MediaAlpha (MAX) Q1 2026 Earnings Transcript

Motley Fool Transcribing, The Motley FoolWed, April 29, 2026 at 10:05 PM UTC

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Date

Wednesday, April 29, 2026 at 5 p.m. ET

Call participants -

Chief Executive Officer — Steven Yi

Chief Financial Officer — Patrick R. Thompson

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Takeaways -

Revenue -- $310 million, exceeding the top end of guidance, reflecting a favorable open marketplace mix shift and broader carrier participation.

Adjusted EBITDA -- $31.4 million, representing 7% year-over-year growth, with a 64% conversion rate from contribution to adjusted EBITDA.

Core business performance (ex-under-65 Health) -- Revenue and adjusted EBITDA both increased 28% year over year.

Share repurchases -- 2.6 million shares repurchased for $25 million, constituting approximately 4% of the company, with most of the $100 million authorization expected to be completed in 2026.

Credit facilities refinancing -- New $150 million senior secured term loan and $60 million revolver, both maturing in March 2031, replaced prior arrangements, extending the debt maturity profile and providing additional financial flexibility.

Cash position -- Quarter-end cash was $26.1 million, with $45 million undrawn on the revolver.

Q2 revenue guidance -- $290 million to $310 million, implying approximately 19% year-over-year growth at the midpoint.

Q2 adjusted EBITDA guidance -- $28 million to $30.5 million, projecting around 19% growth at the midpoint, including an approximately $2 million decline from under-65 Health.

Q2 contribution guidance -- $45.5 million to $48.5 million, up about 18% year over year at the midpoint, with contribution to increase 25% excluding under-65 Health.

Health vertical revenue mix -- Health expected to be about 1% of total revenue in Q2 due to limiting under-65 Health open marketplace participation to carriers only.

Free cash flow guidance -- $90 million to $100 million expected for full year 2026.

One-time cash outflows Q1 -- $11.5 million FTC payment, mid-to-high single-digit million employee bonuses, and annual tax receivable agreement payments impacted Q1 free cash flow.

Transaction value reporting change -- The company will no longer report transaction value starting Q2, shifting to guiding on contribution to align with peer disclosures.

Strategic AI launch -- autoinsurance.net, a ChatGPT-powered insurance shopping experience, was launched as an early proof-of-concept to support carriers’ brand and compliance.

Secular shift in P&C distribution -- Carrier distribution spend continues shifting from agent commissions and offline advertising toward direct-to-consumer, online performance marketing.

LLM industry momentum -- OpenAI’s increased focus on advertising monetization and projected $100 billion ad revenue by 2030 identified as a potential multi-year tailwind for the business.

Carrier spend broadening -- Growth driven primarily by increased participation from non-leading top-15 and top-20 carriers in open marketplace advertising.

Summary

MediaAlpha (NYSE:MAX) reported record financial performance, highlighted by exceeding guidance on both revenue and adjusted EBITDA. Management cited accelerating carrier demand and a favorable mix shift to higher-margin open marketplace transactions as major factors supporting growth. The company announced a completed refinancing that extends debt maturities and preserves borrowing flexibility without materially altering its interest profile. Strategic initiatives included the launch of a generative-AI-powered consumer platform, autoinsurance.net, and the continued reduction of exposure to under-65 Health. MediaAlpha disclosed a transition in investor disclosures, ceasing transaction value reports in favor of contribution metrics, and reaffirmed its intention to deploy substantial free cash flow toward shareholder returns.

CEO Steven Yi said, "We remain confident that carriers will stay central to the quoting and binding experience regardless of how the consumer shopping experience evolves."

Patrick R. Thompson explained that transaction value was something we originally disclosed at the time of the IPO to show our scale, and we have shown it since for that reason. As Steve said in his scripted remarks, we estimate from a transaction value standpoint we are close to 3x the size of our nearest competitor, so we think we have clearly proven that point and investors understand it. As we think about the most important metrics for understanding the business, those really are revenue, contribution, and adjusted EBITDA. Those are the exact metrics that all of our public peers show. From a simplicity standpoint and a conformity standpoint, it makes sense to focus on the same things everybody else does.

Management pointed to OpenAI’s shift toward advertising-based monetization as a "significant tailwind" for industry referral traffic and long-term revenue potential.

