Q3 2025 MediaAlpha Inc Earnings Call

Speaker #4: Good afternoon and welcome to the media Alpha incorporated . Third quarter 2025 Earnings Call . I am Franz , and I'll be the operator assisting you today .

Speaker #4: 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 .

Speaker #4: If you would like to ask a question during this time , simply press star one on your telephone keypad . If you would like to withdraw your question , press star one again .

Speaker #4: Thank you . I would now like to turn the call over to Alex Liloia Investor Relations . Please go ahead .

Speaker #5: Thanks , Franz . Good afternoon , and thank you for joining us . With me are co-founder and CEO Steven Yi and CFO Pat Thompson .

Speaker #5: On today's call , we'll make forward looking statements relating to our business and outlook for future financial results , including our financial guidance for the fourth quarter of 2025 .

Speaker #5: These forward looking statements are subject to risks and uncertainties that could cause actual results to materially . 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 .

Speaker #5: 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 .

Speaker #5: 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 in the Investor Relations section of our website.

Speaker #5: I'll now turn the call over to Steve .

Speaker #6: Hey , thanks , Alex . Hi , everyone . Thank you for joining us . I'm pleased to report that we delivered record third quarter results driven by continued momentum in our PNC insurance vertical .

Speaker #6: Growth in the quarter was fueled by increased marketing investments from leading auto insurance carriers who continued to lean into customer acquisition in what remains a highly favorable operating environment with underwriting margins at unusually high levels .

Speaker #6: Carriers are in a strong position to pursue policy growth . Importantly , peak underwriting profitability does not mean that carrier advertising spending has peaked to the contrary , we're seeing an increasing number of carriers turn their focus earnest to capturing market share marketplace continues to be the most efficient and scalable platform for them to acquire new customers .

Speaker #6: These dynamics give us significant runway for continued growth in the quarters ahead . In our health insurance vertical . Our results impacted by our recent reset .

Speaker #6: In under 65 , which was in line with expectations . Our partnerships with leading Medicare Advantage carriers continue to perform well , and we expect digital advertising to capture a larger share of health insurance distribution spend over time as the secular tailwinds play out .

Speaker #6: We believe we're well positioned to restart growth from this new baseline in . As we look ahead , we're encouraged by the strength of our PNC business .

Speaker #6: The long term potential of our Medicare vertical and the expanding opportunities we see across digital insurance distribution in our PNC vertical . We believe we're in the early stages of a multiyear soft market characterized by strong carrier profitability and robust market share competition , which we expect to sustain healthy marketing spend for years to come .

Speaker #6: The combination of strong industry fundamentals , deep partnerships , and the efficiency of our platform gives us conviction in our ability to deliver sustainable growth .

Speaker #6: We'll continue to balance investment and innovation with disciplined capital deployment , ensuring that we build enduring value for our partners and shareholders . In addition to favorable industry fundamentals , powerful technology shifts , particularly those related to AI , are likely to reshape how consumers discover , evaluate and purchase insurance in the near to mid term .

Speaker #6: If foreseeable , that AI may disrupt traffic patterns and monetization models for some of our publishers , while also creating entirely new supply side opportunities .

Speaker #6: Because our marketplace spans hundreds of publishers across multiple formats and media channels . We expect our ecosystem as a whole to adapt well to these changes , preserving a resilient and diversified supply with materially greater scale than our competitors and growing network effects .

Speaker #6: We expect to remain the partner of choice for both publishers and advertisers , and to continue gaining share as AI adoption accelerates . We're also highly focused on leveraging AI to enhance the productivity of our organization and better serve our partners .

Speaker #6: We believe we're just scratching the surface here and look forward to keeping you updated in the coming quarters. With that, I'll hand it over to Pat.

Speaker #7: Thanks , Steve . I'll start by walking through the key drivers of our Q3 results . Transaction value was $589 million , up 30% year over year , driven by 41% year over year growth in our PNC vertical and our health vertical .

Speaker #7: Transaction value declined 40% year over year . Consistent with our expectations , adjusted EBITDA for the quarter was $29.1 million , an increase of 11% year over year .

Speaker #7: Our efficient operating model and disciplined expense management allowed us to convert 64% of contribution to adjusted EBITDA , up from 63% in the prior year .

