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What changed in MediaAlpha, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MediaAlpha, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+360 added−361 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-27)

Top changes in MediaAlpha, Inc.'s 2023 10-K

360 paragraphs added · 361 removed · 293 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

68 edited+5 added−14 removed92 unchanged
Biggest changeOur proprietary platform is built to be highly extensible and flexible, enabling us to quickly and efficiently develop custom solutions and tools to address the varying and evolving needs of our partners. Supported by our proprietary algorithms, our platform is able to provide continuous, real-time feedback and insights that buyers can use to maximize the value of every consumer opportunity.
Biggest changeOur strengths We believe that our competitive advantages are based on the following key strengths: • Highly scalable, innovative technology platform with rich data. Our proprietary platform is built to be highly extensible and flexible, enabling us to quickly and efficiently develop custom solutions and tools to address the varying and evolving needs of our partners.
Insurance carriers integrate with our platform to provide real-time conversion feedback, allowing them to measure returns on their spending granularly and execute algorithmic optimization of customer acquisition cost based on the expected LTV of the customer. Increasing the number and depth of our conversion data integrations with our partners remains a key part of our strategy.
Insurance carriers can integrate with our platform to provide real-time conversion feedback, allowing them to measure returns on their spending granularly and execute algorithmic optimization of customer acquisition cost based on the expected LTV of the customer. Increasing the number and depth of our conversion data integrations with our partners remains a key part of our strategy.
Our talent development efforts include quarterly goals, weekly “lunch and learn” events, individualized professional development plans, management training, internal workshops, guest speakers, and book club discussions related to enhancing business skills. We use a combination of company and department goals to drive the execution of our business strategy.
Our talent development efforts include quarterly goals, “lunch and learn” events, individualized professional development plans, management training, internal workshops, guest speakers, and book club discussions related to enhancing business skills. We use a combination of company and department goals to drive the execution of our business strategy.
All of this creates the powerful “flywheel” effect that has propelled our business forward as a result of the value created within our ecosystem. 9 Table of Contents Our platform We have created one of the largest global insurance customer acquisition technology platforms.
All of this creates the powerful “flywheel” effect that has propelled our business forward as a result of the value created within our ecosystem. 9 Table of Contents Our platform We have created one of the largest insurance customer acquisition technology platforms.
We believe there is growing demand for improved transparency of Consumer Referral quality, for carriers to secure higher quality Consumer Referrals online, and for the ability to manage consumer acquisition spend across multiple vendors. MediaAlpha is poised to capitalize on these trends.
We believe there is growing demand for improved transparency of Consumer Referral quality, for the ability to secure higher quality Consumer Referrals online, and for the ability to manage consumer acquisition spend across multiple vendors. MediaAlpha is poised to capitalize on these trends.
We employ a hybrid work schedule, with most employees working in one of our offices one or two days per week, and working remotely on other days, to offer employees the flexibility they need to balance their personal and work lives.
We employ a hybrid work schedule, with most employees working in one of our offices two days per week, and working remotely on other days, to offer employees the flexibility they need to balance their personal and work lives.
Our property & casualty insurance vertical is characterized by seasonal weakness during our fourth quarter due to lower customer acquisition budgets from buyers and lower supply of Consumer Referrals during the holiday period.
Our property & casualty insurance vertical is typically characterized by seasonal weakness during our fourth quarter due to lower customer acquisition budgets from buyers and lower supply of Consumer Referrals during the holiday period.
Our platform was designed for multiple Consumer Referral products and flexible deployment models to best serve the varying needs of our partners. Insurance carriers access our platform through a self-service web interface that enables them to manage customer acquisition strategies across all sources of Consumer Referrals, efficiently and with full transparency.
Our platform was designed to support multiple Consumer Referral products and flexible deployment models to best serve the varying needs of our partners. Insurance carriers access our platform through a self-service web interface that enables them to manage customer acquisition strategies across all sources of Consumer Referrals, efficiently and with full transparency.
Our market opportunity Insurance is one of the largest industries in the United States, with attractive growth characteristics and market fundamentals. Insurance companies wrote over $2 trillion in premiums in 2021, growing at a 9% CAGR from 2018, according to S&P Global Market Intelligence.
Our market opportunity Insurance is one of the largest industries in the United States, with attractive growth characteristics and market fundamentals. Insurance companies wrote over $2 trillion in premiums in 2022, growing at a 9% CAGR from 2018, according to S&P Global Market Intelligence.
In our platform, end consumers can engage with insurance companies through multiple touchpoints based on their preferences.
On our platform, end consumers can engage with insurance companies through multiple touchpoints based on their preferences.
Federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), Section 5(c) of the Federal Trade Commission Act, the EU’s General Data Protection Regulation (“GDPR”), supplemented by national laws (such as, in the United Kingdom, the Data Protection Act 2018) and further implemented through binding guidance from the European Data Protection Board, and the EU’s ePrivacy Directive, which is expected to be replaced by the EU’s ePrivacy Regulation, which is still under development and will replace current national laws that implement the ePrivacy Directive.
Federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), Section 5(c) of the Federal Trade Commission Act, the Federal Trade Commission’s Telemarketing Sales Rule, the EU’s General Data Protection Regulation (“GDPR”), supplemented by national laws (such as, in the United Kingdom, the Data Protection Act 2018) and further implemented through binding guidance from the European Data Protection Board, and the EU’s ePrivacy Directive, which is expected to be replaced by the EU’s ePrivacy Regulation, which is still under development and will replace current national laws that implement the ePrivacy Directive.
Our platform enables consumers to (i) proceed to an insurance carrier’s website on a self-directed basis to purchase a policy (click), (ii) engage with an insurance carrier or agent via phone (call), or (iii) submit their data to insurance companies to receive inbound inquiries (lead).
Our platform enables consumers to (i) proceed to an insurance carrier’s website on a self-directed basis to purchase a policy (click), (ii) engage with an insurance carrier or agent via phone (call), or (iii) have their data submitted to insurance companies to receive inbound inquiries (lead).
We intend to gain adoption of our platform with new insurance partners through business development, word-of-mouth referrals, and inbound inquiries. 15 Table of Contents • Grow our product offerings. We are constantly exploring new ways to deliver value to our partners through development of new tools and services and improvement of our conversion analytics model.
We intend to gain adoption of our platform with new insurance partners through business development, word-of-mouth referrals, and inbound inquiries. • Grow our product offerings. We are constantly exploring new ways to deliver value to our partners through development of new tools and services and improvement of our conversion analytics model.
In addition, recent and proposed changes in the regulations governing the marketing of Medicare insurance have materially changed the rules regarding how such policies are marketed, and may materially restrict our ability to sell Consumer 17 Table of Contents Referrals to certain buyers in the future.
In addition, recent and proposed changes in the regulations governing the marketing of Medicare insurance have materially changed the rules regarding how such policies are marketed, and may materially restrict our ability to sell Consumer Referrals to certain buyers in the future.
Our strong cash flow generation is driven by (i) the nature of our revenue model, which is fee based and generated at the time a Consumer Referral is sold, and (ii) our proprietary technology platform, which is highly scalable and requires minimal capital expenditures ($0.1 million and $0.7 million for the years ended December 31, 2022 and 2021, respectively).
Our strong cash flow generation is driven by (i) the nature of our revenue model, which is fee based and generated at the time a Consumer Referral is sold, and (ii) our proprietary technology platform, which is highly scalable and requires minimal capital expenditures ($0.1 million for the years ended December 31, 2023 and 2022).
We have designed our platform to put the best interests of our partners first, fostering a healthy ecosystem within which buyers can transact with confidence. 13 Table of Contents Our Sellers: Our supply partners use our platform to monetize their digital consumer traffic.
We have designed our platform to put the best interests of our partners first, fostering a healthy ecosystem within which buyers can transact with confidence. Our sellers: Our supply partners use our platform to monetize their digital consumer traffic.
Our relationships with our partners are deep, long standing, and involve top-tier insurance carriers in the industry. 15 of the top 20 largest auto insurance carriers by customer acquisition spend are demand partners on our platform. In 2022, 92% of total Transaction Value executed on our platform came from demand partner relationships in existence during 2021.
Our relationships with our partners are deep, long standing, and involve top-tier insurance carriers in the industry. 15 of the top 20 largest auto insurance carriers by customer acquisition spend are demand partners on our platform. In 2023, 93% of total Transaction Value executed on our platform came from demand partner relationships in existence during 2022.
We believe we are the largest online customer acquisition platform in our core verticals of property & casualty (“P&C”) insurance, health insurance, and life insurance, supporting $696 million in Transaction Value (1) across our platform from these verticals during the year ended December 31, 2022. We believe in the disruptive power of transparency.
We believe we are the largest online customer acquisition platform in our core verticals of property & casualty (“P&C”) insurance, health insurance, and life insurance, supporting $571 million in Transaction Value (1) across our platform from these verticals during the year ended December 31, 2023. We believe in the disruptive power of transparency.
This dedicated team will continue to enhance our agency capabilities. • Expand into and scale new verticals. While we are currently focused on growing our core insurance verticals, we continue to seek expansion opportunities in markets that share similar characteristics.
This dedicated team will continue to enhance our agency capabilities. 15 Table of Contents • Expand into and scale new verticals. While we are currently focused on growing our core insurance verticals, we continue to seek expansion opportunities in markets that share similar characteristics.
We offer employees the opportunity to give back to charities of their choice and the Company matches team member contributions to qualified 501(c)(3) organizations, up to $2,500 per team member per calendar year and also by offering employees paid volunteer time each year. We will also be offering company-sponsored volunteer events to our employees starting in 2023.
We offer employees the opportunity to give back to charities of their choice and the Company matches team member contributions to qualified 501(c)(3) organizations, up to $2,500 per team member per calendar year and also by offering employees paid volunteer time each year. We also offer company-sponsored volunteer events to our employees.
We believe we are poised to capitalize on the continued shift among P&C carriers to direct, digital distribution when their underwriting profitability recovers. In our health and life insurance verticals, we continue to capitalize on the shift to direct, digital distribution.
We believe we are poised to capitalize on the continued shift among P&C carriers to direct, digital distribution when their underwriting profitability recovers. 7 Table of Contents In our health and life insurance verticals, we continue to capitalize on the shift to direct, digital distribution.
We believe the acquisition is a good strategic fit with our long-term 7 Table of Contents objectives and will increase our ability to generate Consumer Referrals on various social media and short form video platforms. We expect the broad secular trends driving our growth to resume once carrier profitability recovers and they resume their customer acquisition investments on our platform.
We believe the acquisition is a good strategic fit with our long-term objectives and will increase our ability to generate Consumer Referrals on various social media and short form video platforms. We expect the broad secular trends driving our historical growth to resume once P&C carrier profitability recovers and they resume their customer acquisition investments on our platform.
Employee Health and Welfare Our employee benefits package is tailored to meet a variety of our employees’ needs, including a generous parental leave, open paid time-off, and a charitable giving program for employees to support causes and organizations that have special meaning to them.
Employee Health and Welfare Our employee benefits package is tailored to meet a variety of our employees’ needs, including generous health insurance benefits, 401(k) matching contributions, generous parental and other leave benefits, open paid time-off, and a charitable giving program for employees to support causes and organizations that have special meaning to them.
Traditional, agent-based carriers have responded by investing more heavily in direct customer acquisition efforts themselves, as well as launching digital brands (such as Nationwide and Spire), acquiring 8 Table of Contents digital agencies (such as Prudential and AssuranceIQ), or acquiring digital insurers (such as Allstate and Squaretrade).
