Q4 2023 MediaAlpha Inc Earnings Call
Operator: Ladies and gentlemen, thank you for standing by. I would like to welcome everyone to the Mediaalpha fourth quarter and four years 2023 earnings conference call. At this time, all lines have been placed on mute to prevent any background noise.
Ladies and gentlemen, thank you for standing by I would like to welcome everyone to the media off of fourth quarter and full year 'twenty between three earnings conference call. At this time all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press the star followed by the number one on your telephone keypad.
Operator: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you'd like to withdraw your question, please press the star followed by the number one once again.
Not to withdraw your question. Please press the star followed by the one once again.
Operator: Thank you. I will now hand the call over to Denise Garcia, Investor Relations. You may begin your conference. Thank you, Bhavesh.
Thank you I will now hand, the call over to Denise Garcia Investor Relations you May begin your conference.
Thank you for that after the market closed today media Alpha issued a press release and shareholder letter announcing results for the fourth quarter ended December 31, 2023. These documents are available on the investors section of our website and we will be referring to them on this call. Our discussion today will include forward looking statements about our business and our outlook for future.
Denise Garcia: After the market closed today, Mediaalpha issued a press release and shareholder letter announcing results for the fourth quarter ended December 31, 2023. These documents are available in the Investors section of our website, and we will be referring to them on this call. Our discussion today will include forward-looking statements about our business and our outlook for future financial results, including our financial guidance for the first quarter of 2024, which are based on assumptions, forecasts, expectations, and information currently available to management. These forward-looking statements are subject to risks and uncertainties that could cause future results or events to differ materially from those reflected in those statements. Please refer to the company's SEC filings, including its annual report on Form 10-K and its quarterly reports on Form 10-Q, for a fuller explanation of those risks and uncertainties and the limits applicable to forward-looking statements.
Actual results, including our financial guidance for the first quarter of 2024, which are based on assumptions forecasts expectations and information currently available to management. These forward looking statements are subject to risks and uncertainties that could cause future results or events to differ materially from those reflected in those statements.
Refer to the company's SEC filings, including its annual report on Form 10-K, and its quarterly reports on Form 10-Q for a fuller explanation of those risks and uncertainties and the limits applicable to forward looking statements.
Denise Garcia: These forward-looking statements are based on assumptions as of today, February 20, 2024, and the company undertakes no obligation to revise or update them. In addition, on today's call, we will be referring to certain actual and projected financial metrics with Mediaalpha that are presented on a non-GAAP basis, including adjusted EBITDA and contribution, which we present in order to supplement your understanding and assessment of our financial performance. Non-GAAP measures should not be considered as a substitute for or superior to financial measures calculated in accordance with GAAP.
These forward looking statements are based on assumptions as of today February 22024, and the company undertakes no obligation to revise or update them. In addition on today's call, we will be referring to certain actual and projected financial metrics of media Alpha that are presented on a non-GAAP basis, including adjusted EBITDA and contribution.
Which we present in order to supplement your understanding and assessment of our financial performance non-GAAP measures should not be considered as a substitute for or superior to financial measures calculated in accordance with GAAP.
Denise Garcia: Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our press release and shareholder letter issued today. Finally, I'd like to remind everyone that this call is being recorded and will be made available for replay via a link on the investor section of the company's website at investors.mediaalpha.com. Now I'll turn the call over to Steve and Pat for a few introductory remarks before opening the call to your questions. Thanks, Denise. Hi everyone.
Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our press release and shareholder letter issued today finally, I'd like to remind everyone that this call is being recorded and will be made available for replay via a link on the investor section of the company's website at investors Dot media Alpha Dot com.
Now I'll turn the call over to Steve and Pat for a few introductory remarks before opening the call to your questions.
Thanks Denise.
Hi, everyone welcome to our fourth quarter 2023 earnings call I.
Steve: Welcome to our fourth quarter 2023 earnings call. I'd like to make a few observations before turning the call over to our CFO, Pat Thompson, for his comments. After a difficult up and down year, we ended 2023 on a solidly positive note. Our fourth quarter results exceeded the high end of our guidance ranges across the board, driven by stronger than expected growth in our PNC insurance business. For the past several years, lingering pandemic-related inflationary pressures created the most difficult auto insurance market in decades.
I'd like to make a few observations before turning the call over to our CFO Pat Thompson for his comments.
After a difficult up and down year, we ended 2023 on a solidly positive note.
Our fourth quarter results exceeded the high end of our guidance ranges across the board driven by stronger than expected growth in our TNC insurance vertical.
For the past several years lingering pandemic related inflationary pressures created the most difficult auto insurance market in decades.