Speaker #7: Excluding under 65 health , our core business performance was very strong with year over year transaction value and adjusted EBITDA growth of 38% and 31% , respectively .

Speaker #7: Our take rate , defined as contribution divided by transaction value , decreased year over year as expected for three main reasons . First , our under 65 Subvertical , which was historically at high take rates , has declined .

Speaker #7: Second , our largest PNC carrier partners have continued to represent an outsized share of spend in our marketplace . These carriers were among the first to restore underwriting profitability , which has given them a head start .

Speaker #7: But we are confident that other carriers will enter the race in a more meaningful way . Lastly , our take rate was impacted by large scale new supply partner wins .

Speaker #7: These factors together have increased the percentage of transaction value from private marketplace transactions , which carry lower take rates . Importantly , our open marketplace take rates have remained relatively stable .

Speaker #7: The pressure we're seeing is primarily a function of mix shift . Looking ahead , we expect our Q4 take rate to be approximately 7% with private marketplace transactions representing approximately 54% of total transaction value .

Speaker #7: As we plan for 2026 , our current base case assumes we will start the year with a take rate roughly consistent with Q4 levels before the broadening of carrier demand has a meaningful impact on our take rate .

Speaker #7: Given the strong momentum we are seeing in carrier spend and our usual OPEX discipline, we believe we are well positioned to deliver adjusted EBITDA growth and maintain strong free cash flow generation next year.

Speaker #7: Longer term , we expect an uplift in take rates as more of our carrier partners ramp up their marketing spend to compete for policy growth , resulting in an increasing percentage of spend being transacted on our open marketplace .

Speaker #7: We expect record fourth quarter transaction value as we benefit from continued strong demand from the largest carriers in our marketplace . Accordingly , we expect PNC transaction value to grow approximately 45% year over year in our health vertical , which includes both Medicare and Under 65 health .

Speaker #7: We expect transaction value to decline approximately 45% year over year , driven primarily by under 65 , which is stabilizing at a lower baseline on a year over year basis .

Speaker #7: We expect fourth quarter transaction value and contribution from under 65 health to decline by 34 to $38 million , or 61 to 68% .

Speaker #7: And 8 to $9 million , or 80 to 90% , respectively . To provide additional insight into the new baseline for our health , vertical , similar to last quarter , we've included in this quarter shareholder letter both transaction value and contribution for our under 65 business .

Speaker #7: As a reminder , we expect 2025 under 65 transaction value of 95 to $100 million in contribution of about 10 to $11 million , with around 1 to $2 million of that contribution coming in the fourth quarter .

Speaker #7: Looking ahead , we expect an under 65 will generate annual contribution dollars in the mid-single digit millions , reflecting the reset in both scale and profitability .

Speaker #7: For this subvertical . Moving to our consolidated financial guidance , we expect Q4 transaction value to be between 620 million and $645 million , representing a year over year increase of 27% at the midpoint .

Speaker #7: We expect revenue to be between 280 million and $300 million , representing a year over year decrease of 4% at the midpoint . We expect revenue as a percentage of transaction value to decrease meaningfully year over year .

Speaker #7: As private marketplace transactions , which are recognized on a net basis , are expected to represent around 54% of transaction value , up from 41% in Q4 of last year .

Speaker #7: Adjusted EBITDA is expected to be between 27.5 million and $29.5 million , representing a year over year decrease of 22% at the midpoint , including 8 to $9 million of impact from an expected year over year decline in under 65 contribution , excluding under 65 health , we expect adjusted EBITDA to be roughly flat year over year .

Speaker #7: Finally, we expect overhead to be roughly flat to Q3 levels. Turning to the balance sheet, we generated $23.6 million of free cash flow in the third quarter.

Speaker #7: We ended the quarter with a net debt to adjusted EBITDA ratio below one times , and cash of $39 million , plus restricted cash of $33.5 million .

Speaker #7: Earlier this month , the restricted cash was used to make the initial FTC settlement payment and the remaining $11.5 million is payable in Q1 of 2026 .

