Ladies and gentlemen, thank you for standing by. Hello, and welcome to the MediaAlpha Inc. Q4 2025 Earnings Conference Call. At this time, I would like to turn the call over to our Investor Relations, Alex Liloia. Please go ahead.

Thanks, Dustin. Good afternoon, and thank you for joining us. With me are Co-Founder and CEO, Steve Yi; and CFO, Pat Thompson. On today's call, we'll make forward-looking statements relating to our business and outlook for future financial results, including our financial guidance for the first quarter of 2026. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings, including our annual report on Form 10-K and quarterly reports on Form 10-Q for a fuller explanation of those risks and uncertainties and the limits applicable to forward-looking statements. All the forward-looking statements we make on this call reflect our assumptions and beliefs as of today, and we disclaim any obligation to update such statements, except as required by law. Today's discussion will include non-GAAP financial measures, which are not a substitute for GAAP results. Reconciliations of these non-GAAP financial measures to the corresponding GAAP measures can be found in our press release and investor supplement issued today, which are available on the Investor Relations section of our website. I'll now turn the call over to Steve.

Thanks, Alex. Hi, everyone. Thank you for joining us. 2025 was a pivotal year for MediaAlpha. We delivered exceptional results in our P&C insurance vertical as auto insurance carriers and agents accelerated advertising spend, and we captured more than our fair share of that growth. At the same time, we narrowed the scope of our Under-65 health insurance business, improving our risk profile and sharpening our strategic focus. We generated significant free cash flow, reflecting the strength of our operating model and our disciplined approach to expense management. We returned a significant portion of that capital to shareholders, completing $47.3 million worth of share repurchases or roughly 7% of shares outstanding. Our fourth quarter results were strong with adjusted EBITDA above the high end of our guidance range. While transaction value came in modestly below guidance due to more normalized seasonality in our P&C vertical, open marketplace demand partners leaned in, driving solid revenue growth and a higher-than-expected take rate during the quarter. Our P&C business is off to a strong start in 2026, and we expect continued positive momentum for the full year and beyond. Carriers remain solidly profitable and are increasingly focusing on growing their customer base. As is typical in the early stages of a soft market, competition is beginning to intensify with many carriers lowering rates to gain share. Beyond pricing, advertising is the other primary growth lever available to carriers, and we expect advertising budgets to continue to increase. Given our unmatched scale and targeting capabilities across hundreds of supply partners, we expect carriers to allocate a growing share of wallet to our platform. We're particularly focused on the significant opportunity to scale underpenetrated carriers in our marketplace, helping them optimize their campaigns and drive profitable policy growth. As these partnerships ramp, we expect our transaction value mix to shift gradually to our open marketplace where we offer highly differentiated, predictive AI-driven optimizations for our partners. Looking ahead, I want to address the rapid pace of AI innovation and the tailwinds it's creating for our business. AI-driven search is emerging as an important new starting point for insurance shopping. Against the backdrop of accelerating LLM-driven traffic growth, we increased P&C click volume by more than 20% year-over-year in the fourth quarter, and we expect even stronger growth in Q1. This performance reflects our role as a core infrastructure layer, connecting carriers with high-intent shoppers regardless of where they start their journey. At the same time, we're embedding AI across our platform to price media with far greater precision, leveraging our massive proprietary data set as the largest marketplace in the category. This allows us to price traffic more granularly, improving publisher yield while simultaneously delivering strong return on ad spend for carriers and agents. Our industry-leading scale and data advantage make these AI systems increasingly more effective over time, further strengthening our already powerful network effects. As we think about the potential for AI to reshape the insurance shopping and purchase experience, it's important to distinguish between how a consumer initiates a search and how a transaction is ultimately completed. Quoting and binding require real-time integration with proprietary carrier rating systems and carriers are highly protective about how and where their rates are displayed. Major carriers invest billions each year in their brands, underwriting, and distribution, and they have historically resisted any model that commoditizes their product into a side-by-side price comparison or transfers transactional control to a third-party technology platform. As a result, we believe that most major carriers will continue to keep their pricing from being freely accessible through third parties, including through LLMs. While AI is likely to influence where and how shopping begins and create incremental advertising-based acquisition channels, we believe the infrastructure we provide to connect online shoppers to carrier-controlled quoting and binding systems will remain essential and highly defensible. Taken together, we believe the current industry backdrop, including the evolution of AI, is strengthening our role in the ecosystem. As demand expands and distribution channels evolve, scale, data, and performance will matter more, not less, and we believe we're well-positioned to capture that opportunity and to continue delivering sustainable, profitable growth in the years to come.

