Q1 2024 MediaAlpha Inc Earnings Call
Speaker Change: [music].
Operator: Hello, and thank you for standing by. At this time, we would like to welcome everyone to the Mediaalpha Inc. first quarter 2024 earnings. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, please press star 1. I would now like to turn the conference over to Alex DeLoya. Please go ahead.
Hello, and thank you for standing by at this time I would like to welcome everyone to the media Alpha.
First quarter 2024 earnings call.
Speaker Change: All lines have been placed on mute to prevent any background noise.
Speaker Change: After the Speakers' remarks, there will be a question and answer session if you'd like to ask a question. During this time.
Speaker Change: First star followed by the number one on your telephone keypad.
Speaker Change: She would like to withdraw your question again, Please press star one.
Speaker Change: Now I'd like to turn the conference over to Alex Good lawyer.
Alex Good: Go ahead.
Alex Good: Thank you Jericho.
Alex DeLoya: After the market closed today, Mediaalpha issued a press release and shareholder letter announcing results for the first quarter ended March 31st, 2024. 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 MediaAlpha's business and outlook for future financial results, including its financial guidance for the second quarter of 2024, which are based on assumptions, forecasts, expectations, and information currently available to management.
Alex Good: After the market closed today media Alpha issued a press release and shareholder letter announcing our results for the first quarter ended March 31 2024.
Alex Good: Documents are available in the investors section of our website and will be referring to them on this call.
Alex Good: Our discussion today will include forward looking statements about media outlets business and outlook for future financial results, including our financial guidance for the second quarter of 2024, which are based on assumptions forecasts expectations and information currently available to management.
Alex Good: 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.
Alex Good: 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.
Alex Good: These forward looking statements are based on assumptions as of today May <unk> 2024, and the company undertakes no obligation to revise or update them.
Alex Good: 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 presented in order to supplement your understanding and assessment of our financial performance.
Alex Good: non-GAAP measures should not be considered as a substitute for or superior to financial measures calculated in accordance with GAAP.
Alex Good: Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our press release and shareholder letter issued today.
Alex Good: Finally, I would like to remind everyone that this call is being recorded and will be made available for replay via a link on the investors section of the company's website at investors Dot media Alpha Dot com.
Speaker Change: Now I will turn the call over to Steve and Pat for a few introductory remarks before opening the call to your questions.
Speaker Change: Yes.
Steve: Hey, Thanks, Alex Hi, everyone welcome to our first quarter 2024 earnings call I'd like to make a few comments before turning the call over to our CFO Pat constant for his remarks.
Alex DeLoya: 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 limitations applicable to forward-looking statements. These four forward-looking statements are based on assumptions as of today, May 1st, 2024, and the company undertakes no obligation to revise or update them.
Alex DeLoya: In addition, on today's call, we will be referring to certain actual and projected financial metrics of 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. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our press release and shareholder letter issued today.
Steve: We've had an outstanding start to the year, our first quarter results exceeded the high end of our guidance think it's across the board as we saw increasingly strong step up in marketing investment by our P&C carrier partners during the back half of the quarter.
Steve: We're confident that we're now firmly in the midst of an auto insurance market recovery.
Steve: And we're expecting strong year over year growth in our second quarter TNT transaction value.
Steve: First quarter results and our health insurance vertical were also above expectations.
Steve: This is driven by continued strength in our under 65 as.
Steve: As well as opportunistic heavier spend in Medicare.
Steve: We expect high single to low double digit year over year transaction value growth in our health insurance and the upcoming second quarter.
Steve: As auto insurance carriers rate increases continued to significantly outpace moderating loss cost inflation.
Steve: P&C industry's recovery from a period of unprecedented underwriting loss quickly gaining momentum.
Steve: We expect these favorable market conditions to be sustained for the remainder of this year and beyond as an increasing number of carriers achieve rate adequacy and begin to reinvest in customer acquisition.
Steve: We believe these positive trends will enable us to drive meaningful cash flow growth and shareholder value in the years to come.
Steve: Finally, Eugene Banco My cofounder and the company's Chief Technology Officer will be transitioning out of his current role at the end of the year and handing the reigns to Amy our SVP of technology.
Steve: Amy has worked closely with Eugene during her nine years that media and will take over as our CTO in 2025.
Steve: I would like to personally thank Jim for all he has done over his 13 years with the company without and of course, we would not be where we are today.
Steve: With that I'll turn the call over to Pat.
Pat: Thanks, Steve.
Alex DeLoya: Finally, I would like to remind everyone that this call is being recorded and will be made available for replay via a link on the investors 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.
Pat: I'll begin with a few comments on our first quarter financial results and other recent business and market developments before reviewing our second quarter financial guidance and opening the call up for questions.
Steve: Alex. Hi, everyone. Welcome to our first quarter 2024 earnings call. I'd like to make a few comments before turning the call over to our CFO, Pat Thompson, for his remarks. We've had an outstanding start to the year.
Steve: Our first quarter results exceeded the high end of our guidance ranges across the board as we saw an increasingly strong step-up in marketing investment by our PNC carrier partners during the back half of the quarter. We're confident that we're now firmly in the midst of an auto insurance market recovery, and we're expecting strong year-over-year growth in our second quarter PNC transaction value. First quarter results in our health insurance vertical were also above expectations.
Pat: As Steve mentioned earlier, our first quarter results exceeded the high end of our guidance ranges across all metrics with year over year transaction value and adjusted EBITDA growth of 13% and 98% respectively.
Steve: This is driven by continued strengths in our under 65 business, as well as opportunistic carrier spend in Medicare. We expect high single to low double-digit year-over-year transaction value growth in our health insurance business in the upcoming second quarter. As auto insurance carriers rate increases continue to significantly outpace moderating lost cost inflation.