Speaker #7: Excluding these settlement payments , we expect to convert a substantial portion of adjusted EBITDA into free cash flow , providing us with continued financial flexibility to support our strategic priorities confidence in our strategy and long term growth opportunities , we think our stock is an attractive investment in share buybacks are accretive use of excess cash , particularly at current levels .

Speaker #7: During the quarter , we repurchased approximately 5% of our outstanding shares at a discount to market for $32.9 million . In addition , earlier today , we announced a new share repurchase authorization of up to $50 million , consistent with our disciplined approach to capital allocation and focus on maximizing shareholder value .

Speaker #7: With that operator , we are ready to take the first question .

Speaker #8: Thank you . And as of this moment .

Speaker #4: I will now and proceed to the question and answer session . At this time , I would like to ask everybody to pre please press star one .

Speaker #4: If you want to join queue . And if you would like to withdraw your question , simply press star one . If you are called upon to ask your question and are listening via loudspeaker on your device , please pick up your handset and ensure that your phone is not on mute .

Speaker #4: When asking your question . And your first question comes from the line of Emilio Wicks from Canaccord . Please go ahead .

Speaker #9: Hi . Good afternoon . This is this is Maria Ribes . Thanks for taking my questions . It seems like a lot of investors are focused on Keras profitability instead of peak margins .

Speaker #9: Currently . And as you know , one of the largest carriers recently recorded a sizable credit expense to reflect excess profits . Can you maybe talk about sort of your view on how sustainable current profitability levels are and what that might mean for , for for customer acquisition spend overall ?

Speaker #6: Hey , Maria , I appreciate that question . Yeah . As you're alluding to , I mean , we've been getting that question a lot as well .

Speaker #6: And so it's a good to be able to clear things up with , you know , the what people are doing with regard to like conflating peak profitability for carriers with , you know , either peak of the stock market cycle or peak of advertising spend .

Speaker #6: And so the short answer to that is , you know , conflating those things like , couldn't be further from the truth . Because and to understand this , I think you really need to take a step back and think about hard markets and soft markets , how they work .

Speaker #6: And so we just emerged from what , a two and a half , three year hard market cycle , hard markets are , are , you know , get kicked off when there is reduced profitability because higher than expected loss ratios .

Speaker #6: And so what ends up happening is carriers start to get tighter underwriting restrictions . They raise rates . They pull back on marketing spend .

Speaker #6: And so what happens during a hard market is actually you have a baseline where you start from low margins and then you see margin expansion as the hard market progresses .

Speaker #6: Now it starts to tip over into a soft market . And when those margins sort of start to peak and get to adequate levels , you know , carriers then start to get more competitive , you know , they get looser with their underwriting guidelines , start to reduce pricing , and then invest in customer acquisition .

Speaker #6: And so all of that has the impact of actually compressing margins during the course of a soft market cycle . So when we hear things about carriers being at peak profitability in a lot of ways , what that tells us is that we're just kicking off the meat of or the heart of the soft market cycle .

Speaker #6: And what you can see from our marketplace is that demand remains very top heavy . On one hand , we have 13 carriers who spent more than $1 million a month this quarter .

Speaker #6: That's the greatest number that we've had in history . And so we're seeing a lot of nascent broadening of demand . But again , we're as top heavy as ever with some of the leading carriers for early to take rate .

Speaker #6: Stepping on the gas in terms of marketing spend that continue to dominate our marketplace . And so with rates starting to come down with profitability starting to come down as well , I think what you're going to start to see are a lot more carriers really stepping on the gas in 2026 and beyond , as we really enter into the meat of the soft market cycle and a broadening of demand that I think will continue and be a tailwind for us for the years to come .

Speaker #6: I do think it's worth pointing out that soft market cycles tend to last a lot longer than hard market cycles . Hard market cycles tend to be in about 2 to 3 year increments , and soft market cycles historically have been 2 to 3 times that .

Speaker #6: So about 5 to 7 years on average . And so what we're expecting is several years of tailwinds in terms of carrier advertising spend growth .

Speaker #6: We also expect to see the next level of growth in advertising spend , really being from a broader set of top carriers in the top 25 , with a lot of that spend , as Pat mentioned , coming through the open exchange again , as demand broadens out .