Traditional, agent-based carriers have responded by investing more heavily in direct customer 8 Table of Contents acquisition efforts themselves, as well as launching digital brands (such as Nationwide launching Spire), acquiring digital agencies (such as Prudential acquiring AssuranceIQ), or acquiring digital insurers (such as Allstate acquiring SquareTrade). • More insurance consumers are shopping online.
We have a dedicated team working to incorporate agents into our digital platform and help them expand their customer acquisition capabilities. We generated over 90 million Consumer Referrals in the year ended December 31, 2022, equipping us with valuable conversion insights to help us optimize consumer routing to agents based on their desired goals.
We have a dedicated team working to incorporate agents into our digital platform and help them expand their customer acquisition capabilities. We transacted nearly 99 million Consumer Referrals on our platform in the year ended December 31, 2023, equipping us with valuable conversion insights to help us optimize consumer routing to agents based on their desired goals.
Our platform and industry-agnostic technology enables us to quickly expand our operations into existing and adjacent verticals with minimal investments. We have organically scaled the P&C insurance vertical and the health and life insurance verticals to $399.9 million and $296.0 million in Transaction Value, respectively, for the year ended December 31, 2022.
Our platform and industry-agnostic technology enables us to quickly expand our operations into existing and adjacent verticals with minimal investments. We have organically scaled the P&C insurance vertical and the health and life insurance verticals to $277.6 million and $293.9 million in Transaction Value, respectively, for the year ended December 31, 2023.
As of December 31, 2022, we had 90 buyers with this type of integration in place for active and future campaigns, representing 64% of the total Transaction Value from our insurance verticals for the year then ended.
As of December 31, 2023, we had 85 buyers with this type of integration in place for active and future campaigns, representing 59% of the total Transaction Value from our insurance verticals for the year then ended.
With over 90 million paid transactions on our platform in 2022, we believe we offer the largest source of Consumer Referrals in the insurance sector. Our product is a robust, real-time customer acquisition and data analytics platform. It is fueled by rich, anonymized consumer data provided by our extensive data integrations with our partners.
With nearly 99 million Consumer Referrals transacted on our platform in 2023, we believe we offer the largest source of Consumer Referrals in the insurance sector. Our product is a robust, real-time customer acquisition and data analytics platform. It is fueled by rich, anonymized consumer data provided by our extensive data integrations with our partners.
Beginning in the second half of 2021 and continuing into 2022, many of our demand partners in our P&C vertical experienced higher-than-expected underwriting losses driven by inflation in automobile replacement and repair costs as well as by elevated claims costs from Hurricane Ian, leading them to reduce their customer acquisition spend until they obtain approval of premium increases from state regulators.
Beginning in the second half of 2021, many of our demand partners in our P&C vertical experienced higher-than-expected underwriting losses driven by inflation in automobile replacement and repair costs, leading them to reduce their customer acquisition spend until they obtained approval of premium increases from state regulators.
As the number of digital consumer acquisition sources grows, the complexity and cost of managing those sources continues to increase. As a result, we are seeing significant increases in the frequency and customer acquisition spend of participants on our platform, further enhancing our scale and return on investment to all our partners.
As the number of digital consumer acquisition sources grows, the complexity and cost of managing those sources continues to increase. As a result, over time we have seen significant increases in the number of participants on our platform, further enhancing our scale and return on investment to all our partners.
Our health insurance vertical experiences seasonal strength during the fourth quarter due to a material increase in Consumer Referrals and a related increase in customer acquisition budgets in connection with the Medicare annual enrollment period, which typically runs from October 15 to December 7 each year, and the under-65 health insurance open enrollment period, which typically runs from November 1 through December 15 in many states, with the last ending on January 31st of the following year.
During our first quarter, our P&C insurance vertical typically exhibits seasonal strength as customer acquisition budgets from our buyers and Consumer Referral volume from our sellers both increase sequentially. 16 Table of Contents Our health insurance vertical typically experiences seasonal strength during the fourth quarter due to a material increase in Consumer Referrals and a related increase in customer acquisition budgets in connection with the Medicare annual enrollment period, which generally runs from October 15 to December 7 each year, and the under-65 health insurance open enrollment period, which generally runs from November 1 through December 15 in many states, with the last ending on January 31st of the following year.
See “Management’s discussion and analysis of financial condition and results of operations-Key business and operating metrics.” 6 Table of Contents For the year ended December 31, 2022, we had 15 of the top 20 largest auto insurance carriers by customer acquisition spend as demand partners on our platform, accounting for 25% of our revenue.
See “Management’s discussion and analysis of financial condition and results of operations-Key business and operating metrics.” 6 Table of Contents For the year ended December 31, 2023, we had 15 of the top 20 largest auto insurance carriers by customer acquisition spend as demand partners on our platform. Of these demand partners, 53% were also supply partners in our ecosystem.
However, for the year ended December 31, 2022, we generated $737.5 million of Transaction Value and $459.1 million of revenue, representing decreases of 27.6% and 28.9%, respectively, compared with the year ended December 31, 2021 as challenging conditions in the personal auto insurance industry continued to pressure P&C carrier underwriting profitability and in turn customer acquisition investments on our platform.
However, for the year ended December 31, 2023, we generated $593.4 million of Transaction Value and $388.1 million of revenue, representing decreases of 19.5% and 15.4%, respectively, compared with the year ended December 31, 2022, as challenging conditions in the personal auto insurance industry continued to pressure P&C carrier underwriting profitability and in turn customer acquisition investments on our platform.
This sector is comprised of companies engaged in varied aspects of customer acquisition. On one end of the spectrum, there are companies that are engaged in simple Consumer Referrals acquisition, which they sell to insurance carriers or distributors.
We are part of a sector that is disrupting the conventional agent-based insurance distribution channels. This sector is comprised of companies engaged in varied aspects of customer acquisition. On one end of the spectrum, there are companies that are engaged in simple Consumer Referrals acquisition, which they sell to insurance carriers or distributors.
The following table presents the percentages of total Transaction Value generated from clicks, calls and leads for the year ended December 31, 2022 and 2021: Year ended December 31, 2022 2021 Clicks 75.3 % 79.3 % Calls 15.3 % 9.5 % Leads 9.4 % 11.3 % Our platform leverages precise data and data science for maximum efficiency.
The following table presents the percentages of total Transaction Value generated from clicks, calls and leads for the year ended December 31, 2023 and 2022: Year ended December 31, 2023 2022 Clicks 69.4 % 75.3 % Calls 18.6 % 15.3 % Leads 12.0 % 9.4 % Our platform leverages precise data and data science for maximum efficiency.
During 2022, over 312 million high-intent consumers shopped for insurance products on the websites of sellers on our platform and our proprietary websites, resulting in over 90 million Consumer Referrals acquired by buyers on our platform. We serve over 600 buyer partners, excluding our buyer partners within our agent business.
During 2023, high-intent consumers shopped for insurance products on the websites of sellers on our platform and our proprietary websites over 400 million times, resulting in approximately 99 million Consumer Referrals acquired by buyers on our platform. We serve approximately 600 buyer partners, excluding our agent buyers.
In 2021, 97% of total Transaction Value executed on our platform came from demand partner relationships in existence during 2020. • Culture of transparency, innovation, and execution. Since inception, our co-founders have led with the vision of bringing unparalleled transparency and efficiency to the online customer acquisition ecosystem, executed through a powerful technology-enabled platform.
In 2022, 92% of total Transaction Value executed on our platform came from demand partner relationships in existence during 2021. • Culture of transparency, innovation, and execution. Since inception, our vision has been to bring unparalleled transparency and efficiency to the online customer acquisition ecosystem, executed through a powerful technology-enabled platform.
In 2022, we employed an average of 164 individuals, who produced $737.5 million of Transaction Value ($4.5 million per employee), $72.4 million of net loss ($0.4 million per employee), and $22.9 million of Adjusted EBITDA ($0.1 million per employee) and in 2021, we employed 138 individuals on average who drove $1.0 billion of Transaction Value ($7.4 million per employee), $8.5 million of net loss ($0.1 million per employee), and $58.2 million of Adjusted EBITDA ($0.4 million per employee) for the year. • Sticky, tenured relationships with insurance carriers and distributors.
In 2023, we employed an average of 142 individuals, who produced $593.4 million of Transaction Value ($4.2 million per employee), $56.6 million of net loss ($0.4 million per employee), and $27.1 million of Adjusted EBITDA ($0.2 million per employee) and in 2022, we employed 164 individuals on average who 14 Table of Contents drove $737.5 million of Transaction Value ($4.5 million per employee), $72.4 million of net loss ($0.4 million per employee), and $22.9 million of Adjusted EBITDA ($0.1 million per employee) for the year. • Sticky, tenured relationships with insurance carriers and distributors.
Our value proposition for buyers • Efficiency at scale. We believe we operate the insurance industry’s largest customer acquisition platform, delivering the volume insurance companies need to drive profitable growth, while also providing precise targeting capabilities to ensure they connect with the right prospects.
We believe we operate the insurance industry’s largest customer acquisition platform, delivering the volume of Consumer Referrals insurance companies need to drive profitable growth, while also providing precise targeting capabilities to ensure they connect with the right prospects.
Demand for insurance products is stable, due to, in many instances, coverage being mandated by law (for example, auto insurance) or federally subsidized (for example, senior health insurance). The insurance industry as a whole is highly competitive and invests heavily in customer acquisition.
Demand for insurance products is stable, due to, in many instances, coverage being mandated by law (for example, auto insurance) or federally subsidized (for example, senior health insurance). The insurance industry as a whole is highly competitive and invests heavily in customer acquisition. Overall insurance advertising spend is expected to grow at double digit rates annually over the next decade.
For the year ended December 31, 2022, we had $737.5 million in Transaction Value and served over 950 total insurance partners, excluding our partners within our agent business. For the year ended December 31, 2021, we had $1.0 billion in Transaction Value and served over 900 total insurance partners, excluding our partners within our agent business.
For the year ended December 31, 2023, we had $593.4 million in Transaction Value and served over 920 total insurance partners, excluding our agent buyers. For the year ended December 31, 2022, we had $737.5 million in Transaction Value and served over 950 total insurance partners, excluding our agent buyers.
Each year, our employees participate in a 360-degree evaluation process to identify critical capabilities for development and establish new stretch goals. We seek to achieve our business objectives through a deep commitment to talent development.
We conduct annual confidential employee surveys and believe that ongoing performance feedback encourages greater engagement in our business and improves individual performance. Each year, our employees participate in a 360-degree evaluation process to identify critical capabilities for development and establish new stretch goals. We seek to achieve our business objectives through a deep commitment to talent development.
To cover the costs and help ease the stress of working from home, we provide our employees with benefits such as internet and cell phone reimbursement, office supply purchasing, flexible work schedules, reimbursement for the purchase of ergonomic home office products and access to other tools.
To cover the costs and help ease the stress of working from home, we provide our employees with benefits such as internet and cell phone reimbursement, office supply purchasing, flexible work schedules, and access to other tools. We monitor and follow the advice of the public health authorities in the areas where our offices are located.
Repeat sellers continue to be a strong driver of our business, with 98% of our Transaction Value for 2022 driven by repeat sellers from 2021 (with Transaction Value from such repeat sellers declining 27% in 2022) and 99% of our Transaction Value for 2021 driven by repeat sellers from 2020.
Repeat sellers continue to be a strong 13 Table of Contents driver of our business, with 99% of our Transaction Value for 2023 driven by repeat sellers from 2022 and 98% of our Transaction Value for 2022 driven by repeat sellers from 2021. Our value proposition for sellers • Yield maximization .