Steve: Going into 2024, we're now confident that a sustainable industry recovery is finally underway. During December, we saw a major carrier make meaningful increases in their marketing investments, and this positive trend has continued into the new year. Accordingly, we expect first quarter PNC transaction value to nearly double quarter over quarter, far surpassing typical seasonality, and we expect continued growth over the course of 2024 as more of our auto insurance carrier partners achieve target profitability and retrain their focus on customer acquisition. Q4 results in our health insurance vertical were in line with expectations, driven by continued strength in our under-65 business, which was offset by weakness in Medicare, as our partners faced headwinds in adapting to recent regulatory changes, as well as medical cost inflationary pressures.
Going into 2024, we're now confident that a sustainable industry recovery is finally underway.
During December we saw a major carrier make meaningful increases in their marketing investments and this positive trend has accelerated into the new year.
Accordingly, we expect first quarter P&C transaction value to nearly double quarter over quarter far surpassing typical seasonality.
And we expect continued growth over the course of 2024 at more of our auto insurance carrier partners achieve target profitability and retrain their focus on customer acquisition.
Q4 results and our health insurance vertical were in line with expectations driven by continued strength in our under 65 business, which was offset by weakness in Medicare.
Our partners face headwinds in adapting to recent regulatory changes as well with medical care cost inflationary pressures.
Steve: We expect these broad trends in under 65 and Medicare to continue in the first quarter. Looking forward, we're optimistic that 2024 is the beginning of great things to come. Our unwavering focus on our partnerships and maximizing operating efficiency during what proved to be an exceptionally difficult market downturn have laid the foundation for what we believe will be a period of significant top and bottom line growth. With that, I'll turn the call over to Pat.
We expect these broad trends in under 65 and Medicare to continue in the first quarter.
Looking forward, we are optimistic that 2024 at the beginning of great things to come.
Our unwavering focus on our partnerships and maximizing operating efficiency during what proved to be an exceptionally difficult market downturn have laid the foundation for what we believe will be a period of significant top and bottom line growth.
With that I'll turn the call over to Pat.
Pat Thompson: Thanks, Steve. I'll begin with a few comments on our fourth-quarter financial results and other recent business and market developments before reviewing our first-quarter financial guidance and opening the call. As Steve mentioned earlier, our fourth quarter results exceeded the high end of our guidance. Adjusted EBITDA increased 40% or $3.6 million year-over-year, driven primarily by higher contribution and continued expense disbursement. Transaction value in our PNC insurance vertical was up 21% quarter over ahead of expectations, a major carrier ramp spend on our platform. Transaction value in our health vertical was roughly flat year over year, in line with expectations.
Thanks, Steve ill begin with a few comments on our fourth quarter financial results and other recent business and market developments before reviewing our first quarter financial guidance and opening the call up for questions.
As Steve mentioned earlier, our fourth quarter results exceeded the high end of our guidance ranges.
Adjusted EBITDA increased 40% or $3 $6 million year over year, driven primarily by higher contributions and continued expense discipline.
Transaction value in our P&C insurance vertical was up 21% quarter over quarter ahead of expectations as a major carrier ramp spend on our platform.
Transaction value in our health vertical was roughly flat year over year in line with expectations.
Pat Thompson: Moving to first quarter guidance, we are highly encouraged by the trends we have seen thus far. For P&C, we expect transaction value to nearly double sequentially, far in excess of the typical season. Despite these increases, we expect transaction value in our PNC vertical to be down modestly year over year as a major carrier is ramping customer acquisition at a more measured pace this year relative to their dramatic increase in the first quarter of 2020. In health, Q1 is typically a seasonally weaker quarter with a smaller contribution from
Moving to first quarter guidance, we are highly encouraged by the trends we have seen thus far.
In P&C, we expect transaction value to nearly double sequentially far in excess of typical seasonality. Despite these increases we expect transaction value in our P&C vertical to be down modestly year over year as a major carrier is ramping cut.
<unk> acquisition at a more measured pace this year relative to their dramatic increase in the first quarter of 2023.
In health Q1 is typically a seasonally weaker quarter with a smaller contribution from Medicare.
Pat Thompson: We expect the trend Steve highlighted earlier to continue, with transaction value growing in the mid-to-high single digits year over year. Overall, for Q1, we expect strong year-over-year adjusted EBITDA growth, driven by higher contribution and continued expense. As a result, we expect Q1 transaction value to be between $175 million and $190 million, a year-over-year decrease of 6% at midterm. We expect revenue to be between $105 million and $115 million, a year-over-year decrease of 1%.
We expect the trends Steve highlighted earlier to continue with transaction value growing in the mid to high single digits year over year.
Overall for Q1, we expect strong year over year, adjusted EBITDA growth driven by higher contribution and continued expense discipline.
As a result, we expect Q1 transaction value to be between $175 million and $190 million a.
At year over year decrease of 6% at the midpoint.