Pat: Transaction value in our P&C insurance vertical was up 150% quarter over quarter, driven by strong step up the marketing spend during the back half of the first quarter by our carrier partners, especially our largest advertiser.
Pat: Transaction value in our health vertical was also up 16% year over year above expectations.
Pat: The adjusted EBITDA increase of $7 $1 million year over year was driven by higher contribution and lower overhead.
Pat: We are in a very different place now than where we were at this time last year when carriers were significantly pulling back on marketing spend.
Pat: We expect 60% to 70% sequential growth in P&C transaction value driven by a continuation of the positive trends we've been seeing.
Pat: In health, we expect transaction value to grow at a high single to low double digit rate year over year.
Pat: Moving to our consolidated financial guidance, we expect Q2 transaction value to be between 285 and $300 million.
Pat: Our year over year increase of 132% at the midpoint we.
Pat: We expect revenue to be between 145 and $155 million a year over year increase of 77% at the midpoint.
Pat: We expect adjusted EBITDA to be between $15, five and $17 $5 million a year over year increase of 359% at the midpoint driven by higher contribution.
Pat: We expect overhead to be approximately $500000 higher than Q1 2024 lastly.
Pat: Lastly, Q2 legal costs associated with the ongoing FTC inquiry are expected to be approximately $1 million similar to Q1.
Pat: Finally, a few comments on expenses and profitability going forward. We continue to have measured hiring plans for 2024 and expect limited overhead growth for the full year, given our lean team and capital efficient model, we expect to generate significant operating leverage adjusted EBITDA as our topline growth accelerates cash.
Pat: <unk> is expected to follow suit in our near term priority remains on using excess cash to reduce net debt.
Pat: To the extent attractive alternative capital deployment opportunities arise, we will reassess at that time.
Speaker Change: With that operator, we are ready for the first question.
Pat: Okay.
Pat: And your first question comes from the line of Michael Graham with Canaccord.
Michael Patrick Graham: Please go ahead.
Michael Patrick Graham: Okay. Thanks, a lot and congrats on the really strong results. My first question I just wanted to kind of ask how.
Michael Patrick Graham: How you were thinking about sort of like what the high watermark could be for the business in this.
Michael Patrick Graham: Early.
Michael Patrick Graham: Early cycle like if we look back at your historical transaction value results to sort of.
Michael Patrick Graham: Peaked.
Michael Patrick Graham: In the in the middle part of <unk>.
Michael Patrick Graham: 2021, and you were sort of like on a run rate well north of $1 billion and I'm just wondering like.
Michael Patrick Graham: Do you think the industry is set up for you to be.
Michael Patrick Graham: At that level. When this next cycle between sort of larger or just like how are you thinking about.
Michael Patrick Graham: That topic.
Speaker Change: Hey, Michael.
Michael Patrick Graham: Yes.
Michael Patrick Graham: I'll take the first crack at that question.
Michael Patrick Graham: So.
Michael Patrick Graham: As we as we think about where we are and sort of what the future holds and inherently the first thing that comes to mind.
Speaker Change: Is something that we've talked about in earlier calls.
Steve: The PNC industry's recovery from a period of unprecedented underwriting losses is quickly gaining momentum. We expect these favorable market conditions to be sustained for the remainder of this year and beyond as an increasing number of carriers achieve rate adequacy and begin to reinvest in customer equity. We believe these positive trends will enable us to drive meaningful cash flow growth and shareholder value in the years to come. Finally, Eugene Nanko, my co-founder and the company's chief technology officer, will be transitioning out of his current role at the end of the year and handing the reins to Amy Yeh, our SCT of technology.
Michael Patrick Graham: Which is that.
Michael Patrick Graham: This is an unprecedented underwriting cycle.
Michael Patrick Graham: As the market recovers from it I think theres going to be a lot of unpredictability.
Steve: Amy has worked closely with Eugene during her nine years at Medialpha and will take over as our CTO in 2025. I would like to personally thank Eugene for all he has done over 13 years with the company. Without him, of course, we would not be where we are today. With that, I'll turn the call over to Pat. Thanks, Steve.
Michael Patrick Graham: And so I think certainly we're seeing that with our first quarter results.
Patrick R. Thompson: I'll begin with a few comments on our first quarter financial results and other recent business and market developments before reviewing our second quarter financial guidance and opening the call to questions. As Steve mentioned earlier, our first quarter results exceeded the high end of our guidance ranges across all metrics, with year-over-year transaction value and adjusted EBITDA growth of 13% and 98%. Transaction value in our PNC insurance vertical was up 150% quarter over quarter, driven by strong step-ups in marketing spend during the back half of the first quarter by our carrier partners, especially our largest advertisers.
Michael Patrick Graham: And with how the second quarter is shaping up as well and so.
Patrick R. Thompson: Transaction value in our health vertical was also up 16% year over year, above expectations. The adjusted EBITDA increase of $7.1 million year-over-year was driven by higher contribution and lower oversight. We are in a very different place now than where we were at this time last year when carriers were significantly pulling back on the market.
Patrick R. Thompson: We expect 60-70% sequential growth in PNC transaction value, driven by a continuation of the positive trends we've been seeing. In health, we expect transaction value to grow at a high single to low double-digit rate year over year. Moving to our Consolidated Financial Guidance, we expect Q2 transaction value to be between $285 and $300 million, a year-over-year increase of 132% at the minimum. We expect revenue to be between $145 and $155 million, a year-over-year increase of 77 percent.
Michael Patrick Graham: I think what's driving that are a couple of things I mean first is I think we were right and predicting this recovery that it would start with a small number of the advertisers the carriers really getting back into the marketplace and that momentum will continue to build as more carriers.