Quarterly cash flow was negatively impacted by three specific items: an $11.5 million FTC payment, annual employee bonuses, and tax receivable agreement obligations, all one-time in nature.

The shift in carrier advertising spend from agent commissions to digital channels was described as ongoing, with many non-leading carriers still allocating only 2%-3% of their advertising budgets to MediaAlpha’s marketplace, compared to a benchmark opportunity of 10%-20%.

Industry glossary -

LLM (Large Language Model): Advanced AI systems, such as ChatGPT, that power natural-language interfaces and are increasingly used as channels for insurance customer acquisition and advertising.

P&C (Property and Casualty): Insurance segment covering property loss and liability risk, a primary vertical for MediaAlpha’s platform.

Contribution: A company-specific profitability metric reflecting gross profit after variable costs, highlighted as MediaAlpha's new primary performance disclosure metric.

Full Conference Call Transcript

Steven Yi: Hey. Thanks, Alex. Hi, everyone. Thank you for joining us. We are off to a strong start in 2026, delivering record results across all of our key financial metrics. First quarter transaction value came in above the midpoint of our guidance range, reflecting continued strength in auto insurance carrier spend and further broadening of carrier participation on our platform. These dynamics drove a favorable mix shift to our open marketplace, pushing both revenue and adjusted EBITDA above the high end of our guidance. Within P&C, we have seen a number of carriers that were previously punching under their weight in our marketplace take meaningful steps over the last several quarters to increase their spend.

As anticipated, this is resulting in a mix shift toward our higher-margin open marketplace, where our estimated 3x scale advantage and unmatched proprietary data fuel highly differentiated predictive AI optimizations that drive better outcomes for our partners. Moving forward, I am encouraged by the productive conversations we are having with a growing number of leading carriers about further leveraging our trusted infrastructure and AI targeting capabilities to maximize return on ad spend and gain market share. The underlying auto insurance industry remains healthy. Carriers are strongly profitable and are competing more aggressively by lowering their rates and increasing their advertising spend as they prioritize policy growth.

While underwriting margins have begun to decline from record levels, they remain robust by historical standards. We believe these conditions support further growth in our P&C vertical, which continues to benefit from the secular shift in carrier distribution spend from agent commissions and offline advertising to a direct-to-consumer model supported by online performance marketing. While not yet material to our results, our strong first quarter P&C traffic growth suggests that consumers who are starting their insurance shopping experience on LLMs are driving incremental referrals to our marketplace. During the quarter, we were pleased to see a significant strategic shift by a leading LLM to place greater emphasis on advertising monetization to support the consumer product.

We view this as a favorable development that could meaningfully accelerate LLM referral traffic and revenue growth for us and our partners. We remain confident that carriers will stay central to the quoting and binding experience regardless of how the consumer shopping experience evolves, reinforcing our highly defensible position as the core layer connecting carriers with insurance shoppers. As a trusted partner to carriers and a leader in AI-powered insurance distribution, we recently launched autoinsurance.net, a ChatGPT-powered shopping experience that simplifies the consumer journey while keeping carriers in full control of their brand, compliance standards, and quoting processes.

This is an early proof-of-concept product, and we are excited about what comes next as we continue to build out this capability to better support our partners. On the health insurance side, our under-65 business continues to represent a diminishing portion of our overall mix, which is in alignment with our plans. We continue to believe that Medicare Advantage is the long-term growth opportunity for this vertical. Importantly, we remain focused on utilizing our significant free cash flow to maximize shareholder value. We are executing aggressively on our outstanding share repurchase authorization and have returned over $25 million of capital to shareholders already this year. As we look ahead, we are energized by the opportunities in front of us.

Carrier and agent participation in our marketplace continues to expand, and the innovations we are bringing to market are opening new doors for consumers to discover and connect with both carriers and agents. Overall, we believe we are well positioned to deliver both sustained profitable growth and long-term shareholder value. Before turning the call over to Pat, I am proud to share that MediaAlpha, Inc. has earned a Great Place to Work certification for the tenth consecutive year, with 95% of our team members affirming that our company is indeed a great place to work. This recognition reflects the strength of our culture, and our exceptional team underpins everything that we do.

Operator: Great.