Thanks, Steve. I'll begin with some highlights from the full year, then discuss the key factors behind our Q4 results, and finally, I'll share our outlook. 2025 was a record year for us. We achieved several important milestones, including $2 billion in transaction value, $1 billion in revenue, and $100 million in adjusted EBITDA, all for the first time. Our transaction value increased by 45%, driven by a 65% growth in our P&C vertical, which more than compensated for the anticipated decline in Under-65 Health. Excluding contributions from Under-65 Health, our core business experienced an adjusted EBITDA growth of about 55%. In the fourth quarter, transaction value reached $613 million, a 23% increase year-over-year. Our P&C vertical grew by 38% year-over-year, while our health vertical saw a 40% decline. Total revenue was $291 million, a 3% decline year-over-year as reported, but a 9% increase when excluding Under-65 Health. The health decline was mostly offset by growth in P&C. Under-65 Health contributed around $7 million in revenue in 2025, down from $41 million in 2024. Adjusted EBITDA stood at $30.8 million, a 16% decline year-over-year. Excluding Under-65 Health, our core business delivered an adjusted EBITDA growth of about 10%, reflecting strong momentum in our P&C vertical. We converted 66% of our contribution to adjusted EBITDA, which demonstrates our efficient operating model. Our Q4 take rate was 7.6%, slightly above our expectations, driven by a favorable open marketplace mix. We anticipate take rates in Q1 to exceed those in Q4. Regarding our balance sheet and cash flow, we generated $99 million in free cash flow in 2025, calculated as operating cash flow minus CapEx, excluding a $34 million FTC payment, which totals $65 million on a net basis. We ended the year with $47 million in cash, providing us with financial flexibility to support our strategic priorities. On the balance sheet, we met the U.S. GAAP requirements to release the valuation allowance on our deferred tax assets and recognize the related tax receivable agreement liability, which resulted in an enhancement to our balance sheet. As a reminder, our long-standing Up-C structure generates tax benefits, from which we retain 15% of the savings through basis step-ups over the next 15 years. In terms of capital allocation, we remain dedicated to returning capital to shareholders through share repurchases. In Q4, we bought back approximately 1.1 million shares for $14 million, with total repurchases for the year amounting to $47 million, approximately 7% of the company. Based on our strong and growing free cash flow outlook, our Board has authorized a $50 million increase in our share repurchase program, bringing it to $100 million. We expect to complete most of this program in 2026. Now moving to our Q1 guidance, we project transaction value to be between $570 million and $595 million, which reflects a year-over-year increase of about 23% at the midpoint, with P&C expected to grow by approximately 35% year-over-year due to strong demand from carriers and ongoing share gains. We anticipate a decline of around 50% year-over-year in transaction value from our health insurance vertical, primarily due to Under-65 Health. We expect revenue to be between $285 million and $305 million, which signifies a year-over-year increase of about 12% at the midpoint. Adjusted EBITDA is forecasted to be between $29.5 million and $31.5 million, a 4% increase at the midpoint. Excluding Under-65 Health contributions, adjusted EBITDA is anticipated to grow by approximately 25% year-over-year at the midpoint of the guidance range. Lastly, we expect adjusted EBITDA contributions to be approximately $500,000 to $1 million higher than in Q4 of 2025. While we are not providing formal annual guidance for 2026 today, I will share our perspective for the year. We project that P&C transaction value will continue to drive growth with strong year-over-year gains, as carriers are increasingly eager to expand in this favorable soft market. In Health, our transformation into a smaller, more focused operation is ongoing. We expect this vertical to account for a mid-single-digit percentage of total transaction value this year, but we continue to believe that Medicare Advantage represents a significant long-term growth opportunity. Finally, we expect to generate between $90 million to $100 million in free cash flow, which includes the final $11.5 million FTC payment we made in January. This provides us with significant resources as we plan to execute most of our $100 million buyback program in 2026.