Patrick R. Thompson: We expect adjusted EBITDA to be between $15.5 and $17.5 million, a year-over-year increase of 359% at the midpoint, driven by higher contribution. We expect overhead to be approximately $500,000 higher than Q1 2020. Lastly, Q2 legal costs associated with the ongoing FTC inquiry are expected to be approximately $1 million, similar to Q1. Finally, a few comments on expenses and profitability going forward. We continue to have measured hiring plans for 2024 and expect limited overhead growth for the full year.
Patrick R. Thompson: Given our lean team and capital efficient model, we expect to generate significant operating leverage and adjusted EBITDA as our top line growth accelerates. Cash flow is expected to follow suit, and our near-term priority remains on using excess cash to reduce net debt. To the extent attractive alternative capital deployment opportunities arise, we will reassess at that time. With that, Operator, we are ready for the first question.
Operator: And your first question comes from the line of Michael Graham with Canucla. Peace.
Michael Patrick Graham: Hey, thanks a lot and congrats on the on the really strong results. My first question, I just wanted to kind of ask. How you were thinking about, you know, sort of like what the high watermark could be for the business in this, you know, you know, early cycle, like, if we look back at your historical, you know, transaction value results, you sort of, you know, peaked in the, you know, in the middle part of, of, of 2021, and you were sort of like on a run rate, well, north of a billion dollars, and I'm just wondering, like, you know, Do you think the industry is set up for you to be, you know, at that level when this next cycle peaks or larger or just like how are you thinking about that topic?
Michael Patrick Graham: Achieved rate adequacy and started to really reinvest in growth through 'twenty four and into 25, certainly we've seen that play out.
Steve: Hey, Michael. Yeah, I'll take the first crack at that question. So as we think about where we are and sort of what the future holds, I mean, certainly, you know, the first thing that comes to mind is, you know, something that we've talked about in earlier calls, which is that this is an unprecedented underwriting cycle. And as the market recovers from it, I think there's going to be a lot of unpredictability. And so I think certainly we're seeing that with our first quarter results and with, you know, how the second quarter is shaping up as well.
Michael Patrick Graham: I think the second thing we got right.
Steve: I think what's driving that are a couple of things. I mean, first of all, I think we were right in predicting for this recovery that it would start with a small number of the advertiser carriers really getting back into the marketplace, and that momentum would continue to build as more carriers achieved rate adequacy and started to really reinvest in growth, you know, through 24 and into 25. Certainly, we've seen that play out.
Michael Patrick Graham: That was that consumer shopping sentiment with auto insurance is at an all time high the volume is at an all time high in our marketplace and that's to be expected because consumers have had tough.
Steve: The second thing we got right was that consumer shopping sentiment for auto insurance is at an all-time high. Volume is at an all-time high in our marketplace, and that's to be expected because consumers have had rate increases of 30-40 percent, which really spur shopping behavior. And again, there too, we expect that to continue through 2024 and 2025 because rate taking continues. So, even now, I think, you know, rates are going up about 20 to 22 percent year over year.
Michael Patrick Graham: Increases of 30%, 40%, which released for shopping behavior and again, there too we expect that to continue through 'twenty four and 'twenty five.
Michael Patrick Graham: Right taking continues.
Michael Patrick Graham: So even though rates are going up by 20% to 22% year over year. They are carriers, we're still taking rate. This year and we will be taking rate is 25 and as those rate increases continue to earn through and show up in People's renewal notices that's going to trigger shopping behavior. So we expect the shopping behavior has continued to remain elevated.
Steve: There are carriers who are still taking rates this year and will be taking rates into 25. And as those rate increases continue to trickle through and show up in people's renewal notices, that's going to trigger shopping behavior. So, we expect shopping behavior to continue to remain elevated, again, through this year and into next.
Michael Patrick Graham: <unk> again through this year and into next I think the thing that we got wrong in terms of the unpredictability is really the pricing with a small number of national carriers really re entering the marketplace. Early this year I think everyone knows who those carriers are the ones who were early to take rate achieved rate adequacy.
Steve: I think the thing that we got wrong in terms of the unpredictability is really the pricing. You know, with a small number of national carriers really reentering the marketplace early this year, I think everyone knows who those carriers are. They're the ones who were early to take rates, achieve rate adequacy, and I think that was enough to really get pricing back to pre-hard market levels over the first quarter and early part of the second quarter. And that was unexpected.
Michael Patrick Graham: I think that was enough to really get pricing back.
Michael Patrick Graham: Due to the pre hard market levels.
Michael Patrick Graham: Over the first quarter and early part of the second quarter and that was unexpected.
Steve: I think we can attribute that snapback in pricing to a couple of things. I think one is just the appetite that these carriers have after having sat on the sidelines for the better part of three years. I think the second is really the hallmark of our marketplace that we've talked about in the past, which is measurability, right? The measurability, which then leads to a small number of competitors really being needed to actually have pricing be set based on expected lifetime value and return on ad spend and far less on competitive dynamics.
Michael Patrick Graham: I think we can attribute that snapback in pricing to a couple of things.
Michael Patrick Graham: I think one is just the appetite that these carriers have after having sat on the sidelines for the better part of three years.
Michael Patrick Graham: I think the second is really the hallmark of our marketplace that we've talked about in the past, which is the measure ability.
Michael Patrick Graham: The measure ability, which then leads to a small number of competitors really being needed to actually have pricing be set based on expected lifetime value and return on AD spend and far less on competitive dynamics and so along the pricing fraud.
Michael Patrick Graham: And so on the pricing crud, again, we've been pleasantly surprised at how quickly that's returned to pre-hard market levels. What we do expect going forward is that as more carriers come back in, pricing is going to go up, right? As some of the states like California and New York, New Jersey kind of come back online again, average pricing across our network is going to go up. But I think those increases going forward are going to be a bit more measured than the sharp increase that we've seen. Okay, Michael. Does that give you the color that you were looking for? Yes, Steve. Thank you.
