Q1 2025 MediaAlpha Inc Earnings Call
Unknown Executive: Ladies and gentlemen, thank you for standing by.
Ladies and gentlemen, thank you for standing by.
Unknown Executive: Hello. Thank you for standing by. My name is.
Hello.
Thank you for standing by my name is.
Cory Carpenter: Cory Carpenter and I'm today.
Okay.
That was a day.
Cory Carpenter: I would like to welcome everyone to the Mediaalpha first quarter 2025 earnings conference call. All lines have been placed on mute to prevent any After the speaker's remark, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you.
Now I would like to welcome everyone to the media Alpha first quarter 2025 earnings Conference call.
Lines have been placed on mute to prevent it.
After the Speakers' remarks, there will be a question and answer.
If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If he would like to withdraw your question Press Star one again.
Alex Liloia: I will now turn the call over to Alex Liloia, Investor Relations. Please go ahead.
Speaker Change: I will now turn the call over to Alex well layer in.
Speaker Change: That's your relations. Please go ahead.
Speaker Change: Okay.
Unknown Executive: Thanks, Carmen.
Alex Liloia: Good afternoon and thank you for joining us. With me are co-founder and CEO Steve Yi and CFO Pat Thompson.
Speaker Change: Thanks, Tom and.
Steve: Good afternoon, and thank you for joining us with me, our founder and CEO, Steve <unk> and CFO Pat Thompson.
Alex Liloia: On today's call, we'll make forward-looking statements relating to our business and outlook for the future financial results, including our financial guidance for the second quarter of 2025. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially.
Steve: On today's call, we will make forward looking statements relating to our business outlook future financial results, including our financial guidance for the second quarter of 2025.
Steve: These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings, including our annual report on Form 10-K, and quarterly reports on Form 10-Q for a floor explanation of those risks and uncertainties mentioned applicable to forward looking statements.
Alex Liloia: Please refer to our SEC filings, including our annual report on Form 10-K and quarterly reports on Form 10-Q, for a fuller explanation of those risks and uncertainties and the limits applicable to forward-looking statements. All the forward-looking statements we make on this call reflect our assumptions and beliefs as of today, and we disclaim any obligation to update such statements except as required by law.
Steve: All the forward looking statements we make on this call reflect our assumptions and beliefs as of today and we disclaim any obligation to update such statements except as required by law.
Alex Liloia: Today's discussion will include non-GAAP financial measures, which are not a substitute for GAAP results. Reconciliations of these non-GAAP financial measures to the corresponding GAAP measures can be found in our press release and shareholder letter issued today, which are available on the investor relations section or our website.
Steve: Today's discussion will include non-GAAP financial measures, which are not a substitute for GAAP results reconciliations of these non-GAAP financial measures to the corresponding GAAP measures can be found in our press release and shareholder letter issued today.
Steve: Well on the Investor Relations section of our website.
Steve Yi: I'll now turn the call over to Steve. Hey, thanks, Alex. Hi, everyone. Thank you for joining us. 2025 is off to an outstanding start as we delivered record first quarter financial results that exceeded our guidance across all key performance metrics. Our strong results were driven by continued strength in our P&C insurance vertical, supported by robust growth investments from several carriers amidst solid underlying profitability in the personal auto insurance sector. While automotive tariff developments may put pressure on profitability as the year progresses, we anticipate continued near-term momentum and another strong quarter for our core PMC business.
Steve: I'll now turn the call over to Steve.
Steve: Hey, Thanks, Alex Hi, everyone. Thank you for joining us.
Steve: 2025 is off to an outstanding start.
Steve: Record first quarter financial results that exceeded our guidance across all key performance metrics.
Steve: Our strong results were driven by continued strength in our P&C insurance vertical supported by robust growth investment from several carriers and it's solid underlying profitability in the personal auto insurance sector.
Steve: While automotive tariff developments may put pressure on profitability as the year progresses, we anticipate continued near term momentum and another strong quarter for our core P&C business.
Steve Yi: In our health insurance vertical, our first quarter performance was in line with expectations.
Steve: And our health insurance vertical our first quarter performance was in line with expectations going forward. We've made the strategic decision to scale back certain areas of our under 65 business as we continue to shift our focus to Medicare advantage, a large and growing market, where we believe we had a strong competitive position.
Steve Yi: Going forward, we've made the strategic decision to scale back certain areas of our under 65 business as we continue to shift our focus to Medicare Advantage, a large and growing market where we believe we have a strong competitive position.
Steve Yi: With regard to the FTC matter, we continue to engage in constructive dialogue with the FTC staff in an effort to work towards a reasonable resolution.
Steve: With regard to the FTC matter, we continue to engage in constructive dialogue with the FTC staff in an effort to work towards a reasonable resolution.
Steve Yi: In connection with these evolving discussions, we increased our reserve related to this matter by $5 million, bringing the total reserve to $12 million at the end of the quarter. While we cannot predict the outcome, we remain committed to resolving the FTC's claims in a manner that's in the best long-term interest of our shareholders.
Steve: In connection with these evolving discussions we increased our reserve related to this matter by $5 million, bringing.
Steve: Bringing the total reserve to $12 million at the end of the quarter.
Steve: While we cannot predict the outcome, we remain committed to resolving the FTC's claims in a manner. That's in the best long term interest of our shareholders.
Steve Yi: Looking ahead, we remain bullish on our near term outlook for auto insurance advertising spend. While the upcoming automotive tariffs has the potential to negatively affect the industry, carriers by and large are highly profitable at this time and are ready to react quickly by adjusting rates if needed. We're staying closely connected with our partners and remain focused on delivering high returns on advertising spend and providing performance driven marketing solutions that help them to exceed through different macroeconomic conditions.
Steve: Looking ahead, we remain bullish on our near term outlook for auto insurance advertising spend.
Steve: While the upcoming automotive tariffs has the potential to negatively affect the industry carriers find larger highly profitable at this time and are ready to react quickly by adjusting rates if needed.
Steve: Closely connected with our partners and remain focused on delivering high returns on advertising spend and provide a performance driven marketing solutions that help them succeed through different macroeconomic conditions.
Pat Thompson: With that, I'll hand it over to Pat for a deeper dive into our first quarter performance and second quarter guidance. Thanks, Steve. I'll start by walking through the drivers of our Q1 results, which beat expectations. Transaction value per Q1 was $473 million, up 116% year-over-year, driven by 200% year-over-year growth in our P&C growth. PNC transaction value was up sequentially, above expectations, as several carriers meaningfully increased marketing investments in March. Transaction value in our health vertical was down 17% year over year in line with expectations. Q1 Adjusted EBITDA doubled year-over-year to $29.4 million, representing 67% of contribution, up from 52% in the prior year.
Steve: With that I'll hand, it over to Pat for a deeper dive into our first quarter performance and second quarter guidance.
Pat: Thanks, Steve.
Pat: Start by walking through the drivers of our Q1 results, which beat expectations.
Pat: Transaction value for Q1 was $473 million up 116% year over year, driven by 200% year over year growth in our P&C vertical.
Pat: PNC transaction value was up sequentially above expectations at several carriers meaningfully increased marketing investments in March.
Pat: Transaction value on our health vertical was down 17% year over year in line with expectations.
Pat: Q1, adjusted EBITDA doubled year over year to $29 4 million.
Pat: Presenting 67% of contribution up from 52% in the prior year.
Pat Thompson: Q1 adjusted EBITDA included $6.9 million of add backs related to the FTC match. These consisted of $1.9 million of legal expenses, along with an additional $5 million reserve recorded in accordance with U.S. GAAP requirements. We also recognize the $13.4 million charge to write off certain intangible assets acquired as part of the CHT Act.
Pat: Q1, adjusted EBITDA included $6 $9 million of add backs related to the FTC matter.
Pat: These consisted of $1 $9 million of legal expenses, along with an additional $5 million reserve recorded in accordance with U S GAAP requirements.
Pat: We also recognized a $13 $4 million charge to write off of certain intangible assets acquired as part of the CHP acquisition.
Pat Thompson: Additionally, we have decided to exit the travel vertical by the end of the second quarter, which contributed approximately $1 million of transaction value and $100,000 of profit in Q1. Looking forward to Q2 we have seen continued strength in PNC carrier marketing investments, particularly among those maintaining profit margins at or above their target level. Accordingly, we expect PNC transaction value levels to grow approximately 65% to 75% year over year. In our health vertical, we expect transaction value to be down 25 to 30% year over year. It's improving trends in Medicare for more than offset by a significant decline in under 65 as we scale back parts of that business.