We expect revenue to be between $105 million and $115 million a year over year decrease of 1% at the midpoint.
Lastly, we expect adjusted EBITDA to be between $9 5 million and $11 $5 million a year over year increase of 45% at the midpoint.
Pat Thompson: Lastly, we expect adjusted EBITDA to be between $9.5 million and $11.5 million, a year-over-year increase of 45%. For overhead, we expect contribution less adjusted EBITDA to be approximately $500,000 to $1 million higher than Q4 2020. Touching briefly on expenses, we remain focused on driving efficiencies and have modest hiring plans for 2021. We therefore expect limited overhead growth for the full year, driving significant operating leverage as revenue growth picks up. Regarding share-based compensation, 2024 levels are expected to be approximately $20 million lower than 2023, as certain founder grants issued at the IPO were fully vested by the end of the year. Finally, Q1 legal costs associated with the ongoing FTC inquiry are expected to be approximately $750,000.
Our overhead we expect contribution less adjusted EBITDA to be approximately 500000 to $1 million higher than Q4 2023.
Touching briefly on expenses, we remain focused on driving efficiencies and have modest hiring plans for 2024.
We therefore expect limited overhead growth for the full year driving significant operating leverage as revenue growth picks up.
Regarding share based compensation 2024 levels are expected to be approximately $20 million lower than 2023 as certain founder grants issued at the IPO were fully vested by the end of the year.
Finally, Q1 legal costs associated with the ongoing FTC inquiry are expected to be approximately $750000.
Turning to the balance sheet, we continue to prioritize financial flexibility and using excess cash to decrease net debt.
We ended the quarter with $17 million of cash on hand, and our focus remains on reducing financial leverage through a combination of net debt reduction and adjusted EBITDA growth with that operator, we are ready for the first question.
Thank you if any participant would like to ask a question. Please press the star followed by the one on your telephone keypad.
Operator: Turning to the balance sheet, we continue to prioritize financial flexibility and using excess cash to decrease net debt. We ended the quarter with $17 million of cash on hand, and our focus remains on reducing financial leverage through a combination of net debt reduction and adjusted EBITDA. With that operator, we are ready for the first question. Thank you. If any participant would like to ask a question, please press the star followed by the 1 on your telephone keypad. We'll pause for just a moment to compile the given AVA. Our first question comes from the line of Corey Carpenter of J.P. Morgan. Please go ahead.
So just a moment to compile the Q&A roster.
Our first question comes a lot I'm Cory Carpenter of Jpmorgan. Please go ahead.
Hey, thanks for the questions.
Steve I wanted to ask.
Your view, what's what's different this time around you mentioned a sustainable recovery is underway. So that's kind of what's different than what you saw this time last year that you would call out and then secondly, you called out one major carrier ramping spin are deemed <unk> curious what youre seeing from other carriers as the year's progressed. Thank you.
Sure Hey, Corey.
Yes.
I think what's different this time around it.
It's pretty evident when you look at the underlying profitability of all the carriers in the industry.
What you've seen is really the second half of 'twenty three.
Being far better than the first half and carriers such as progressive Allstate really everyone, who is coming out with their <unk>.
Steve: Hey, thanks for the questions. Steve, wanted to ask, you know, in your view, what's different this time around? You mentioned a sustainable recovery is underway. So it's kind of what's different than what you saw this time last year that you would call out. And then secondly, you call that one major carrier ramping spin at the end for Q. Curious what you're seeing from other carriers as the years progress. Thank you. Sure. Hey, Corey.
Q4 results showing.
Stronger results in the second half of 'twenty, three and particularly strong results in Q4 of 'twenty three that's really leading into I think.
I think justifiable optimism justified optimism, that's sort of where the rates are going into 'twenty four.
Steve: Yeah, so, you know, I think what's different this time around is that it's pretty evident when you look at the underlying profitability of all the carriers in the industry. You know, what you've seen is really the second half of 23 being far better than the first half, and carriers such as Progressive, Allstate, really everyone who's coming out with their Q4 results, you know, showing, you know, stronger results in the second half of 23, particularly stronger results in Q4 of 23, that's really leading into, I think, I think justifiable optimism or justified optimism as to where their rates are going into 24. I think as you look back into, you know, where the industry was in 22 coming into 23, I think you're just going to see a far different picture from a profitability perspective. I think that goes to the second part of the question that you had as well, which is about other carriers.
You look back into where the industry was in 'twenty two coming into 'twenty three.
You're just going to see a far different picture from a profitability perspective.
That goes to the second part of the question that you had as well which is that.
In terms of other carriers.
We do see sort of broad based sentiment that the market has turned.
We are engaged in positive growth discussions with almost all of our major major carriers. Certainly this currently the recovery is being driven by one primary direct writer.