Michael Patrick Graham: Again, we've been pleasantly surprised at how quickly that's returned to pretty hard market levels what.
Michael Patrick Graham: But we do expect going forward is that as more carriers come back and pricing is going to go up but as some of the states like California, and New York, New Jersey kind of come back online again average pricing across our network is going to go up.
Michael Patrick Graham: But I think those increases going forward are going to be a bit more measured than the sharp increase that we've seen year to date.
Michael Patrick Graham: Okay. Michael does that give you the color that you were looking for.
Steve: It does, Steve. Thank you. That was a complete answer. So I'll defer to the next caller. Thanks so much. Michael.
Michael Patrick Graham: Steve Thank you.
Speaker Change: <unk> answer so I'll defer to the next caller. Thanks, so much.
Speaker Change: Thanks, Michael.
Speaker Change: Our next question comes from the line of Mike Zaremski with BMO capital markets. Please go ahead.
Operator: Our next question comes from the line of Mike Zaremski with BMO Capital Markets. Please go ahead.
Michael David Zaremski: Thanks, good afternoon. I guess my only follow-up question to uh that that good uh question and answer is just um should we be cognizant or maybe you can remind us uh if there's Seasonality, we should be thinking about it, you know, clearly you gave us 2Q guide, you know, I believe historically there's been seasonality around tax refund season, maybe that we've, maybe that's, you know, obviously that would be encapsulated in the 2Q guide if that is true, but anything on the seasonality front, we should keep in mind.
Michael David Zaremski: Thanks, Good afternoon I.
Michael David Zaremski: I guess my only follow up.
Michael David Zaremski: Question two.
Michael David Zaremski: Good question and answer is just should we be cognizant or maybe you can remind us.
Michael David Zaremski: If there is some seasonality we should be thinking about it clearly you gave us <unk> guide.
Michael David Zaremski: I believe historically, there has been seasonality around tax refunds season, maybe.
Speaker Change: Obviously that would be encapsulated in the <unk> guide if that is true, but anything on the seasonality front.
Speaker Change: Keep in mind.
Patrick R. Thompson: Yeah, and Steve, do you want me to text this one? Yeah, go ahead, Pat.
Speaker Change: Yes.
Speaker Change: <unk> you want me to take that one yes.
Pat: Yes go ahead Pat.
Patrick R. Thompson: Perfect. Yeah. So, Mike, thanks for the question.
Pat: Perfect, Yes, so Mike Thanks for the question and I would say that.
Pat: I think Steve our two main verticals have different seasonality trends and so I would say in P&C in a typical year Q1, and Q3 tend to be the biggest for consumer shopping Q2 tends to be a little bit below that.
Patrick R. Thompson: And I would say that, you know, I think our two main verticals have different seasonality trends. And so, in P&C, in a typical year, Q1 and Q3 tend to be the biggest for consumer shopping. Q2 tends to be a little bit below that, and then Q4 tends to be a bit lower than that. And I think we've given guidance in the past that, in a typical year, we would expect Q1 to be 15 to 25 percent bigger.
Pat: And then Q4 tends to be in a bit lower than that and I think we've given the guidance in the past than in a typical year. We would expect expect Q1 to be 15% to 25% bigger than Q4.
Patrick R. Thompson: You know, some of the guidance we're giving for Q2 shows a trend that's kind of bucking normal seasonality on the PNC side, and we haven't given any guidance, as you pointed out, for Q3. On the health vertical, that piece of the business is relatively focused on Q4. So in a typical year, Q4 is about 40% of our business in health. You know, Q1 tends to be the next largest because some of the enrollment period leads over into January, and then Q2, Q3 tend to be a little bit smaller than Q1.
Steve: So I think that some of the guidance, we're giving for Q2 shows a trend thats kind of bucking normal seasonality on the P&C side, and we havent given any guidance, but as you pointed out for Q3 and beyond.
Pat: On the health vertical.
Pat: That piece of the business is relatively focused on Q4. So in a typical year Q4 is about 40% of our business and health Q1 tends to be the next largest because some of the enrollment period weeds over at the January in that.
Patrick R. Thompson: And so hopefully, that kind of gives you an idea of, you know, what typical seasonality looks like. And, you know, I would say, just as in the hard market downturn we had, some of the seasonality was a bit hard to tease out of the numbers. I wouldn't doubt that it could be hard to tease out as the business recovers as well.
Pat: Q2, Q3 tend to be a little bit smaller than Q1.
Pat: So hopefully that kind of gives you that view.
Pat: What typical seasonality looks like and I would say just as in the hard market downturn. We had some of the seasonality was a bit hard to tease out of the numbers I wouldn't doubt that it.
Pat: It could be hard to tease out as the business recovers as well.
Michael David Zaremski: Okay, got it, yep, that is helpful, and I guess you guys have, you know, it's been, maybe you've done a good job. I know it's probably tough with the expense cuts in recent years, you know, directly as the market. Are you guys going to be kind of cautious at first and kind of making sure the revenues are there before kind of reinvesting, or are you guys, you know, good enough line of sight that we should just be thinking you guys are going to go back to kind of, you know, doing what you have always done in terms of how to reinvest when we think about margins?
Speaker Change: Okay got it yes that is helpful and I guess.
Pat: It's been you guys have spent.
Pat: Maybe.
Pat: Done a good job I know, it's probably tough with the expense cuts.
Pat: In recent years.
Pat: Directionally.
Pat: The market.
Pat: Stabilize it.
Pat: It gets a lot better.
Pat: Are you guys going to be kind of.