Pat: Additionally, we have decided to exit the travel vertical by the end of the second quarter, which contributed approximately $1 million of transaction value and $100000 of profit in Q1.
Pat: Looking forward to Q2, we have seen continued strength in P&C carrier marketing investments, particularly among those maintaining profit margins at or above their target levels.
Pat: Accordingly, we expect PNC transaction value levels to grow approximately 65% to 75% year over year.
Pat: And our health vertical we expect transaction value to be down 25% to 30% year over year is improving trends in Medicare or more than offset by a significant decline in under 65, as we scale back parts of that business.
Pat Thompson: We expect Medicare to account for over 40% of our health verticals transaction value.
Pat: We expect Medicare to account for over 40% of our health vertical transaction value for the quarter.
Pat Thompson: Moving to our consolidated financial guidance, we expect Q2 transaction value to be between $470 million and $495 million, a year over year increase of 50% at the We expect revenue to be between $235 million and $255 million, a year-over-year increase of 37% of the mid- We expect adjusted EBITDA to be between $25 million and $27 million, a year over year increase of 39%. We expect overhead to increase sequentially by approximately $500,000 to $1 million as we continue to selectively add headcount to support and drive growth. We generated significant cash flow and made solid progress in deleveraging our balance sheet during the quarter.
Pat: Moving to our consolidated financial guidance, we expect Q2 transaction value to be between $470 million and $495 million.
Pat: Our year over year increase of 50% at the midpoint.
Pat: We expect revenue to be between 235 million and $255 million a year over year increase of 37% at the midpoint.
Pat: We expect adjusted EBITDA to be between $25 million and $27 million a year over year increase of 39% at the midpoint.
Pat: We expect overhead to increase sequentially by approximately 500000 to $1 million as we continue to selectively add head count to support and drive growth.
Pat: We generated significant cash flow and made solid progress in deleveraging our balance sheet during the quarter cash flow was $20 million and we ended the quarter with approximately $64 million of cash and a net debt to adjusted EBITDA ratio of less than one times move.
Pat Thompson: Cash flow was $20 million and we ended the quarter with approximately $64 million of cash in a net debt to adjusted EBITDA ratio of less than one time.
Unknown Executive: Moving forward, we expect to convert a significant portion of adjusted EBITDA into unlevered free cash flow due to the operating efficiencies in our business, including minimal capital expenditures and low working With that operator, we are ready for the first Thank you.
Pat: Moving forward, we expect to convert a significant portion of adjusted EBITDA and Unlevered free cash flow due to the operating efficiencies in our business, including minimal capital expenditures low working capital needs.
Pat: With that operator, we are ready for the first question.
Operator: Thank you. Your first question comes from Maria <unk> with Canaccord Maria. Please go ahead with your question.
Unknown Executive: Your first question comes from Maria Rips with Canaccord.
Maria Rips: Maria, please go ahead with your question. Great, thanks so much for taking my questions and congrats on the strong quarter. Well, thanks for all the color on the PNC vertical in the shareholder letter, and it looks like the strength is continuing here in Q2. I know you're not providing full year guidance, but any additional color maybe you can share on how carrier spend sort of may play out in the second half of the year, especially given tariffs. I guess is there anything sort of you're seeing in carrier behavior that gives you any early maybe indications, or what are some sort of maybe considerations here to keep in mind?
Maria: Great. Thanks, so much for taking my question is on that congrats on a strong quarter.
Maria: Well thanks for all the color on the painful vertical in the shareholder letter I know it looks like the strength continues in Q2, I know, you're not providing full year guidance, but any additional color. Maybe you can share on how tariffs may play out in the second half of the year Festival in Paris, I guess is there anything sort of you have seen in current behavior.
Maria: Any early indications what it sounds like maybe considerations here to keep in mind.
Steve Yi: Hey Maria, it's Steve. Thanks for your question. I think, I mean, I think we continue to believe that overall the auto insurance marketplace, you know, remains very well positioned for a period of sustained growth. I mean, I think that, you know, our optimism for this space, right, is really goes back to the underlying profitability that we continue to see, you know, remaining very strong in the auto sector, right? You know, that there's certain carriers who are not just, you know, at good profitability rates. I think they have some carriers who are even above, you know, or better than their long-term profitability goals.
Speaker Change: Hey, Steve.
Steve: Steve Thanks for the question.
Maria: I think.
Maria: And I think we continue to believe that overall, the auto insurance marketplace remains very well positioned for a period of sustained growth.
Maria: Our optimism.
Maria: For the space right is really goes back to the underlying profitability that we continue to see remaining very strong in the auto sector right.
Maria: Certain carriers, who are not just good.
Maria: Good profitability rates I think they have some carriers or even above or better than their long term profitability goals. So I think that really bodes well.
Steve Yi: And I think that really bodes well, right, for, you know, what the upcoming quarters will bring in terms of the investment from these carriers into growth and customer acquisition. I do, we do see, I think, quarter by quarter, the market is gradually entering into a period of heightened competition. You know, we are seeing new carriers, I think, every quarter who are really shifting from rate taking and profitability focus. to growth, customer acquisition focus. And so you're seeing the recovery and the participation on the demand side in our marketplace, you know, becoming more broad based, I think every quarter.
Maria: For the coming quarters will bring in terms of the investment from these carriers into growth and customer acquisition.
Maria: I do we do see I think quarter by quarter as the market gradually entering into a period of heightened competition.
Maria: We're seeing new carriers I think every quarter, who are really shifting from rate, taking and profitability focus.
Maria: Two.
Maria: Gross customer acquisition focus.
Maria: And so youre seeing the recovery and the participation on the demand side in our marketplace, becoming more broad based I think every quarter.
Steve Yi: I think one thing that bodes well for longer term growth as the year progresses is that, you know, with everything that I've just said, there's still. top 10 carriers who we really don't believe are punching nearly where they should be in terms of the rest in this channel, whether you, you know, measure that based on their historical love or suspense. or just their overall market position. But with that said, I think all of these carriers, I mean, we're really happy with where we are with our partnerships with these carriers, because the level of integration with that we have with them, the level of sophistication that they have with the internal marketing teams in their knowledge of this channel.
One thing that bodes well for longer term growth as the year progresses is that.
Maria: With everything that I've, just said Theres still.
Maria: Ken carriers, who really don't believe.
Maria: <unk> nearly where they should be in terms of the rest of it in this channel whether you measure that based on their historical levels of spend.
Maria: Yes, or just the overall market position.
Maria: But with that said I think all of these carriers and we're really happy with where we are with our partnerships with these carriers because the level of integration with that we have with them I think the level of sophistication that they have with the internal marketing teams and our knowledge of this channel.
Steve Yi: and the product development discussions that we're having with them, I think positioned them very well to be able to grow, you know, for the remainder of this year and next year as they continue the secular shift to emphasizing direct-to-consumer distribution, whether in place of agent-based distribution or in addition to agent-based distribution.
Maria: And the product development discussions that we're having with them I think positioned us very well to be able to grow.
Maria: The remainder of this year and next year.
Maria: They continue the secular shift to emphasizing direct to consumer.
Maria: Distribution, whether in place of agent based distribution or in addition to agent based distribution.
Steve Yi: So, now, I think the only, you know, sort of dark lining, I think, in this silver cloud is the potential for these automotive tariffs, right, to put some headwinds in carrier profitability in the second half of this year and next year. And so I think you're already hearing from the carriers who are focused on this issue, right, that it's a little bit too early to tell exactly what the impact is going to be. But I think you're also seeing a consensus on a couple of things. One is that a lot of the carriers are pretty good straight right now.
Maria: So.
Speaker Change: No I think the only.
Speaker Change: Dark lining I think in the silver cloud is the potential for these automotive tariffs.
Speaker Change: To put some headwinds.
Speaker Change: Carrier profitability in the second half of this year and next year and so I think you're already hearing from the carriers who are focused on this issue.
Speaker Change: But it's a little bit too early to tell exactly what the impact is going to be.
Speaker Change: But I think you're also seeing a consensus on a couple of things one is that a lot of the carriers that are pretty good shape right now and so they have a bit of a buffer for loss rates actually go up.
Steve Yi: And so they have a bit of buffer for loss rates to actually go up. I think the second thing that you're seeing and hearing is that the impact of these automotive tariffs, you know, will be relatively moderate. I think what we're seeing is estimates of between low to mid single digits that we expect to see layering in on the second half of this year. And we believe that the carriers are pretty well positioned to react quickly to these rate increases, or I'm sorry, to these lost cost increases by filing for rate increases, I think pretty early in the cycle.
