Conference Transcript - MAX 2026-08-11

Maria Ripps, Analyst — Canaccord Genuity

All right, thank you all for joining this morning. Good morning, everyone. I'm Maria Rips, Internet Analyst here at Canaccord Genuity. And it's my pleasure to introduce Pat Thompson, CFO's Media Alpha CFO, and Tigran Sinanian, VP of Finance. Gentlemen, thank you so much for joining us today. And with that, let's get started.

Pat Thompson, CFO

Great, thanks for having us, Maria.

Maria Ripps, Analyst — Canaccord Genuity

So maybe we can start with a broader sort of industry backdrop. Investors are weighing a few important themes right now, including a soft market cycle, AI risks and benefits, and ongoing macro uncertainty. How would you describe the environment today, and how is MediaAlpha navigating sort of these dynamics?

Pat Thompson, CFO

Yeah, I think the industry backdrop that we have right now, it's very good, it's a very good position. And broadly speaking, I'll probably oversimplify things here, but every auto insurance carrier is profitable right now. I'm sure if you canvassed, you could find one of the top 100 that isn't, but pretty much everybody is making money. And carriers are increasingly pivoting from being in a situation where they're focused on getting underwriting results where they need them to be. So they've kind of pivoted from that to looking for growth. And as you look over the last four or five, six years, the lion's share of industry growth has gone to one or two players in the industry. And so a lot of the other players are now, I think, answering questions from investors or from the boardroom of how are you going to grow? You need to grow. And that plays very much to our strengths of being a performance marketing channel that's very measurable and allows carriers to focus on the customer segments, cohorts, and characteristics where they are most likely to win. And so we really like where we're positioned right now. We think that we've got the wind at our back, and we should continue to do that for the years to come.

Maria Ripps, Analyst — Canaccord Genuity

So maybe just expanding a little bit on what you just talked about as it relates to auto and the softer market cycle, how long do the cycles typically last and where are current sort of carrier acquisition spend today versus sort of compared to prior soft market sort of peaks?

Pat Thompson, CFO

So Maria, I'll take on, you know, I think you're right to point out, you know, where we are in the center, which is firmly kind of in a stock market, right? That's where we're being interested in for new customer acquisition. And I'd say that historically, these are multi-year centers, right? We have, you know, we're a couple of years into a recovery from a generation of market in 2022 and 2023. But as you look back, you know, the leading indicator here was combined ratios and carrier profitability, and we sit in a really good spot as an action, right, with, you know, everyone seeing combined ratios at or near peak, you know, levels of profitability. And so even when the market starts to harden, what we've seen in the past, and I'll point to 2006, yeah.

Speaker 3

2016, you know, you see ad spend growth maybe moderate a little bit, decline in the low to mid single digits, and from there you have, you know, years of equilibrium where ad spend continues to kind of grow at a modest rate. And so where we are today is a place where we see a broadening of demand and a lot of carriers really turning to growth and trying to, you know, drive policy in force. And it's coming from everyone outside of the top two, right? And so that, I think, signals to us that we're in a good spot in the cycle. We expect that to be a good multi-year run, right, rather than a softening that's led by just one or two carriers.

Maria Ripps, Analyst — Canaccord Genuity

Maybe expand a little bit on what you just said, which is broadening sort of recovery. Is it largely coming from sort of larger carriers, smaller carriers? Do carriers are carriers that are already on the platform spending more?

Speaker 3

What are you seeing? we're seeing the larger carriers continue to focus on growth and highly efficient growth what we're seeing is an acceleration from the field right everyone other than the top two really stepping on the gas and starting to catch up right and so it's mostly the I won't call them new entrance because we've worked with these carriers for years they just hadn't stepped up you know the level of investment in our channel the way they have here in 2026. I think one stat that we put out there was you know everyone outside of the top two you know what we've seen from carriers three four and five is a forex growth year over year for staff 26 over 25 in terms of ad spend growth and the top two continue to grow at you know double digit rates but it's really that field catching up. And that's a really good sign for us.