Speaker #6: And so I hope that explains sort of our position and what we're hearing in the marketplace about peak carrier profitability . Certainly , that doesn't concern us at all .

Speaker #6: And if anything , that gets us excited that heart of the soft market is just beginning .

Speaker #7: And Maria , I'll just and Maria , this is Pat . I'll just add one thing to what Steve said there , which is that , you know , we've got you know , we're kind of two years into kind of an improving operating environment .

Speaker #7: And our guidance for Q4 envisions 45% year over year transaction value growth for us and PNC . So we feel like we've got the wind at our back right now , and we've got a pretty nice operating momentum going into 2026 .

Speaker #9: Yeah , that's that's great . And that's very helpful . Thank you . And then can you share a little bit more color on the transition within your health vertical .

Speaker #9: Is that largely completed at this point . And I guess how are you thinking about the long term opportunity in the within that vertical sort of outside of on the 65 .

Speaker #6: Yeah . I'll take that . I'll take the second part first . I think that can address the first part of your question , which is , I mean , what we're looking with in the health insurance vertical is really focused on Medicare Advantage .

Speaker #6: We think that's a very strategic vertical . Again , I'll reiterate that it's a half $1 trillion industry really new to direct to consumer advertising .

Speaker #6: So we we see a ton of opportunities there over the long term . You know , it's a challenging market environment right now with loss ratios being elevated because of high utilization rates .

Speaker #6: And so what you're seeing is a lot of plan redesigns and carriers pulling out of certain markets . And so we have our own version within the Medicare Advantage space of the hard market that we saw in the PNC space .

Speaker #6: And so I think most people are expecting that the market to to recover , I think starting next enrollment period , and certainly we anticipate carriers starting to reinvest in growth during that time .

Speaker #6: But really for us , it's about the long term opportunity that Medicare Advantage offers just because of the market size and really where the carriers are in terms of their adoption cycle of direct to consumer advertising and direct to consumer platforms .

Speaker #6: And we see a lot of opportunities for integrated solutions to really help that space navigate the transition to direct , to consumer distribution model .

Speaker #7: And Maria , I'll tackle the shorter term portion of that question and kind of the nearer financial outlook . So I think in under 65 , we've taken a number of actions to kind of rebaseline that business .

Speaker #7: We think Q4 is kind of approximating that new baseline for us . And so for the quarter , we're expecting , you know , plus or -65% year over year decline in transaction value with contribution down 80 to 90% .

Speaker #7: And so it's a business that should make us $1 million to $2 million in Q4. We believe it'll be kind of a mid-single-digit million dollar contribution business for us next year.

Speaker #7: And kind of from a compliance standpoint , we've already implemented effectively all of the necessary changes there hasn't been a whole lot of cost that we've had to to layer on to do that .

Speaker #7: And actually we've embedded some AI technologies into that framework , which has allowed us to automate a lot of the monitoring that historically would have been labor intensive .

Speaker #7: So we feel like we're in a spot where , you know , kind of towards the middle of next year , the comps for the health vertical will start to normalize , right ?

Speaker #9: That's very helpful . Thank you very much .

Speaker #6: Thanks , Maria .

Speaker #4: And your next question comes from Corey Carpenter from J.P. Morgan. Please go ahead.

Speaker #10: Hey , Stephen . Pat , thanks for the question . I hoping you could drill down a bit more into what you're seeing in the discussions you're having with carriers .

Speaker #10: I think , Steve , last time we talked , carriers kind of hit the pause button a just given the tariff uncertainty , started ramping .

Speaker #10: Three Q and now you're guiding to accelerating growth in four . Q so maybe just talk about dynamics you saw in your quarter .

Speaker #10: And then also how much visibility do you have into into year end budgets at this point in the cycle ? Thank you .

Speaker #6: Sure . Hey , Cory . Yeah . And so I think that , you know , when carriers had paused , it was related to the uncertainties around tariffs .

Speaker #6: I think that paused . I guess that pause was relatively short lived . And I think the carriers who were spending aggressively prior to , you know , prior to Q3 , I think , resumed their levels of spend and were continuing to see them grow .

Speaker #6: Their spend right now , as you can see from our estimates and our forecasts , I think in terms of visibility into Q4 , I mean , obviously , we're sharing that with the guidance that we have .