We believe our vertical-agnostic platform and established playbook for entering new markets will allow us to capture attractive market opportunities effectively if we decide to pursue such opportunities. Our competition We operate in the broadly defined tech-enabled insurance distribution sector. We are part of a sector that is disrupting the conventional agent-based insurance distribution channels.
We believe our vertical-agnostic platform and established playbook for entering new markets will allow us to capture attractive market opportunities effectively if we decide to pursue such opportunities. We believe we have the ability to enter most new verticals with only a modest increase in headcount. Our competition We operate in the broadly defined tech-enabled insurance distribution sector.
We believe the versatility and breadth of our offerings, coupled with our focus on high-quality products, provide significant value to insurance carriers and distributors, resulting in strong retention rates. As a result, many insurance carriers and distributors use our platform as their central hub for broadly managing digital customer acquisition and monetization.
We believe the versatility and breadth of our offerings, coupled with our focus on high-quality products, provide significant value to insurance carriers and distributors, resulting in strong retention rates.
Repeat buyers continue to be a strong driver of our business, with 92% of our Transaction Value for 2022 driven by repeat buyers from 2021 (with total Transaction Value from such repeat buyers decreasing 37% in 2022) and 97% of our Transaction Value for 2021 driven by repeat buyers from 2020.
Repeat buyers continue to be a strong driver of our business, with 93% of our Transaction Value for 2023 driven by repeat buyers from 2022 and 92% of our Transaction Value for 2022 driven by repeat buyers from 2021. Our value proposition for buyers • Efficiency at scale.
While the advertising industry as a whole allocates approximately 65% of their budgets to digital, insurers allocated less than 20% of their budgets to digital channels in 2020.
While the advertising industry as a whole was estimated to allocate approximately 66% of their budgets to digital in 2021, insurers allocated less than 22% of their budgets to digital channels in that year.
As of December 31, 2022, we had 156 full-time employees. The human capital measures and objectives that we focus on in managing our business include talent acquisition and retention, employee engagement, development and training, diversity and inclusion, compensation and pay equity, and employee health and welfare.
The human capital measures and objectives that we focus on in managing our business include talent acquisition and retention, employee engagement, development and training, diversity and inclusion, compensation and pay equity, and employee health and welfare. None of our employees are represented by a collective bargaining unit or are a party to a collective bargaining agreement.
Our value proposition for end consumers • Search relevancy. By enabling insurance carriers and distributors to apply sophisticated targeting, we facilitate the delivery of hyper-relevant product options to our end consumers based on consumer-provided demographics and other relevant characteristics.
By enabling insurance carriers and distributors to apply sophisticated targeting, we facilitate the delivery of hyper-relevant product options to our end consumers based on consumer-provided demographics and other relevant characteristics. We believe this improves the overall research and purchase experience and helps enable our end consumers to make better decisions. • Shopping efficiency.
Due to the broad participation of top-tier insurance carriers within our ecosystem, consumers are able to more efficiently navigate a range of options and offers relevant to their policy searches. During the year ended December 31, 2022, over 312 million high-intent consumers shopped for insurance products through the websites of sellers on our platform and our proprietary websites.
Due to the broad participation of top-tier insurance carriers within our ecosystem, consumers are able to more efficiently navigate a range of options and offers relevant to their policy searches.
Access to our platform, other than to obtain basic information, requires 16 Table of Contents system usernames and passwords. We also add additional layers of security such as dual-factor authentication, encryption in transit and intrusion detection.
Access to our platform, other than to obtain basic information, requires system usernames and passwords. We also add additional layers of security such as dual-factor authentication, encryption in transit and intrusion detection. See “Risk factors-Risks related to our intellectual property rights and our technology.” Seasonality Our results are subject to significant seasonal fluctuations as a result of vertical level seasonality.
In the auto insurance industry, there are carriers focused on DTC distribution (such as Progressive and GEICO) and carriers focused more on traditional, agent-based distribution (such as State Farm, Liberty Mutual and Allstate). DTC carriers accounted for approximately 31% of industry premiums in 2019, up from approximately 23% in 2013, according to S&P Global Market Intelligence.
In the auto insurance industry, there are carriers focused on DTC distribution (such as Progressive and GEICO) and carriers focused more on traditional, agent-based distribution (such as State Farm, Liberty Mutual and Allstate). The industry shift to more direct distribution is accelerating.
See “Risk factors-Risks related to laws and regulation.” Employees We are committed to attracting and retaining the brightest and best talent, so investing in human capital is critical to our success. The employee traits we value include hands-on work no matter what the experience level, intellectual curiosity, open-mindedness, growth mindset, and deeply caring about the quality of work.
See “Risk factors-Risks related to laws and regulation.” Employees We are committed to attracting and retaining the brightest and best talent, so investing in human capital is critical to our success.
During the year ended December 31, 2022, we closed the acquisition of substantially all of the assets of Customer Helper Team, LLC ("CHT"), a provider of customer generation and acquisition services for Medicare insurance, automobile insurance, health insurance, and life insurance.
We aim to drive deeper adoption and integration of our platform within the insurance ecosystem to continue delivering strong results to our partners. During 2022, we closed the acquisition of substantially all of the assets of Customer Helper Team, LLC ("CHT"), a provider of customer generation and acquisition services for Medicare insurance, health insurance, and life insurance.
Total customer acquisition spend in the insurance industry was estimated to be $146 billion in 2021 and is expected to grow to approximately $176 billion by 2025, according to William Blair. Our technology platform was created to serve and grow with our insurance end markets.
Total advertising spend in the insurance industry was $11 billion in 2022 and is expected to grow to approximately $17 billion by 2027, according to Allied Market Research and the Business Research Company. Our technology platform was created to serve and grow with our insurance end markets.
We believe our technology is a key differentiator and a powerful driver of our performance. We maintain deep, custom integrations with partners representing the majority of our Transaction Value, which enable automated, data-driven processes that optimize these partners’ customer acquisition spend and revenue.
We maintain deep, custom integrations with partners representing the majority of our Transaction Value, which enable automated, data-driven processes that optimize these partners’ customer acquisition spend and revenue. Through our platform, our insurance carrier partners can target and price across over 35 separate consumer attributes to manage customized acquisition strategies.
In fact, two of the top five most-advertised brands in the U.S. across traditional and online channels are insurance companies—Progressive and GEICO. According to S&P Global Market Intelligence, Progressive’s customer acquisition spend was $1.9 billion in 2021, while GEICO’s customer acquisition spend was nearly $2.1 billion in the same period.
Total customer acquisition spend in the insurance industry was estimated to be $146 billion in 2021 and is expected to grow to approximately $176 billion by 2025, according to William Blair. In fact, two of the top five most-advertised brands in the U.S. across traditional and online channels are insurance companies—Progressive and GEICO.
We believe this improves the overall research and purchase experience and helps enable our end consumers to make better decisions. • Shopping efficiency. We facilitate access to the most relevant products for each respective end consumer, allowing for minimal research and maximum efficiency, through an omni-channel, seamless consumer platform experience.
We facilitate access to the most relevant products for each respective end consumer, allowing for minimal research and maximum efficiency, through an omni-channel, seamless consumer platform experience. We enable consumers to get quotes from multiple insurance carriers and distributors in different ways, including directly online or offline.
We designed our business to be highly scalable, driving sustainable long-term growth that delivers superior value to both demand and supply partners. Our technology enables us to grow in a highly capital efficient manner, with minimal need for working capital or capital expenditure investment.
Our technology enables us to grow in a highly capital efficient manner, with minimal need for working capital or capital expenditure investment.
As such, we believe secular trends in the insurance industry will continue to provide strong tailwinds for our business. • Direct-to-consumer is the fastest growing insurance distribution channel.
While the P&C insurance industry has experienced underwriting losses driven by inflation in automobile replacement and repair costs, we believe that the secular trends in the insurance industry will provide strong tailwinds for our business over the long term. • Direct-to-consumer is the fastest growing insurance distribution channel.
None of our employees are represented by a collective bargaining unit or are a party to a collective bargaining agreement. Employee Engagement and Development Our employee engagement efforts include regular “all-hands” meetings and frequent executive communications, through which we aim to keep our employees well-informed and to maximize transparency.
Employee Engagement and Development Our employee engagement efforts include regular “all-hands” meetings and frequent executive communications, through which we aim to keep our employees well-informed and to maximize transparency. We believe in continual improvement and use employee feedback to drive and improve processes that support our customers and ensure a deep understanding of our employees’ needs.
Of these demand partners, 60% were also supply partners in our ecosystem. During 2022, an average of 26.0 million consumers shopped for insurance products through the websites of our diversified group of supply partners and our proprietary websites each month, producing an average of over 7.5 million Consumer Referrals on our platform each month.
During 2023, an average of 36.9 million consumers shopped for insurance products through the websites of our diversified group of supply partners and our proprietary websites each month, producing an average of 8.2 million Consumer Referrals on our platform each month. We believe our technology is a key differentiator and a powerful driver of our performance.
According to S&P Global Market Intelligence, GEICO’s customer acquisition spend increased from $1.7 billion in 2018 to $2.1 billion in 2021, representing 20% growth, and Progressive’s customer acquisition spend increased from $1.3 billion in 2018 to $1.9 billion in 2021, representing 45% growth.
According to S&P Global Market Intelligence, Progressive’s customer acquisition spend was $1.7 billion in 2022, while GEICO’s customer acquisition spend was nearly $1.3 billion in the same period.
This industry shift to more direct distribution is accelerating. A major driver of this growth has been the DTC carriers’ outsized investments, relative to peers, in direct customer acquisition channels.
A major driver of this growth has been the DTC carriers’ outsized investments, relative to peers, in direct customer acquisition channels. According to S&P Global Market Intelligence, Progressive and GEICO's advertising spend in 2022 was $1.7 billion and $1.3 billion, respectively.
The increased participation in our technology-driven platform will continue to generate valuable data, enhance feedback loops, and drive stronger results for all participants in the ecosystem. We believe this creates a flywheel effect as our platform continues to grow. 14 Table of Contents • Superior operating leverage.
Our platform is vertical agnostic, allowing us to quickly and easily expand into new markets with attractive attributes. The increased participation in our technology-driven platform will continue to generate valuable data, enhance feedback loops, and drive stronger results for all participants in the ecosystem.
Our deep data integrations allow our buyers to utilize millions of anonymized data points to target and acquire their desired customers with a unique level of precision and control. As of December 31, 2022, there were over 400 insurance supply partners on our platform. We also provide our supply partners with sophisticated, data-driven yield management and monetization capabilities.
As of December 31, 2023, there were over 410 insurance supply partners on our platform. We also provide our supply partners with sophisticated, data-driven yield management and monetization capabilities. We believe these capabilities are critical to our partners’ monetization strategies, as they enable optimization of business performance and revenue.
Consumers are increasingly using the internet not just for research and price discovery, but to purchase insurance as well. The J.D. Power 2021 U.S. Insurance Shopping Study suggests that 88% of consumers are open to purchasing their auto insurance online.
Consumers are increasingly using the internet not just for research and price discovery, but to purchase insurance as well. According to TransUnion, the number of consumers shopping for insurance online rose from 22% in 2022 to 27% in 2023. Younger consumers are not the only driving force of this shift; the share of digitally savvy older consumers is rapidly growing.
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Through our platform, our insurance carrier partners can target and price across over 35 separate consumer attributes to manage customized acquisition strategies.
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According to the Pew Research Center, the share of U.S. internet users ages 65 or older has grown from 66% in 2018 to 88% in 2023. • Insurance customer acquisition spending is growing.
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We aim to drive deeper adoption and integration of our platform within the insurance ecosystem to continue delivering strong results to our partners. While our focus remains on insurance, we plan to continue to grow opportunistically in sectors with similar market dynamics.