Maria Ripps, Analyst — Canaccord Genuity

Got it. So on your Q2 call last week, you framed sort of the gating factor for some of these carriers to spend more as a capability with many still sort of new to direct to consumer and performance based channels. Maybe talk about some of your initiatives to help sort of to move some of these carriers along the adoption curve.

Pat Thompson, CFO

You know, I think the. Agent-based carriers are a big opportunity for us, and as you look at the league table of auto insurers, State Farm is captive agent-based, the number two carrier. Allstate, who's number four, has captive agents being a meaningful portion of their distribution, and then as you go down the league table there's american family uh farmers others uh that also uh focus on that and you know as we look at the opportunity with those we're thinking uh really about meeting them where they're at and in the near term you know that could be things like partnering with major carriers to create a lead marketplace so we did it with one of the the major carriers and what that is is us kind of partnering with them to make leads available to their agents including exclusive leads and so that's an opportunity for us to bring kind of technology and partnership which are two of our kind of core capabilities to bear to ultimately help those agents acquire online shoppers the other longer term opportunity for us is helping these agent-based carriers really go direct to consumers. And so State Farm would be a good example of this, which is State Farm, up until very, very recently, you could not buy a policy on statefarm.com. Clearly, they are investing there. Clearly, that is going to become a more important part of their distribution base, just given demographics and consumer preference. And as they look to move increasingly online with customer acquisition, that plays to just our natural business strength. And so we're prepared to help them as they make that transition. And we're really excited about the agent-based opportunity because it's been a nice growth lever for us and one that we expect to continue going forward.

Maria Ripps, Analyst — Canaccord Genuity

Got it. So I guess as carrier sort of participation broadens, you're also seeing sort of more favorable mix shift towards the higher margin open marketplace for investors that are less familiar with MediaAlpha's model. Can you maybe refresh us on the key dynamics impacting the mix of open versus private marketplace transactions and what that means for you at P&L?

Speaker 3

Sure, I'll take this one. We've got two primary deployment models. One is the open marketplace and one is the private. And so So I'll start with just a little bit of a definition on each. With the open marketplace, that's carriers bidding on consumer inventory through our platform across hundreds of publishers and supply sources that we work with. And they're leveraging our team, our analytics capabilities, our managed service capabilities to really deploy that cement efficiently at a high ROI. So they're using our bidding models, right? They're relying on us to really step into their shoes and help them drive efficient spend. And there, the ad spend is recognized as our gap revenue. Our revenue share to our supply partners is the cost of goods. Our contribution dollars, you know, is basically our gross profit or variable marketing margin, as others call it. And so, you know, we do a lot more, right? We take a consultative, hands-on approach, and we take more margin there. In the private marketplace, you know, we design that as a deployment where at-scale partners on the supply side and very sophisticated buyers on the demand side can work together but still leverage our technology to do the ad serving, tracking, reporting, optimization, and all of that. But really, the supply partner steps into our shoes and does all of that account management work with the demand partner. And so our take rate there is lower. And the ad spend, we recognize as transaction value. Our gap revenue is the fee that we charge for use of our platform. And so really, that revenue from private marketplace drops down to the contribution line, really one-to-one. And as we're seeing this broadening of demand, you can imagine it's coming from carriers that don't have that level of sophistication. They are ramping entrants, and so they're leveraging our teams, our capabilities to manage that spend. So a lot of it, or most of it, is coming through the open marketplace. And so you do see a favorable mix shift to open marketplace, which does have higher overall margin.

Maria Ripps, Analyst — Canaccord Genuity

That's great. So maybe given sort of the ongoing macro uncertainty, including tariff and gas-related headwinds, maybe talk about what are you seeing in terms of carrier sentiment today and sort of what are you hearing from carriers as they plan their spending for the second half of the year?