Speaker #6: You know , know , there has been a tendency in these types of markets for there to be sort of excess budget , you know , being kind of , you know , made available to us as the quarter starts to wind down .

Speaker #6: And again , because we're very efficient source and very trackable source , you know , that excess budget does tend to accrue to us , but it's not something that we're planning on right now .

Speaker #6: And so our Q4 estimates really have our best estimates of what the carrier budgets are going to be for the remainder of the year.

Speaker #6: We are starting to have some early discussions about 2026 , budgets and those discussions have been highly encouraging . And again , they really support the narrative that , you know , up until this point , really the recovery of the ad spend market , you know , coming out of the hard market has been very narrow and robustly driven by a narrow set of carriers .

Speaker #6: Really , what we're doing is having discussions with everyone else and and starting to see that there really will be a meaningfully meaningful broadening of demand in 2026 .

Speaker #6: The timing of that , I think , is going to be hard to hard to gauge . You know , certainly those carriers that we're talking about who have an early lead have taken a sizable lead .

Speaker #6: So it'll take a bit of time and a few quarters for the expansion or the broadening of demand to really start to have a positive impact on our take rates .

Speaker #6: But certainly we've been very encouraged by the early discussions that we've had with a lot of the major carriers . Again , outside the top couple and really do anticipate that 26 is going to be a year where we see meaningful , meaningful of demand within our TNC marketplace .

Speaker #10: You answered my second question , which was any early thoughts in 26 ? So I'll turn it back over . Thank you .

Speaker #6: Thanks , Corey .

Speaker #4: And your next question comes from Tommy Joint from KBW. Please go ahead.

Speaker #11: Hey , guys . A couple questions on your comments around the take rate . Can you remind us , is there a seasonality in for Q and then just want to confirm that you're expecting both those quarters or the fourth quarter and then the start of 2026 to be 7% take rate .

Speaker #11: And then just your expectation about increasing the take rate over time . Is that a function of a broader array of demand partners or supply partners or both ?

Speaker #7: Perfect . And Tommy , I can I can get started on that question . And then Steve and I can potentially tag team the the last one .

Speaker #7: So on seasonality historically we had a good bit of seasonality in our business on take rate . And that was when PNC was a smaller percentage of the total mix .

Speaker #7: And our health vertical was significantly larger. You know, now we're in a spot in Q4 with under 65 having stepped down pretty meaningfully, where there is a lot less take rate seasonality in the business because the Medicare portion of that looks pretty similar to PNC overall.

Speaker #7: And to tackle the second part of the question , yes , our guidance for Q4 is for around a 7% take rate . As a for us , take rate is contribution divided .

Speaker #7: By transaction value . And our view is that that 7% plus or minus is kind of the right benchmark for the next couple of quarters .

Speaker #7: And , you know , kind of moving to the the over time and the opportunity to drive take rate from to drive take rate over time .

Speaker #7: A broadening of demand would be kind of the primary driver of that happening . Obviously , broadening supply could help as well . But we believe that the demand side is the bigger opportunity .

Speaker #7: As a reminder , you know , the the largest advertisers with us tend to be , you know , relatively more private and smaller .

Speaker #7: Advertisers tend to be , you know , either fully open or very , very heavily open . And so as we see more people coming to the marketplace and more people start to spend seven figures a month , we would expect to see the business start to shift more to open over time .

Speaker #6: Yeah . And what I'll add is that as the demand starts to broaden out , which will be the key driver of improvement on our end , one of the reasons that that will primarily flow through the open marketplace is that the next set of carriers who are underrepresented in our marketplace , you know , need , need a lot of help from us , right ?

Speaker #6: So they leverage our managed services and machine learning algorithms to optimize their campaigns on their path . They leverage our platform solutions and integrated platform solutions in order to help host and optimize certain parts of the conversion experience .

Speaker #6: And so so we're putting a lot of effort behind those services that will better support and accelerate a lot of these carriers journeys to embracing direct to consumer embracing our channel and being successful in our channel .

Speaker #6: And again , all of those services are available really only through the open marketplace . And so that's why , as demand starts to broaden out and we see , you know , other carriers within the top 25 really start to punch their weight in terms of allocation of advertising dollars to us , the way we make them successful is through these solutions and managed services .