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During the year ended December 31, 2023, high-intent consumers shopped for insurance products on the websites of sellers on our platform and our proprietary websites over 400 million times, resulting in approximately 99 million Consumer Referrals acquired by buyers on our platform. Our value proposition for end consumers • Search relevancy.
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Similarly, tech-enabled distribution businesses focused on health and life insurance, such as eHealth, GoHealth and SelectQuote, have also emerged in recent years. These companies advertise to and acquire customers primarily through digital means and rank among the largest distribution platforms for health and life insurance products. • More insurance consumers are shopping online.
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Supported by our proprietary algorithms, our platform is able to provide continuous, real-time feedback and insights that buyers can use to maximize the value of every consumer opportunity. Our deep data integrations allow our buyers to utilize millions of anonymized data points to target and acquire their desired customers with a unique level of precision and control.
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By comparison, a decade ago, only 35% of consumers who had not made an online auto insurance policy purchase in the past said they would consider doing so in the future, according to the Comscore 2010 Online Auto Insurance Shopping Report. This shift is not only prevalent among younger insurance shoppers.
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We believe this creates a flywheel effect as our platform continues to grow. • Superior operating leverage. We designed our business to be highly scalable, driving sustainable long-term growth that delivers superior value to both demand and supply partners.
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According to LexisNexis Insurance Demand Meter, consumers 56 and older were the fastest growing group of online auto insurance shoppers in 2020. • Insurance customer acquisition spending is growing. Total insurance customer acquisition spending was estimated to be $146 billion in 2021 and is expected to grow to $176 billion by 2025, according to William Blair.
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The employee traits we value include hands-on work no matter what the experience level, intellectual curiosity, 17 Table of Contents open-mindedness, growth mindset, and deeply caring about the quality of work. As of December 31, 2023, we had 137 full-time employees.
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Annual spend per demand partner on our platform with over $1 million in Transaction Value was $9.0 million in 2020 and $9.1 million in 2021, but declined to $6.3 million in 2022, driven by a reduction in marketing spend by our top insurance partners due to significant declines in their underwriting profitability.
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Annual spend per supply partner on our platform representing over $1 million in Transaction Value annually has declined, from $11.9 million in 2020 and $13.9 million in 2021 to $9.5 million in 2022, due to a reduction in demand driven by reduced marketing spend from insurance advertisers on our platform. Our value proposition for sellers • Yield maximization .

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAmong other things, these provisions: • divide our Board of Directors into three staggered classes of directors that are each elected to three-year terms; • provide the Board of Directors with the sole ability to fill a vacancy created by the expansion of the Board of Directors; • prohibit stockholder action by written consent after the date on which White Mountains, Insignia, and the Founders cease to collectively own at least a majority in voting power of shares of our common stock; • authorize the issuance of “blank check” preferred stock that could be issued by our Board of Directors to increase the number of outstanding shares of capital stock, making a takeover more difficult and expensive; 41 Table of Contents • prohibit cumulative voting in the election of directors, which could otherwise allow holders of a lesser number of shares to elect director candidates; • provide that special meetings of the stockholders may be called only by or at the direction of the Board of Directors, the chairman of our board, the Chief Executive Officer or, so long as White Mountains, Insignia, and the Founders collectively own at least a majority in voting power of shares of our common stock, any such stockholder, subject to certain limitations; • require advance notice to be given by stockholders for any stockholder proposals or director nominees; • after the date on which White Mountains, Insignia, and the Founders cease to collectively own at least a majority in voting power of shares of our common stock, require the affirmative vote of holders of at least 75% of the voting power of our outstanding shares of common stock to amend certain provisions of our amended and restated certificate of incorporation and any provision of our amended and restated bylaws; • after the date on which White Mountains, Insignia, and the Founders cease to collectively own at least a majority in voting power of shares of our common stock, require the affirmative vote of holders of at least 75% of the voting power of our outstanding shares of common stock to remove directors and only for cause; • provide that each of White Mountains, Insignia and the Founders are entitled to (i) nominate two directors to the Board of Directors for so long as such stockholder owns at least 12.5% of our issued and outstanding shares of common stock as of the closing of our IPO and (ii) nominate one director to the Board of Directors for so long as such stockholder owns less than 12.5% but at least 5% of our issued and outstanding shares of common stock as of the closing of our IPO; • provide that White Mountains, Insignia and the Founders agree to vote for each other’s board nominees pursuant to the terms of the stockholders’ agreement; and • require the prior written consent of a majority in interest of White Mountains, Insignia and the Founders for any change in the size of the Board of Directors and to engage in change in control transactions, for so long as such stockholders collectively own at least a majority of the issued and outstanding shares of common stock.
Biggest changeAmong other things, these provisions: • divide our Board of Directors into three staggered classes of directors that are each elected to three-year terms; • provide the Board of Directors with the sole ability to fill a vacancy created by the expansion of the Board of Directors; • prohibit stockholder action by written consent after the date on which White Mountains, Insignia, and the Founders cease to collectively own at least a majority in voting power of shares of our common stock; • authorize the issuance of “blank check” preferred stock that could be issued by our Board of Directors to increase the number of outstanding shares of capital stock, making a takeover more difficult and expensive; • prohibit cumulative voting in the election of directors, which could otherwise allow holders of a lesser number of shares to elect director candidates; • provide that special meetings of the stockholders may be called only by or at the direction of the Board of Directors, the chairman of our board, the Chief Executive Officer or, so long as White Mountains, Insignia, and the Founders collectively own at least a majority in voting power of shares of our common stock, any such stockholder, subject to certain limitations; • require advance notice to be given by stockholders for any stockholder proposals or director nominees; • after the date on which White Mountains, Insignia, and the Founders cease to collectively own at least a majority in voting power of shares of our common stock, require the affirmative vote of holders of at least 75% of the voting power of our outstanding shares of common stock to amend certain provisions of our amended and restated certificate of incorporation and any provision of our amended and restated bylaws; • after the date on which White Mountains, Insignia, and the Founders cease to collectively own at least a majority in voting power of shares of our common stock, require the affirmative vote of holders of at least 75% of the voting power of our outstanding shares of common stock to remove directors and only for cause; • provide that each of White Mountains, Insignia and the Founders are entitled to (i) nominate two directors to the Board of Directors for so long as such stockholder owns at least 12.5% of our issued and outstanding shares of common stock as of the closing of our IPO and (ii) nominate one director to the Board of Directors for so long as such stockholder owns less than 12.5% but at least 5% of our issued and outstanding shares of common stock as of the closing of our IPO; • provide that White Mountains, Insignia and the Founders agree to vote for each other’s board nominees pursuant to the terms of the stockholders’ agreement; and • require the prior written consent of a majority in interest of White Mountains, Insignia and the Founders for any change in the size of the Board of Directors and to engage in change in control transactions, for so long as such stockholders collectively own at least a majority of the issued and outstanding shares of common stock. 42 Table of Contents In addition, Section 203 of the General Corporate Law of the State of Delaware (the “DGCL”) may affect the ability of an “interested stockholder” to engage in certain business combinations, for a period of three years following the time that the stockholder becomes an “interested stockholder.” We elected in our amended and restated certificate of incorporation not to be subject to Section 203 of the DGCL.
Our 21 Table of Contents principal competitors in this space include technology companies engaged in digital customer acquisition for insurance carriers, as well as other companies including: • direct distribution companies focused on insurance products; • industry-specific portals or customer acquisition companies with insurance-focused research online destinations; • online marketing or media services providers; • major internet portals and search engine companies with online advertising platforms; and • supply partners with their own sales forces that sell their online Consumer Referrals directly to buyers.
Our principal competitors in this space include technology companies engaged in digital customer acquisition for insurance carriers, as well as other companies including: • direct distribution companies focused on insurance products; • industry-specific portals or customer acquisition companies with insurance-focused research online destinations; • online marketing or media services providers; 21 Table of Contents • major internet portals and search engine companies with online advertising platforms; and • supply partners with their own sales forces that sell their online Consumer Referrals directly to buyers.
In addition, we may face risks or experience difficulties in: • effectively managing the combined business following the acquisition; • implementing operations, technologies, controls, procedures, and/or policies at the acquired company; • integrating the acquired company’s accounting, human resource, and other administrative systems, and coordination of product, engineering, and sales and marketing functions; • transitioning operations, users, and customers onto our existing platforms; 23 Table of Contents • obtaining any required approvals on a timely basis, if at all, from governmental authorities, or conditions placed upon approval that could, among other things, delay or prevent us from completing a transaction, or otherwise restrict our ability to realize the expected financial or strategic goals of an acquisition or other strategic transaction; • cultural challenges associated with integrating employees from the acquired company into our organization, and retention of employees from the businesses we acquire; • liability for activities of the acquired company before the acquisition, including intellectual property infringement claims, privacy issues, violations of laws, commercial disputes, tax liabilities, and other known and unknown liabilities; and • litigation or other claims in connection with the acquisition of the acquired company, including claims from terminated employees, customers, former stockholders, or other third parties.
In addition, we may face risks or experience difficulties in: • effectively managing the combined business following the acquisition; • implementing operations, technologies, controls, procedures, and/or policies at the acquired company; • integrating the acquired company’s accounting, human resource, and other administrative systems, and coordination of product, engineering, and sales and marketing functions; • transitioning operations, users, and customers onto our existing platforms; • obtaining any required approvals on a timely basis, if at all, from governmental authorities, or conditions placed upon approval that could, among other things, delay or prevent us from completing a transaction, or otherwise restrict our ability to realize the expected financial or strategic goals of an acquisition or other strategic transaction; • cultural challenges associated with integrating employees from the acquired company into our organization, and retention of employees from the businesses we acquire; 23 Table of Contents • liability for activities of the acquired company, including intellectual property infringement claims, privacy issues, violations of laws, commercial disputes, tax liabilities, and other known and unknown liabilities; and • litigation or other claims in connection with the acquisition of the acquired company, including claims from terminated employees, customers, former stockholders, or other third parties.
Finding, developing, and retaining high quality Consumer Referrals on a cost-effective basis is challenging because competition for web traffic among technology companies engaged in digital customer acquisition, websites, and search engines, as well as competition with traditional media companies, has resulted and may continue to result in significant increases in web traffic costs, declining margins, and reduction in revenue.
Finding, developing, and retaining high quality Consumer Referrals on a cost-effective basis is challenging because competition for web traffic among companies engaged in digital customer acquisition, websites, and search engines, as well as competition with traditional media companies, has resulted and may continue to result in significant increases in web traffic costs, declining margins, and reduction in revenue.
Any accidental or unauthorized access to or disclosure, loss, destruction, disablement or encryption of, use or misuse of or modification of data, cybersecurity breach or other security incident that we or our partners could experience or the perception that one has occurred or may occur, could harm our reputation, reduce the demand for our products and services and disrupt normal business operations.
Any accidental or unauthorized access to or disclosure, loss, destruction, disablement or encryption of, use or misuse of or modification of data, cybersecurity breach or other security incident that we or our partners could experience or the perception that one has occurred or may occur, could harm our reputation, reduce the demand for our services and disrupt our normal business operations.
They can attract consumers directly through their own customer acquisition strategies, including third-party online platforms and other traditional methods of distribution, such as referral arrangements, physical storefront operations or broker agreements. Such demand partners also may obtain Consumer Referrals through one or more online competitors of our business.
They can attract consumers directly through their own customer acquisition strategies, including third-party online platforms and other methods of distribution, such as referral arrangements, physical storefront operations or broker agreements. Such demand partners also may obtain Consumer Referrals through one or more online competitors of our business.