But we are starting to see an uptick in spend from many of our major carriers and we expect that to really continue through 'twenty four 'twenty five.
Okay, great. Thank you.
Thank you. Our next question comes from Michael Graham of Canaccord Genuity. Please go ahead.
Yeah.
Steve: We do see sort of broad-based sentiment that the market has turned. We're engaged in positive growth discussions with almost all of our major carriers. Certainly, currently, the recovery is being driven by one primary direct rider.
Yes. Thank you it's.
It's great to see the recovery taking shape I wanted to ask a question on.
What kind of operating leverage you think you might be able to see as we move through the year you just guided to I.
I think 95% EBITDA margin, which we.
Steve: But we are starting to see an uptick in spend from, you know, many of our major carriers. We expect that to really continue through 24 and into next year. Okay, great.
Which is great and pretty consistent with what you were doing sort of a couple of years ago before the downturn.
I know you have cut some costs sort of from from then until now so just wondering if you could kind of frame out.
How youre thinking about operating leverage if we're fortunate enough to see this recovery gained momentum throughout the year.
Operator: Thank you. Thank you. Our next question comes on the line from Michael Graham of Canaccord Generity. Yeah, thank you.
Yeah and Michael This is Pat Thank you for the question so.
Pat Thompson: It's great to see the recovery taking shape. I wanted to ask you a question on, you know, what kind of operating leverage you think you might be able to see as we move through the year. You just guided to, I think, nine and a half percent EBITDA margin, which is great and, you know, pretty consistent with what you were doing sort of a couple years ago before the downturn. And I know, you know, you have cut some costs, you know, sort of from then until now. So just wondering if you could kind of frame out, you know, how you're thinking about operating leverage if we're fortunate enough to see this recovery gain momentum throughout the year. Yeah, and Michael, this is Pat.
I'd, probably take that question in a couple of chunks first piece would be to say that we're generally in the business of giving guidance one quarter at a time, so there's not going to be any firm numbers kind of beyond Q1 that will sure.
Probably a couple of things I would point you towards one would be that.
This is a largely fixed cost business.
And this transaction value goes up revenue tends to go up as.
As well in contribution tends to go up in overhead tends to be relatively more fixed and I think we're in a spot where we don't have <unk>. Our ambitious hiring plans of course, we're going to be adding capacity in a few places, but we're not planning on anything.
Pat Thompson: Thank you for the question. So, you know, I would probably take that question in a couple chunks. The first piece would be to say that, you know, we're generally in the business of giving guidance, you know, kind of one quarter at a time. So there's not going to be, you know, any firm numbers kind of beyond Q1 that we'll share. But, you know, probably a couple things I would point you towards. One would be that, you know, this is a largely fixed cost business. And, you know, as transaction value goes up, revenue tends to go up, as well. And contribution tends to go up, and, you know, overhead tends to be, you know, relatively low. And, you know, I think we're in a spot where, you know, we don't have grandiose or ambitious hiring plans.
No step function change in our in our overhead base over the course of this year.
And.
Regarding kind of the overhead guidance, we did give for the year.
The modest growth.
Where do you kind of point you towards.
At the top on that which was.
On may 1st of last year, we did a rash so our Q1 overhead guidance houses down versus Q1 of 2023.
Q2 the comp.
The comps got a little harder because we had.
Some of the risk benefit in there.
And Q3, and Q4 or kind of run rating at the lower level and so as you think about this year Q1 will be down year over year, and then the growth rate all kind of step up as we go through the year and wouldn't be probably expect Q3 Q4 other had to be a bit above where we're where we're projecting for Q1.
Pat Thompson: You know, of course, we're going to be adding capacity, you know, in a few places, but we're not planning on anything, you know, no step function change in our overhead base over the course of this year, and, you know, regarding, you know, kind of the overhead guidance we did give for the year of modest growth, would kind of point you towards the comps on that, which was on May 1st of last year, we So our Q1 overhead guidance has us down versus Q1 of 2023. Q2: The comp got a little harder because we had, you know, some of the RIF benefit in there. And, you know, Q3 and Q4 were kind of run ratings at a lower level.
So hopefully that gives you some color on opex to be able to kind of forecast what the take rates could look like as the business recovers.
Yeah. That's helpful. Thank you Pat.
As a reminder, teleconference participants would like to ask a question. Please press the star followed by the number one on your telephone keypad.
Our next question comes from the line of Thomas Chong from <unk>. Please go ahead.
Hey, good afternoon, guys. Thanks for taking my questions.
Or are there any lessons learned.
Sort of thinking about the cycle relative to the last hard market and kind of exiting 2017 into 2018 and beyond.