Speaker Change: I think the second thing that Youre seeing and hearing is that the impact of these automotive tariffs will be relatively moderate.
Speaker Change: And I think what we're seeing is estimates between low to mid single digits, alright that we expect to see layering in in the second half of this year.
Speaker Change: And we believe that the carriers are pretty well positioned to react quickly to these rate increases or im sorry to these.
Speaker Change: Our loss cost increases.
Speaker Change: By filing for rate increases I think pretty early in the cycle.
Steve Yi: And I say that because the carriers are all coming from a period of, you know, sustained unprofitability, and I think remain very acutely aware of the need to react quickly to address any profitability concerns that start to pop up. And so I think for all of these reasons, we think that the impact of automotive tariffs that we expect to see in about half of this year, and in 2026, you know, will generally be manageable by the overall industry, and that the industry is going to continue to invest in customer acquisition and growth during this period.
Speaker Change: Is that because the carriers are all coming from a period of such.
Speaker Change: State Unprofitability and I think remain very acutely aware of the need to react quickly to address any profitability concerns that start to pop up and so I think for all of these reasons, we think that the impacted automotive tariffs that we expect to see in the back half of this year and in 2026 will generally be manageable by the overall into.
And that the industry is going to continue to invest in customer acquisition and growth. During this period, but it's something that we'll obviously keep a very close eye on and continue to update with you in upcoming quarters.
Unknown Executive: But it's something that we'll obviously keep a very close eye on and continue to update with you in upcoming quarters. Great, that's, that's very helpful.
Speaker Change: Great.
Unknown Executive: And then just a quick follow up. Can you give the refresh us on key dynamics across your open and private marketplaces?
Speaker Change: Very helpful. And then just a quick follow up can you maybe refresh us on telmex.
Speaker Change: Next Costco open in private marketplaces, maybe just talk about some of the presents of benefits.
Steve Yi: Maybe just talk about some of the reasons or benefits or maybe even use cases a carrier would opt to use a private marketplace? Yeah, and so I think with the private marketplaces, I think, you know, that's that's a product offering that we have that's, you know, primarily designed for our largest publishers, and their ability to work directly with our largest advertisers, you know, so it's really covered the minority of the relationships that we create through our marketplace, you know, as we get a broader base of demand, and I think a broader base of supply coming into the marketplace, you know, as the as the current, I think, growth cycle continues, I think you're going to see, you know, more and more transactions really move from the seller exchange, or not move from the seller exchange, but you're going to see more of these transactions really happen in the open exchange.
Speaker Change: This call from Macquarie I would up King private marketplace.
Speaker Change: Okay.
Yes, and so I think with the private marketplaces I think.
Speaker Change: That's a product offering.
Speaker Change: That we have.
Speaker Change: Primarily designed for our largest hub.
Speaker Change: <unk> and their ability to work directly with our largest advertisers.
Speaker Change: So it's really covered the minority of the relationships that we create through our marketplace.
Speaker Change: As we get a broader base of demand and I think a broader base of supply coming into the marketplace.
Speaker Change: <unk>.
Speaker Change: Correct I think growth cycle continues I think youre going to see more and more transactions really move from the seller exchange or has that moved from the stock exchange, but youre going to see more of these transactions really happened in the open exchange because again the seller exchange product that we have where parties can contract directly.
Pat Thompson: Because again, the seller exchange product that we have, where parties can contract directly, and pay us a platform fee for making that connection through our marketplace is really meant for large publishers, connecting directly with large advertisers.
Speaker Change: The platform fee for making that connection through our marketplace is really Matt for large publishers connecting directly with large advertisers.
Unknown Executive: Great, that's very helpful.
Speaker Change: Great. That's very helpful. Thank you so much.
Unknown Executive: Thank you so much.
Pat Thompson: And this is Pat. I just wanted to add, you know, one thing to what to what Steve said there. that you know I think as you think about the open to private mix in our business it's important to think about the vertical mix that we have as well and so you know for us historically PNC is you know had a higher mix of private marketplace than has health and you know one of the things that you know we have seen is that you know for instance you know if we were to if we win a big partner that partner may be you know relatively more private and can shift the numbers a little bit in one direction.
Speaker Change: And this is Pat I just wanted to add one thing to what to add to what Steve said, there which is.
Pat: That I think as you think about the open to private mix in our business. It's important to think about the vertical mix that we have as well and so for US historically PNC is had a higher mix of private marketplace that is helpful.
And one of the things that we have seen is that for instance, if we were if we win a big a big partner that partner may be relatively more private and can shift the numbers a little bit in one direction and so I think everything Steve said is correct, which over time.
Unknown Executive: And so, you know, I think everything Steve said is correct, which over time, you know, we would expect to see We would expect to see more of the business going open in the short term, wouldn't be surprised if it went a little bit more private. Got it.
Pat: We would expect to see.
Pat: Yeah.
Pat: We would expect to see more of the business going.
Pat: Going open in the short term, yes, I wouldn't be surprised if it went a little double sided.
Unknown Executive: Thank you so much, Pat.
Scott: Got it thank you for that Scott.
Pat: Yes.
Cory Carpenter: Your next question comes from the line of Cory Carpenter with J.P. Morgan. Cory, please go ahead. Good afternoon. I have two. Maybe the first, just sticking on T&T. Steve, you said last quarter that pricing was down to start the year. It sounds like that picked back up again in March. Just curious what you think changed specifically in March.
Speaker Change: And your next question comes from the line of Cory Carpenter with J P. Morgan Cory. Please go ahead.
Cory Carpenter: Hey, good afternoon.
Speaker Change: Maybe it's versus taking on TNT.
Speaker Change: As we said last quarter than I think it was down to start the year. It sounds like a quick back up again in March just curious.
Speaker Change: Specifically in March and then secondly on the health business could you just talk more about your decision to scale back the under 65 business how much of that is kind of doing business conditions.
Cory Carpenter: And then secondly, on the health business, could you just talk more about your decision to scale back the under 65 business? How much of that is kind of due to business conditions, or could that have also perhaps been related to some of the FTC changes? Thank you.
Speaker Change: And then also perhaps than you are leading to some of the FCC changes. Thank you.
Steve Yi: Hey, Cory, I'll address the first part of that question, which is I don't know that anything really, I think, changed in March. I think what we saw was, I think, strong demand from carriers as the quarter progressed, you know, really manifesting itself in terms of having greater budget, access to greater budget, you know, as the quarter progressed. You know, I think the reason for this is really just, you know, what we pointed to in the last quarter, which is less of a change in the underlying, I think, economics and the growth demand that we're seeing from carriers.
Speaker Change: Hey, Cory I'll address the first part of that question.
Speaker Change: Which is.
Speaker Change: I don't know that anything really.
Speaker Change: Changed in March I think what we saw was quite a.
Speaker Change: Strong demand from carriers as the quarter progressed.
Speaker Change: Really manifesting itself in terms of having greater budget, alright access to greater budget as as the quarter progressed.
Speaker Change: I think the reason for this is really just what we pointed to in the last quarter.
Speaker Change: Less of a change in the underlying.
Speaker Change: Economics, and the growth demand that we're seeing from carriers. It was really just I think that the.
Steve Yi: It was really just, I think, the conservatism that we saw from carriers as the year started, you know, coming on the heels, I think, of a Q4, where there was a heavy amount of spend in customer acquisition. And as we alluded to, you know, because the numbers were coming in so strongly for most I think there was a bit of, you know, more aggressive customer acquisition spend, as we saw Q4 close out. And I think as a result of that, a lot of carriers took a bit of a more conservative position to start out the year.
Speaker Change: The conservatism that we saw from carriers as the year started coming on the heels I think of a Q4, where there was a heavy amount of spend and customer acquisition and as we alluded to.
Speaker Change: The numbers are coming in so strongly for most carriers I think there was a bit of.
Speaker Change: More aggressive customer acquisition spend as we saw Q4 closed out and I think as a result of that a lot of carriers took a bit of a more conservative position to start out the year and I think the fact that we got allocated more budget and we saw a great participation from carriers.
Steve Yi: And I think the fact that, you know, we got allocated more budget, and we saw greater participation from carriers, as the quarter progressed, was really that, you know, beginning of year conservatism really starting to wear off.
Speaker Change: As the quarter progressed was really.
Speaker Change: Beginning of your conservatism really starting to wear off and.
Steve Yi: And, you know, and we've certainly seen the strength that we saw in March really continue into Q2, which is embedded in our forecast.