Speaker 3

I think we see continued attention on driving policy growth. I would say from a tariff perspective, miles driven, gas prices, you know, we haven't heard anything from carriers about that impacting, you know, profitability really. And so what's really driving that for them is how much they want to invest in new policy growth and customer acquisition. I'd say, again, the carriers three and on continue to look at this channel, which is highly measurable, as a growth lever for them. And so we see continued investment, continued ramp and velocity in spend from the field.

Pat Thompson, CFO

Yeah, and maybe just to throw an additional stat out on that, which is we've pretty consistently over a number of quarters have had two to 10 percent of revenue customers and uh for uh q2 we just announced having a third and you know we've got a fourth customer that's not far off that threshold and so you know from a customer diversification standpoint you know we feel like we're in the best position we've been in and in a long time and we and you know the stat tegrin threw out earlier of carriers three four and five are growing 300% year over year. So we feel like the wind is definitely blowing in the right direction.

Maria Ripps, Analyst — Canaccord Genuity

Yeah, that's great. So let's talk about sort of outside of order. You were in healthcare vertical. You largely exited that vertical. But maybe just talk about sort of what's out there in terms of verticals and what would be interesting to meet Alpha going forward.

Speaker 3

Yeah, I think Medicare remains an interesting opportunity, a long-term opportunity, right, with, you know, premium dollars that are actually bigger than auto at $400 billion plus. Today, the carriers are, you know, challenged a little bit from a margin perspective, and so we continue to watch that space and, you know, have relationships in place to scale when the opportunity is right. But today, you know, I think you're right. Our guide is about 1% of revenue in non-seasonal peaks, maybe 2% to 3% in Q4 during annual enrollment periods and open enrollment periods. I would say that broadly, you know, our platform is uniquely positioned to help publishers and advertisers where there is high consideration, high ticket products being sold in the end markets and where every consumer search comes with a lot of structured data. And that is where the transparency and granularity that we offer our partners can really come to play and bring efficiency to bear. And so we like our position in PNC. We think there's some interesting opportunities in adjacent verticals like commercial. But those are all in the early stages of exploration from both an organic build perspective and then M&A and just canvassing what's out there.

Maria Ripps, Analyst — Canaccord Genuity

Got it. So I want to switch gears and talk about AI, but more so on the traffic side. with platforms like ChatGPT becoming sort of more relevant in consumer discovery and beginning to expand sort of advertising opportunities. How are you thinking about sort of the potential to impact consumer traffic source for your marketplace?

Pat Thompson, CFO

Yeah, and I think we're in the very early days of AI search today. And we're seeing it grow in a pretty quick clip. and you know we're hearing from some of our publishers that LLM traffic now exceeds what they're getting from organic or SEO and you know one of the things that two positive things about it one is that the quality that you know they're seeing and we're seeing from that traffic is very very good and a number of publishers have told us that the quality of that traffic is even better than they typically see in the organic channel. And secondly, kind of building on what Tigran just talked about, the thing that's really exciting for us over the long term is the structured data component of AI, which is an LLM over time will learn a tremendous amount about you. And thus, they will be able to potentially pass that either to our publishers or directly to us if they become a publisher. And so that piece is very, very exciting. And so you can imagine searching in the future, searching for insurance on an LLM, and they might only need to ask you two or three questions to actually know everything they need to know and ultimately kind of start to really pass you along to whoever can best meet your needs. And so, you know, as we think about our role in that ecosystem, you know, our role is one of, you know, being connectivity infrastructure between publishers and carriers. And so we've got the schema of data that is used for all that. We've got a tremendous shopper database. We've got bids from every carrier on every customer. So we understand roughly how customers are valued. And so over time, we're very excited about, you know, both the quality of traffic that they'll deliver to publishers and ultimately, you know, to have partnerships with the ChatGPTs, the Gemini's, the Claude's, the Grock's, the perplexities of the world. So we are very, very excited about it and we think it's ultimately going to be a tailwind.