Just putting that kind of in context, how we can think about the buildup in the ramp of the recovery in personal auto spend and if you could put that answer in the context of acknowledging that just the overall pie I guess of the overall personal auto premium market sizes is evidently much larger.
Pat Thompson: And so as you, you know, think about this year, Q1 will be down year over year, and then the growth rate will, you know, kind of step up as we go through the year and, you know, wouldn't be, you know, we'd probably expect, you know, Q3, Q4 overhead to be a bit above where we're projecting for Q1. So, you know, hopefully that gives you some color on OpEx to be able to kind of forecast what the take rates could look like as the business recovers. Yep, that's helpful.
Right now than it was back then so if you could just kind of put that in context, as we think about building our forecast.
Yes sure.
I think the.
The most important takeaway that I have.
The last hard market is really about how unpredictable the recovery can be.
Operator: Thank you, Pat. Thank you. As a reminder, if a teleconference participant would like to ask a question, please press the star followed by the number 1 on your telephone key. Our next question comes from Lionel Tommy McJoynt from KBW. Please go ahead.
You see the potential recovery really making that transition from the last hard market in 2016, and 17 into 2018 that was our biggest growth year in the history of our company.
And so.
Steve: Hey, good afternoon, guys. Thanks for taking my questions. Are there any lessons learned sort of thinking about this cycle relative to the last hard market and kind of exiting 2017 into 2018 and beyond? Just putting that kind of in context, how can we think about the buildup and the ramp of the recovery and personal auto spend? And if you could put that answer in the context of acknowledging that just the overall pie, I guess, of the overall personal auto premium market size is evidently much larger right now than it was back then. So if you could just kind of put that in context as we think about building our forecast. Yeah, sure.
So the timing of this recovery.
I think it's still.
To be determined I think that's really a testament to how unpredictable the cycle has been and how much deeper it's hard market cycle was then the last one will really carry advertising spend remained flat as opposed to this time around where by some estimates overall auto insurance carrier advertising spend went down by 30, 540%.
And so but when we think about the recovery and where the market come back to.
Certainly I don't think we don't have.
We don't have a magic ball when it comes to exactly the timing and the magnitude of the recovery, but we do know from past experience that when the market does recover it can recover pretty quickly and in a very fulsome way.
Steve: I think the most important takeaway that I have from the last hard market is really about how unpredictable the recovery can be and the magnitude of the potential recovery. Making that transition from the last hard market in 2016 and 2017 into 2018, that was our biggest growth year in the history of our company. And so the timing of this recovery, I think it's still to be determined, and I think that's really a testament to how unpredictable the cycle has been and how much deeper this hard market cycle was than the last one, where carrier advertising spend remained flat as opposed to this time around, where, by some estimates, overall auto insurance carrier advertising spend went down by 35%, 40%.
Got it that's good color and then my second question.
It was really a tough stretch here for any of the business models that are dependent on insurer customer acquisition spend.
Over the past couple of years do you do you have any indication whether or not the competitive landscape has gotten more attractive simply by means of some competitors, maybe not making it through or are having to tamper down some of their growth expectations or do you view most of the competition to be pretty large and scaled players.
Just sort of how the capital resources to navigate so it's a pretty unchanged competitive landscape.
Yes, I would say listen to honestly I think it's remained relatively unchanged.
We measure competitive our competitive landscape and our market share based on the number of supply partners, we have a marketplace and so I mean and that card.
Steve: But when we think about the recovery and where the market can come back to, certainly, I don't think we don't have a magic ball as it comes to exactly the timing and the magnitude of the recovery, but we do know from past experience that when the market does recover, it can recover pretty quickly and in full. Got it. That's a good color.
Card market when really advertisers warrant spending we didn't see really any notable movement in market share.
Any losses of supply partners were gains of major supply partners.
By market as we've seen over the last two five to three years that totally to be expected.
Steve: And then my second question. It was, you know, really a tough stretch here for any of the business models that are dependent on customer acquisition spend over the past couple years. Do you have any indication whether or not the competitive landscape has gotten more attractive simply by means of, you know, some competitors maybe not making it through or having to tamper down some of their growth expectations? Or do you view most of the competition to be pretty large and scaled? Players sort of have the capital resources to navigate.
I think with that said I think that the players players in this space have largely.
Remained we didn't see anyone really drop out of the competitive marketplace.
So the competitive landscape hasnt changed, but we do expect that coming out of the part of market cycle that we're going to gain market share as we did coming out of the last hard market cycle.
Simply because we are the largest marketplace marketplace dedicated to the carrier spend and really that's where the recovery is going to happen and.
