max-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________

FORM 10-Q

________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-39671

____________________

MediaAlpha, Inc.

(Exact name of registrant as specified in its charter)

____________________


Delaware			85-1854133
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)

700 South Flower Street, Suite 640

Los Angeles, California 90017

(Address of principal executive offices, including zip code)

(213) 316-6256

(Registrant's telephone number, including area code)

_______________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.01 par value per share

MAX

NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 29, 2022, there were 41,584,400 shares of MediaAlpha, Inc.'s Class A common stock, $0.01 par value per share, and 19,537,469 shares of MediaAlpha, Inc.’s Class B common stock, par value $0.01 per share, outstanding.

Table of Contents

MediaAlpha, Inc. and Subsidiaries

TABLE OF CONTENTS




	PART I. FINANCIAL INFORMATION
Item 1	Financial Statements	6
	Consolidated Balance Sheets	6
	Consolidated Statements of Operations	6
	Consolidated Statements of Stockholders’ Equity (Deficit)	8
	Consolidated Statements of Cash Flows	10
	Notes to Consolidated Financial Statements	11
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4	Controls and Procedures	33
	PART II. OTHER INFORMATION
Item 1	Legal Proceedings	33
Item 1A	Risk Factors	33
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3	Defaults Upon Senior Securities	34
Item 4	Mine Safety Disclosures	34
Item 5	Other Information	34
Item 6	Exhibits	35

Signatures		36

Table of Contents

Certain Definitions

As used in this Quarterly Report on Form 10-Q:

•“Class A-1 units” refers to the Class A-1 units of QL Holdings LLC (“QLH”).

•“Class B-1 units” refers to the Class B-1 units of QLH.

•“Company,” “we,” or “us” refers to MediaAlpha, Inc. and its consolidated subsidiaries, unless the context requires otherwise.

•“Consumer Referral” means any consumer click, call or lead purchased by a buyer on our platform.

•“Consumers” and “customers” refer interchangeably to end consumers. Examples include individuals shopping for insurance policies.

•“Digital consumer traffic” refers to visitors to the mobile, tablet, desktop and other digital platforms of our supply partners, as well as to our proprietary websites.

•“Direct-to-consumer” or “DTC” means the sale of insurance products or services directly to end consumers, without the use of retailers, brokers, agents or other intermediaries.

•“Distributor” means any company or individual that is involved in the distribution of insurance, such as an insurance agent or broker.

•“Exchange agreement” means the exchange agreement, dated as of October 27, 2020 by and among MediaAlpha, Inc., QLH, Intermediate Holdco, Inc. and certain Class B-1 unitholders party thereto.

•“Founders” means, collectively, Steven Yi, Eugene Nonko, and Ambrose Wang.

•“High-intent” consumer or customer means an in-market consumer that is actively browsing, researching or comparing the types of products or services that our partners sell.

•“Insignia” means Insignia Capital Group, L.P. and its affiliates.

•“Intermediate Holdco” means Guilford Holdings, Inc., our wholly owned subsidiary and the owner of all Class A-1 units.

•“Inventory,” when referring to our supply partners, means the volume of Consumer Referral opportunities.

•“IPO” means our initial public offering of our Class A common stock, which closed on October 30, 2020.

•“Legacy Profits Interest Holders” means certain current or former employees of QLH or its subsidiaries (other than the Senior Executives), who indirectly held Class B units in QLH prior to our IPO and includes any estate planning vehicles or other holding companies through which such persons hold their units in QLH (which holding companies may or may not include QL Management Holdings LLC).

•“Lifetime value” or “LTV” is a type of metric that many of our business partners use to measure the estimated total worth to a business of a customer over the expected period of their relationship.

•“NAIC” means the National Association of Insurance Commissioners.

•“Open Marketplace” refers to one of our two business models. In Open Marketplace transactions, we have separate agreements with demand partners and suppliers. We earn fees from our demand partners and separately pay a revenue share to suppliers and a fee to Internet search companies to drive consumers to our proprietary websites.

•“Partner” refers to a buyer or seller on our platform, also referred to as “demand partners” and “supply partners,” respectively.

◦“Demand partner” refers to a buyer on our platform. As discussed under Item 2. Management’s Discussion & Analysis – Management Overview, our demand partners are generally insurance carriers and distributors looking to target high-intent consumers deep in their purchase journey.

◦“Supply partner” or “supplier” refers to a seller to our platform. As discussed under Item 2. Management’s Discussion & Analysis – Management Overview, our supply partners are primarily insurance carriers looking to maximize the value of non-converting or low LTV consumers, and insurance-focused research destinations or other financial websites looking to monetize high-intent consumers.

Table of Contents

•“Private Marketplace” refers to one of our two business models. In Private Marketplace transactions, demand partners and suppliers contract with one another directly and leverage our platform to facilitate transparent, real-time transactions utilizing the reporting and analytical tools available to them from use of our platform. We charge a fee based on the Transaction Value of the Consumer Referrals sold through Private Marketplace transactions.