Speaker Change: And we've certainly see Deane the strength that we saw in March really continue into Q2, which is which is embedded in our forecast.
Pat Thompson: And Cory, this is Pat, I can address the second part of the question. And so, you know, I would say, as a company, we've already, we've always prioritized compliance is kind of a core part of how we operate. And we're, we are regularly reviewing and enhancing our compliance programs to try to stay ahead of regulations as they evolve and to kind of help drive industry best practices. And I would say that, you know, kind of as part of these efforts, we are proactively implementing some additional. And, you know, a couple of things we've done. We've updated our partner code of conduct to reinforce the expectations on what partners can and cannot do.
Speaker Change: And Corey this is Pat I can address the second part of the question and so yes, I would say is the company. We've already we've always prioritized compliance is kind of a core part of how we operate and where we are regularly reviewing and enhancing our compliance programs to try it out.
Speaker Change: Stay ahead of regulations as they evolve.
Speaker Change: Help drive industry best practices, and I would say that.
Speaker Change: Yes.
Speaker Change: Part of these efforts we are proactively implementing some additional measures.
Speaker Change: And in a couple of things we've done we've updated our partner code of conduct to reinforce the expectations on what partners can and cannot do and we've expanded proactive monitoring of calls to ensure ongoing compliance with certain code of conduct.
Pat Thompson: And we've expanded proactive monitoring of calls to ensure ongoing compliance with said code of conduct. And so, you know, I think our view is this is, you know, the kind of behavior we've demonstrated, you know, over years and years for us. And, you know, it's, you know, our focus really remains on, you know, having having a great product, one that is transparent and accurate, and that ultimately links up consumers, you know, with the right, you know, brokers, carriers, agents that can help them get their needs met.
Speaker Change: So I think our view is this is the kind of behavior, we have demonstrated.
Speaker Change: Over years and years.
Speaker Change: For us and it's.
Speaker Change: Our focus really remains on having having a great product one that is transparent and accurate and that ultimately links up consumers.
Speaker Change: What the right brokers carriers agents that can help them get their needs.
Unknown Executive: Thank you.
Speaker Change: Thank you.
Speaker Change: Okay.
Thomas McJoynt: Your next question comes from the line of Thomas Mcjoynt with KBW. Please go ahead, Tommy. Hey, good afternoon, guys. Staying on the subject of the under 65 segment. Can you just kind of clarify exactly what you mean by scale back? Does that mean a wind down? And then when you think about the the revenue or transaction value, or I guess best would be kind of earnings mix of that under 65 segment within health. Anything you can share to disclose around that? I'm sorry. Yeah, sorry. I was I was on. I was on mute there. So I would.
Speaker Change: Your next question comes from the line, Tom Joint with K B W.
Speaker Change: Please go ahead Tom.
Tom Joint: Hey, good afternoon guys.
Tom Joint: Staying on the subject of the under 65 segment.
Tom Joint: Could you just kind of clarify exactly what you mean by a scaled back does that mean, a wind down and then when you think about that.
Tom Joint: The revenue or transaction value or I guess that would be kind of earnings mix of that under 65 segment within health anything you can share to disclose around that.
Tom Joint: Okay.
Tom Joint: Yes.
Tom Joint: Yes.
Tom Joint: I'm, sorry, I'm, sorry, I think yes, yes, sorry, I was on that I would not be a debt so I would say.
Pat Thompson: So Tommy, I would say on that, you know, with the health business or with a the under 65 business, we said we were scaling down. That business, you know, and so I would not read that as being an exit, you know, rather, you know, we are going to be taken a partial step backwards in it and, you know, I think we gave guidance for the upcoming quarter that we thought the health vertical as a whole would be down twenty five to thirty percent and we thought, you know, Medicare would be improving overall. So hopefully that can get you to a spot where you can start to kind of contextualize what is what is happening there to the business.
Tom Joint: So Tommy I would say on that.
Tom Joint: With the health beds or are they the under 65 business. We said we were scaling down.
Tom Joint: That business and so I would not read that as being an asset rather.
Tom Joint: That would be taken a partial step backwards.
Tom Joint: And I think we gave guidance for the upcoming quarter that we thought the health vertical as a whole would be down 25% to 30% and we thought Medicare would be improve.
Tom Joint: Improving overall, so hopefully that gets you to a spot where you can start.
Tom Joint: Kind of contextualize.
Tom Joint: What is what is happening to the business and so what happens.
Pat Thompson: And so, you know, would have, you know, we believe that business, you know, we're gonna be kind of rebase lining that. over the Common Core. Okay, got it.
Tom Joint: We believe that business.
Tom Joint: Can it be kind of rebase lining business.
Tom Joint: Over the coming quarters.
Tom Joint: Okay got it.
Pat Thompson: And then staying within the health side, looking at the Medicare Advantage, can you share what what you guys see, in terms of the health of that market? It seems like we've seen some sort of mixed reviews from some of the healthcare providers and some of the recent quarterly reports. So it'd be helpful to hear your commentary.
Tom Joint: And then staying within the health side looking at the Medicare advantage.
Speaker Change: Can you share what you guys see in terms of the health of that market. It seems like we've seen some sort of mixed reviews from some of the health care providers in some of our recent quarterly airports that'd be helpful to hear your commentary.
Tom Joint: Yes.
Pat Thompson: Certainly. So, Pat, again, the Medicare Advantage market is one that is in a temporary hard market cycle. And I think our view is that it's actually relatively similar to some of the past cycles we've seen in the PNC space. And so, as a reminder, we dealt with that in 2022 and 2023. And these cycles are normal and they're temporary. And really, they're being driven by some of the carrier partners experiencing headwinds due to elevated loss costs, which are pressuring overall profits. And as we look at the Medicare Advantage market, you know, what we see is a, you know, business that over time has a lot of wins.
Tom Joint: Certainly so Pat again.
Tom Joint: The Medicare advantage market is one that.
Tom Joint: In temporary hard market cycle, and again I think our view is that it's actually relatively similar to some of the past cycles. We have seen in the P&C space and so as a reminder, we dealt with that in 2022 and 2023.
Tom Joint: And these cycles are normal and they're temporary.
Tom Joint: And really there are being driven by some of the carrier partners experiencing headwinds due to <unk>.
Tom Joint: Elevated loss costs, which are pressuring overall profitability.
And as we look at the Medicare advantage market, what we see is a business that over time has a lot of wind at its back which is the number of.
Pat Thompson: which is the number of seniors and eligible population for Medicare is growing. That population is increasingly opting into Medicare Advantage. Medicare Advantage is a, it's an important purchase for people or important decision for folks and it is one where the new folks aging in every year are much more kind of Internet enabled. And we believe we're very well positioned to kind of help that industry navigate more and more to online as consumers look to shop there. And so it's an area where we think, you know, over a 3, 5, 7, 10 year period, the opportunity is very, very attractive.
Tom Joint: Seniors in eligible population for Medicare is growing.
Tom Joint: Population is increasingly opting into Medicare advantage Medicare advantage is a it's an important.
Tom Joint: Purchase for people are important decision for folks.
Tom Joint: And it is one where the new folks aging in every year or much more kind of internet enabled.
Tom Joint: And we believe we're very well positioned to kind of help that industry navigate more and more to online as consumers look to shop, there and so it's an area, where we think over a 357 10 year period. The opportunity is very very attractive for us.
Tom Joint: Yeah.
Steve Yi: You know, Tommy, I'll add, this is Steve, I'll also add that, you know, while Medicare Advantage has pretty broad, bipartisan support, you know, I think at the margin, certainly, you know, because it's a private market alternative to government run, paper service, Medicare, that it has marginally more support from Republican administrations. And so, you know, I think you're starting to see that play out a bit, and a more favorable climate, you know, starting to emerge, right, you know, from, you know, increased payment rates, which I think, I think the industry was pleasantly surprised by the 5% plus payment rates that were set by CMS earlier this month.
Tom Joint: No.
Hey, Tommy I'll add this is Steve I'll I'll also add that as well.
Tom Joint: While Medicare advantage has pretty broad bipartisan support.
Speaker Change: I think at the margin certainly.
Speaker Change: It's a private market alternative to government run paper service Medicare that.
Speaker Change: It has marginally more support from Republican administrations, and so I think you're starting to see that play out a bit and a more favorable climate.
Speaker Change: Starting to emerge.
Speaker Change: From increase payment rates, which I think I think the industry was pleasantly surprised by the 5% plus payment rates that were set by CMS earlier this month.