Steve: So it's a pretty unchanged competitive landscape. Yeah, I would say, listen, honestly. I think I think it's remained relatively honest. You know, we measure our competitive landscape and our market share based on the number of supply partners we have at Woorimarket. And so, I mean, in this hard market, when really advertisers weren't spending, we didn't see any really notable movements in market share, namely any losses of supply partners or gains of major supply partners. In a dry market, as we've seen over the last two and a half to three years, that's totally to be expected. I think with that said, I think that the players in the space have largely remained. We didn't see anyone really drop out of the competitive marketplace.
So we do anticipate that we're going to gain market share vis vis our competitors and what you're seeing over the past two and half to three years.
That's great. Thank you.
Thank you. Our next question comes from the line of Andrew <unk>.
Hagerman from TV Cowen. Please go ahead.
Hey.
Good evening and congrats.
And your persistency and having a great quarter.
Yes, Thanks, Andrew.
Sure I mean, it's been a lot of tough quarterly calls so great to be on this one.
But.
Thinking about the cadence of how your revenue might come back.
I guess, the first question and the two are intertwined.
Do you think and again I know you only give quarterly guidance.
Steve: And so, the competitive landscape hasn't changed, but we do expect that coming out of this hard market cycle, we're going to gain market share as we did coming out of the last hard market cycle, simply because we're the largest marketplace, we're a marketplace dedicated to carrier spend, and really that's where the recovery is going to happen. And so, we do anticipate that we're going to gain market share vis-a-vis our competitors and what you've seen over the past two and a half to three years. That's great! Thank you. Thank you. Our next question comes from the line of Andrew. T. Gorman from TD Caron, please go ahead.
Pat catch says but.
But looking out to 2025.
Do you see a potential where you could be at a run rate on transaction value that looks like it can grow on top of 2019 type numbers and then tied into that question.
Private versus open transactions.
Is this large customer that youre talking about more geared towards the private market and so.
As advertising opens up and more activity occurs could that come from more open type business and could that be a lot lot higher in margin and profitability than what we're seeing out of the gate in the first quarter.
Operator: Hey, good evening, and congrats on and on your perseverance in having a great quarter. I guess there have been a lot of tough quarterly calls. Great to be on this one.
Okay.
So Andrew I can I can take.
I can take that I'll, maybe answer the second question first actual okay with plus.
Pat Thompson: But, you know, thinking about the cadence of how your revenue might come back. I guess the first question, and the two are intertwined. Do you think, and again, I know you only give quarterly guidance, as Pat says, but looking out to 2025, do you see the potential where you could be at a run rate on transaction value that looks like it can grow on top of 2019-type numbers? And then tied into that question, private versus open transactions, is this large customer that you're talking about more geared toward the private market? And so as advertising opens up, and more activity occurs, could that come from more open-type business? And could that be a lot higher in margin and profitability than what we're seeing out of the gate in the first quarter? Great. So, Andrew, I can take that.
Regarding large large customer and.
Kind of getting to the private marketplace. So yes that is true.
We have I'd say a couple of things one is our P&C business generally has.
Slightly lower take rates than our health business.
And within PNC P&C tends to be more private that his health and our largest advertiser in P&C tends to be more heavily private then the rest is the rest of the P&C.
And so I think kind of given those couple of trends actually what we've seen is.
Margin step down in January.
Which was we had less health in January than we did in Q4 and then.
<unk> kind of wrapped up in January and February February take rates down a bit.
Pat Thompson: I'll maybe answer the second question first, actually, which was, you know, regarding, you know, a large, large customer and, you know, kind of gearing to the private marketplace. So, you know, yes, that is true. The you know, we have, you know, I've said a couple things. One is our PNC business generally has, you know, slightly lower take rates than our health and within PNC, PNC tends to be, you know, more private than our health and our largest advertiser in PNC tends to be more heavily private than the rest of the rest of PNC. And so, you know, given those couple of trends, actually, you know, given those couple of trends, actually, you know, what we've seen is, a margin step down in January, you know, which was, you know, we had less health in January than we did in Q4, and then, you know, spend kind of ramped up in January, February, you know, February, you know, take rates come down a bit.
Casting March we think theyre going to come down a bit more and thats going to be largely mix driven.
For us, but in terms of take rate, which we kind of think of as being contribution of our transaction value that.
That number is.
Just kind of generally coming down as the market recovers and that's probably consistent with some.
Some of the trends that you've seen over the last few years this week.
Had periods.
Relative strengths.
Periods of relative strengths and.
Flipping to your first question, which is.
What could 2025 be light.
I would just say it that way.
And guide to what we have confidence in which is Q1 and then one.
One of the things in my two plus years I've seen here is that the further out we get is just the wider.
Potential outcomes guests and I think <unk>, given what we see right now we're feeling pretty good about what 2025 could look like but.