Infiltration of our systems or those of our partners and third-party service providers could in the future lead to disruptions in systems, accidental or unauthorized access to or disclosure, loss, destruction, disablement or encryption of, use or misuse of or modification of confidential or otherwise protected information (including personal data) and the corruption of data.
Infiltration of our systems or those of our partners and third-party service providers could lead to disruptions in systems, accidental or unauthorized access to or disclosure, loss, destruction, disablement or encryption of, use or misuse of or modification of confidential or otherwise protected information (including personal data) and the corruption of data.
Demand partners who access our platform can attract consumers directly through their own customer acquisition strategies, including third-party online platforms and other traditional methods of distribution, or obtain similar services from our competitors.
Demand partners who access our platform can attract consumers directly through their own customer acquisition strategies, including third-party online platforms and other methods of distribution, or obtain similar services from our competitors.
For example, in April 2021, Google implemented a new policy requiring paid search advertisers to be licensed health insurance brokers to bid on health insurance-related keywords, which required us and our suppliers to become a licensed health insurance broker in all 50 states and the District of Columbia to be able to continue bidding on such keywords.
For example, in April 2021, Google implemented a new policy requiring paid search advertisers to be licensed health insurance brokers to bid on health insurance-related keywords, which required us to become a licensed health insurance broker in all 50 states and the District of Columbia to be able to continue bidding on such keywords.
These laws are subject to change at any time and could further limit our ability to protect our intellectual property rights. Additionally, there is uncertainty concerning the scope of patent and other intellectual property protection for software and business methods, which are fields in which we rely on intellectual property laws to protect our rights.
These laws are subject to change at any time and could further limit our ability to protect our intellectual property rights. Additionally, there is uncertainty concerning the scope of intellectual property protection for software and business methods, which are fields in which we rely on intellectual property laws to protect our rights.
The availability of cookie data may be limited by numerous potential factors, including general trends among internet users to refuse to accept cookies on their web 33 Table of Contents browsers, web browsers blocking third-party cookies by default or otherwise transitioning away from using cookies, other laws or regulations limiting the transferability or use of information gathered using cookies, or the refusal of providers of such information to provide it to us or to provide it to us on favorable terms.
The availability of cookie data may be limited by numerous potential factors, including general trends among internet users to refuse to accept cookies on their web browsers, web browsers blocking third-party cookies by default or otherwise transitioning away from using cookies, other laws or regulations limiting the transferability or use of information gathered using cookies, or the refusal of providers of such information to provide it to us or to provide it to us on favorable terms.
Our success depends on the ability to attract online visitors to our suppliers’ websites and our proprietary websites and convert them into Consumer Referrals for our partners in a cost-effective manner. We depend on internet search companies to direct a substantial share of visitors to our suppliers’ websites and our proprietary websites.
Our success depends on our suppliers’ ability to attract online visitors to their websites and our ability to attract online visitors to our proprietary websites, and to convert them into Consumer Referrals for our partners in a cost-effective manner. We depend on internet search companies to direct a substantial share of visitors to our suppliers’ websites and our proprietary websites.
If one or more of the search engines or other online sources on 24 Table of Contents which we or our suppliers rely for purchased listings modifies or terminates its relationship with us or decides to decrease its rating of the relevance and quality of our suppliers’ or our proprietary websites, our expenses could rise, we could lose consumers, and traffic to our suppliers’ websites and our proprietary websites could decrease, which could in turn decrease the amount and quality of Consumer Referrals made available for sale on our platform.
If one or more of the search engines or other online sources on which we or our suppliers rely for purchased listings modifies or terminates its relationship with us or decides to decrease its rating of the relevance and quality of our suppliers’ or our proprietary websites, our expenses could rise, we could lose consumers, and traffic to our suppliers’ websites and our proprietary websites could decrease, which could in turn decrease the amount and quality of Consumer Referrals made available for sale on our platform.
We will not be able to grow as expected, or at all, if we do not accomplish the following: • maintain and expand the number of demand and supply partners that use our platform; • increase the volume and quality of Consumer Referrals available on our platform; • further enhance the capabilities and effectiveness of our platform, and effectively demonstrate the value provided by our platform to current and prospective partners; • maintain the quality of our platform; and • expand our presence to new verticals.
We will not be able to grow as expected, or at all, if we do not accomplish the following: • maintain and expand the number of demand and supply partners that use our platform; • increase the volume and quality of Consumer Referrals available on our platform; 22 Table of Contents • further enhance the capabilities and effectiveness of our platform, and effectively demonstrate the value provided by our platform to current and prospective partners; • maintain the quality of our platform; and • expand our presence to new verticals.
In particular, because our platform helps 35 Table of Contents connect consumers to websites and other distribution channels where they can shop for insurance policies from a panel of insurance carriers, the expansion of government-sponsored coverage through “Medicare-for-All” or the implementation of a single payer system may adversely impact our business, financial condition, operating results, cash flows, and prospects.
In particular, because our platform helps connect consumers to websites and other distribution channels where they can shop for insurance policies from a panel of insurance carriers, the expansion of government-sponsored coverage through “Medicare-for-All” or the implementation of a single payer system may adversely impact our business, financial condition, operating results, cash flows, and prospects.
Even if not subject to legal challenge, the perception of privacy concerns, whether or not valid, may harm our reputation and brand and materially and adversely affect our business, financial condition, operating results, cash flows, and prospects. Our and our partners’ communications with potential and existing consumers are subject to laws regulating telephone and email marketing practices.
Even if not subject to legal challenge, the perception of privacy concerns, whether or not valid, may harm our reputation and brand and materially and adversely affect our business, financial condition, operating results, cash flows, and prospects. 37 Table of Contents Our and our partners’ communications with potential and existing consumers are subject to laws regulating telephone and email marketing practices.
Our effective tax rate and profitability could be subject to volatility or adversely affected by a number of factors, including: • changes in applicable tax laws and regulations, or their interpretation and application, including the possibility of retroactive effect; 27 Table of Contents • changes in accounting and tax standards or practice; • changes in the valuation of deferred tax assets and liabilities; and • our operating results before taxes.
Our effective tax rate and profitability could be subject to volatility or adversely affected by a number of factors, including: • changes in applicable tax laws and regulations, or their interpretation and application, including the possibility of retroactive effect; • changes in accounting and tax standards or practice; • changes in the valuation of deferred tax assets and liabilities; and • our operating results before taxes.
Cybersecurity incidents are increasing in frequency and evolving in nature and include, but are not limited to, installation of malicious 31 Table of Contents software, ransomware, viruses, phishing attacks, denial of service or other attacks, breach by intentional or negligent conduct on the part of employees or other internal sources, unauthorized access to data and other electronic security breaches.
Cybersecurity incidents are increasing in frequency and evolving in nature and include, but are not limited to, installation of malicious software, ransomware, viruses, phishing attacks, denial of service or other attacks, breach by intentional or negligent conduct on the part of employees or other internal sources, unauthorized access to data and other electronic security breaches.
It is also possible that certain provisions in agreements with our buyers, sellers, and service providers may be found to be unenforceable or not compliant with applicable law. 34 Table of Contents Recent financial, political, and other events may increase the level of regulatory scrutiny on larger companies and technology companies in general.
It is also possible that certain provisions in agreements with our buyers, sellers, and service providers may be found to be unenforceable or not compliant with applicable law. Recent financial, political, and other events may increase the level of regulatory scrutiny on larger companies and technology companies in general.
Complying with these regulations may cause us to incur substantial operational costs or require us to change our business practices. Despite our efforts, we may not be successful in our efforts to achieve compliance either due to internal or external factors such as resource allocation limitations or a lack of vendor cooperation.
Complying with these 36 Table of Contents regulations may cause us to incur substantial operational costs or require us to change our business practices. Despite our efforts, we may not be successful in our efforts to achieve compliance either due to internal or external factors such as resource allocation limitations or a lack of vendor cooperation.
These potential conflicts of interest could have a material and adverse effect on our business, financial condition, operating results, cash flows and prospects if attractive 42 Table of Contents business opportunities are allocated by White Mountains, Insignia or the Founders to themselves or their respective affiliates instead of to us.
These potential conflicts of interest could have a material and adverse effect on our business, financial condition, operating results, cash flows and prospects if attractive business opportunities are allocated by White Mountains, Insignia or the Founders to themselves or their respective affiliates instead of to us.
The impact of any natural disaster, act of terrorism or other disruption to us or our third-party providers’ abilities could result in decreased demand for our offerings or a delay in the 25 Table of Contents provision of our offerings, which could adversely affect our business, financial condition, operating results, cash flows, and prospects.
The impact of any natural disaster, act of terrorism or other disruption to us or our third-party providers’ abilities could result in decreased demand for our offerings or a delay in the provision of our offerings, which could adversely affect our business, financial condition, operating results, cash flows, and prospects.
Any person or entity purchasing or otherwise acquiring any interest in our Class A common stock shall be deemed to have notice of and consented to this exclusive forum provision, but will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
Any person or entity purchasing or otherwise acquiring any interest in our Class A common stock shall 43 Table of Contents be deemed to have notice of and consented to this exclusive forum provision, but will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
If we identify any additional material weaknesses in the future and are unable to successfully remediate any future material weaknesses in our internal control over financial reporting, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting, and our share price may decline as a result.
If we identify any material weaknesses in the future and are unable to successfully remediate any future material weaknesses in our internal control over financial reporting, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law 40 Table of Contents requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting, and our share price may decline as a result.
Any of the foregoing could have a material and adverse effect on our business, financial condition, operating results, cash flows and prospects. The ability to maintain or grow the number of visitors to our suppliers’ websites and our proprietary websites from search companies is not entirely within our control.
Any of the foregoing could have a material and adverse effect on our business, financial condition, operating results, cash flows and prospects. 24 Table of Contents The ability to maintain or grow the number of visitors to our suppliers’ websites and our proprietary websites from search companies is not entirely within our control.
If the market rate of interest increases substantially, we will have to pay additional interest on this indebtedness, which would reduce cash available for our other business needs. The Amended Credit Agreement requires us to comply with certain financial covenants, including maintaining specific financial ratios.
If the market rate of interest increases, we will have to pay additional interest on this indebtedness, which would reduce cash available for our other business needs. The Existing Credit Agreement requires us to comply with certain financial covenants, including maintaining specific financial ratios.
Additionally, the CPRA, which became effective in most material respects on January 1, 2023, modifies the CCPA significantly, including by expanding consumers’ rights with respect to certain sensitive personal information and creating a 36 Table of Contents new state agency to oversee implementation and enforcement efforts, which may result in further uncertainty and require us to incur additional costs and expenses in an effort to comply.
Additionally, the CPRA, which became effective in most material respects on January 1, 2023, modifies the CCPA significantly, including by expanding consumers’ rights with respect to certain sensitive personal information and creating a new state agency to oversee implementation and enforcement efforts, which may result in further uncertainty and require us to incur additional costs and expenses in an effort to comply.
Accordingly, payments under the tax receivables agreement may be made years in advance of the actual realization, if any, of the anticipated tax benefits and may be significantly greater than the benefits we eventually realize. In these situations, our obligations under the tax receivables agreement could have a substantial negative impact on our liquidity.
Accordingly, payments under the tax receivables agreement may be made years in advance of the actual realization, if any, of the anticipated tax benefits and may be 46 Table of Contents significantly greater than the benefits we eventually realize. In these situations, our obligations under the tax receivables agreement could have a substantial negative impact on our liquidity.
If our quarterly results fall below the expectations of investors or any securities analysts who follow our stock, or below any guidance we may provide, the price of our common stock could decline substantially. 38 Table of Contents We are required to make significant estimates and assumptions in the preparation of our financial statements.