Steve Yi: And I think that you're starting to see signs of a different regulatory approach that this administration is ready to take with Medicare Advantage. And again, while both parties had to be pretty supportive of Medicare Advantage, I do think that over the next few years, at the margins, you'll see, you know, an administration that's going to take more of a growth oriented and a supportive position with regard to Medicare Advantage carriers. Thank you.
Speaker Change: And I think that youre, starting to see signs of that.
Speaker Change: Different regulatory approach that this administration is ready to take with Medicare advantage and again, while both.
Speaker Change: Sorry, both parties tend to be pretty supportive of Medicare advantage I do think that over the next few years at the margins you will see.
Speaker Change: And in those situations that it's going to take more of a growth oriented and a supportive position with regard to Medicaid Medicare advantage carriers.
Speaker Change: Thank you.
Mike Zaremski: Your next question comes from the line of Mike Zaremski with BMO Capital Markets. Please go ahead, Mike. Hey, great. Good afternoon.
Speaker Change: Your next question comes from the line of Mike Zaremski with BMO capital markets. Please go ahead Mike.
Mike Zaremski: Hey, great good afternoon.
Pat Thompson: I know there might be a complicated question, but can you help unpack kind of what's contributing to the contribution margin ratio declining? Yes, and Mike, which contribution margin are you talking about as a percentage of revenue? Yes, percentage of revenue. And, you know, for us, that number, you know, has been decreasing a bit over time. And, you know, I would say first off on that, that number for us tends to peak every year in the fourth quarter, which is when we have the largest health is the largest portion of our business. And, you know, secondly, I would say it's been trending down, you know, over time as PNC has become and is continuing to become a larger percentage of our business.
Mike Zaremski: I know that there might be a complicated question, but can you help unpack kind of whats contributing to the contrary contribution margin ratio.
Declining.
Mike Zaremski: Yes.
Mike Zaremski: And Mike, which contribution margin are you talking about as a percentage of revenue.
Mike Zaremski: Yes, the percentage of revenue.
Mike Zaremski: Yeah, and Mike I would say, we don't spend a ton of time.
Mike Zaremski: Looking at metrics as a percentage of revenue I would say that.
Mike Zaremski: The two big metrics, we really we focus on most heavily internally and we would encourage you to focus on would be the first is take rate, which is contribution as a percentage of transaction value.
Mike Zaremski: And for us that.
Mike Zaremski: <unk> has been decreasing.
Mike Zaremski: A bit over time.
And I would say first off on that that number for us tends to peak every year in the fourth quarter, which is when we have the largest health is the largest portion of our business.
Mike Zaremski: And secondly, I would say it's been trending down over time at PNC has become and is continuing to become a larger percentage of our business. Yes, I would say third one other thing we've seen is that as certain publishers have gotten larger we've naturally seen a bit of compression in the in the <unk>.
Pat Thompson: Yeah, I would say third, one other thing we've seen is that is, you know, certain publishers have gotten larger, you know, we've naturally seen a bit of compression in the, in the take rates that we've seen with them, you know, kind of to reflect the increase. The same thought that they've been able. And, you know, so I would say those are the three biggest drivers. And then the other piece, which was, I think, implicit in the three things I talked about is the mix of open and private exchange, because the private exchange has a lower take rate.
Mike Zaremski: Rates that we've seen with them.
Mike Zaremski: To reflect the increased scale.
David.
Mike Zaremski: <unk> been able to realize.
Speaker Change: And so I would say those are the three biggest drivers and then the other piece, which was I think implicit in the three things I talked about is the mix of open and private exchange because the private exchange has a lower take rate.
Mike Zaremski: Ross.
Mike Zaremski: That's helpful, Pat.
Speaker Change: That's helpful. Pat any anything going on on the mix of.
Pat Thompson: And anything going on on the mix of clicks increasing meaningfully, that's also impacting some of the The profit margins KPIs we look at. Yeah, and Mike, is what you're getting at the relative mix of clicks, calls and leads? Yeah. Yeah, I would say. You know, the the mix is changing a little bit. But, you know, really, the big driver of that mix change within our business is going to be the mix of PNC versus health, where the PNC business is very heavily click driven for us, whereas the health business is a bit more balanced. So it really is, you know, kind of a mix between verticals.
Mike Zaremski: Clicks increasing meaningfully.
Mike Zaremski: Also impacting some of the.
Mike Zaremski: Yep.
Mike Zaremski: But margin Kpis, we look at.
Mike Zaremski: Yeah, and Mike is what Youre getting out the relative mix of clicks calls on leads.
Mike Zaremski: Yes.
Mike Zaremski: Yeah, I would say.
Mike Zaremski: The mix is changing a little bit, but really the big driver of that mix change within our business is going to be the mix of P&C versus health, where the P&C business is very heavily collect driven for us, whereas the health business is a bit more balanced.
Mike Zaremski: So it really is kind of a mix between vertical stack.
Unknown Executive: Okay, got it. That's helpful.
Mike Zaremski: Okay got it.
Mike Zaremski: That's helpful.
Mike Zaremski: I guess I'm going back to, I guess, two part question on auto. Steve, you mentioned, you know, the potential, you talked about tariffs and their potential impact. Curious, in your 2Q guide, did you embed any conservatism from tariffs? And related, when we think back to three months ago, when you put out your 1Q25 guide, which was handily exceeded. You know, maybe in your prepared remarks, you know, what changed? I think your prepared remarks, you might have said, you know, March ended up being a lot better. I'm not saying being conservative isn't a good, you know, way to go.
Mike Zaremski: I guess.
Mike Zaremski: Going back to.
Speaker Change: Two part question on auto Steve You mentioned, the potential you talked about tariffs and.
Mike Zaremski: Their potential impact.
Mike Zaremski: I'm curious in your <unk> Guide did you in that any.
Mike Zaremski: Conservatism from tariffs.
Mike Zaremski: And related when we think back.
Mike Zaremski: Two three months ago.
Mike Zaremski: When you put out your.
Mike Zaremski: <unk> 25 guide, which was handily exceeded.
Mike Zaremski: Maybe in your prepared remarks.
Mike Zaremski: What changed I think your prepared remarks, you might have said March ended up being.
Mike Zaremski: A lot better I'm, not saying being conservative there isn't a good.
Mike Zaremski:
Mike Zaremski: Way to go but I'm curious if something just dramatically changed versus 90 days ago. When you put out what would appear to be a conservative guy that was exceeded thanks.
Mike Zaremski: But I'm curious if something just dramatically changed versus kind of 90 days ago when you put out what would appear to be a conservative guide that was exceeded.
Unknown Executive: Thanks.
Pat Thompson: Yeah, so, you know, Pat can address that. The first question about the forecast, I think, with regard to how we guided for Q1, you know, I think, as I, as I mentioned earlier in the call, I don't think so, you know, The things changed so much as the initial conservatism with which carriers really started off the year, you know, which we highlighted, started to wear off as the quarter wore on. And so we did have, you know, stronger performance than expected in March. You know, because I think the carriers are very profitable, and they see heightened consumer shopping behavior, it's hard for them to really ignore that and remain conservative around the lines for too long in a market environment like that.
Mike Zaremski: Yes.
Speaker Change: So Pat can address the first question about the forecast I think with regard to how we guided for Q1.
Mike Zaremski: I think as I as I mentioned earlier in the call I don't think so.
Mike Zaremski: Did things change so much as the initial conservatism with which carriers really started off the year, which we highlighted started to wear off as the quarter wore on and.
Mike Zaremski: And so we did have a stronger performance than expected in March.
Mike Zaremski: Because I think the carriers are very profitable.
Mike Zaremski: They see heightened consumer shopping behavior, it's hard for them to really ignore that and remain conservative around the sidelines for too long in a market environment like that and so I'm.
Steve Yi: And so, and so I think, you know, certainly when we gave back guidance, we were seeing some of the conservatism from the carriers as the new year started. You know, I think we did our best to point out that we suspected that this was an overly conservative start to the year, right? And that there was a possibility that things could improve as the quarter wore on. I just think that, you know, things improved, and carriers really started to put robust budget into our marketplace, you know, perhaps a bit earlier than we expected. And again, we saw that, the growth in March, and we've seen that continue into Q2.
Mike Zaremski: So I think certainly when we gave that guidance we were seeing some of the conservatism from the carriers as the new year started I think we did our best to point out that we suspected that this was an overly conservative start to the year right.
Mike Zaremski: There was a possibility that things could improve as the quarter wore on I would just think that if things improved and carriers really started to put robust budget into a marketplace, perhaps a bit earlier than we expected and again, we saw that the growth in March and we've seen that continue into Q2.