•“Proprietary” means, when used in reference to our properties, the websites and other digital properties that we own and operate. Our proprietary properties are a source of Consumer Referrals on our platform.

•“Reorganization Transactions” means the series of reorganization transactions completed on October 27, 2020 in connection with our IPO.

•“Secondary Offering” means the means the sale of 8,050,000 shares of Class A common stock pursuant to the registration statement on Form S-1 (File No. 333-254338), which was declared effective by the Securities Exchange Commission ("SEC") on March 18, 2021.

•“Senior Executives” means the Founders and the other current and former officers of the Company listed in Exhibit A to the exchange agreement. This term also includes any estate planning vehicles or other holding companies through which such persons hold their units in QLH.

•“Selling Class B-1 Unit Holders” means Insignia, the Senior Executives, and the Legacy Profits Interests Holders who sold a portion of their Class B-1 units to Intermediate Holdco in connection with the IPO.

•“Transaction Value” means the total gross dollars transacted by our partners on our platform.

•“Vertical” means a market dedicated to a specific set of products or services sold to end consumers. Examples include property & casualty insurance, life insurance, health insurance, and travel.

•“White Mountains” means White Mountains Insurance Group, Ltd. and its affiliates.

•“Yield” means the return to our sellers on their inventory of Consumer Referrals sold on our platform.

Cautionary Statement Regarding Forward-Looking Statements

We are including this Cautionary Statement to caution investors and qualify for the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the “Act”) for forward-looking statements. This Quarterly Report on Form 10-Q contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would,” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:

•Our ability to attract and retain supply partners and demand partners to our platform and to make available quality Consumer Referrals at attractive volumes and prices to drive transactions on our platform;

•Our reliance on a limited number of supply partners and demand partners, many of which have no long-term contractual commitments with us, and any potential termination of those relationships;

•Fluctuations in customer acquisition spending by property and casualty insurance carriers due to unexpected changes in underwriting profitability as the carriers go through cycles in their business;

•Existing and future laws and regulations affecting the property & casualty insurance, health insurance and life insurance verticals;

•Changes and developments in the regulation of the underlying industries in which our partners operate;

•Competition with other technology companies engaged in digital customer acquisition, as well as buyers that attract consumers through their own customer acquisition strategies, third-party online platforms or other traditional methods of distribution;

Table of Contents

•Our ability to attract, integrate and retain qualified employees;

•Reductions in DTC digital spend by our buyers;

•Mergers and acquisitions could result in additional dilution and otherwise disrupt our operations and harm our operating results and financial condition;

•Our dependence on internet search companies to direct a significant portion of visitors to our suppliers’ websites and our proprietary websites;

•The novel strain of the coronavirus and the disease it causes (COVID-19);

•The terms and restrictions of our existing and future indebtedness;

•Disruption to operations as a result of future acquisitions;

•Our failure to obtain, maintain, protect and enforce our intellectual property rights, proprietary systems, technology and brand;

•Our ability to develop new offerings and penetrate new vertical markets;

•Our ability to manage future growth effectively;

•Our reliance on data provided to us by our demand and supply partners and consumers;

•Natural disasters, public health crises, political crises, economic downturns, or other unexpected events;

•Significant estimates and assumptions in the preparation of our consolidated financial statements;

•Potential litigation and claims, including claims by regulatory agencies and intellectual property disputes;

•Our ability to collect our receivables from our partners;

•Developments with respect to LIBOR;

•Fluctuations in our financial results caused by seasonality;

•The development of the DTC insurance distribution sector and evolving nature of our relatively new business model;

•Disruptions to or failures of our technological infrastructure and platform;

•Failure to manage and maintain relationships with third-party service providers;

•Cybersecurity breaches or other attacks involving our systems or those of our partners or third-party service providers;

•Our ability to protect consumer information and other data and risks of reputational harm due to an actual or perceived failure by us to protect such information and other data;

•Risks related to being a public company;

•Risks related to internal control on financial reporting;

•Risks related to shares of our Class A common stock;

•Risks related to our intention to take advantage of certain exemptions as a “controlled company” under the rules of the NYSE, and the fact that the interests of our controlling stockholders (White Mountains, Insignia, and the Founders) may conflict with those of other investors;

•Risks related to our corporate structure; and

•The other risk factors described under Part I, Item 1A "Risk Factors" in the 2021 Annual Report on Form 10-K.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Quarterly Report on Form 10-Q. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Many of the important factors that will determine these results are beyond our ability to control or predict. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and, except as otherwise required by law, we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Table of Contents

Part I. Financial Information

Item 1. Financial Statements.