Patrick R. Thompson: Thank you, Steve. I will start by walking through the key drivers of our Q1 results and then cover our Q2 outlook. As Steve mentioned, transaction value came in above the midpoint of our guidance range. Revenue was $310 million, above the high end of our guidance range, reflecting a favorable open marketplace mix shift driven by broader carrier participation in our marketplace. Adjusted EBITDA for the quarter was $31.4 million, up 7% year over year. Our efficient operating model and disciplined expense management allowed us to convert 64% of contribution to adjusted EBITDA. Excluding under-65 Health, our core business performance was very strong, with year-over-year revenue and adjusted EBITDA each growing 28%.

Turning to the balance sheet, we completed the refinancing of our credit facilities during the quarter, as detailed in the Form 8-Ks we filed with the SEC. We put in place a new $150 million senior secured term loan and a $60 million revolving credit facility, both maturing in March 2031. The refinancing replaces our prior arrangements, extends our debt maturity profile meaningfully, and provides enhanced financial flexibility. We drew modestly on the revolver in connection with closing, and we ended the quarter with $26.1 million in cash and $45 million undrawn on the revolver. On capital allocation, since the beginning of the year, we have repurchased approximately 2.6 million shares for $25 million, representing approximately 4% of the company.

We remain committed and on track to complete the vast majority of the remaining $60 million of our $100 million authorization in 2026. Turning to Q2, we will be changing how we present guidance. We will be guiding to contribution and will no longer report transaction value, as we think contribution is a more relevant metric for investors evaluating the company’s performance relative to our publicly traded peers.

For Q2, we expect revenue of $290 million to $310 million, up approximately 19% year over year at the midpoint; contribution of $45.5 million to $48.5 million, up approximately 18% year over year at the midpoint; and adjusted EBITDA of $28 million to $30.5 million, up approximately 19% year over year at the midpoint, including an approximately $2 million year-over-year decline in contribution from under-65 Health. Excluding under-65 Health, we expect contribution to increase by 25% and adjusted EBITDA to increase by 31% year over year. For Q2, we expect the Health vertical to be approximately 1% of total revenue, as we made a strategic decision to limit under-65 Health open marketplace participation to carriers only, simplifying our operations.

Looking at the remainder of 2026, we are entering a more normalized growth environment in P&C. Accordingly, we expect growth rates to moderate in 2026 as we lap increasingly strong prior-year comparisons. For the year, we expect to generate $90 million to $100 million in free cash flow. Overall, we remain confident in the strength of our position and the long-term opportunity ahead. With that, Operator, we are ready to take the first question.

Operator: We will now open the call for questions. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. Your first question comes from the line of Thomas Mcjoynt-Griffith with KBW. Your line is now open.

Thomas Mcjoynt-Griffith: Hi. Good evening. Steven, could you go into a bit more detail and specifics about the LLM comments that you made? You seemed to suggest a strategy shift by an LLM that is monetizing advertising leads. Could you add more details and specifics around that?

Steven Yi: Yes. What I was referring to was OpenAI’s announcement that ChatGPT was going to increase its reliance on advertising monetization. I think the number they put out was that by 2030 they wanted to generate about $100 billion in ad revenue by then, which is about 4x the previous forecast for ad revenue that they had released earlier this year. For us, that was a clear sign that OpenAI and ChatGPT, at least with the consumer-facing product, are going to monetize primarily using an advertising model. Certainly, with Gemini being owned by Google, you can expect Gemini to do something similar.

What we were really saying is that with the adoption of this advertising model, as opposed to a closed commerce model as some people had expected, it is a good thing for our overall industry. I have full confidence in our supply partners to be able to adapt to this new upstream traffic acquisition source and really tap into the incremental demand and shopping behavior that the LLMs are going to generate. We think, ultimately, over the next two to three years, this is going to be a significant tailwind to our business, both on the publisher side and for us as a whole.

Thomas Mcjoynt-Griffith: Thanks for that explanation. Switching gears, we often talk about carriers being stratified into those leading players that were first to reengage in advertising spend and then more carriers catching up. Have you seen any of the leading carriers start to pull back on advertising spend as they seem to notice that the underwriting cycle is nearing its peak?

Steven Yi: We have not. What we are seeing is accelerating growth from the non-leading carriers more than any pullback from the leaders. They were the first ones to come back and really lean into growth mode by acquiring customers, and the spending came back very quickly within our marketplace from a couple of the leading carriers. I think they are maintaining their levels of spend, and we are continuing to see growth there. What you are seeing, and you see it in the numbers with the higher growth rate in our open marketplace, is the growth we are seeing from many of the other top 15, top 20 carriers as they increasingly lean into growth marketing. We are encouraged by that.