Pat Thompson: And Mike, to address the other part of your question, you know, I would say that, you know, on the tariffs and their potential impact on Q2, you know, from a guidance standpoint, we guide to what we have a high degree of confidence in. And, you know, we're in a spot where April is pretty much in the books for us, and we're starting to get some visibility on what May looks like. And so we've extrapolated out for the balance of the quarter. And, you know, I think the, the view of tariffs and potential impact on Q2 is likely to be relatively muted.
Mike Zaremski: And Mike to address that.
Mike Zaremski: The other part of your question.
Mike Zaremski: I would say that.
Mike Zaremski: On the tariffs and their potential impact on Q2 from.
Mike Zaremski: From a guidance standpoint, we guide to what we have a high degree of confidence in.
Mike Zaremski: And we're in a spot where April is pretty much in the box for us and we're starting to get some visibility on what may looks like and so we.
Mike Zaremski: Extrapolated out for the balance of the quarter and I think that.
Mike Zaremski: The view of tariffs and potential impact on Q2 is likely to be relatively muted I think Steve in his prepared remarks said.
Pat Thompson: You know, I think Steve, and his prepared remarks that, you know, it could be something that impacts more of the later, the latter part of the year, but, you know, probably too early to tell exactly what that might ultimately look like. But, you know, I think we, we feel like we've guided for Q2 numbers that we have a pretty good degree of confidence. Got it.
Mike Zaremski: It could be something that impacts more of the later the latter part of the year, but probably too early to tell exactly.
What that might ultimately look like but I think we feel like we've guided for Q2 numbers that we have.
Mike Zaremski: That's a pretty good degree of confidence.
Mike Zaremski: Got it.
Mike Zaremski: And Probably nothing you can say on this, but. Any, any comments you can make on. Timeline for Resolution to the legal inquiry that's been ongoing. Yeah, and I think you, I think you pointed as you pointed out, I think it's, it's difficult for us to really comment on this while we're actively engaged in discussions with the FTC staff, you know, both because we're limited in what we can disclose. And because I think the timing of these types of negotiations, particularly with the with the government body, tends to be tends to be hard to predict.
Mike Zaremski: Probably nothing you can say on this but.
Mike Zaremski: Any any comments you can make on.
Mike Zaremski: The timeline for resolution to the legal inquiry.
Mike Zaremski: That's been ongoing.
Speaker Change: Yes. Thank you.
Speaker Change: I think you pointed as you pointed out I think it's it's difficult for us to really comment on dose while we're actively engaged in discussions with the FTC staff.
Speaker Change: Because we are limited in what we can disclose and because I think the timing of these types of negotiations, particularly with the with the government body tends to be tends to be hard to predict.
Mike Zaremski: is, sorry my last follow up, is there any kind of statutory timeline whereby Something would have to be disclosed in a certain amount of time based on kind of what you know that this has been going on for a while or just trying to fish for. for if there's anything that might come out into the public domain based on just the required disclosure. Yeah, Mike, it's, you know, I'm not certain of this, but to my knowledge, there is no statutory time.
Speaker Change: It is.
Speaker Change: Alright, My last follow up is there any kind of statutory timeline whereby.
Speaker Change: Something would have to be disclosed in a certain amount of time based on kind of what this has been going on for a while or just trying to fish for.
Speaker Change: If there is anything that might come out into the public domain based on just the required disclosure.
Mike Zaremski: Yeah, Mike.
Speaker Change: Yes.
Speaker Change: Not certain of this but to my knowledge there is no statutory timeline.
Unknown Executive: and Ed Place.
Speaker Change: At play here.
Andrew Klagerman: Yeah, and Mike, I would just say, you know, if we reach a resolution, we'll update investors, you know, otherwise, we're going to keep Updating our disclosures and investors on Your next question will come from the line of Andrew Klagerman with TD Securities.
Mike Zaremski: Yeah, and Mike I would just say.
Mike Zaremski: If we reach a resolution we will update investors otherwise, we're going to keep kind of updating our disclosures and investors on a quarter to quarter basis.
Speaker Change: And your next question will come from the line of Andrew <unk> with TD Securities. Please go ahead Andrew.
Andrew Klagerman: Please go ahead, Andrew. Hey, good evening.
Andrew: Hey, good evening.
Andrew Klagerman: First question on the private market versus open exchange. You know, I wasn't quite clear on why more business will flow to open exchange. And maybe so maybe you can elaborate on what you were saying earlier.
Andrew: First question on the.
Andrew: Private market versus opening exchange.
Andrew: Steve I wasn't quite clear on.
Andrew: Why more business will slow to open exchange.
Andrew: And maybe so maybe you can elaborate on what you were seeing earlier and then.
Pat Thompson: And then Pat, you mentioned that it would probably in the near term shift more toward private exchange. So year over year, it went from 41, 44.1% to 45.4. How high could that private exchange proportion get in the near term?
Andrew: You mentioned that it would probably in the near term shift more towards private exchange so year over year. It went from 41 44, 1% to 45 four.
Andrew: How high could that Brian.
Andrew: Private exchange proportion get.
Andrew: In the near term.
Steve Yi: I don't know Pat, I can start off. the answer which is that you know what I was the point I was making was that I think as the the first carriers to recover and the first publishers to really be able to take advantage of the recovery of the PNC market were the large advertisers and the large publishers and so I think what you're seeing now as this you know recovery starts to build momentum we're still in a position where the recovery is relatively head-heavy right again compared to where we expect to be three quarters from now four quarters from now and so there's going to be more transactions generally speaking in the early part of a recovery like this because because the private marketplace right or the seller exchange you know option that we have is really meant for our largest publishers to be able to work directly and contract directly you know with our largest advertisers and so the point I was making is overall as the recovery starts to gain momentum and become more based both on the carrier side and in terms of attracting new publishers into our marketplace is that they the new entrants are going to be smaller right and in nature and so and so most likely the growth you know at some point in this recovery is going to start to flow into the open exchange vis-a-vis the seller exchange and I think what you know what Pat was pointing out was that notwithstanding this general trend Our seller exchange and open exchange mix tends to be vertically vertical specific and there's specific partnerships that we might be onboarding that might skew this one one direction or another.
Andrew: I don't know that I can start off.
Andrew: The answer which is that when I was the point I was making was that I think as the.
Andrew: So first carriers to recover in the first publishers to really be able to take advantage of the recovery of the P&C market or the large advertisers and the large publishers and so I think what youre seeing now.
Andrew: Recovery starts to build momentum we're still in a position where the recovery is relatively heavy alright, again compared to where we expect to be three quarters from now four quarters from now.
Andrew: So theres going to be more transactions generally speaking in the early part of February like this.
Andrew: Because the private marketplace right or the seller exchange option that we have.
Speaker Change: Our largest publishers to be able to work directly in contract directly with our largest advertisers and so the point I was making is overall as the recovery starts to gain momentum and become more broad based both on the carrier side and in terms of attracting new publishers into our marketplace.
Speaker Change: Is that they thought the new entrants are going to be smaller right.
Speaker Change: In nature, and so and so most likely the growth at some point in this recovery is going to start to flow into the open exchange vis vis vis other exchange and I think what.
Speaker Change: What Pat was pointing out was that notwithstanding this general trend alright.
Speaker Change: Our seller exchange, an open exchange mix tends to be vertically vertical specific and there are specific partnerships that we might be onboarding that might skew this one direction or another.
Pat Thompson: That makes a lot of sense.
Speaker Change: That makes you think you have anything to add yes.
Andrew Klagerman: I think you have anything to add. Yeah. I know, I think that's a great topic. Go ahead Andrew. I'm glad we can clarify that. Yes, thank you for that.
Speaker Change: Okay.
Speaker Change: Thanks, that's a great spot.
Speaker Change: Go ahead Andrew.
Speaker Change: Clarify that yes.
Speaker Change: Yes, hi, Thank you for that and then Steve you made another comment in the Q&A that.
Andrew Klagerman: And then Steve, you made another comment in the Q&A that there, I think you said something like there are 10 carriers not punching where they should be, so you think that there's more, more activity to come going forward.
Speaker Change: I think you said something like 10 carriers.
Speaker Change: Clenching, where they should be so you think that theres more.
Speaker Change: More activity to come going.
Andrew Klagerman: So I, this is kind of a broad question for you, but kind of curious, like in your view... And it feels like the market has come back a lot like on a scale of one to 10. Where are we in terms of shopping activity? Are we like a seven or an eight? It feels like an eight, but I'm kind of curious as to how you, you see the market having reopened.