Pat: Shifts at first and kind of making sure.
Pat: The revenues are there before kind of reinvesting or is it or.
Pat: Are you guys right.
Speaker Change: Yes, good enough line of sight that we should just be thinking you guys. When I go back to kind of doing what you.
Speaker Change: As always John in terms of how to reinvest.
Speaker Change: When we think about margins.
Patrick R. Thompson: Yeah, and you know Mike, I would say that efficiency is in our DNA as a company, and it was a bootstrap company, and it's been profitable since the very beginning. And, you know, we take that very, very seriously. And so, you know, I think we've, you know, we've managed pretty well through the hard market, and we're going to be seeing, you know, a bit of investment over the course of this year.
Speaker Change: Yes.
John: Mike I would say that.
Speaker Change: Efficiency is in our DNA as a company and the bootstrap company and profitable since.
Speaker Change: At the very beginning.
Speaker Change: And we take that very very seriously and so I think we have.
Speaker Change: Managed pretty well through the hard market, we're going to be seeing.
Speaker Change: A bit of investment over the course of this year and I would say that some of that is going to be capacity and some of that is going to be.
Patrick R. Thompson: And I would say that, you know, some of that is going to be capacity and some of that is going to be, you know, and kind of core tech product analytics, but you know our guidance for the year is on limited dollar overhead growth for the full year 24 as compared to 23 and you know I think we've kind of you know we've indicated Q2 should be you know up 500,000 versus Q1 and you know would expect you know probably a bit of increase in you know Q3 relative to Q2 and Q4 relative to Q3 as we start to hopefully reinvest as we gain more confidence.
Speaker Change: Core tech product analytics.
Speaker Change: Our guidance for the year is on limited dollar over had growth for the full year 24 as compared to 23.
Speaker Change: And I think we've kind of we've indicated Q2 should be up 500000 versus Q1 and would expect probably a bit.
Speaker Change: Increase in Q3 relative to Q2 and Q4 relative to Q3 as we start to.
Speaker Change: Hopefully reinvest as we gain more confidence.
Speaker Change: And as.
Patrick R. Thompson: And Pat, as a last follow-up, is there any way you could size it up by level, like what percentage of your expense base is fixed versus variable? That's not something we disclosed.
Speaker Change: Last follow up is there any way you could size up high level like what percentage of your expense base is fixed versus variable.
Patrick R. Thompson: That's not something we have disclosed, Mike. The one thing I would say is that...
Speaker Change: That's not something we disclose Mike the one thing I would say that.
Speaker Change: The vast majority of our head count is included in.
Patrick R. Thompson: The vast majority of our headcount is included in the operating expenses category, and so we would, you know, deem it to be fixed or semi-fixed. Obviously, there are some roles in there that are probably variable at some point, which is Hey, if you've got, you know, a bunch more business happening, do you need another account manager or something like that? But, you know, I'd say that the vast majority of our headcount I would deem as being
Speaker Change: The operating expenses category and so we would do.
Speaker Change: <unk> to be fixed or semi.
Speaker Change: Semi fixed.
Speaker Change: <unk> there are some roles in their debt.
Speaker Change: <unk>, our variable at some point, which is.
Speaker Change: <unk> got a bunch more business happening do you need another account manager or something like that but I would say that.
Speaker Change: The vast majority of our head count I would deem as being fixed.
Speaker Change: Okay. Thank you.
Speaker Change: Our next question comes from the line of Cory Carpenter with Jpmorgan.
Operator: Our next question comes from the line of Cory Carpenter with J.P. Morgan. Please go ahead.
Cory Alan Carpenter: Please go ahead.
Cory Alan Carpenter: Good afternoon. Thank you.
Cory Alan Carpenter: Hey, good afternoon. Thank you Steve.
Cory Alan Carpenter: Steve could you just give us a sense of how close the wave one carrier is back to normal fully normalized spending levels.
Steve: Steve, could you just give us a sense of how close the wave one carrier is back to normal, fully normalized spending levels? And then if we think of, I'll call them the wave two or wave three carriers, how much are they contributing? How material is that to 1Q, and how do you expect them to ramp up in 2G? Thank you.
Cory Alan Carpenter: Then if we think of I'll call. It in the wave two <unk> with two carriers how much are they contributing how material was that <unk> had.
Cory Alan Carpenter: Do you expect them to ramp and Gigi. Thank you.
Cory Alan Carpenter: Yes.
Steve: So, Cory, if I heard your question correctly, I think you're asking about, I think, the small number of carriers who, right now, are getting, you know, close to normal levels. And I think I just answered your question by saying that I think, I think the small number of carriers who've achieved great adequacy are really starting to reinvest in growth and are actually getting close to normal levels. And so, we've been again surprised by that, very pleasantly surprised.
Steve: So Cory if I heard your question correctly, I think you're asking about I think the small number of.
Gigi: Carriers, who right now are getting close to normal levels.
Gigi: And I think I just answered your question by saying that I think I think the small number of carriers. We've achieved rate adequacy are really starting to reinvest in growth.
Steve: So, again, I think that's really attributable to the fact that, you know, there's been three years of muted growth investments, and the industry is really ready to start reinvesting in growth once each of the carriers in the industry achieves great adequacy. In terms of color on what that next wave looks like, I mean, we're certainly engaged in positive discussions with all of the other carriers. I think that, you know, one thing that we're seeing that's a little bit different than the last hard market cycle is just the sheer number of other carriers, right?
Cory Alan Carpenter: Our product is getting close to normal levels.
Cory Alan Carpenter: And so we've been again surprised by that very pleasantly. So again I think thats really attributable to the fact that there has been three years of muted growth investments and the industry is really ready to start reinvesting in growth once each of the carriers in the industry achieved rate adequacy.
