MediaAlpha, Inc.

Good day, everyone, and welcome to the Media Alpha fourth quarter and full year 2022 earnings call. Today's call is being recorded. All lines have been placed on mute to prevent any background noise. And after the speaker's remarks, there will be a question and answer session. And if you would like to ask a question during this time, simply press star 1 on your telephone keypad. If you would like to remove yourself from the queue, that is star 1 again. I would now like to turn the conference over to Denise Garcia, Investor Relations. Please go ahead.

Thank you, Lisa. After the market closed today, Media Alpha issued a press release and shareholder letter announcing results for the fourth quarter and full year ended December 31st, 2022. These documents are available in the investor section of our website, and we will be referring to them on this call. Our discussion today will include forward-looking statements about our business and our outlook for future financial results, including our financial guidance for the first quarter of 2023, which are based on assumptions, forecasts, expectations, and information currently available to management. These forward-looking statements are subject to risks and uncertainties that could cause future results or events to differ materially from those reflected in those statements. Please refer to the company's SEC filings, including its annual report on Form 10-K and its quarterly reports on Form 10-Q, for a fuller explanation of those risks and uncertainties and the limits applicable to forward-looking statements. These forward-looking statements are based on assumptions as of today, February 23rd, 2023, and the company undertakes no obligation to revise or update them. In addition, on today's call, we will be referring to certain actual and projected financial metrics of media output that are presented on a non-GAAP basis. This includes adjusted EBITDA, which we present in order to supplement your understanding and assessment of our financial performance. Non-GAAP measures should not be considered as a substitute for or superior to financial measures calculated in accordance with GAAP. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our press release and the shareholder letter issued today. Finally, I'd like to remind everyone that this call is being recorded and will be made available for replay via a link on the Investors section of the company's website at investors.medialpha.com. Now I'll turn the call over to Steve and Pat for a few introductory remarks before opening the call to your questions.

Hey, thanks, Denise. Hi, everyone. Welcome to our fourth quarter and full year 2022 earnings call. I'd like to make a few observations before turning the call over to Pat for his comments. We saw strong performance in our health insurance vertical in the fourth quarter. This is driven by a sharp year-over-year increase in demand from Medicare Advantage carriers, and we remain bullish about the long-term growth opportunity with this segment. The market for Medicare Advantage is expected to continue to outpace growth of Medicare as a whole, and seniors are increasingly shopping for Medicare Advantage policies online. With carriers prioritizing direct relationships with their members, we expect health insurance companies to continue to increase their direct marketing investments, which represent tremendous long-term tailwinds for this business. Turning to our P&C insurance vertical, we believe Q4 was the low point of this auto insurance hard market cycle, and we're optimistic that 2023 will be a better year than 2022. Driven by the resumption of marketing investments by one leading carrier who was early to achieve rate adequacy, we expect spend in our PNC marketplace to roughly double from Q4 to Q1, which is well above typical seasonal patterns. As the year progresses, We expect more carriers to return to growth mode as rate increases continue to be approved and as underwriting profitability is gradually restored. Coupled with the heightened consumer shopping behavior that will result from these double-digit pricing increases, we believe that this has the potential to create market conditions to support outsized growth coming out of this hard market. Now taking a step back, It's now clear that 2022 will be remembered as one of the most difficult years ever for the PNC insurance industry. Our ability to deliver adjusted EBITDA and free cash flow in this unprecedented market environment not only speaks to the efficiency of our marketplace model, but also to our team and culture. As a bootstrap company, doing more with less has always been in our DNA, and I couldn't be prouder of how the entire MediaAlpha team rose to the occasion this past year. enabling us to flatten our expense growth to meet these challenging conditions. Looking ahead, we continue to believe MediaAlpha can be a multi-billion dollar company due to the vast size of our addressable market and our highly differentiated marketplace model. We look forward to executing on this market opportunity and delivering strong top and bottom line growth in the upcoming years. With that, I'll turn the call over to Pat before we open the call to your questions. Thanks, Steve.