And we will take our first question from Tommy McJoynt of KBW.

Yes. My first question, I appreciate some of your comments around some of the changes that are happening through the developments in AI. I want to expand on that. Does anything functionally or financially change with your role and your value proposition to carriers when a consumer starts their search with an LLM rather than through Google?

The short answer is no. The impact we expect from AI is mainly focused on enhancing the research and shopping experience. It's essential to understand that regardless of how consumers begin their shopping journey, as they approach the quoting and purchasing stages, carriers prefer to keep control over the visibility of their quotes and where policies are ultimately purchased. Traditionally, over two-thirds of the market comprises direct-to-consumer carriers and captive agent carriers, which have generally been hesitant to allow their rates to be displayed on third-party sites, especially in side-by-side comparisons. Moreover, they are reluctant to permit binding of policies outside of their agents or websites. We serve as the infrastructure that connects insurance shoppers with publishers, facilitating the quoting and binding process that carriers manage. Regardless of whether a consumer starts their search on Google, an insurance comparison site, or an LLM, that necessary connection and handoff must occur. Ultimately, we believe the ecosystem involving LLMs, while an important entry point for insurance searches, will resemble the existing system more than it will differ.

And to clarify, so did the LLMs become their own supply partners, or did the supply partners that you currently partner with, perhaps they will integrate within the LLMs directly?

I think it's a good question. I see either possibilities happening. I think, we think it's more likely that it's more of the latter, that the LLMs become a traffic source for most of our existing supply partners. I mean, certainly, some of our supply partners may not make the adjustment and are not able to acquire traffic in an efficient way from the LLMs. But once the LLMs layer on an advertising model, we think that could be a tremendous tailwind for our supply partners as that introduces an incremental advertising traffic acquisition source for them. Right now, I think they're making some good headway in acquiring traffic from the LLMs. I think anecdotally, our supply partners are telling us that somewhere in the mid- to high single digits of their traffic is coming from the LLMs, and this is in the early stages. I think as you've seen a couple of our supply partners have introduced apps for the LLMs. We're certainly benefiting from that because the traffic is hitting their site ultimately that we're monetizing on their behalf. And so as our publishers and the supply partners get smarter about doing that and building more apps, finding ways to be discovered by the LLMs and then ultimately taking advantage of the advertising ecosystem that the LLMs are going to create, we think that ecosystem is going to look a lot more like the current Google ecosystem than one where the LLMs are connecting directly with us as a supply partner. I mean, certainly, we've had discussions with them. And if they are open to doing that, we would welcome that. But again, our guess is that the LLMs will evolve into something more like Google than one of our supply partners.

Got it. That all makes sense. And then just my second topic of questions here. You made some encouraging remarks about continuing to scale with the underpenetrated carriers in the marketplace. Is there anything different about your go-to-market strategy or sales pitch that's getting more of these underpenetrated carriers to sign up? What's resonating with them that works around the cycle?

That's a great question, and I appreciate it. There is a different message, and that's where we're investing heavily in our platform solutions capabilities. This means we're moving beyond just creating a marketplace layer for the media that's transacted and are working directly with carriers who have historically been underpenetrated in our channel. We're creating a platform that allows us to take ownership of parts of the pre-quote conversion process, enabling us to optimize that conversion funnel for them. We have capabilities and access to data that allow us to do this very effectively, often better than many less experienced carriers. Our goal is not just to offer media from our marketplace but also to provide a hosted optimized conversion experience that enhances the early steps of that process. This approach has been well-received and has helped optimize their campaigns in our marketplace, making these carriers more competitive than they would have been without our solutions.