Speaker #6: And again , most of that spend is going to flow through the open exchange , which we'll have over time , a very positive impact on our take rates .

Speaker #11: Got it . Thanks for that . And then switching over to some of our expectations for the overhead expenses . Do you guys have any plans to either add or account managers or , technology headcount or make any other major new technology investments that we should be thinking about as we enter 2026 and think about the fixed expense leverage in the business next year ?

Speaker #7: Yeah , and Tommy , thanks for the question . I would say , you know , over the last couple of years , we have been consistently investing in the business , but doing so in a thoughtful and measured way .

Speaker #7: And we are a business that we've always run lean . We've got 150 employees today . You know , we've bootstrapped business , you know , efficiency is in our DNA .

Speaker #7: We will continue to invest to support the growth in our business . But we would expect to be a business where we would see leverage on those overhead items over time .

Speaker #7: And when I say leverage , I mean the mapping from contribution to adjusted EBITDA being flat to increasing over time .

Speaker #11: Thanks .

Speaker #12: Pat .

Speaker #6: Thanks , Tommy .

Speaker #4: And your next question comes from Andrew Kligerman from TD Cohen . Please go ahead .

Speaker #13: Hi . Good evening . First question is around . Open versus private . And as private becomes a bigger proportion , I think first nine months it's now 4,048% Steven .

Speaker #13: Pat how do you see that kind of playing out long maybe three years out five years out . Where does that mix kind of settle down ?

Speaker #13: If it ever settles down ?

Speaker #6: Yeah , I think it's a good question . I think we're at unusually high levels . You know , favoring the private marketplace right now .

Speaker #6: And again, I think that's really the nature of how the market has recovered on the heels of this generationally difficult, hard market cycle.

Speaker #6: What we had was a couple of leading carriers who were early to take great right step on the gas full year and a half or so , you know , ahead of everyone else .

Speaker #6: And these are carriers are very sophisticated and direct to consumer . Advertising , very sophisticated and all experience in our marketplace . And the private marketplace product was , you know , was designed to support advertisers like this .

Speaker #6: And their relationships with some of our biggest publishers . And so I think the way that the market has recovered has really lent to us being overindexed on the private side .

Speaker #6: And I think , as you know , as the long term plays out , again , as the industry and the recovery and the demand starts to broaden out , not just because carriers who are later to take rate and get to rate adequacy , start to spend in advertising and growth again .

Speaker #6: But because the whole secular trend towards direct to consumer advertising , which means online advertising and greater budgets allocated to measurable sources like us as starts to really take foot again , right ?

Speaker #6: Or take hold again , what we expect are just more and more of the top 25 carriers allocating a greater percentage of their overall customer acquisition spend and converting , in effect , right .

Speaker #6: A lot of commissions that they're paying to agents and to advertising dollars that they spend with us as they prioritize their direct channels .

Speaker #6: And again , this growth based on the support that they'll need , right . And being relatively new to this channel , you know , the services and the platform support that they're going to require to be successful in our channel .

Speaker #6: We believe that it's predominantly going to flow through the open exchange . And so I think what you're going to see over time is the shift back to the open exchange .

Speaker #6: And again , we don't have any views to exactly what that level should be . But certainly I think , you know , internally what we think is that the private open mix is kind of at a high watermark because the unusual nature of the head heaviness of demand right now , which is really a byproduct of how this market recovered after the after the most recent hard market cycle .

Speaker #13: I see . So maybe even next year , it could start to inflect more , more toward open again .

Speaker #6: I think that sort of anticipation again , I think what we're what we're expecting is that for the next few quarters , it'll take rates will stay about where they are right we do anticipate that next year the demand will start to broaden out .

Speaker #6: And so you're going to see carriers 10, 11, 12, 15, and 20 really start to spend more in our marketplace.

Speaker #6: And again, that's going to flow through the open exchange. And over time, that's really going to start to skew that mix back towards, from what I think we internally see as a high watermark right now.

Speaker #6: .

Speaker #13: Got it . Steve , thank you for that . And then and then in your shareholder letter you talked about how most carriers were investing .