If our quarterly results fall below the expectations of investors or any securities analysts who follow our stock, or below any guidance we may provide, the price of our common stock could decline substantially. We are required to make significant estimates and assumptions in the preparation of our financial statements.
As our insurance carrier partners go through these market cycles, our demand partners may increase or decrease their spending on Customer Referrals on our 20 Table of Contents platform. These changes in spending may occur rapidly and without warning, and the duration of these market cycles can be difficult to predict accurately.
As our insurance carrier partners go through these market cycles, our demand partners may increase or decrease their spending on Customer Referrals on our platform. These changes in spending may occur rapidly and without warning, and the duration of these market cycles can be difficult to predict accurately.
As a result, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. In addition, we may be required to incur costs in improving our internal 39 Table of Contents control over financial reporting, including the hiring of additional personnel.
As a result, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. In addition, we may be required to incur costs in improving our internal control over financial reporting, including the hiring of additional personnel.
Should we become dependent on fewer demand or supply partner relationships (whether as a result of the termination of existing relationships, insurance carrier consolidation or otherwise), we may become more vulnerable to adverse changes in our relationships with our demand or supply partners, which in turn could harm our business, financial condition, operating results, cash flows, and prospects.
Should we become dependent on fewer demand or supply partner relationships (whether as a result of the termination of existing relationships, insurance carrier consolidation or otherwise), we may become more vulnerable to adverse changes in our relationships with, or demand for our Consumer Referrals from, our demand or supply partners, which in turn could harm our business, financial condition, operating results, cash flows, and prospects.
We derive a substantial majority of our revenue from sales of Consumer Referrals to property & casualty insurance carriers, health insurance carriers, and life insurance carriers. Revenue from our insurance verticals accounted for 95.5% and 96.5% of our total revenue for the years ended December 31, 2022 and 2021, respectively.
We derive a substantial majority of our revenue from sales of Consumer Referrals to property & casualty insurance carriers, health insurance carriers, and life insurance carriers. Revenue from our insurance verticals accounted for 96.6% and 95.5% of our total revenue for the years ended December 31, 2023 and 2022, respectively.
Our initial purchase of units in the IPO, the Pre-IPO Leveraged Distribution and other actual or deemed distributions by QLH to its members, and the post-IPO exchanges of Class B-1 units may result in increases in our share of the tax basis of the assets of QLH.
Our initial purchase of units in the IPO, the Pre-IPO Leveraged Distribution and other actual or deemed distributions by QLH to its members, and the post-IPO exchanges of Class B-1 units may result in increases in our share of the 45 Table of Contents tax basis of the assets of QLH.
For example, in the third quarter of 2021, many automobile insurers began to reduce their customer acquisition spending sharply in response to higher-than-expected loss ratios resulting from higher accident severity and increased repair costs due to global supply chain issues, and those reductions continued and in many cases worsened during 2022.
For example, in the third quarter of 2021, many automobile insurers began to reduce their customer acquisition spending sharply in response to higher-than-expected loss ratios 20 Table of Contents resulting from higher accident severity and increased repair costs due to global supply chain issues, and those reductions continued and in many cases worsened during 2022 and 2023.
In addition, the lack of a robust resale market may require a stockholder who desires to sell a large 40 Table of Contents number of shares of our Class A common stock to sell the shares in increments over time to mitigate any adverse impact of the sales on the market price of our stock.
In addition, the lack of a robust resale market may require a stockholder who desires to sell a large number of shares of our Class A common stock to sell the shares in increments over time to mitigate any adverse impact of the sales on the market price of our stock.
Any of these situations could result in buyers’ dissatisfaction with us, which could cause our buyers to stop using our platform or prevent prospective buyers from using our platform. Additionally, our proprietary predictive modeling tools and artificial intelligence algorithms may lead to unintentional bias and discrimination, which could subject us to legal or regulatory liability as well as reputational harm.
Any of these situations could result in buyers’ dissatisfaction with us, which could cause our buyers to stop using our platform or prevent prospective buyers from using our platform. Additionally, our proprietary predictive modeling tools and machine learning algorithms may lead to unintentional bias and discrimination, which could subject us to legal or regulatory liability as well as reputational harm.
Many of our agreements with our partners have no fixed term and are cancellable upon 30 or 60 days’ notice. Furthermore, the agreements with our partners do 19 Table of Contents not require that such partners transact a minimum amount on our platform.
Many of our agreements with our partners have no fixed term and are cancellable upon 30 or 60 days’ notice. Furthermore, the agreements with our partners do not require that such partners transact a minimum amount on our platform.
The market price of our Class A common stock could decline as a result of sales of a large number of shares of our Class A common stock by our pre-IPO stockholders, including shares issuable upon the exchange of Class B-1 units (together with an equal number of shares of our Class B common stock).
The market price of our Class A common stock could decline as a result of sales of a large number of shares of our Class A common stock by our pre-IPO stockholders, including shares issuable upon the exchange of Class B-1 units (together 41 Table of Contents with an equal number of shares of our Class B common stock).
In addition, we may be subject to audits of our income, sales, and other taxes by U.S. federal, state and local taxing authorities, and foreign authorities. Outcomes from these audits could have a material and adverse effect on our business, financial condition, operating results, cash flows, and prospects.
In addition, we have in the past been, and may in the future be subject to audits of our income, sales, and other taxes by U.S. federal, state and local taxing authorities, and foreign authorities. Outcomes from these audits could have a material and adverse effect on our business, financial condition, operating results, cash flows, and prospects.
In particular, our corporate headquarters are located in Los Angeles, California, a region known for seismic activity. In addition, any unforeseen political crises, terrorist attacks, war, political instability, or other catastrophic events, whether in the United States or abroad, could adversely affect our operations or the economy as a whole.
In particular, our corporate headquarters are located in Los Angeles, California, a region known for seismic activity. In addition, any unforeseen 28 Table of Contents political crises, terrorist attacks, war, political instability, or other catastrophic events, whether in the United States or abroad, could adversely affect our operations or the economy as a whole.
Any debt financing that we may secure in the future could involve debt service obligations and restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities.
Any debt financing that we may secure in the future could involve debt service obligations and restrictive covenants relating to our capital 26 Table of Contents raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities.
Period to period 37 Table of Contents variability or unpredictability of our results could result in our failure to meet our expectations or those of any analysts that cover us or investors with respect to revenue or other operating results for a particular period.
Period to period variability or unpredictability of our results could result in our failure to meet our expectations or those of any analysts that cover us or investors with respect to revenue or other operating results for a particular period.
Assuming no material changes in relevant tax law and based on our current operating plan and other assumptions, if all of the Class B-1 units were acquired by us in taxable transactions at December 31, 2022 for a price of $9.95 (which is the last reported sale price of our Class A common stock as of December 31, 2022 on the NYSE) per Class B-1 unit, we estimate that the amount that we would be required to pay under the tax receivables agreement could be approximately $157 million.
Assuming no material changes in relevant tax law and based on our current operating plan and other assumptions, if all of the Class B-1 units were acquired by us in taxable transactions at December 31, 2023 for a price of $11.15 (which is the last reported sale price of our Class A common stock as of December 31, 2023 on the NYSE) per Class B-1 unit, we estimate that the amount that we would be required to pay under the tax receivables agreement could be approximately $160 million.
Federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), Section 5(c) of the Federal Trade Commission Act, the EU’s General Data Protection Regulation, supplemented by national laws (such as, in the United Kingdom, the Data Protection Act 2018) and further implemented through binding guidance from the European Data Protection Board.
Federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), Section 5(c) of the Federal Trade Commission Act, the FTC’s Telemarketing Sales Rule (the “TSR”), the EU’s General Data Protection Regulation, supplemented by national laws (such as, in the United Kingdom, the Data Protection Act 2018) and further implemented through binding guidance from the European Data Protection Board.
Moreover, our proprietary predictive modeling tools and artificial intelligence algorithms may lead to unintentional bias and discrimination. We use proprietary predictive modeling tools and artificial intelligence algorithms in our product offerings. The data that we gather from interactions with consumers is evaluated and curated by proprietary predictive modeling tools and artificial intelligence algorithms.
Moreover, our proprietary predictive modeling tools and machine learning algorithms may lead to unintentional bias and discrimination. We use proprietary predictive modeling tools and machine learning algorithms in our product offerings. The data that we gather from interactions with consumers is evaluated and curated by proprietary predictive modeling tools and machine learning algorithms.
However, we may not be aware that our products or services are infringing, misappropriating or otherwise violating third-party intellectual property 29 Table of Contents rights and such third parties may bring claims alleging such infringement, misappropriation or violation.
However, we may not be aware that our products or services are infringing, misappropriating or otherwise violating third-party intellectual property rights and such third parties may bring claims alleging such infringement, misappropriation or violation.
Furthermore, the laws and regulations governing the sale of insurance may change in ways that adversely impact our business or those of our insurance partners. For example, CMS has recently proposed significant changes in the regulations regarding how Medicare plans may be marketed and sold.
Furthermore, the laws and regulations governing the sale of insurance may change in ways that adversely impact our business or those of our insurance partners. For example, CMS has recently made significant changes in the regulations regarding how Medicare plans may be marketed and sold, and may make additional changes in the future.
If we are held to have breached or failed to fully comply with all the terms and conditions of an open source software license, or if an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations, could be subject to significant damages, enjoined from the operation of our platform or other liability, or be required to seek costly licenses from third parties to continue providing our platform on terms that are not economically feasible, to re-engineer our platform, to discontinue or delay the provision of our platform if re-engineering could not be accomplished on a timely basis, or to make generally available, in source code form, our proprietary code, any of which would adversely affect our business, financial condition, operating results, cash flows, and prospects, and could help our competitors develop platforms that are similar to or better than ours.
If we are held to have breached or failed to fully comply with all the terms and conditions of an open source software license, or if an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations, could be subject to significant damages, enjoined from the operation of our platform or other liability, or be required to seek costly licenses from third parties to continue providing our platform on terms that are not economically feasible, to re-engineer our platform, to discontinue or delay the provision of our platform if re-engineering could not be accomplished on a timely basis, or to make generally available, in source code form, our proprietary code, any of which would adversely affect our business, financial condition, operating results, cash flows, and prospects, and could help our competitors develop platforms that are similar to or better than ours. 34 Table of Contents Risks related to laws and regulation Our business is subject to a variety of laws and regulations, both in the U.S. and internationally, many of which are evolving.
However, we have in the past and may from time to time in the future be involved in various legal proceedings, including, but not limited to, actions relating to claims of violations of laws or regulations, breach of contract, and intellectual property infringement, misappropriation or other violation.
We are currently not a party to any material legal proceedings. However, we have in the past and may from time to time in the future be involved in various legal proceedings, including, but not limited to, actions relating to claims of violations of laws or regulations, breach of contract, and intellectual property infringement, misappropriation or other violation.
Since shares of our Class A common stock were initially sold in the IPO in October 2020 at a price of $19.00 per share, the low and high closing sales prices of our Class A common stock ranged from $7.87 to $64.11 per share, respectively, through December 31, 2022.
Since shares of our Class A common stock were initially sold in the IPO in October 2020 at a price of $19.00 per share, the low and high closing sales prices of our Class A common stock ranged from $5.36 to $64.11 per share, respectively, through December 31, 2023.