Cory Alan Carpenter: In terms of color into what that next wave looks like.
Cory Alan Carpenter: I mean, we're certainly engaged in a positive discussions with all of the other carriers.
Cory Alan Carpenter: I think that.
Cory Alan Carpenter: One thing that we're seeing that's a little bit different than the last hard market cycle is just the sheer number of of other carriers Gregg who typically hasnt been big players within the online direct to consumer space.
Steve: Typically, they haven't been big players within the online direct-to-consumer space, and just how far advanced they are versus when they emerged from the last hard market. And what I mean by that is just in terms of the level of technical integrations that we have with them, their understanding of how to measure expected lifetime value, and how to match that to media cost to achieve target return on ad spend. The value of programs to gain additional monetization from visitors, like our carrier publishing program and the strong adoption we got of that program during the hard market period.
Cory Alan Carpenter: And just how hard bands they are versus when they when we emerge from the last hard market.
Cory Alan Carpenter: And what I mean by that is just in terms of the level of technical integrations that we have with them there.
Cory Alan Carpenter: And their understanding of how to measure expected lifetime value to match that to media cost to it.
Cory Alan Carpenter: <unk> target return on Ad spend.
Cory Alan Carpenter: The value of programs to gain additional monetization from visitors alike, our carrier publishing program and the strong adoption, we got out of that program during the hard market period.
Steve: And even with the personnel that are within the marketing departments of a lot of these carriers and just the level of sophistication they have. And so, you know, the timing of the second tier or the next wave of carriers to come on will really be dictated by how quickly they achieve rate adequacy. And I think, you know, you and I have the same access to that data. Again, I'm not going to go out and say that they're going to return ahead of getting profitability where they need to be. It was a tough cycle.
Cory Alan Carpenter: And even with the personnel that are within the marketing department of a lot of these carriers and just the level of sophistication behalf and so.
Cory Alan Carpenter: The timing of the second tier or the next wave of carriers to come on I think really will be dictated by how quickly the fee rate adequacy.
Cory Alan Carpenter: And I think you and I have the same access to that data.
Cory Alan Carpenter: Again, I'm not going to go out and say that they're going to return ahead of getting profitability, where they need to be it was a tough cycle.
Steve: But when they come back, really, what we're excited about is just how many more carriers are actually in a good place to really scale their spend with us. And I think that that really bodes well for this vertical for us over the next couple of years, again, in what we are expecting to be sort of the opposite of the hard market cycle, which is a soft market cycle, where a number of carriers are really aggressively spending on growth and in marketing in order to gain market share. And we're excited about working with just a growing number of carrier partners to really help them realize their growth objectives.
Cory Alan Carpenter: But when they come back really what were excited about is just how many more carriers actually in a good place to really scale their spend with us.
Cory Alan Carpenter: And I think that but that really bodes well for this vertical for us over the next couple of years.
Cory Alan Carpenter: Again of what we are expecting to be sort of the opposite of the hard market cycle, which the soft market cycle, where a number of carriers are really aggressively spending in growth and in marketing in order to gain market share.
Cory Alan Carpenter: And we're excited about working with the growing number of carrier partners to really realize that.
Cory Alan Carpenter: Help them realize their growth objectives.
Speaker Change: Great. Thank you very much.
Operator: Great, thank you very much.
Cory Alan Carpenter: Our next question comes from the line of Tom joined.
Thomas Patrick Mcjoynt: Our next question comes from the line of Tony McJoynt with KBW. Please go ahead.
Tom: Joining with <unk>.
Tom: Go ahead.
Tom: Hey, good afternoon, thanks for taking my questions.
Steve: Hey, good afternoon. Thanks for taking my questions. With so much, you know, auto consumer shopping going on, mentioned that carriers are certainly thinking pretty hard about lifetime values of customers. Can you talk about some of the advantages that Mediaalpha has over its competitors in terms of helping carriers evaluate this really important input as they are looking to seek out new customers? Basically, just what is the value proposition that Mediaalpha goes to market with its carriers? Sure. Bye.
Tom: With so much auto consumer shopping going on.
Tom: You mentioned that carriers are certainly thinking pretty hard about lifetime values.
Speaker Change: Customers can.
Cory Alan Carpenter: Can you talk about some of the advantages that media Alpha has over its competitors in terms of helping carriers.
Cory Alan Carpenter: Valuate this really important input as carriers are looking to kind of seek out new customers base.
Cory Alan Carpenter: Basically just what is the value proposition that that media alpha goes to market to.
Cory Alan Carpenter: Two its carriers.
Steve: Sure. I think the first thing to consider is measurability. All the media in our marketplace is performance media, and so it's expected to, and it's tied back to an actual sale. And so, at the end of the day, every dollar spent in our marketplace is fully accountable, and again, tied back to a policy sale to justify media pricing. So, in addition to being a performance-based marketplace, right, you know, it's really the scale of our marketplace, because in terms of carrier spend and our ability to support that as a marketplace, the carrier spend here is oftentimes two to three times that of any other marketplace, and that additional data really allows the carriers to get a much better view into the expected lifetime value because there's just so much data out there for every consumer segment that they'
Cory Alan Carpenter: Sure.
Cory Alan Carpenter: I think first is the metro ability all the media in our marketplace.
Cory Alan Carpenter: Its performance media and so it is expected to tie back to an actual sale.
Cory Alan Carpenter: And so that.
Cory Alan Carpenter: At the end of the day every.
Cory Alan Carpenter: Every dollar spend in our marketplace is fully accountable and again tied back to a policy sale to justify our media pricing.
Speaker Change: So let's see.
Speaker Change: So in addition to being a performance based marketplace right.
Speaker Change: It's really the scale of our marketplace because in terms of carrier spend and our ability to support that as the marketplace the carrier spend here.
