MediaAlpha anticipates record Q4 transaction value with 45% P&C growth as sector demand broadens

Earnings Call Insights: MediaAlpha, Inc. (MAX) Q3 2025

MANAGEMENT VIEW

* Steve Yi, Co-Founder, CEO, President & Director, announced, "we delivered record third quarter results, driven by continued momentum in our P&C insurance vertical. Growth in the quarter was fueled by increased marketing investments from leading auto insurance carriers who continue to lean into customer acquisition in what remains a highly favorable operating environment." Yi highlighted that "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 in earnest to capturing market share, and our marketplace continues to be the most efficient and scaled platform for them to acquire new customers."
* Yi addressed the health insurance vertical: "our results were impacted by our recent reset 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."
* Regarding technology, Yi noted, "powerful technology shifts, particularly those related to AI, are likely to reshape how consumers discover, evaluate and purchase insurance...we expect our ecosystem as a whole to adapt well to these changes, preserving a resilient and diversified supply base."
* Patrick Thompson, CFO & Treasurer, reported, "Transaction value was $589 million, up 30% year-over-year, driven by 41% year-over-year growth in our P&C vertical. In our health vertical, 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."
* Thompson added, "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."

OUTLOOK

* Thompson stated, "We expect Q4 transaction value to be between $620 million and $645 million, representing a year-over-year increase of 27% at the midpoint. We expect revenue to be between $280 million and $300 million, representing a year-over-year decrease of 4% at the midpoint."
* For P&C, Thompson said, "we expect P&C transaction value to grow approximately 45% year-over-year."
* In the Health vertical, "we expect transaction value to decline approximately 45% year-over-year, driven primarily by under-65, which is stabilizing at a lower baseline."
* Take rate guidance for Q4 is "approximately 7%, with private marketplace transactions representing approximately 54% of total transaction value."

FINANCIAL RESULTS

* Transaction value reached $589 million for Q3 2025, up 30% year-over-year, with P&C vertical growth of 41% and health vertical down 40% year-over-year.
* Adjusted EBITDA for the quarter was $29.1 million, increasing 11% year-over-year, and the company converted 64% of contribution to adjusted EBITDA.
* Free cash flow in Q3 was $23.6 million, with cash of $39 million and restricted cash of $33.5 million at quarter end. The restricted cash was used for the initial FTC settlement payment, with a remaining $11.5 million payable in Q1 2026.
* Share repurchases during the quarter totaled $32.9 million, about 5% of outstanding shares.

Q&A

* Maria Ripps, Canaccord Genuity Corp.: Questioned the sustainability of current carrier profitability and its impact on customer acquisition spend. Yi responded, "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...we're as top heavy as ever with some of the leading carriers who are early to take rate, stepping on the gas in terms of marketing spend that continue to dominate our marketplace."
* Ripps followed up on the health vertical transition. Thompson replied, "in under-65, we've taken a number of actions to kind of rebaseline that business. We think Q4 is kind of approximating that new baseline for us."
* Cory Carpenter, JPMorgan Chase & Co: Asked about carrier discussions and visibility into year-end budgets. Yi stated, "we're sharing that with the guidance that we have...our Q4 estimates really have our best estimate to what the carrier budgets are going to be for the remainder of the year. We are starting to have some early discussions about 2026 budget."
* Thomas Mcjoynt-Griffith, Keefe, Bruyette, & Woods, Inc.: Asked about take rate seasonality and expectations. Thompson answered, "there is a lot less take rate seasonality in the business because the Medicare portion of that looks pretty similar to P&C overall."
* Andrew Kligerman, TD Cowen: Asked about long-term private vs. open marketplace mix. Yi commented, "we're at unusually high levels favoring the private marketplace right now...as the industry and the recovery and the demand starts to broaden out...what we expect are just more and more of the top 25 carriers allocating a greater percentage of their overall customer acquisition spend...over time is the shift back to the open exchange."

SENTIMENT ANALYSIS

* Analysts remained focused on sustainability of growth and profitability, with a tone that was probing but not overtly negative, as seen in Ripps' questions on profitability and health vertical transition.
* Management maintained a confident stance in both prepared remarks and Q&A, as reflected in statements such as "we're just kicking off the meat of -- or the heart of the soft market cycle" (Yi) and "we feel like we've got the wind at our back right now" (Thompson).
* Compared to last quarter, the management's tone remained confident with continued emphasis on growth opportunities and capital returns, while analysts' skepticism on cyclicality and margin outlook persisted but was not heightened.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for Q4 transaction value increased compared to Q3 guidance, with a stronger growth outlook for P&C (45% year-over-year vs. the prior quarter's 35% year-over-year guidance).
* The health vertical's under-65 reset was highlighted as largely complete, with near-term contribution expected at a much lower baseline, consistent with last quarter's commentary.
* Take rate guidance for Q4 is at 7%, with private marketplace mix higher than last quarter, reflecting persistent market concentration.
* Management's confidence in capital allocation, specifically share repurchases, was more pronounced this quarter.
* Analyst questions this quarter were more focused on the sustainability and broadening of carrier demand, compared to prior quarter's emphasis on FTC resolution and compliance.

RISKS AND CONCERNS

* Management noted continued pressure on take rates due to mix shifts, with private marketplace transactions representing a larger share.
* The health vertical faces ongoing challenges, particularly in under-65, with transaction value and contribution expected to remain at lower levels.
* FTC settlement payments are impacting near-term cash flows, with $11.5 million remaining payable in Q1 2026.
* Potential cyclicality in carrier advertising spend and the timing of broadening demand among carriers were identified as factors that may affect future results.

FINAL TAKEAWAY

Management emphasized that MediaAlpha is entering a period of strong P&C growth, supported by robust carrier demand and a multiyear soft market cycle expected to drive healthy advertising spend. The health vertical has largely reset, and while some headwinds remain, technology investments and a disciplined approach to capital allocation, including a new $50 million share repurchase authorization, position the company for continued growth and shareholder value creation. The outlook for the remainder of 2025 and into 2026 is underpinned by expectations of demand broadening across more carriers and ongoing efficiency improvements across the platform.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/max/earnings/transcripts]

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