Our existing or future indebtedness could have important consequences, including: • requiring us to dedicate a substantial portion of our cash flow to payments on our indebtedness, which would reduce the amount of cash flow available to fund working capital, capital expenditures or other corporate purposes; • increasing our vulnerability to general adverse economic, industry, and market conditions; • subjecting us to restrictive covenants, including restrictions on our ability to pay dividends and requiring the pledge of substantially all of our assets as collateral, that may reduce our ability to take certain corporate actions or obtain further debt or equity financing; • limiting our ability to plan for and respond to business opportunities or changes in our business or industry; and • placing us at a competitive disadvantage compared to our competitors that have less debt or better debt servicing options. 26 Table of Contents In addition, our indebtedness under the 2021 Credit Facilities bears interest at a variable rate, making us vulnerable to increases in the market rate of interest.
Our existing or future indebtedness could have important consequences, including: • requiring us to dedicate a substantial portion of our cash flow to payments on our indebtedness, which would reduce the amount of cash flow available to fund working capital, capital expenditures or other corporate purposes; 25 Table of Contents • increasing our vulnerability to general adverse economic, industry, and market conditions; • subjecting us to restrictive covenants, including restrictions on our ability to pay dividends and requiring the pledge of substantially all of our assets as collateral, that may reduce our ability to take certain corporate actions or obtain further debt or equity financing; • limiting our ability to plan for and respond to business opportunities or changes in our business or industry; and • placing us at a competitive disadvantage compared with our competitors that have less debt or better debt servicing options.
The perception in the public market that our pre-IPO stockholders might sell shares of Class A common stock could also depress our market price. As of December 31, 2022, 43.7 million Class A-1 units and 18.9 million Class B-1 units were outstanding.
The perception in the public market that our pre-IPO stockholders might sell shares of Class A common stock could also depress our market price. As of December 31, 2023, 47.4 million Class A-1 units and 18.1 million Class B-1 units were outstanding.
Our past growth or the past growth in our verticals or by our competitors may not be indicative of future growth, if any.
Our past growth or the past growth in our verticals or by our competitors may not be indicative of future growth, and our revenue growth rate may decline in the future. Our past growth or the past growth in our verticals or by our competitors may not be indicative of future growth, if any.
Based on our recent history of pre-tax losses, the Company does not believe it will generate sufficient future taxable income to utilize the related tax benefits in the foreseeable future and therefore will not be required to make any payments under the tax receivable agreement, except as it relates to payments related to 2021 tax year payable during Q1 2023.
Based on our recent history of pre-tax losses, the Company does not believe it will generate sufficient future taxable income to utilize the related tax benefits in the foreseeable future and therefore will not be required to make any payments under the tax receivable agreement.
A failure by us to protect our brand and deliver on these expectations could harm our reputation and damage our ability to attract and retain partners, which could adversely affect our business, financial condition, operating results, cash flows, and prospects.
Maintaining strong brand recognition and a reputation for delivering value to our partners is important to our business. A failure by us to protect our brand and deliver on these expectations could harm our reputation and damage our ability to attract and retain partners, which could adversely affect our business, financial condition, operating results, cash flows, and prospects.
In addition, in November 2021, pursuant to a registration rights agreement with certain of our existing investors, including White Mountains, Insignia, and the Senior Executives, we registered 34.9 million of their shares of our Class A common stock, including those delivered in exchange for Class B-1 units, for resale.
In November 2021, pursuant to a registration rights agreement with certain of our existing investors, including White Mountains, Insignia, and the Senior Executives, we registered certain of their shares of our Class A common stock, including those delivered in exchange for Class B-1 units, for resale, of which 34.3 million shares remained registered and available for sale as of November 30, 2023.
Failure to comply with obligations and restrictions related to telephone, text message, and email marketing could subject us and them to lawsuits, fines, statutory damages, consent decrees, injunctions, adverse publicity, and other losses that could harm, directly or indirectly, our business, financial condition, operating results, cash flows, and prospects.
Our failure to comply with obligations and restrictions related to telephone, text message, and email marketing, or similar failures by our Supply Partners or Demand Partners (or third parties with whom they work), could subject us and them to lawsuits, fines, statutory damages, consent decrees, injunctions, adverse publicity, and other losses that could harm, directly or indirectly, our business, financial condition, operating results, cash flows, and prospects.
We might not determine whether we have effectively made such excess cash payments for a number of years following the time of such payments. 45 Table of Contents We may not be able to realize all or a portion of the tax benefits that are currently expected to result from our purchase (through Intermediate Holdco) of Class B-1 units from certain unitholders in connection with the IPO, the Pre-IPO Leveraged Distribution and other actual or deemed distributions by QLH to its members, post-IPO exchanges of Class B-1 units, the utilization of pre-IPO net operating losses of Intermediate Holdco, and payments made under the tax receivables agreement.
We may not be able to realize all or a portion of the tax benefits that are currently expected to result from our purchase (through Intermediate Holdco) of Class B-1 units from certain unitholders in connection with the IPO, the Pre-IPO Leveraged Distribution and other actual or deemed distributions by QLH to its members, post-IPO exchanges of Class B-1 units, the utilization of pre-IPO net operating losses of Intermediate Holdco, and payments made under the tax receivables agreement.
Our largest demand partner represented 10% and 16% of our revenue for the years ended December 31, 2022 and 2021, respectively, and our next largest demand partner represented 5% and 11% of revenue for the years ended December 31, 2022 and 2021, respectively.
Our largest demand partner represented 7% and 10% of our revenue for the years ended December 31, 2023 and 2022, respectively, and our next largest demand partner represented 6% and 5% of revenue for the years ended December 31, 2023 and 2022, respectively.
If the Delaware legislature takes action to limit or eliminate our ability to include this provision in our amended and restated bylaws or a court were to find this provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition. 43 Table of Contents Different interests among our investors or between our investors and us, including with respect to related party transactions, could prevent us from achieving our business goals.
If the Delaware legislature takes action to limit or eliminate our ability to include this provision in our amended and restated bylaws or a court were to find this provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.
Our top 20 demand partners represent 46% and 60% of our revenue for the years ended December 31, 2022 and 2021, respectively.
Our top 20 demand partners represented 41% and 46% of our revenue for the years ended December 31, 2023 and 2022, respectively.
If we do not manage the growth of our business and operations effectively, the quality of our services and efficiency of our operations could suffer and we may not be able to execute on our business plan, which could harm our business, financial condition, operating results, cash flows, and prospects. 22 Table of Contents Our past growth or the past growth in our verticals or by our competitors may not be indicative of future growth, and our revenue growth rate may decline in the future.
If we do not manage the growth of our business and operations effectively, the quality of our services and efficiency of our operations could suffer and we may not be able to execute on our business plan, which could harm our business, financial condition, operating results, cash flows, and prospects.
As a result, we cannot guarantee that our partners will continue to work with us, or, if they do, the amount of Consumer Referrals demand partners will purchase or the amount of Consumer Referrals supply partners will make available on our platform.
As a result, we cannot guarantee that our partners will continue to work with us, or, if they do, the amount of Consumer Referrals demand partners will purchase or the amount of Consumer Referrals supply partners will make available on our platform. 19 Table of Contents If a partner is not satisfied with our platform, it could cause us to lose our relationship with them.
If a partner is not satisfied with our platform, it could cause us to lose our relationship with them. In addition to a loss of revenue, this may produce publicity that could hurt our reputation and adversely affect our ability to retain business or secure new business with other partners.
In addition to a loss of revenue, this may produce publicity that could hurt our reputation and adversely affect our ability to retain business or secure new business with other partners.
Although we are not aware of any material information security breaches to date, we have detected common types of attempts to attack our information systems and data. 32 Table of Contents We collect, process, store, share, disclose, transfer, and use consumer information and other data, and an actual or perceived failure to protect such information and data or respect users’ privacy could damage our reputation and brand or negatively affect our ability to retain partners and harm our business, financial condition, operating results, cash flows, and prospects.
We collect, process, store, share, disclose, transfer, and use consumer information and other data, and an actual or perceived failure to protect such information and data or respect users’ privacy could damage our reputation and brand or negatively affect our ability to retain partners and harm our business, financial condition, operating results, cash flows, and prospects.
If we are unable to maintain or enhance client awareness of our brand cost-effectively, our business, financial condition, operating results, cash flows, and prospects could be materially and adversely affected. Our existing and any future indebtedness could adversely affect our ability to operate our business.
If we are unable to maintain or enhance client awareness of our brand cost-effectively, our business, financial condition, operating results, cash flows, and prospects could be materially and adversely affected. Changes in tax laws or exposure to additional income or other tax liabilities could affect our future profitability.
We cannot ensure that we will be able to retain the services of any members of our senior management or other key employees. If we do not succeed in attracting well-qualified employees or retaining and motivating our existing employees, our business, financial condition, operating results, cash flows, and prospects could be materially and adversely affected.
If we do not succeed in attracting well-qualified employees or retaining and motivating our existing employees, our business, financial condition, operating results, cash flows, and prospects could be materially and adversely affected.
We intend to continue to take advantage of certain of these exemptions for so long as we continue to qualify as a “controlled company.” Accordingly, during such time our stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements. 44 Table of Contents Risks related to our structure We are a holding company and our only material asset is our indirect interest in QLH and, accordingly, we are dependent upon distributions from QLH to pay taxes and other expenses.
We intend to continue to take advantage of certain of these exemptions for so long as we continue to qualify as a “controlled company.” Accordingly, during such time our stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements.
If we experience operational failures or prolonged disruptions or delays in the availability of our 30 Table of Contents systems, we could lose current and potential partners, which could harm our business, financial condition, operating results, cash flows, and prospects.
If we experience operational failures or prolonged disruptions or delays in the availability of our systems, we could lose current and potential partners, which could harm our business, financial condition, operating results, cash flows, and prospects. 32 Table of Contents Any errors, defects, or disruptions in our platform or services we rely on from third parties, or other performance problems with our platform or services we rely on from third parties could harm our brand and may damage the businesses of our partners.
Similarly, supply partners can seek to monetize high-intent consumers or maximize the value of non-converting consumers on their websites by building their own solutions or turning to other service providers, including our competitors.
Similarly, supply partners can seek to monetize high-intent consumers or maximize the value of non-converting consumers on their websites by building their own solutions or turning to other service providers, including our competitors. The majority of our demand partners do not have exclusive relationships with us, and they may change the manner in which they market and distribute their products.
These reductions continue to impact revenue from our P&C insurance vertical and we are currently unable to predict the timing or slope of a recovery in this vertical. We may not have sufficient funds, and may be unable to generate sufficient cash flows from operations, to pay the amounts due under our existing debt instruments.
These reductions continue to impact revenue from our P&C insurance vertical and we are currently unable to predict the timing or slope of a recovery in this vertical.
These or other changes could impact the manner in which we or our partners are permitted to conduct business, which could negatively affect our and/or their marketing practices, budgets, and overall level of business with us, which could adversely impact our business, financial condition, operating results, cash flows, and prospects.
In addition, CMS has recently proposed changes in the regulations regarding the compensation of Medicare brokers and the maximum duration of short-term, limited-duration health insurance plans, These or other changes have impacted and could in the future impact the manner in which we or our partners are permitted to conduct business, which could negatively affect our and/or their marketing 35 Table of Contents practices, budgets, and overall level of business with us, which could adversely impact our business, financial condition, operating results, cash flows, and prospects.
Failure to make payments or comply with other covenants under our existing or future debt instruments could result in an event of default. If an event of default occurs and the lender accelerates the amounts due, we may need to seek additional financing, which may not be available on acceptable terms, in a timely manner or at all.
Upon the maturity of the 2021 Credit Facilities, or earlier if an event of default occurs and the lender accelerates the amounts due, we may need to seek additional financing, which may not be available on acceptable terms, in a timely manner or at all.
