MediaAlpha(MAX) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents MediaAlpha, Inc.'s unaudited consolidated financial statements as of June 30, 2025, detailing balance sheets, operations, and cash flows, reflecting revenue growth but a net loss due to a legal settlement Consolidated Balance Sheets As of June 30, 2025, the company had $85.4 million in cash and cash equivalents, an increase from $43.3 million at year-end 2024, while total assets decreased to $249.4 million from $262.4 million Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $85,381 | $43,266 | | Accounts receivable, net | $102,776 | $142,932 | | Total current assets | $192,474 | $189,909 | | Total assets | $249,418 | $262,447 | | Liabilities & Stockholders' Deficit | | | | Accounts payable | $75,838 | $105,563 | | Accrued expenses | $63,980 | $18,542 | | Total current liabilities | $148,687 | $132,954 | | Long-term debt, net | $149,154 | $153,596 | | Total liabilities | $306,375 | $308,679 | | Total stockholders' deficit | $(56,957) | $(46,232) | Consolidated Statements of Operations For Q2 2025, revenue increased 41.1% to $251.6 million, but the company reported a net loss of $22.5 million due to increased general and administrative expenses, including a legal reserve Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $251,622 | $178,274 | $515,931 | $304,923 | | (Loss) income from operations | $(20,042) | $6,493 | $(19,926) | $8,865 | | Net (loss) income | $(22,533) | $4,420 | $(24,867) | $2,929 | | Net (loss) income attributable to MediaAlpha, Inc. | $(18,742) | $3,620 | $(20,690) | $2,507 | | Basic Net (loss) income per share | $(0.33) | $0.07 | $(0.33) | $0.05 | | Diluted Net (loss) income per share | $(0.33) | $0.07 | $(0.37) | $0.04 | Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash from operations significantly increased to $49.4 million, leading to a $42.1 million rise in cash and cash equivalents Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $49,423 | $23,287 | | Net cash (used in) investing activities | $(232) | $(164) | | Net cash (used in) financing activities | $(7,076) | $(11,735) | | Net increase in cash and cash equivalents | $42,115 | $11,388 | | Cash and cash equivalents, end of period | $85,381 | $28,659 | Notes to the Consolidated Financial Statements The notes detail accounting policies, revenue disaggregation, and legal contingencies, highlighting a $13.4 million intangible asset write-off and a $45.0 million FTC settlement - The company has significant customer concentration, with two customers accounting for 50% of revenue in Q2 2025 and 48% for the first six months of 2025[36] - During the first six months of 2025, the company wrote off $13.4 million in intangible assets related to the Customer Helper Team, LLC acquisition, as no future economic benefits are expected from them[48][49] - The company reached an agreement with the FTC to settle an investigation, agreeing to pay $45.0 million in monetary relief, with a reserve of $45.0 million recorded as of June 30, 2025[61][62] Revenue by Vertical (Six Months Ended June 30, in thousands) | Vertical | 2025 | 2024 | | :--- | :--- | :--- | | Property & casualty insurance | $450,407 | $203,664 | | Health insurance | $52,011 | $82,053 | | Life insurance | $10,798 | $14,081 | | Other | $2,715 | $5,125 | | Total | $515,931 | $304,923 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2025 financial results, highlighting 41.1% revenue growth driven by P&C insurance, offset by health declines, and a $22.5 million net loss due to an FTC settlement charge Executive Summary Q2 2025 saw revenue grow 41.1% to $251.6 million and Transaction Value increase 49.4%, but a $22.5 million net loss was recorded due to an FTC reserve, while Adjusted EBITDA rose 30.7% Q2 2025 Financial Highlights (in millions) | Metric | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $251.6 | $178.3 | $73.3 | 41.1% | | Transaction Value | $480.8 | $321.8 | $159.0 | 49.4% | | Contribution | $39.8 | $33.7 | $6.1 | 18.1% | | Net (Loss) Income | $(22.5) | $4.4 | $(26.9) | n/m | | Adjusted EBITDA | $24.5 | $18.7 | $5.8 | 30.7% | - The primary driver for revenue growth was a significant increase in customer acquisition spending by P&C carrier partners in response to their improving underwriting profitability[90] - The company and the FTC entered into a Consent Order to resolve all claims, with the company agreeing to pay $45.0 million, and a charge of $33.0 million was taken in the quarter to increase the related reserve[92] Results of Operations Operating results for Q2 2025 show P&C revenue surged 69.0% while Health insurance revenue fell 48.0%, with general and administrative expenses rising 241.1% due to $34.0 million in legal costs Revenue by Vertical (Three Months Ended June 30, in thousands) | Vertical | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Property & Casualty insurance | $227,162 | $134,422 | $92,740 | 69.0% | | Health insurance | $18,074 | $34,774 | $(16,700) | (48.0)% | | Life insurance | $5,225 | $6,518 | $(1,293) | (19.8)% | | Total Revenue | $251,622 | $178,274 | $73,348 | 41.1% | - General and administrative expenses for Q2 2025 increased by $33.3 million (241.1%) year-over-year, primarily