Speaker #13: Well below their full potential . And there's this kind of analysis where you say , you know , that the investing was below 2019 levels last year , 2024 , even though premium was up 44% .

Speaker #13: So I'm kind of , you know , here we are a year later , premium has kind of leveled out year over year .

Speaker #13: I think , you know what ? Where are we And in where carriers are investing ? I'm kind of curious as to where we are now as opposed to the 24 number .

Speaker #13: versus 2019 .

Speaker #6: Sure . And let me try to answer this question . Tell me , if not answering it , the question that you're asking .

Speaker #6: But I think where we are versus 2019 , I think we we we highlighted that stack just to show that even though the overall volume has gone up within our marketplace with a couple of leading carriers , really investing heavily in growth in 24 and 25 , that the vast majority of other carriers again , top 25 carriers really weren't back to the pre market levels of 2019 and 2020 .

Speaker #6: And that's one of the reasons that we're still we're top heavier now than we were in 2020 . Now if you're asking where the carriers are like now versus 2019 , what I'll tell you is is that I'll point back to the stat of having 13 carriers spending more than $1 million a month .

Speaker #6: That's an all time high for us . I know that sounds a bit paradoxical with what I just said , but what that means is that our marketplace is scaled tremendously .

Speaker #6: As everyone knows , but be . We do see more carriers now than 2019 and 2020 who are really ready to adopt this channel .

Speaker #6: We have more integrations with more carriers than before to enable them to be successful in this channel. And so we see the nascent broadening of demand.

Speaker #6: We see a lot of encouraging signs from the discussions that we're having with these carriers . And so we see more carriers than ever before , really poised to be able to grow in this channel and to advertise and punch their weight in this channel .

Speaker #6: Then we have ever seen and certainly a lot more than what we saw in 2019 or 2020 . Now , Andrew , does that answer your question ?

Speaker #13: Yeah , it did . It feels like directionally there's still a lot of momentum . There is that kind of the right take on what you're saying .

Speaker #13: So when I look . 100% I .

Speaker #6: Mean that's absolutely right . I mean , I think I think because of what happened with the pandemic related harm cycle and now transitioning to a soft cycle , what market in some ways gotten lost in a lot of that is just the secular shift that the whole industry is undergoing , right .

Speaker #6: And so really , at the heart of it is really that people are shopping for insurance online , the best way to connect with these consumers and sell policies is consumers is through advertising online , enabling policy sales , online .

Speaker #6: Yet still two thirds of policies are still sold offline , where the main main expense distribution expense is commissions paid to agents . And so what you would expect to see are the advertising budgets continue to go up right over time , because what you're essentially doing is converting commissions that are paid to agents , which are in the neighborhood of , you know , for for us , personal auto like 17 , $18 billion a year , you would expect to see more of that being converted into advertising dollars as more and more carriers really adopt direct to consumer marketing as a necessary part of their distribution strategy .

Speaker #6: And so it's that secular story that I think got lost cyclical story that we've had over the past few years , and we're seeing that play out .

Speaker #6: And again , we're seeing that play out in the form of having 13 , 15 , 20 carriers at this point who I think are really well poised to start to grow in our channel over the next several years .

Speaker #6: During the during the upcoming soft market cycle .

Speaker #13: Super helpful . And if I could just sneak one last one in with with all the turbulence in Medicare . Medicare Advantage over the last 3 to 4 years .

Speaker #13: And it's been brutal . Do you ever see that business getting back to . Because I think a lot is shifted to med supplement .

Speaker #13: Now , do you ever see that business getting back to what it looked like in 2021 or 20 20 or 2019 ? I forget what year , but it's been a rough , rough number of years .

Speaker #6: Yeah , I mean , I think that's a great question . I think that I think people in the industry don't expect a return to , I think the frothiness that you saw in those markets when quite honestly , the Medicare , Medicare Advantage payers or the this case , you know , we're probably making a little bit too much from Medicare Advantage policy .

Speaker #6: And again , there's been a resetting of of of payment rates . Right ? A resetting a lot of the plans . And the fact remains that it's a half $1 trillion industry , right ?

Speaker #6: You know , Medicare Advantage policies are still profitable and big profit centers for these major carriers like UHC and Humana , just because it's , you know , in the past , it used to be 2 to 3 times as profitable to sell a Medicare advantage policy as another policy .