Pat Thompson: And, you know, as we're forecasting March, we think they're going to come down a bit more. And that's, you know, going to be, you know, largely driven by mixed results for us. But in terms of take rate, which we kind of think of as contribution over transaction value, you know, that number, you know, is kind of gently coming down as the market recovers. And that's probably, you know, consistent with some of the trends that you've seen, you know, over the last few years, as we've had, you know, periods of relative strength, periods of relative strength, and, flipping to your first question, which is And, you know, I would just say that we guide to what we have confidence in, which is Q1.
It could be better that I am expecting worst than I am expecting better than youre expecting worse than youre expecting and so it's kind of hard to say and so I don't want to get into the businesses.
It hard numbers on that when we when we just quite frankly are focused on executing in Q1 into Q2 before we talk to you again.
Very good and just but just taking that.
If I'm assuming a good.
Gross level, we could see more margin coming from the <unk>.
Open transactions, which would which would be more profit, Ken but that would be.
My view not yours is that a fair kind of assumption is if we see a nice trajectory and growth more could come from.
Given that this big account is private.
Yes, and Andrew I would say, it's going to be very dependent on the spend dynamics within within the P&C vertical which is one one major carriers more private.
Pat Thompson: And, you know, one of the things in my, you know, two plus years I've seen here is that the further out we get, the wider our fan of potential outcomes gets. And, you know, I think, you know, 20, you know, given what we see right now, you know, we're feeling pretty good about what 2025 could look like, but, you know, it could be better than I'm expecting, worse than I'm expecting, better than you're expecting, worse than you're expecting. And so, you know, it's kind of hard to say, and so don't want to get into the business of, you know, given hard numbers on that when we just quite frankly are focused on executing in Q1 and into Q2. Before we talk to you again.
<unk> been stepping in and in a meaningful way.
As others come back.
That mix start to shift more up than in a shortcut.
Got it and if I could sneak one last one in.
On the Medicare advantage business.
Would you expect.
This was a very tough year in terms of new regulations.
And to play.
Do you see that.
You see that dynamic playing in and the big fourth quarter of 2024.
Do you think that that youll be more nimble do you think more of the case with carriers more nimble.
And active in that market given that they may have adapted to this regulation. So if you could give a little color on what the regulation was.
Pat Thompson: Very fair, Matt, but just taking that, if I'm assuming a good growth level, we could see more margin coming from the open transactions, which would be more profitable, again, but that would be my view, not yours. Is that a fair kind of assumption, if we see a nice trajectory in growth, more could come from open, given that, you know, this big account is private? Yeah, and Andrew, I would say it's going to be very dependent on the spend dynamics within the PNC vertical, which is, you know, one major carrier is more private, you know, they've been, you know, stepping in in a meaningful way. And, you know, as others come back, you know, could that mix start to shift more open, you know, sure it could. I didn't know if I could sneak one last one in on the Medicare Advantage business.
And how companies might be in 2024 that would that would be really helpful.
Yes.
Andrew I think the <unk>.
Trends for 2023 and what.
What could be coming in 2024, a little bit different.
The order which is.
I think on the 2023, what we saw was.
New marketing rules put into place and that was around.
Kind of what you could say and creative with the carriers ultimately having to.
Approved marketing messaging.
That was put in front of consumers.
And.
And also some changes around waiting periods.
Kind of working leads at outbound dialing.
The biggest change was the marketing.
And essentially we saw some set of publishers struggled to adapt to those new marketing rules to say, hey, you've always used marketing messaging.
Pat Thompson: Would you expect, this was a very tough year in terms of new regulations to play, do you see that, you know, how do you see that dynamic playing out in the big fourth quarter of 2024? Do you think that you'll be more nimble; do you think, more the case, will carriers be more nimble and active in that market given that they may have adapted to this regulation? So if you could give a little color on what the regulation is and and how companies might be in 2024, that would be really helpful. Yeah.
You've got a pivot debate and that.
Some people were able to adapt more quickly than others on that and.
On the approval side.
<unk> different carriers.
Some major brokers as well had to accrue creative.
And there was a degree of inconsistency between that and as to what was allowed and what wasn't.
And it took them a while because they were kind of ramping the process in real time, and so that has kind of knock on effects on the industry.
Pat Thompson: And Andrew, I think the, you know, the trends for 2023 and, and, you know, what could be coming in 2024 are a little bit different, in order, which is, you know, I think on the, you know, 2023, you know, what we saw was new marketing rules put into place, and that was around, you know, kind of what you could say in creative with the carriers, you know, ultimately having to approve marketing messaging that was put in front of consumers. And, you know, and also some changes around, you know, waiting periods for, you know, kind of working leads and outbound dials, the you know the biggest change was the marketing rules and essentially we saw you know some set of you know kind of publishers struggled to adapt to those new marketing rules to say you know hey you've always used marketing messaging a and you know you got to pivot to b and that's, Some people were, you know, able to adapt more quickly than others on that.