MediaAlpha, Inc. and subsidiaries

Consolidated Balance Sheets

(Unaudited; in thousands, except share data and per share amounts)


	March 31, 2022		December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	55,288	$	50,564
Accounts receivable, net of allowance for credit losses of $464 and $609, respectively	61,163		76,094
Prepaid expenses and other current assets	7,820		10,448
Total current assets	124,271		137,106
Intangible assets, net	11,884		12,567
Goodwill	18,402		18,402
Deferred tax asset	101,859		102,656
Other assets	18,805		19,073
Total assets	$	275,221	$	289,804
Liabilities and stockholders' equity (deficit)
Current liabilities
Accounts payable	$	51,509	$	61,770
Accrued expenses	10,012		13,716
Current portion of long-term debt	8,740		8,730
Total current liabilities	70,261		84,216
Long-term debt, net of current portion	175,878		178,069
Liabilities under tax receivables agreement, net of current portion	81,850		85,027
Other long-term liabilities	4,881		4,058
Total liabilities	$	332,870	$	351,370
Commitments and contingencies (Note 6)
Stockholders' equity (deficit):
Class A common stock, $0.01 par value - 1.0 billion shares authorized; 41.6 million and 41.0 million shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	416		410
Class B common stock, $0.01 par value - 100 million shares authorized; 19.6 million and 19.6 million shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	196		196
Preferred stock, $0.01 par value - 50 million shares authorized; 0 shares issued and outstanding as of March 31, 2022 and December 31, 2021	—		—
Additional paid-in capital	433,157		419,533
Accumulated deficit	(431,552)		(424,476)
Total stockholders' equity (deficit) attributable to MediaAlpha, Inc.	$	2,217	$	(4,337)
Non-controlling interests	(59,866)		(57,229)
Total stockholders' (deficit)	$	(57,649)	$	(61,566)
Total liabilities and stockholders' deficit	$	275,221	$	289,804

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

MediaAlpha, Inc. and subsidiaries

Consolidated Statements of Operations

(Unaudited; in thousands, except share data and per share amounts)


	Three months ended March 31,
	2022		2021
Revenue	$	142,599	$	173,588
Costs and operating expenses
Cost of revenue	120,881		147,180
Sales and marketing	7,223		5,391
Product development	5,216		3,320
General and administrative	17,148		15,749
Total costs and operating expenses	150,468		171,640
(Loss) income from operations	(7,869)		1,948
Other (income), net	(523)		(150)
Interest expense	1,359		2,301
Total other expense, net	836		2,151
(Loss) before income taxes	(8,705)		(203)
Income tax expense (benefit)	1,143		(364)
Net (loss) income	$	(9,848)	$	161
Net (loss) attributable to non-controlling interest	(2,772)		(124)
Net (loss) income attributable to MediaAlpha, Inc.	$	(7,076)	$	285
Net (loss) income per share of Class A common stock
-Basic	$	(0.17)	$	0.01
-Diluted	$	(0.17)	$	0.00
Weighted average shares of Class A common stock outstanding
-Basic	40,847,941		33,136,632
-Diluted	40,847,941		62,163,390

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

MediaAlpha, Inc. and subsidiaries

Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited; in thousands, except share data)


	Class A common stock			Class B common stock			Additional Paid-In- Capital		Accumulated deficit		Non- Controlling Interest		Total Stockholders’ (Deficit)
	Units	Amount		Units	Amount		Amount		Amount		Amount		Amount
Balance at December 31, 2021	40,969,952	$	410	19,621,915	$	196	$	419,533	$	(424,476)	$	(57,229)	$	(61,566)
Establishment of liabilities under tax receivables agreement and related changes to deferred tax assets associated with increases in tax basis	—	—		—	—		19		—		—		19
Exchange of non-controlling interest for Class A common stock	60,197	—		(60,197)	—		(180)		—		180		—
Vesting of restricted stock units	593,810	6		—	—		(6)		—		—		—
Equity-based compensation	—	—		—	—		13,688		—		85		13,773
Forfeiture of equity awards	(23,294)	—		—	—		—		—		—		—
Shares withheld on tax withholding on vesting of restricted stock units	—	—		—	—		(820)		—		—		(820)
Distributions to non-controlling interests	—	—		—	—		—		—		(130)		(130)
Settlement of 2021 annual bonus as restricted stock units	—	—		—	—		880		—		—		880
Tax impact of changes in investment in partnership	—	—		—	—		43		—		—		43
Net (loss)	—	—		—	—		—		(7,076)		(2,772)		(9,848)
Balance at March 31, 2022	41,600,665	$	416	19,561,718	$	196	$	433,157	$	(431,552)	$	(59,866)	$	(57,649)

Table of Contents

Class A
common stock

Class B
common stock

Additional
Paid-In-
Capital

Accumulated deficit

Non- Controlling Interest

Total Stockholders’ (Deficit)

Units

Amount

Units

Amount

Balance at December 31, 2020

33,371,056

334

25,536,043

255

SEC Form 10-Q filed by MediaAlpha Inc.