Speaker Change: Going forward. So this is kind of a broad question for you, but kind of curious like.
Speaker Change: In your view.
Speaker Change: And it feels like the market has come back a lot.
Speaker Change: On a scale of one to 10.
Speaker Change: Where are we in terms of shopping activity, we like a seven or an eight if feels like a neat, but I'm kind of.
Speaker Change: Curious as to how you you.
Speaker Change: You see the market having reopened.
Speaker Change: So I think.
Speaker Change: A couple of different things one is the point I was making was that was that of the top 10.
Speaker Change: Personal lines carriers or personal auto carriers.
Speaker Change: Still several who are punching their weight in terms of spending at historical levels in our channel.
Speaker Change: Or if you're really investing in the secular growth of their direct to consumer offering and distribution channel and so again.
Speaker Change: For carriers, who really aren't punching the way based on where they were pre COVID-19 or.
Speaker Change: Pretty hard market sorry.
Speaker Change: I think you'd expect to see them starting to really ramp up their spend more quickly, but there are other carriers in the top 10 in the top 25, right who has been a bit slow to really invest in direct to consumer as a channel.
Speaker Change: Okay.
Speaker Change: And that you would expect to see those carriers really started to make that secular shift to emphasizing direct to consumer channels more in the upcoming quarters and years and so that was really the point I was trying to make with that now you asked about where the where the.
Speaker Change: Where the shopping behavior is I.
Speaker Change: I think it's a slightly different question, because we're talking about consumer shopping and switching activity that has been heightened because of all the rate increases that you saw.
Speaker Change: Flowing in and starting to earn in over the last few years.
Speaker Change: And certainly I think currently.
Speaker Change: Consumer shopping behavior.
Speaker Change: Switching behavior remain at historical highs, but I think youre going to start to see that come down a bit as as the rate increases that carriers are taking start to slow down and so the rate increases that are being passed through to existing customers through the renewals also start to slowdown.
Steve Yi: So if the shopping activity slows Steve... Thank you. would that mean, you know, kind of less activity for Mediaalpha? Do you feel like there's a lot of tailwind left before, you know, before things normalize?
Speaker Change: So if the shopping activity slows Steve.
Speaker Change: Sure.
Yes.
Speaker Change: Would that mean kind of less activity for media Alpha.
Speaker Change: Do you feel like Theres, a lot of tailwind left before.
Speaker Change: Before things normalize.
Steve Yi: You know, it's a great question. I think it can come both ways. And I would say that my general quick answer is going to be no. All right. And because I think Consumer shopping activity being at very high levels, I think oftentimes for carriers acts as an excuse to not spend too much in marketing because they're getting a lot of organic traffic. But the carriers being immensely profitable and actually needing to grow, that need is not going to go away. And so in some ways, I think they're going to be carriers who then invest more in advertising to try to fuel their growth because they can't rely on this ambient consumer shopping activity to generate new policies for them.
Speaker Change: It's a great question I think it can cut both ways and I would say that my general quick answer is going to be though.
Speaker Change: Yes.
Speaker Change: Because I think.
Speaker Change: Consumer shopping activity being at very high levels, I think oftentimes the carriers acts as an excuse to not spend too much on marketing because youre getting a lot of organic traffic.
Speaker Change: But the carriers being nicely profitable and actually needing to growth that need is not going to go away and so in some ways I think they're going to be carriers, who then invest more in advertising.
Speaker Change: To try to fuel their growth because they can't rely on this AMD consumer shopping activity.
Speaker Change: To generate new policies for them and so.
Steve Yi: And so certainly it might make it a little bit more difficult for our publishers to get interested consumers to shop on their site. But there again, if there's ample budget and appetite for carriers to grow, I think we're just firm believers that the comparison sites and the lead generation sites and the carrier sites that we work with among our publisher base will find a way to generate interested consumer shopping activity if there's ample budget on the part of carriers to support that. I see. So it sounds like you feel like there's some some significant runway ahead for more?
Speaker Change: It might make it a little bit more difficult for our publishers to to get interested consumers to shop on their site, but there again, if theres ample budget and appetite for carriers to grow I think we're just firm believers that that the comparison sites and the lead generation sites and the carrier sites that we work with among our publisher base, we'll find a way to generate.
Speaker Change: Interested.
Speaker Change: Consumer shopping activity, if theres ample budget on the part of carriers to support that.
Speaker Change: I see so it sounds like you feel like there is some.
Speaker Change: Some significant runway ahead.
Unknown Executive: Yes. Okay.
Speaker Change: Yes, yes, Okay, and then just one last one.
Andrew Klagerman: And then just one last one. Um, so the customer help team, so you've taken this, um, write down. I think it's like $11 million. As I looked back, it's a deal that you acquired back in Feb 22, February of 2022. So maybe share with us a little bit, what happened there? Why the...
Speaker Change: So the customer help teams you've taken this.
Speaker Change: Right and I think it was like $11 million.
Speaker Change: As I look back it's a deal that you acquired back in $2000 to February of 2022, So so maybe share with us a little bit what has happened there why why the.
Pat Thompson: Why the write down after such a short time? Yeah, and Andrew, we acquired the customer helper team in 2022. As a reminder, it was a business that was focused on, known to operate a business focused on social media within the Medicare and health space. And, you know, the acquisition, you know, brought us some new capabilities, I would say, you know, in general, it fell short of our expectations. And, you know, as we've, kind of, continued to integrate the team and, kind of, you know, focus on, you know, focus on, kind of, our true strengths going forward, we've sunset a lot of those social marketing activities.
Speaker Change: Why the write down after such a short time.
Speaker Change: Yes.
Andrew: Andrew we acquired the customer help our team.
Speaker Change: In 2022.
Speaker Change: Reminder, that the business that was focused on <unk>.
Speaker Change: Known and operated business focused on social media within.
Speaker Change: Medicare and health space.
Speaker Change: And the acquisition.
Speaker Change: <unk> brought us some new capabilities I would say in general it fell short of our expectations.
Speaker Change: And as we've kind of continued to integrate the team and kind of focus on.
Speaker Change: Focus on kind of our true strengths going forward.
Speaker Change: We sunset a lot of those social marketing activity and as a result under our kind of accounting policy, we have to run.
Pat Thompson: And as a result, under a kind of accounting policy, we had to run, you know, analyses on that, and we ultimately recognized a write-off of certain intangible assets that we acquired from them.
Speaker Change: Analyses on that and we ultimately recognize.
Speaker Change: Recognize the write off of certain.
Speaker Change: Intangible assets that we acquired from that so I would say.
Andrew Klagerman: And so, I would say, you know, it You know, it's probably the last you will hear us talk about CHD and any of our files. Got it. Hey, thanks a lot for answering all the questions. Appreciate you asking.
Speaker Change: Yes.
Speaker Change: It's probably the last you won't hear us talk about CHD and any other filings.
Speaker Change: Got it hey, thanks, a lot for answering another question.
Speaker Change: Now if you're asking.
Speaker Change: Yes.
Eric Sheridan: Your next question comes from the line of Eric Sheridan with Goldman Sachs. Thank you so much for taking the questions.
Speaker Change: Your next question comes from the line of Eric Sheridan with Goldman Sachs.
Eric Sheridan: Thank you so much for taking the questions.
Eric Sheridan: In terms of looking out of the next 12, 18 runs, I wanted to know if you could parse out some of the investments that almost should be viewed as fixed against where you want to take the platform and elements of growth, looking out over the time horizon and where there could be elements of variability in the way you invest or protect margin if there was an overall slowdown in the broader macroeconomic activity. Sort of elements of must invest versus elements where there could be flex and ability to respond to an environment shift. Thank you.
Speaker Change: In terms of looking out over the next 12 18 months I wanted to know if you could parse out some of the investments that almost should be viewed as fixed against where you want to take the platform and elements of growth looking out over the time horizon, and where there could be elements of variability in the way you invest or protect margin if there was.
Speaker Change: An overall slowdown in the broader macroeconomic activity sort of elements of must invest versus elements, where there could be flex in.
Speaker Change: And ability to respond to an environment. Thank you.
Pat Thompson: Yeah, and Eric, this is Pat, are you thinking of this in terms of Like kind of overhead and people investments or in terms of commercial relationships are kind of in what context are you thinking about? Frankly, a little bit of growth investments that you plan on making against what you see as the opportunity set over the next couple of years that you probably wouldn't want to lose sight of if there was a slowdown in the economy for a couple of quarters versus areas where you could be responsive to a slowdown and either slow the rate of investments or cut the fixed cost to protect the margin if there was such a slowdown.