As I think about 2023 and those regulatory changes, we're feeling like we'll be a lot better as an industry. The second time around.
Moving to the second part of your question, which is kind of going forward.
CMS is always looking to optimize things as far as regulations.
And I think theyre talking about a number of things and there's been commentary from a number of different carriers around.
Kind of where they're at but I would say that rule changes by CMS, It's generally made real and meaningful progress in cleaning up some of the.
That bad practices in the industry and they have ultimately improved the user experience for seniors.
Are things that we think are actually really long term positive for the industry and we think theyre going to keep continuing to look for ways to build on that on that progress.
Pat Thompson: And on the approval side, you know, uh, different carriers and some major brokers as well had to approve creative, and there was a degree of inconsistency between them as to what was allowed and what wasn't, and so, it took them a while because they were kind of ramping up the process in real time, and so that had, you know, kind of knock-on effects on the industry, and as I think about 2023 and those Moving to the second part of your question, which is, you know, kind of going forward, and, you know, I think CMS is always looking to optimize things as far as, you know, regulation goes, and, you know, I think they're talking about, you know, a number of things, and there's been commentary from a number of different carriers around, you know, kind of where they're at. But, you know, I would say that rule changes by CMS generally make real and meaningful progress and clean up some of the bad practices in the industry. And they've ultimately improved the user experience for seniors.
Quite frankly.
We've been pretty good at adapting to these changes over time, because they represent an opportunity and where we will continue to do that going forward and we're really excited about the future of the Medicare advantage business.
Awesome. Thanks, so much.
Okay.
Thanks, Andrew.
Thank you our final question for the day comes from the line of Ben Hendrix from RBC Capital. Please go ahead.
Hey, Thank you very much just a quick question on the.
On the healthcare business.
We saw a lot.
Turbulent MAA.
Period for earning season for carriers and softer market share go to one carrier in particular Cvs versus slower growth in some of the others just wanted to see kind of how that translated to your.
To your transaction.
Mix this quarter, if you saw anything in the fourth quarter that was unusual in terms of mix and then how that's translating to OAP, thus far in the season. Thank you.
Pat Thompson: And, you know, those are things that we think are actually really long-term positives for the industry. And we think they're gonna keep continuing to look for ways to build on that progress. And, you know, quite frankly, we're, you know, we've been pretty good at adapting to these changes over time because they represent an opportunity. And, you know, we'll continue to do that going forward. And we're really excited about the future of the Medicare Advantage business. Thanks so much. Thanks, Andrew. Thank you. Our final question for the day comes from the line of Ben Hendricks from RBC Capitals. Hey, thank you very much. Just a quick question on the health care business.
Yes, and Ben I would say.
Of course, we saw changes on an individual carrier level basis, and we do every year on that which is seen as some people are a little bit more bullish a little bit more bearish, but.
But I would say that the macro trends.
<unk> have been pretty stable over time.
Carriers continue to find our marketplace attractive and B.
Leaning in to try to find pockets of customers that that makes sense.
For that and then as far as translating into.
The special enrollment period, that's underway now I would say that business is.
Down significantly from the peak.
I'd say the trends are not.
Operator: We saw a lot, a very turbulent MA period for earnings season for the carriers, and saw some market share go to one carrier in particular, CVS, versus slower growth in some of the others. Just wanted to see kind of how that translated to your transaction mix this quarter. If you saw anything in the fourth quarter that was unusual in terms of mix and then how that's translating to OEP thus far in the season,
All that different from kind of what we saw during AEP or quite frankly, what we're seeing even gone in AEP.
Thank you for squeezing me in.
Thank you Ben.
Yes.
Thank you, ladies and gentlemen, as we have no further questions. At this time, we will conclude today's conference call. We thank you for participating and you may now disconnect.
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Pat Thompson: Thank you. Yeah, and Ben, I would say, you know, of course, we saw changes on an individual carrier level, and we do every year on that, which is, you know, some people are a little bit more bullish, a little bit more bearish. You know, but I would say that the macro trends, you know, have been pretty stable over time; their, you know, carriers continue to find our marketplace attractive and are, you know, leaning in to try to find, you know, pockets of customers that make sense for them. And, you know, as far as translating into a special enrollment period that's underway now, you know, I would say that business is, you know, down significantly. From the peak, and, you know, would say the trends are, you know, not all that different from, you know, kind of, you know, what we saw during a year, quite frankly, what we're seeing even going in.
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Okay.
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Yes.
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Yes.
Thank you.
Pat Thompson: Thank you for squeezing me in. Thank you, Ben. Thank you, ladies and gentlemen, as we have no further questions at this time, we will conclude today's conference call. We thank you for participating, and you may now disconnect.
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