Speaker Change: Here there is often times two to three times that of any other marketplace.
Speaker Change: And that additional data really allows the carriers to get a much better view into the expected lifetime value because they are just so much data out there for every consumer segment that they're targeting and so what that helps us get enables them to get to to get a much more accurate bearing on the estimated lifetime.
Steve: And so what that helps is enable them to get here to get a much more accurate bearing on the estimated lifetime value of all the customers that they're acquiring in our channel, which then allows them to have a much better ROI or return on ad spend, again, across three to four hundred publishers within our marketplace. And in a time like this, when advertisers are really looking to scale up, the granularity that's really enabled that massive scale and transparency that we have in our marketplace is really what's going to enable carriers to scale up, right, while keeping their efficiencies at target levels.
Speaker Change: <unk> all the customers that they are acquiring in our channel.
Cory Alan Carpenter: Which then allows them to have a much better ROI or return on AD spend again across three to 400 publishers within our marketplace and in a time like this when advertisers are really looking to scale up the granularity thats really enabled at massive scale and transparency.
Cory Alan Carpenter: That we have in our marketplace is really what's going to enable carriers to scale up.
Cory Alan Carpenter: While keeping their efficiencies at target levels.
Speaker Change: Got it thanks.
Thomas Patrick Mcjoynt: Got it. Thanks.
Speaker Change: And then just a second question here from from your perspective have you seen a lot of unbundling of customers in terms of looking at the separate home and auto.
Steve: And then just a second question here. From your perspective, have you seen a lot of unbundling of customers in terms of, you know, looking to separate home and auto? And kind of how has that impacted what carriers are kind of willing to bid for customers are looking to acquire? Yeah, I mean, I think that that's certainly something that a lot of people are talking about.
Speaker Change: How has that impacted what carriers are.
Speaker Change: Kind of willing to bid for customers, who are looking to acquire.
Speaker Change: Yes, I mean I think.
Steve: Yeah, I mean, I think that that's certainly something that a lot of people are talking about the dynamic in the marketplace, just because both auto and home have had their own issues in terms of dislocated markets and, and, and large price increases. And so I certainly believe that that is happening in the marketplace. We don't really have visibility into that. You know, our marketplace is predominantly auto, and home is a smaller part of our marketplace.
Speaker Change: I mean, thats certainly something that a lot of people are talking about <unk>.
Speaker Change: Dynamic in the marketplace, just because both auto and home has had its own issues in terms of dislocated markets and large pricing increases and so I certainly believe that that is happening in the marketplace that we don't really have visibility into that.
Speaker Change: Our marketplaces predominantly auto and home is a smaller part of our marketplace.
Steve: But what we are seeing is increased demand for home that I think is reflected or resulting in part from some of the issues that the carriers may be having with retaining some of their bundle customers.
Speaker Change: But what we are seeing is increased demand for home that I think is reflected.
Speaker Change: Our resulting in part from some of the some of the issues that the carriers may be having with retaining some of their bundle customers.
Speaker Change: Makes sense. Thanks.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line of Ben Hendrix with RBC capital market.
Operator: Our next question comes from the line of Ben Hendrix with RBC Capital Market. Please go ahead.
Benjamin Hendrix: Go ahead.
Benjamin Hendrix: Great. Thanks, guys congratulations on the quarter.
Benjamin Hendrix: Great. Thanks, guys. Congratulations on the quarter. Maybe a couple of quick ones here. First, just if you could follow up on this opportunistic partner spend in Medicare, can you remind us kind of the nature of that arrangement, kind of what you saw in terms of magnitude this quarter, and how we should think about that going forward?
Benjamin Hendrix: Maybe a couple of quick ones here first just if you could follow up on this opportunistic partner spend in Medicare can you remind us kind of the nature of that arrangement kind of what you saw in terms of magnitude this quarter and how should we think about that going forward.
Speaker Change: Yes.
Patrick R. Thompson: Yeah, and Ben, this is Pat. So, you know, I would say that on the Medicare side, there were a couple of carriers that, you know, kind of in late February and March unlocked some spending with us. And, you know, I'd say that presumably they liked what they saw in terms of market opportunity and returns. And so they, you know, invested in that, and, you know, the feedback from them was generally positive on, you know, they felt like they got a good return on that spend.
Pat: Ben This is Pat.
Pat: I would say that on the Medicare side, there were a couple of carriers that.
Pat: Kind of in late February and March unlocked, some spend with us and I'd say that presumably they liked what they saw in terms of market opportunity and returns and so they spent into that at.
Pat: The feedback from them was generally positive body. They felt like they got a good return on that spend.
Patrick R. Thompson: The thing I would say is that, you know, given the size of our health vertical in Q1, and, you know, the, the, spend and kind of the growth out performance we had relative to expectations, like, it wasn't that much spend. It just ended up driving 6810 percentage points B versus expectations, but, you know, clearly positive from our
Pat: Thing I would say is that kind of given the size of our health vertical in Q1.
Pat: And.
Pat: The spend in content that growth outperformance, we had relative to expectations like it wasn't that much spend it just ended up driving.
Pat: Yes, six 810 percentage point beat versus expectations, but clearly positive from our perspective.
Speaker Change: Got you and just also we saw a sub optimal rate notice for Medicare advantage next year, we see some of the MAA leaders Humana and Cvs talking about protecting margins curtailing benefits for next year. It seems like the shopping setup is just getting incrementally better just wanted to see kind of.
Benjamin Hendrix: Gotcha. And also, you know, we saw a suboptimal rate notice for Medicare Advantage next year. We saw some of the M.A. leaders, Humana and CPS, talking about protecting margins, and curtailing benefits for next year.