Our next question comes from the line of Mike Zaremski from BMO Capital Markets.

My first question is about property and casualty, specifically regarding seasonality. I understand it's already late February. Your guidance appears strong, but are we not experiencing as much seasonality as you anticipated six months ago or three months ago? Or is this in line with your normal expectations?

Yes. And Mike, this is Pat. I would say that I think the last few years, we've seen pretty robust volume in Q4. I would say Q4 of this year maybe was a little bit less robust than we maybe thought it would be, but it was robust. And kind of what we've seen in Q1 is probably a little bit muted versus what we maybe have seen in some past years. Having said that, what we've seen is some of the smaller carriers that have underpunched their weight historically in our marketplace, being the ones that have really been leaning in so far in Q1 and some of the bigger ones have maybe taken their foot off the gas just a tiny bit on it. And we're in a spot where it's been probably a number of years since we've had a really normal year from a seasonality standpoint. And we feel like Q1 is off to a good start. We're feeling pretty good about where the rest of February and March are going to end up, and we're feeling optimistic about the year. So we're obviously feeling pretty good, although it's still early overall in the year.

Got it. That's helpful. And moving back to, I know it's not easy to forecast the future in regards to AI and your comments have been very thoughtful so far. If we were to kind of bucket up into a profile of insurance carrier that was much more sophisticated data-wise than peers and also offered on average, a much lower cost or a lower cost policy on average, would that profile make that insurance carrier more likely to test the waters to offer their pricing to third parties and LLMs? Or I don't know if there's any kind of way to maybe differentiate your broad strokes to kind of a certain subset of insurance carriers?

Yes, I believe you can view the landscape of auto insurance providers as divided into a few categories. There are captive agent carriers, like State Farm, which utilize exclusive agents to sell only their policies. Then there are direct-to-consumer companies, exemplified by major brands like GEICO and Progressive. Additionally, there are many smaller carriers that operate through independent agents. Historically, those carriers that have permitted their rates to be aggregated for comparison, similar to what Kayak does for air travel, are mainly the smaller, midsized independent agent carriers that are accustomed to a multi-carrier sales environment. We anticipate that if large language models begin to aggregate rates, they will primarily draw from these independent agent carriers. This is important to note as captive agents and direct-to-consumer entities account for over two-thirds of the total market. As a result, while some rates may be available, the typical consumer’s search will likely reflect only a limited subset of available carriers. To illustrate, it would be akin to searching on Kayak for flights and only seeing a few carriers, missing out on major airlines like American Airlines, United Airlines, and Delta Airlines. So, while some of our publishers may offer a decent consumer experience, it won't provide a comprehensive search. Therefore, we expect that the integration of rates into a large language model will continue as it is now, primarily featuring those independent agency carriers.

That's helpful. And just lastly for Pat, could you clarify something about free cash flow? When you mention the $90 million to $100 million, does that account for the final payment? Also, are there any cash taxes or cash receivable payments included in the $90 million or whatever the number is that you're projecting?

Yes. And Mike, the guidance is for $90 million to $100 million of free cash flow this year, and that includes the $11.5 million payment that was made to the FTC. So kind of absent that, we would be at $101 million to $111 million. And from a cash tax standpoint, there is a TRA payment that's going out in Q1. It's kind of a mid-single-digit millions payment going out, and that's kind of the star of the show from a cash tax standpoint for calendar 2026.

Our next question comes from the line of Andrew Kligerman from TD Cowen.

I'm a bit unclear about your answer to Mike's question regarding two-thirds of the market being held by captive and direct insurers and how the focus on LLMs might only apply to smaller, midsized independent carriers. When I consider larger companies that operate independently, Progressive has a significant independent channel, Allstate is expanding its independent channel, and GEICO may also be beginning to explore that area. So, my question is whether it’s possible that well-known companies like those I've mentioned are already participating in the early stages with LLMs, and why wouldn’t that be the case in a few years?