Speaker Change: Yes.
Speaker Change: Eric This is Pat are you thinking of debts in terms of.
Speaker Change: Like kind of overhead and people investments are in terms of commercial relationships are kind of in what context are you thinking about that.
Speaker Change: Frankly, a little bit of growth investments that you plan on making against what you see as the opportunity set over the next couple of years could you probably wouldn't want to lose sight of if there was a slowdown in the economy for a couple of quarters versus areas, where you could be responsive to a slowdown and either slowed the rate of investments or cut the fixed cost.
Speaker Change: Protect the margin if there was such a slowdown.
Pat Thompson: Yeah, and in, in, Eric, I appreciate the clarification on that. I would say, you know, for us, for us, we run a very, very lean as a company, I think we ended Q1 with 140 And, you know, if you look at what we did in 2022 and 2023, which was the hardest market, the worst market the PNC carriers have had in my lifetime. You know, we we batten down the hatches, you know, we had a reduction in force. And, you know, we did we did make some, you know, a lot of belt tightening, and there were some cuts in there.
Yes.
Speaker Change: And Eric I appreciate the clarification on that I would say.
Speaker Change: For us we run.
Speaker Change: Very very lean as a company I think we ended Q1 with 146 employees.
And.
Speaker Change: If you look at what we did in 2022, and 2023, which is the hardest market their worst market P&C carriers have had in my lifetime.
Speaker Change: We batten down the hatches.
Speaker Change: We had a reduction in force.
Speaker Change: <unk>.
Speaker Change: We did we did make some there's a lot of belt tightening and there were some cuts in there, but we kept the core team intact.
Pat Thompson: But, you know, we kept the core team intact. You know, we continued to, you know, higher selectively where there was And, you know, we we think we positioned ourselves really well to take advantage of the market recovery that happened in 2024 and, you know, relatively strong market dynamics that we have today. And I think, you know, to the extent we needed to do something like that again in the future, you know, we would look to the playbook that we executed in the past, which is. You know, anything that we can live without we live without, but, you know, our business, you know, has had cycles in the past and, you know, the cycles can be painful on the downside, but a lot of activity happens.
Speaker Change: Continue to hire selectively where there was business needs and we think we positioned ourselves really well to take advantage of the market recovery that happened in 2024.
Speaker Change: Relatively strong market dynamics that we have today and I think to the extent we needed to do something like that again in the future. We would look to the playbook that we executed in the past which is.
Speaker Change: Anything that we can live without we live without but our business has had cycles in the past and the <unk>.
Speaker Change: Cycles can be painful on the downside, but a lot of.
Speaker Change: Activity happens.
Pat Thompson: In the recovery, and it is paramount to be well positioned for that recovery. And, you know, I think we will continue to execute the playbook that has treated us very well over the last Great. Really appreciate it. Thank you.
Speaker Change: The recovery and it is paramount to be well positioned for that recovery.
Speaker Change: We will continue to execute the playbook that has treated us very well over the last 15 years.
Speaker Change: Great really appreciate it thank you.
Ben Hendrix: Your next question is from the line of Ben Hendrix with RBC. Please go ahead, Ben. Great, thank you very much. I just wanted to go back to your comments on the senior Medicare Advantage business and the hard market cycle. We saw, I guess, earlier this week, Elevance Health announced that they will be removing nearly all of their Medicare Advantage plans from online marketing platforms, I guess effective tomorrow. I read that as kind of a reaction to this elevated utilization environment and a desire to kind of sidestep some of the adverse selection they may be seeing, considering they're one of the stronger growers this year.
Dan Hendrix: Your next question is from the line of Dan Hendrix Hendricks with RBC. Please go ahead.
Speaker Change: Great. Thank you very much.
Speaker Change: Wanted to go back to your comments on the scene your Medicare advantage business in the hard market cycle.
Speaker Change: We saw I guess earlier this week.
Speaker Change: <unk> announced that they will be removing nearly all of their Medicare advantage plans from online marketing platforms, I guess effective tomorrow and I read that as kind of a reaction to this elevated utilization environment.
Speaker Change: As I already kind of sidestep some of the adverse selection they may be seeing considering there wanted to stronger growers this quarter or this year and just wanted to see just given given this isn't the number four largest EMEA carrier if that is factoring in into your thoughts to the back.
Ben Hendrix: I just wanted to see, given that they're the number four largest M.A. carrier, if that is factoring in your thoughts through the back half of the year or the back part of the year, and if that's a behavior that you're seeing from any other big M.A. carriers. Thanks.
Speaker Change: Half of the year in the bag.
Speaker Change: Part of the year.
Speaker Change: And if that's a behavior that youre seeing from any other big carriers. Thanks.
Steve Yi: Yeah, I'll take the first question. I think, you know, we're certainly not seeing, not having the discussions of investment discussions for the upcoming AEP period with carriers at this time. And so we're not, it's too early for us to tell whether these actions that they're taking now will flow into the upcoming AEP. I do think that this is just a normal cycle of carriers or payers in this case, really just making adjustments that are needed to maintain their profitability in a time when they have challenging utilization rates and challenging payment rates as well, which, again, I think are starting to be addressed by this new administration.
Speaker Change: Yes, I'll take the first stab at that question I think.
Speaker Change: Certainly not seeing not having the discussions of investment discussions for the upcoming AEP period with carriers at this time and so we're not it's too early for us to tell.
Speaker Change: Whether whether these actions that we're taking now will flow into the upcoming AEP.
Speaker Change: I do think that this is just a normal cycle of carriers are payers in this case.
Speaker Change: Really just making adjustments that are needed to.
Speaker Change: To maintain their profitability at a time when they have challenging utilization rates.
Speaker Change: And challenging came at rates as well, which again I think are starting to be addressed by the student registration.
Steve Yi: And so, as Pat mentioned, I think that, you know, it's not technically hard market, but this hard market-like environment for Medicare Advantage, I think we will, you know, be temporary and we'll continue to work with the carriers. And we continue to believe that, you know, this $500 billion industry covering, you know, over 50% of seniors will continue to grow and will continue to move online, you know, as we've seen other insurance verticals do. And we believe that we're pretty well positioned to capitalize on that long-term opportunity.
Speaker Change: And so.
Speaker Change: So as Pat mentioned, I think that it's not technically hard market, but this hard market like environment for Medicare advantage.
Speaker Change: I think we will we will be temporary and we will continue to work with the carriers and we continue to believe that this $500 billion industry covering over 50% of seniors will continue to grow and we will continue to move online.
Speaker Change: As we have seen other insurance verticals do and we believe that we're pretty well positioned to capitalize on that long term opportunity.
Pat Thompson: And Ben, I'll probably just add two things, which is, you know, I would say that Medicare has been similar to PNC and that, you know, certain carriers have taken action earlier. Some have taken action later. And so, you know, we've seen folks be taking actions for, you know, 4 or 5 quarters now, and, you know, I'm sure there will still be more that that are yet to come on that. And, you know, would also say that, you know, I think the carriers are in a spot that's pretty tough, but I think some of the brokers are actually doing all right.
Speaker Change: Yes, and then I'll, probably just that two things which is.
Speaker Change: I'd say that Medicare has been similar to PNC and net.
Speaker Change: Certain carriers have taken action earlier, some have taken action later and so we've seen folks be taking actions for <unk>.
Speaker Change: Five quarters, now and I'm sure there will still be more of that that are yet to come on that and would also say that I think the carriers are in a spot that's pretty tough, but I think some of the brokers are actually due on all right at the moment in the Medicare side and while carriers are probably the most.
Pat Thompson: At the moment in the Medicare side, and, you know, while carriers are probably the most exciting long term opportunity for us in Medicare, we've got good broker relationships and, you know, I think those relationships are, you know, I think generally doing all right.
Speaker Change: Exciting long term opportunity for us in Medicare, we've got good broker relationships and I think those relationships are.
Speaker Change: Yes, I think generally doing alright at the moment.
Unknown Executive: Great. Thanks for the call, Eric. Thanks, Ben. There are no further questions at this time.
Speaker Change: Great. Thanks for the color.
Doug: Thanks, Doug.
Speaker Change: There are no further questions at this time.
Unknown Executive: Yeah, well, thanks, everyone.
Speaker Change: Yes, Hello, Thanks, everyone I think that concludes the call.
Unknown Executive: I think that concludes the call. Thank you everyone for joining today's call.
Speaker Change: Thank you everyone for joining today's call you may now disconnect.
Unknown Executive: You may now disconnect.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Okay.