It represents the broadening of demand we have been expecting for the last couple of years. It reflects strong cyclical tailwinds as carriers start to lower rates and pour money into advertising to grow their policy counts, and it is fueling the secular shift we are seeing from an increasing number of carriers as they pivot from being primarily reliant on agent-based distribution to building a strong direct-to-consumer channel. That effectively means a lot of distribution costs that agent-based carriers were incurring are starting to shift from agent commissions into advertising dollars, which is a net positive for our industry and clearly a net positive for us.

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Operator: Your next question comes from the line of Cory Carpenter with J.P. Morgan. Your line is now open.

Cory Carpenter: Hey, thanks for the question. Last quarter, you talked about an expectation for carriers to enter the year with a more prudent start and then save some for later in the year should the opportunity present itself. Could you give an update on that? Has any of the macro uncertainty we have seen over the last couple of months changed your expectations for how you expect spend to trend through the year? Thank you.

Steven Yi: Sure. I think what I said in the last comment holds here. They may have started the year a little conservatively. Certainly, the big ones have continued to grow organically, but it is really the body of demand from carriers who are again top 15, top 20 carriers but were not big spenders in the past within our marketplace. We have been pleasantly surprised to see the level of growth from them. I will add a couple of things: we still think the broadening of demand has a way to go because many carriers outside of the top tier are still allocating only 2% to 3% of their overall advertising budgets to our marketplace.

If you look at benchmarks for where we expect them to be, it is really somewhere between 10% to 20%. They have somewhere between 5x to 10x to go in terms of the level of spend they could support with us once they eventually get to the point where the industry leaders are. Even though we are seeing strong demand and robust growth in our open marketplace driven by the broadening of demand, we think there is still a ways to go. On the macro front, if you are referring to the war, rising gas prices, and fears of increasing inflation, certainly those could have an impact on loss ratios.

We are not seeing carriers taking any action right now based on inflation fears. It could cut both ways: gas prices going up can mean people drive less, reducing frequency, but higher oil prices are likely to result in inflation of car prices, which could have a negative effect on severity.

Cory Carpenter: Great. Thank you very much.

Operator: Your next question comes from the line of Michael Zaremski with BMO Capital. Your line is now open.

Michael Zaremski: Hey, thanks. A couple of numbers questions. You reiterated the free cash flow outlook; did you mention why the cash flow did not come through this quarter? And did you specify the new terms on the debt so we can calculate potential savings?

Patrick R. Thompson: Mike, on the cash flow side, a couple of things happened in Q1. First, we had an $11.5 million payment to the FTC. That was our second and final payment to the FTC, so that was obviously a use of cash. Q1 is also a quarter where we have a couple of annual payments that go out the door: annual bonuses to employees, which is a mid-to-high single-digit million number, and annual payments under our tax receivable agreement. Q1 had those three one-timers or once-annual items. The rest of the year should not have those, and the adjusted EBITDA-to-free-cash-flow conversion should be very strong for the balance of the year.

Moving to the debt side, the refinance had very minimal changes to the overall interest profile of the debt. The most meaningful change to cash flow is that amortization is slightly lower. We have $7.5 million annually of amortization, paid a quarter of that every quarter, so there is a little bit less natural paydown on the debt. Otherwise, the economics of the debt are largely unchanged from the prior agreement to this one.

Michael Zaremski: Got it. Thanks, Pat. Probably for Steve: on removing transaction value, I would say investors did find that helpful. Are you saying you feel like it is proprietary and some of your competitors do not disclose it, so you would rather not disclose it?

Patrick R. Thompson: Yes, and Mike, this is Pat; I will take that one. Transaction value was something we originally disclosed at the time of the IPO to show our scale, and we have shown it since for that reason. As Steve said in his scripted remarks, we estimate from a transaction value standpoint we are close to 3x the size of our nearest competitor, so we think we have clearly proven that point and investors understand it. As we think about the most important metrics for understanding the business, those really are revenue, contribution, and adjusted EBITDA. Those are the exact metrics that all of our public peers show.

From a simplicity standpoint and a conformity standpoint, it makes sense to focus on the same things everybody else does.

Michael Zaremski: Thank you.

Operator: That concludes our question-and-answer session and today’s call. Thank you all for joining. You may now disconnect.

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