Sure, that's a great question. We speak with our carrier partners, and generally, most of them, which include typical large brand captive agent carriers as well as those primarily focused on direct-to-consumer models, are not in a rush to make their rates available through LLMs. It's important to understand that these carriers invest billions annually in brand advertising and similar amounts in developing their underwriting and distribution capabilities. The only reason they would want to share their rates through LLMs would be to offer a more accessible comparison model, which they have historically opposed for the last 20 years. The technology to integrate rates into third-party platforms has existed for over two decades; the real issue lies with the unwillingness of the mentioned carriers to allow this model to develop in the U.S. There are valid business reasons for this resistance, as achieving a bindable rate across multiple carriers within a single user experience is incredibly challenging. These carriers justifiably fear being reduced to the lowest price and want to ensure that consumers see accurate pricing that does not change significantly after the necessary inputs for a bindable quote. While some of these carriers are developing independent agency capabilities, the major direct writers and large captive agent carriers are likely to withhold rates from their primary brands. It’s possible that their subsidiary brands might be included, but they will certainly avoid aggregating rates from their major brands onto the LLMs.

Pat mentioned earlier that he views Medicare Advantage as a significant long-term growth opportunity. It has been a challenging few years for distribution, around three or four years to be exact. Can you explain why it seems like you are now seeing an inflection point? Additionally, how do you envision the growth trajectory of the Medicare Advantage business on your platform?

Yes. And this is Pat. I'm happy to take that one. So I think we're probably now in the fourth year of a challenging market for Medicare. I think '23 was probably when it started. And I think this year is going to be another challenging year in Medicare. And looking at the crystal ball, I think early signs point to next year being challenging as well given some of the reimbursement news that's out there. And I would say for our health vertical, we've given the guidance for this year that we expect it to be a mid-single-digit percentage of total transaction value, so a very small portion of the mix. Having said that, when we look at Medicare Advantage, this is a large product that there are tens of millions of consumers that have opted into Medicare Advantage. It is a product set where the number of eligible people is growing and the number of people opting in are growing. In terms of total spend on Medicare Advantage premiums, it's a bigger market than personal auto. And it's a market that has the wind at its back in terms of seniors aging into Medicare, you are much more likely to look to the Internet either as part of their shopping journey or their first port of call when it comes to shopping. And so while the market backdrop for Medicare has been and likely will continue to be challenging for the next year or 2, we look at all of these market dynamics and all of these winds are blowing in the right direction and in a direction that suits us very well. And so as a result, we're long-term bullish, but not banking on significant financial contribution from that business in the short term.

Got it. And maybe I could sneak one more in. Do you see the proprietary component kind of continuing to pick up? Or do you see that because I guess private this quarter was about 53.7%, up from 41% last year and the full year was a similar pickup. So it's been happening. Where do you see the private percentage of transaction value leveling out? Are we there yet? Or does it get bigger?

Yes. And we're in a spot where I think the trend is the guidance for Q1 envisions the business move shifting a bit private or a bit open, apologies, towards the open marketplace and away from private. And I think we talked pretty consistently in our earnings calls and our materials last year that we have this view that as kind of more carriers caught up in terms of rate adequacy that we would see some of the smaller and midsized carriers and some of the folks that historically underpunch their weight in our marketplace start to lean in. And we saw that kind of happen as we went through Q4 of this year, and we've seen kind of a furtherance of that trend thus far in Q1, and we've envisaged that in our guidance for Q1. And so we're feeling like we're in a pretty good spot as far as that goes. We, as a company, go quarter-to-quarter with guidance, so we don't give long-term numbers on that, but we feel pretty good kind of about where we're at, at this point in time.

I see. So that would be the driver of why guidance in revenue is like $285 million to $305 million against a consensus number that's lower than the lower end of the range. That's kind of the bigger piece of why you have such really solid guidance going forward, correct?

That would be correct. Yes, that the business is effectively more open than folks may have been expecting.

Thank you. There are no further questions. That concludes our question-and-answer session. That also concludes our call for today. Thank you all for joining. You may now disconnect.