Patrick R. Thompson: It seems like the shopping setup is just getting incrementally better. Just want to see kind of if you agree and how you see the, you know, the transaction value opportunity shaping up for OEP this year. Yeah, and I would say that, you know, I think he did it again.
Pat: Is that if you agree and how you see the transaction value opportunity shaping up for OSB. This year.
Patrick R. Thompson: Yeah, and, you know, I would say that, you know, I think you did a nice summary of a lot of the market forces that have been at play. And I think, you know, one of the things we've, you know, seen over time with, you know, both Medicare and our under 65 businesses that, you know, regulatory and, you know, market shifts, you know, can have an impact on the business, you know, say, over the long term, totally confident that the industry will successfully adapt to whatever, whatever changes come, you know, near term, you know, maybe hiccups, maybe positive surprises, you know, we'll we'll kind of see on that.
Pat: Yes.
Speaker Change: I'd say that I think you did get a nice summary of a lot of the market forces that have been at play and I think.
Speaker Change: One of the things we've.
Speaker Change: <unk> seen over time with.
Speaker Change: Both Medicare and are under 65% debt.
Speaker Change: Regulatory and market shifts can have an impact on the business say over the long term totally confident that the industry will successfully adapt to whatever whatever changes come near term.
Speaker Change: May be hiccups may be positive surprises will kind of see on that.
Patrick R. Thompson: And, you know, I would say that, you know, we're excited by the long-term opportunity, you know, we're hearing decent things from our advertising partners and on the publishing side. And I think we're, you know, we're feeling okay about Q2, and I think we'll provide more guidance as we get closer to the time and get a little bit more clarity on exactly what folks are thinking. You know, we'll we'll see how things shape up and where we will, as always, be ready to do the best we can and react to whatever may come our way.
Speaker Change: And I would say that we're excited by the long term opportunity. We're here in a decent things from our advertising partners on the publishing side and I think where.
Speaker Change: We're feeling okay about Q2, and I think we'll provide more guidance as we get closer to the time and get a little bit more clarity on exactly what folks are thinking, but well, we'll see how things shape up then.
Speaker Change: Laura we will as always be ready to do the best we can and react to whatever may come our way.
Laura: Thank you very much.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Is there a follow up question from Mike Zaremski with BMO capital markets. Your line is now open.
Operator: There's a follow-up question from Mike Zaremski with BMO Capital Markets. Please, your line is now open.
Michael David Zaremski: Thanks for fitting me in. Just one quick follow up, and I think you might have used a bit of this out, you know, thinking on the property and casualty insurance segment, I believe, you know, if we go back to the prior to the industry's profitability woes, that, you know, you The revenue is very concentrated with one or, you know, with a with a smaller number of carriers in terms of the largest carrier is if we think about the first half of, 24, is it, and I believe it de-fragmented after that, but maybe I'm wrong, when we think of the first half 24, is it still very, is it back to like being very concentrated and you expect it to de-concentrate, or maybe you could just... Unpack that a little bit. Yeah, Mike, I think I think you
Michael David Zaremski: Thanks for fitting me in just one quick.
Michael David Zaremski: Follow up and I think you might have to use a bit of this out.
Michael David Zaremski: Thinking on the property and casualty insurance segment.
Michael David Zaremski: I believe if we go back.
Michael David Zaremski: <unk>.
Michael David Zaremski: Prior to the industry as profitability was.
Michael David Zaremski: That.
Michael David Zaremski: The revenue was very concentrated with one of our.
Michael David Zaremski: With a smaller number of carriers in terms of the largest carrier.
Michael David Zaremski: If we think about the first half of 'twenty.
Michael David Zaremski: <unk> four is it.
Michael David Zaremski: Deep fragmented after that but maybe I'm wrong. When we think about first half 'twenty four is it still very comps is it back to like being very concentrated and you expect it to.
Michael David Zaremski: The concentrate or maybe you could just.
Speaker Change: Unpack that a little bit.
Steve: Yeah, Mike, I think you said it exactly right. I think because we're in the early part of the recovery, where there's still a small number of carriers who are, you know, back to or something close to normal levels of spend, you're going to see more concentration in our P&C marketplace. Again, as more carriers achieve rate adequacy, and start to make growth investments again, I think you're going to see increasing diversity and demand in our P&C marketplace.
Speaker Change: Yes, Mike I think you said it exactly right I think because they are in the early part of the recovery where theres still.
Speaker Change: A small number of carriers who are.
Speaker Change: Back to or something close to normal levels of spend youre going to see more concentration in our P&C marketplace.
Speaker Change: As more carriers achieve rate adequacy start to make growth investments again, I think youre going to see it.
Speaker Change: Increasing diversity and demand in our NRT E&C marketplace, and I think coming out of this card market as I mentioned before I think we have.
Steve: And I think coming out of this hard market, as I mentioned before, again, I think we have, you know, a stable of additional carriers that we're working with who, I think, again, we feel are really poised to really embrace this channel in this next growth cycle. And so I think you're going to expect to see, I think, additional, like you said, fragmentation and demand, diversification and demand as the soft market really starts to gain traction. Okay, loud and clear. Thank you.
Speaker Change: Our stable of additional carriers that we're working with what I think again, we feel are really poised to really embrace this channel.
Speaker Change: And this next growth cycle, and so I think.
Speaker Change: We're going to expect to see I think additional I guess, you said fragmentation and demand diversification in demand as the soft market really starts to gain traction.
Speaker Change: Okay loud and clear thank you.
Speaker Change: Thanks, Mike.
Speaker Change: Yeah.
Speaker Change: It seems that there are no further questions at this time and this concludes today's conference call you may now disconnect.
Operator: It seems that there are no further questions at this time, and this concludes today's conference call. Do we now disconnect?