Maria Ripps, Analyst — Canaccord Genuity

Are you sort of working with sort of other AI platforms outside of ChatGPT in terms of developing this kind of relationship?

Pat Thompson, CFO

I would say we're in the experimentation stage in terms of advertising for our own account. So our business is primarily, we're overwhelmingly a partnership business where we work with publishers, but we do a little bit of our own media. And so we're experimenting with that. You know, I think it is a longer term opportunity just given where the LLMs are at in terms of monetization, which is, you know, they're in the early days of adopting an ad model. And I think the stat saw is that 20% of ChatGPT users have seen an ad in the last month, up from 1%, you know, as opposed to Google where it's 100% of searches see an ad. And, you know, I think they're in the early days of that transition to an ad model, and then they'll have to, you know, identify insurance as being, you know, an attractive vertical to go deeper in. So we think we're a little bit away from that, but we're very excited for that opportunity.

Maria Ripps, Analyst — Canaccord Genuity

That makes sense. So let's switch gears here and talk about your demand and supply partners. And one of the unique aspects of your two-sided marketplace is the ability for demand partners to also function as supply partners. And Tigran, we talked about this for years and years and years. How does the strategy strengthen your relationship with carriers? and approximately what portion of your partners are currently sort of active on both sides of the marketplace?

Speaker 3

So, Maria, I think the way it strengthens our relationships is once a partner is integrated on both sides, it really changes how they view media alpha holistically, right? The integrations get deeper. They view this monetization channel, right, as an opportunity to be ad funding, right? Right. It's one of the levers that they have for growth. And as they monetize this, I'll call it, non-converting consumer base, who's getting quotes, that allows them to go out and spend more and acquire new customers and just improve their overall marketing mix efficiency. And so it changes things from us being a, you know, acquisition channel to being a much more integrated partner with them. And it's really how we started the business. Right. We started as an owned and operated, you know, website. But the big pivot to being MediaAlpha was bringing on a carrier as a supply partner, and that was assurance. And I think, you know, we're committed to continuing to develop those relationships. In terms of numbers, I'd say the number of partners that sit on both sides has been relatively stable. And really, the dollars will grow and will continue to grow with how much they invest in ad spend going forward. And so I'd say if it's a broker, if it's a carrier, the overwhelming majority of those folks do sit on both sides of our marketplace as both buyers and sellers.

Maria Ripps, Analyst — Canaccord Genuity

Interesting. So let's talk about financials before we wrap up. You guided both Q3 revenue and profitability above the street, expecting sort of continued momentum. What are some of the key considerations sort of embedded in the range, whether it's on the carrier health, macro volatility, or sort of product-driven momentum?

Pat Thompson, CFO

Yeah, and I would say, you know, philosophically, when it comes to guidance, you know, we guide to what we have a high degree of confidence in. And so it's, you know, momentum-based, based on known and likely items. And, you know, I think we have a good track record of achieving or beating the quarterly guidance. And, you know, we kind of base it on what we're seeing and what we're hearing from carriers. And so, you know, with carriers, we tend to have really good visibility into kind of this month. You get decent visibility into the month after, and the further out you go, you know, it gets a little bit harder to know, you know, is it going to be up a little bit or flat or down a little bit? And, you know, I think we're in a spot right now where, you know, we kind of talked about it on the public earnings call that the end of June was really good and, you know, July was good when we were kind of in the run up to earnings. And, you know, that was kind of the big driver for the good guidance for Q3. And, you know, I think we've seen a really nice sequential performance for 10 or 11 quarters now. And, you know, as we talked about in the beginning of the call, we think the market is in a good spot. We think our value proposition to publishers and carriers is the strongest it's ever been in continuing to strengthen. in. And we think that we're set up for a good remainder of 2026 and a really nice 2027 and beyond.

Maria Ripps, Analyst — Canaccord Genuity

Well, related to that, I know you're not guiding to next year, but how should we think about sort of key growth variables next year, given all the momentum that you're seeing?

