash flows from investing activities

Purchases of property and equipment (568 ) (156 )

Purchase of cost method investment - (10,000 )

Net cash (used in) investing activities (568 ) (10,156 )

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 )

Proceeds from issuance of long-term debt 190,000 210,000

Repayments on long-term debt (186,375 ) (100,023 )

Payments of debt issuance costs (866 ) (4,467 )

Repurchase of Class B units at QLH up to fair value - (1,453 )

Distributions (338 ) (131,224 )

Shares withheld for taxes on vesting of restricted (2,782 ) - stock units

Net cash (used in) financing activities (361 ) (27,167 )

Net increase in cash and cash equivalents 5,747 1,977

Cash and cash equivalents, beginning of period 23,554 10,028

Cash and cash equivalents, end of period $ 29,301 $ 12,005

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 driver of revenue, with differing revenue recognition based on the economic relationships we have with our partners. Our partners use our platform to transact via Open and Private Marketplace transactions. In our Open Marketplace model, Transaction Value is equal to the revenue recognized and revenue share payments to our supply partners represent costs of revenue. In our Private Marketplace 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 nine months ended September 30, 2021 and 2020:

Three months ended Nine months ended September 30, September 30,

(dollars in thousands) 2021 2020 2021 2020

Open Marketplace $ 147,800 $ 148,240 $ 469,670 $ 386,224 transactions

Percentage of total 57.9 % 68.1 % 60.7 % 69.1 %Transaction Value

Private Marketplace 107,290 69,320 304,410 172,590 transactions

Percentage of total 42.1 % 31.9 % 39.3 % 30.9 %Transaction Value

Total Transaction Value $ 255,090 $ 217,560 $ 774,080 $ 558,814

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

Three months ended Nine months ended September 30, September 30,

(dollars in thousands) 2021 2020 2021 2020

Property & Casualty $ 175,375 $ 161,323 $ 535,448 $ 390,955 insurance

Percentage of total 68.8 % 74.2 % 69.2 % 70.0 %Transaction Value

Health insurance 48,692 33,650 146,275 98,739

Percentage of total 19.1 % 15.5 % 18.9 % 17.7 %Transaction Value

Life insurance 13,361 11,628 41,736 31,717

Percentage of total 5.2 % 5.3 % 5.4 % 5.7 %Transaction Value

Other ^(1) 17,662 10,959 50,621 37,403

Percentage of total 6.9 % 5.0 % 6.5 % 6.7 %Transaction Value

Total Transaction Value $ 255,090 $ 217,560 $ 774,080 $ 558,814

(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 statements 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. We define "Contribution Margin" as 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 nine months ended September 30, 2021 and 2020:

(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 statements 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. We define "Contribution Margin" as 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 nine months ended September 30, 2021 and 2020:

Three months ended Nine months ended September 30, September 30,

(in thousands) 2021 2020 2021 2020

Revenue $ 152,749 $ 151,548 $ 483,690 $ 394,609

Less cost of revenue (128,080 ) (130,830 ) (407,563 ) (335,692 )

Gross profit 24,669 20,718 76,127 58,917

Adjusted to exclude thefollowing (as related to cost of revenue):

Equity-based 447 18 1,289 58 compensation

Salaries, wages, and 501 434 1,523 1,175 related

Internet and hosting 105 107 315 328

Other expenses 103 69 320 205

Depreciation 7 6 22 17

Other services 300 189 847 616

Merchant-related fees 56 130 286 447

Contribution 26,188 21,671 80,729 61,763

Gross margin 16.2 % 13.7 % 15.7 % 14.9 %

Contribution Margin 17.1 % 14.3 % 16.7 % 15.7 %

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 adjustments 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 nine months ended September 30, 2021 and 2020.

Three months ended Nine months ended September 30, September 30,

(in thousands) 2021 2020 2021 2020

Net (loss) income $ (4,260 ) $ 4,819 $ (4,451 ) $ 23,800

Equity-based compensation 11,198 606 33,321 2,553 expense

Interest expense 1,765 1,594 6,303 4,844

Income tax expense 2,125 20 1,636 20

Depreciation expense on 99 73 272 210 property and equipment

Amortization of intangible 746 799 2,238 2,402 assets

Transaction expenses^(1) 1,152 6,049 3,883 6,049

Employee-related costs^(2) 270 - 619 -

SOX implementation costs^ 348 - 797 - (3)

Settlement costs^(4) 800 - 800 -

Changes in TRA related (448 ) - (604 ) - liability^(5)

Reduction in TaxIndemnification Receivable^ - - 147 - (6)

Adjusted EBITDA $ 13,795 $ 13,960 $ 44,961 $ 39,878

(1)

Transaction expenses include $1.2 million and $3.9 million of expenses incurred by us for the three and nine months ended September 30, 2021, respectively, for legal and accounting fees and other costs in connection with the Secondary Offering, and other registration statements, and the refinancing of our 2020 Credit Facilities. Transaction expenses of $6.0 million for the three and nine months ended September 30, 2020, include $4.0 million in legal, accounting, and professional fees in connection with the Reorganization Transaction and IPO and $2.0 million in loss on extinguishment of debt related to the termination of the 2019 Credit Facilities.

(2)

Employee-related costs include $0.3 million and $0.5 million of expenses incurred by us for the three and nine months ended September 30, 2021, respectively, for amounts payable to recruiting firms in connection with the hiring of certain executive officers to support our operation as a publicly-reporting company.

(3)

SOX implementation costs include $0.3 million and $0.8 million of expenses incurred by us for the three and nine months ended September 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). During 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)

Settlement costs include $0.8 million of expenses incurred by us for the three and nine months ended September 30, 2021, to settle certain claims made by the Attorney General's Office of the State of Washington.

(5)

Changes in TRA related liability includes $0.4 million and $0.6 million of income for the three and nine months ended September 30, 2021, respectively, due to a change in the estimated future state tax benefits and other changes in the estimate resulting in reduction of the TRA liability created in connection with the Reorganization Transactions.

(6)

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20211110006300/en/

CONTACT: Investors Denise Garcia Hayflower Partners Denise@HayflowerPartners.com

CONTACT: Press Louise@MediaAlpha.com