Speaker #6: You know , the fact that it's probably going to come down and be maybe nearly as profitable as other health insurance policies they see .

Speaker #6: I mean , certainly I think the pricing will go away , but I do think that as that market matures , you're going to start to see it evolve more like the auto insurance industry , where a lot of the carriers , depending on how they're feeling about their plan designs , start to get aggressive about advertising and taking market share away from other carriers .

Speaker #6: And so we do see the market start , you know , settling down over time . And again , one that's going to look a lot more like the auto auto insurance industry than it does today .

Speaker #6: But certainly I think a lot of the frothiness that you saw in the early period , I think probably will be gone for a while .

Speaker #7: Yeah . And Steve , yeah . And this is Pat , I'll probably just add 1 or 2 things to what Steve said on that , which is , you know , I think the consumer penetration of Medicare Advantage plans continues to tick up a point or two every year .

Speaker #7: I think this year for this plan , year , 54% of the enrollees chose it . And the estimates show that number going up to about 64% by 2034 .

Speaker #7: And the other nice tailwind , we think we have in the Medicare market for a number of years to come , is online shopping .

Speaker #7: And so , you know , as you get 65 year olds aging into Medicare , they are much more internet savvy than the average Medicare consumer .

Speaker #7: And so , you know , we think that trend is going to be continuing every year . And we're going to have more and more internet native seniors , you know , coming into the market , which should be very , very good for our business over time .

Speaker #13: Super helpful. Thank you.

Speaker #6: Thanks , Andrew .

Speaker #4: Before we proceed again, if you want to join the queue, press "*1," and your next question comes from Ben Hendricks from RBC Capital Markets.

Speaker #4: Please go ahead .

Speaker #14: Hi . This is Michael Murray on for Ben . Congrats on the strong results . It looks like normalizing for the under 65 segment adjusted EBITDA grew 31% .

Speaker #14: But then, looking at your guidance, you expect EBITDA to be flat on transaction value. Growth of 38%, excluding the under 65 segment.

Speaker #14: So is there a level of conservative conservatism baked in there ? Any color on the puts and takes would be helpful . Thanks .

Speaker #7: Yeah , and Michael , this is Pat . I would say that , you know , our philosophy from a guidance standpoint is we guide to , you know , kind of based on what we know as of today and what we have a high degree of confidence in .

Speaker #7: And , you know , I think our track record against guidance has been pretty good over time . And , you know , we're guiding based on , you know , 28 days of actuals .

Speaker #7: We've seen in this quarter . And , you know , our view on how things are going to play out . So , you know , I think our goal is always to is is always to deliver the best numbers that we can .

Speaker #7: And we're going to be looking to do that this quarter . And I think we'll we'll have more to report when we come out with earnings in February .

Speaker #7: But , you know , we try to be , you know , realistic and put out numbers that we believe we can achieve .

Speaker #14: Okay . Just shifting gears . So a large Ma payer recently indicated that they would be suspending their relationship with a large tele broker , which had high complaints to Medicare and also , you know , the least engaged members do .

Speaker #14: Do you see any opportunity to gain share here, just given payers' increased focus on quality leads? Thanks.

Speaker #6: Yeah , I do , and the way I see it is that is that I think there is a growing trend with payers to actually start to acquire customers directly and rely less on on brokers and brokers .

Speaker #6: And so and so again , it's unfortunate that these types of things happen right ? Certainly , I think one of the reliance on tele brokers of this industry is , is that a lot of the carriers within the Medicare space are relatively new to direct to consumer , and certainly new to online customer acquisition .

Speaker #6: So I think as that industry gets more well-versed in that area, I think there will be a shift from reliance almost entirely on brokers and brokers and brokers to sell policies.

Speaker #6: And again , a greater shift to carrier selling policies directly . And that's something that you saw in the auto insurance industry in the early days .

Speaker #6: And and we expect that trend to , to take hold within the Medicare Advantage space over time .

Speaker #14: All right . Thank you .

Speaker #4: Okay . There are no further questions at this time . And that's all for now , ladies and gentlemen . Thank you all for joining .