Pat Thompson, CFO

Yeah. I think the couple of things I would tell folks to think about, one is that broadening of demand that Tigran in particular has talked about and I've talked a little bit about of you know we historically were very top heavy in terms of demand and we're seeing that you know broaden out and the opportunity over time is for our demand to look quite a bit more like the league table for auto insurers and so that's been moving in the right direction and that's a trend that we would expect to continue and you know the other thing I would just encourage folks to look at is the comps, basically, which is, you know, kind of as we've, you know, go through the year, the comps, you know, will get a little bit harder as we continue to put up, you know, sequential growth. But, you know, it is too early for us to put out 2027 guidance, but, you know, we do feel like it should be a good year and another year of record results.

Speaker 3

The only thing I'd add to that is, you know, we've talked about, you know, the top two carriers, And we represent, you know, north of 10% of their marketing mix, right? Ads been deployed on our channel. When you look at everyone outside of those, you know, top two, it's in the mid to low single digits. And so we should become a more meaningful and more representative share of their overall marketing mix over time. And, you know, we're not guiding to it in any quarter or, you know, near term kind of year. But I think, again, that market dynamic really supports the growth that we expect to see.

Maria Ripps, Analyst — Canaccord Genuity

We have a minute or so left. I just want to see if we have any questions from the audience.

Speaker 4

When people aren't spending, when people aren't spending.

Pat Thompson, CFO

Yeah, and I can take that, which is, you know, broadly speaking, you know, I think carriers have three buckets of distribution spent. The biggest bucket in aggregate for carriers is going to be on commissions. And so as you think of agent-based carriers, that's the lion's share of what they do. And for every dollar of commissions, there's about 50 cents of working marketing spend. That working marketing spend that is spent, the majority of that is going to be on brand spend. And I remember when I was interviewing to join Media Alpha five years ago, Steve, our CEO, talked about how big the marketing opportunity was, and I happened to watch a football game right after my conversation with him. And literally every commercial break, you'd see an ad for one of the major auto insurers. And so that's the biggest bucket. But then online advertising is also an increasingly meaningful part of the mix. And so for every dollar of commissions, there's 50 cents of marketing. And of that 50 cents, 40% of it or 20 cents is online marketing. And so we are the biggest online platform for insurance-specific advertising. We've got a couple of public peers, and obviously there's Google and other channels on there. But we've seen our share consistently grow over time, and we really think that is testament to what we've built, the transparency of the marketplace and the results that our carrier partners have seen.

Speaker 4

In your first comment, you were saying that with these share markets solved, I would look through things work together. I would have thought it would be an opposite of pricing solved.

Pat Thompson, CFO

Yeah, so in the insurance space, a soft market is a good thing. Yeah, yeah, yeah, exactly. And so, I think the soft markets are characterized by strong profitability and they focus on growth. And so carriers 2024 and 2025 was, I think, one of the best years on record for auto insurance profitability. 2026 should be probably not quite as good, but still very good. And as carriers pivot to growth, they tend to do two things. You know, one is lean in on marketing spend to try to acquire the customers. And secondly, to selectively focus on rate reductions or minimal rate increases, where it makes sense. And so we're seeing, you know, both of those things happen. And both of those are good for us. marketing spend obviously directly translates to the P&L and rate decreases tend to spur shopping activity which is good for us yeah and and I would say it's modest price declines if anything and you know there's still natural inflation and claims cost and everything so I wouldn't necessarily read it as you know carriers are cutting price willy-nilly it's more you know hey say, married homeowners in greater Boston are attractive, we're going to cut rates 2% there. And so it's much more targeted than surgical.

Maria Ripps, Analyst — Canaccord Genuity

All right, that was a great discussion. I think we're out of time. Gentlemen, thank you so much for joining us today, and thank you all for coming.

Pat Thompson, CFO

Yeah, thank you, Maria, and thank you, everybody.