due to a $34.0 million increase in legal costs, including a $33.0 million charge for the FTC Matter reserve[128] - For the six months ended June 30, 2025, the company wrote off $13.4 million of intangible assets from the Customer Helper Team, LLC acquisition as they were not expected to generate future cash inflows[145] Key business and operating metrics The company's non-GAAP metrics show Adjusted EBITDA at $53.9 million for the six months ended June 30, 2025, with Contribution at $83.8 million and total Transaction Value reaching $953.9 million Reconciliation of Net (Loss) Income to Adjusted EBITDA (in thousands) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | 2025 | 2024 | 2025 | 2024 | | Net (loss) income | $(22,533) | $4,420 | $(24,867) | $2,929 | | Adjustments | $47,035 | $14,320 | $78,745 | $30,230 | | Adjusted EBITDA | $24,502 | $18,740 | $53,878 | $33,159 | Transaction Value by Vertical (Six Months Ended June 30, in thousands) | Vertical | 2025 | 2024 | | :--- | :--- | :--- | | Property & Casualty insurance | $842,198 | $390,070 | | Health insurance | $95,092 | $124,365 | | Life insurance | $13,775 | $18,123 | | Total Transaction Value | $953,880 | $540,916 | Liquidity and capital resources As of June 30, 2025, the company had $85.4 million in cash and equivalents, extended debt maturities to July 2027, and plans to use cash on hand for the $45.0 million FTC settlement - As of June 30, 2025, the company had $85.4 million in cash and cash equivalents and $45.0 million available under its revolving credit facility[166] - In August 2025, the company extended the maturity date for the majority of its term loans ($138.1 million) and revolving credit facility ($45.6 million) by one year to July 29, 2027[166][179] - The company will pay a $45.0 million settlement to the FTC, with $33.5 million due within seven days of court entry and $11.5 million within 90 days, planning to use cash on hand for these payments[169] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks, including interest rate fluctuations on its variable-rate credit facilities and significant customer and supplier concentration, with two customers accounting for 50% of Q2 2025 revenue - The company is exposed to interest rate risk from its variable-rate 2021 Credit Facilities, where a hypothetical 1.0% increase in interest rates would have resulted in a $0.8 million impact on interest expense for the six months ended June 30, 2025[189] Customer and Supplier Concentration (Q2 2025) | Concentration Type | Number > 10% | Aggregate Value (in millions) | % of Total | | :--- | :--- | :--- | :--- | | Revenue | 2 | $125 | 50% | | Purchases | 2 | $53 | 25% | Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[194] - No changes occurred in the company's internal control over financial reporting during Q2 2025 that have materially affected, or are reasonably likely to materially affect, these controls[195] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section incorporates by reference details on legal matters, primarily the Federal Trade Commission (FTC) settlement, from Note 5 to the Consolidated Financial Statements - The report refers to Note 5 of the financial statements for details on legal proceedings, which covers the FTC matter settlement[198] Item 1A. Risk Factors This section updates risk factors, emphasizing the company's high dependency on cyclical insurance industries and the financial and operational risks associated with the FTC settlement - The company's business is highly subject to cyclicality in the insurance industry, where 'hard' market conditions can lead to significant reductions in customer acquisition spending by insurance carriers, adversely impacting revenue[200] - The settlement with the FTC, while resolving the commission's claims, includes a $45.0 million payment and injunctive terms that will affect operations, particularly in the under-65 health insurance subvertical, where a reduction in Transaction Value and Contribution is expected for 2025[204][205] - Even with the FTC settlement, the company faces risks of litigation from other government authorities or private claimants regarding business practices subject to the FTC investigation[206] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities but repurchased 102,348 shares of Class A Common Stock at $10.39 per share to satisfy tax obligations related to RSU vesting - There were no unregistered sales of equity securities in the quarter[208] Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | — | — | | May 2025 | 102,348 | $10.39 | | June 2025 | — | — | | Total | 102,348 | $10.39 | Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[210] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[211] Item 5. Other Information No director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q2 2025 - No director or officer adopted, modified, or terminated a Rule 10b5-1 trading plan during the three months ended June 30, 2025[212] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including an employment agreement amendment, CEO/CFO certifications, and Inline XBRL data files - Exhibits filed include CEO/CFO certifications (31.1, 31.2, 32.1) and XBRL data files[213]