On July 29, 2021, our subsidiary QuoteLab, LLC entered into the First Amendment to the 2020 Credit Agreement (“Amended Credit Agreement”), which provides for the 2021 Term Loan Facility and the 2021 Revolving Credit Facility (collectively “2021 Credit Facilities”). The 2021 Revolving Credit Facility is available for general corporate purposes.
Our existing and any future indebtedness could adversely affect our ability to operate our business. On July 29, 2021, our subsidiary QuoteLab, LLC entered into the First Amendment to the 2020 Credit Agreement (“Existing Credit Agreement”), as amended, which provides for the 2021 Term Loan Facility and the 2021 Revolving Credit Facility (collectively “2021 Credit Facilities”).
The digital customer acquisition services market is relatively new and rapidly evolving, and it uses different measurements than traditional media to gauge its effectiveness. Some of our current or potential partners have little or no experience using the internet for customer acquisition purposes and have historically allocated only limited portions of their customer acquisition budgets to the internet.
Some of our current or potential partners have little or no experience using the internet for customer acquisition purposes and have historically allocated only limited portions of their customer acquisition budgets to the internet.
We implemented new internal controls to address this material weakness, and remediated the control deficiency that led to the material weakness as of December 31, 2021. We cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to avoid potential future material weaknesses.
We cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to avoid potential future material weaknesses.
If we are unsuccessful in collecting such taxes from our end-customers, we could be held liable for such costs. Such tax assessments, penalties and interest, or future requirements may adversely affect our operating results.
If we are unsuccessful in collecting such taxes from our end-customers, we could be held liable for such costs.
We could be subject to costly litigation and, if we are unsuccessful in defending ourselves or in obtaining indemnity from our vendors, we could incur damages for the unauthorized or unlawful acts of sellers or vendors. 28 Table of Contents Risks related to our intellectual property rights and our technology If we are unable to adequately obtain, maintain, protect or enforce our intellectual property rights, proprietary systems, technology and brand, our ability to compete could be harmed.
We could be subject to costly litigation and, if we are unsuccessful in defending ourselves or in obtaining indemnity from our vendors, we could incur damages for the unauthorized or unlawful acts of sellers or vendors.
The TCPA prohibits companies from making telemarketing calls to numbers listed in the Federal Do-Not-Call Registry and imposes other obligations and limitations on making phone calls and sending text messages to consumers.
The TCPA prohibits companies from making telemarketing calls using an automated telephone dialing system (ATDS) or artificial or prerecorded voice technology (collectively, “robocalls”), or to numbers listed in the Federal Do-Not-Call Registry, and imposes other obligations and limitations on making phone calls and sending text messages to consumers, in either case without the prior consent of the consumer.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Removed
Item 4. Mine Safety Disclosures. Not applicable. 46 Table of Contents PART II
Added
The content of Part II, Item 8 "Financial Statements and Supplementary Data—Note 8 to the Consolidated Financial Statements—Commitments and contingencies - Litigation and other matters" of this Annual Report on Form 10-K is hereby incorporated by reference in its entirety in this Item 3. Item 4. Mine Safety Disclosures. Not applicable. 48 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities authorized for issuance under equity compensation plans Number of securities to be issued upon vesting of restricted stock units and awards Weighted average price Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) QLH Class B-1 Units (Restricted Stock Awards) 42,170 — — Restricted Class A Shares (Restricted Stock Awards) 181,061 — — 2020 Omnibus Incentive Plan 4,894,121 — 5,051,934 47 Table of Contents Performance Graph The performance graph and related information shall not be deemed to be “soliciting material” or “filed” for purposes of Section 18 of the Exchange Act nor shall such information be incorporated by reference into any filing of MediaAlpha, Inc. under the Exchange Act or the Securities Act, except to the extent we specifically incorporate it by reference in such filing.
Biggest changeSecurities authorized for issuance under equity compensation plans The information required by this item will be included in our Proxy Statement for the 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023 and is incorporated herein by reference. 49 Table of Contents Performance Graph The performance graph and related information shall not be deemed to be “soliciting material” or “filed” for purposes of Section 18 of the Exchange Act nor shall such information be incorporated by reference into any filing of MediaAlpha, Inc. under the Exchange Act or the Securities Act, except to the extent we specifically incorporate it by reference in such filing.
The graph set forth above compares the cumulative total return to stockholders on our Class A common stock relative to the cumulative total returns of the Russell 3000 Index and the S&P 500 Information Technology Index between October 28, 2020 (the date our Class A common stock commenced trading on NYSE) through December 31, 2022.
The graph set forth above compares the cumulative total return to stockholders on our Class A common stock relative to the cumulative total returns of the Russell 3000 Index and the S&P 500 Information Technology Index between October 28, 2020 (the date our Class A common stock commenced trading on NYSE) through December 31, 2023.
We withheld these shares at their fair market values based upon the closing prices of our Class A Common Shares on NYSE on the purchase dates. 48 Table of Contents Item 6. Reserved.
We withheld these shares at their fair market values based upon the closing prices of our Class A Common Shares on NYSE on the purchase dates. 50 Table of Contents Item 6. Reserved.
Holders of Record As of January 31, 2023, there were 33 holders of record of our Class A common stock and 13 holders of record of our Class B common stock. We believe there are a significantly larger number of beneficial owners of our common stock because many shares are held by brokers and other institutions on behalf of stockholders.
Holders of Record As of January 31, 2024, there were 24 holders of record of our Class A common stock and 13 holders of record of our Class B common stock. We believe there are a significantly larger number of beneficial owners of our common stock because many shares are held by brokers and other institutions on behalf of stockholders.
Issuer Purchases of Equity Securities The following table provides information about our share repurchase activity for the quarter ended December 31, 2022: Period: Total Number of Shares (or Units) Purchased (1) Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (b) October, 2022 — — N/A N/A November, 2022 99,266 14.31 N/A N/A December, 2022 — — N/A N/A (1) These shares of Class A Common Stock were withheld to satisfy tax withholding obligations in connection with the vesting of restricted stock units issued to employees of the Company.
Issuer Purchases of Equity Securities The following table provides information about our share repurchase activity for the quarter ended December 31, 2023: Period: Total Number of Shares (or Units) Purchased (1) Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs October, 2023 — — N/A N/A November, 2023 85,933 9.56 N/A N/A December, 2023 — — N/A N/A (1) These shares of Class A Common Stock were withheld to satisfy tax withholding obligations in connection with the vesting of restricted stock units issued to employees of the Company.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeInterest expense The following table presents our interest expense for the years ended December 31, 2022 and 2021, and the dollar and percentage changes between the periods: (in thousands) Year ended December 31, 2022 $ % Year ended December 31, 2021 Interest expense, net $ 9,245 1,415 18.1 % $ 7,830 Percentage of revenue 2.0 % 1.2 % The increase in interest expense for the year ended December 31, 2022, compared with the year ended December 31, 2021, was driven primarily by the interest on amounts drawn on our 2021 Revolving Credit Facility in April 2022 to fund a portion of the consideration for our acquisition of CHT and higher interest rates on our 2021 Term Loan Facility, offset in part by the impact of a lower average outstanding balance on the 2021 Term Loan Facility. 57 Table of Contents Income tax expense (benefit) The following table presents our income tax expense (benefit) for the years ended December 31, 2022 and 2021, and the dollar and percentage changes between the periods: (in thousands) Year ended December 31, 2022 $ % Year ended December 31, 2021 Income tax expense (benefit) $ 102,905 103,952 n/m $ (1,047) Percentage of revenue 22.4 % (0.2) % For the year ended December 31, 2022, we recorded income tax expense of $102.9 million resulting from our effective tax rate of 337.8%, which differed from the U.S. federal statutory rate of 21%, due primarily to changes in valuation allowance, tax impacts associated with equity based awards, and tax impacts of losses attributable to non-controlling interests.
Biggest changeIncome tax (benefit) expense The following table presents our income tax (benefit) expense for the years ended December 31, 2023 and 2022, and the dollar and percentage changes between the periods: (in thousands) Year ended December 31, 2023 $ % Year ended December 31, 2022 Income tax (benefit) expense $ (463) (103,368) n/m $ 102,905 Percentage of revenue (0.1) % 22.4 % For the year ended December 31, 2023, our income tax benefit of $0.5 million consisted primarily of the tax impacts of changes in our uncertain tax positions, as we recorded a valuation allowance against our current year losses.
The change also resulted in an expense/benefit of the same amount which has been recorded within income tax expense (benefit) for the same periods.
The change also resulted in an expense/benefit of the same amount, which has been recorded within income tax (benefit) expense for the same periods.
The Amended Credit Agreement provides for a new senior secured term loan facility in an aggregate principal amount of $190.0 million (the “2021 Term Loan Facility”), the proceeds of which were used to refinance all of the $186.4 million outstanding under the existing 2020 Term Loan Facility and the unpaid interest thereon as of the date of the First Amendment, to pay fees related to these transactions, and to provide cash for general corporate purposes, and a new senior secured revolving credit facility with commitments in an aggregate amount of $50.0 million (the “2021 Revolving Credit Facility” and, together with the 2021 Term Loan Facility, the "2021 Credit Facilities"), which replaced the 2020 Revolving Credit Facility.
The Existing Credit Agreement provides for a new senior secured term loan facility in an aggregate principal amount of $190.0 million (the “2021 Term Loan Facility”), the proceeds of which were used to refinance all of the $186.4 million outstanding under the existing 2020 Term Loan Facility and the unpaid interest thereon as of the date of the First Amendment, to pay fees related to these transactions, and to provide cash for general corporate purposes, and a new senior secured revolving credit facility with commitments in an aggregate amount of $50.0 million (the “2021 Revolving Credit Facility” and, together with the 2021 Term Loan Facility, the "2021 Credit Facilities"), which replaced the 2020 Revolving Credit Facility.
The auto insurance industry began to experience a cyclical downturn in the second half of 2021, with many P&C insurance carriers experiencing lower than expected underwriting profitability due to higher than expected inflation in automobile claims costs, leading them to reduce their customer acquisition spending on our platform until they can obtain regulatory approval to increase their premium rates.
The auto insurance industry began to experience a cyclical downturn in the second half of 2021, with many P&C insurance carriers experiencing lower than expected underwriting profitability due to higher than expected inflation in automobile claims costs, leading them to reduce their customer acquisition spending on our platform until they obtain regulatory approval to increase their premium rates.
During the second half of 2021, the auto insurance industry began to experience a cyclical downturn, as supply chain disruptions and cost increases caused by the pandemic and overall inflationary pressures contributed to higher-than-expected P&C insurance claims costs, which led many carriers to reduce their customer acquisition spending to preserve their profitability.
During the second half of 2021, the auto insurance industry began to experience a cyclical downturn, as supply chain disruptions and cost increases caused by the pandemic and overall inflationary pressures contributed to higher-than-expected P&C insurance claims costs, which led many carriers to reduce their customer acquisition spending significantly to preserve their profitability.
To the extent that our current liquidity is insufficient to fund future activities or we do not remain in compliance with our financial covenants under the 2021 Credit Facilities, we may need to reduce operating costs, negotiate amendments to or waivers of the terms of such credit facilities, refinance our debt, or raise additional capital.
To the extent that our current liquidity is insufficient to fund future activities or we do not remain in compliance with our financial covenants under the 2021 Credit Facilities, we may need to further reduce operating costs, negotiate amendments to or waivers of the terms of such credit facilities, refinance our debt, or raise additional capital.
(6) Changes in TRA related liability for the year ended December 31, 2022 consist of $83.3 million of gain on reduction of liability pursuant to the TRA resulting from remeasuring of the non-current portion of liability to zero as we no longer consider the payments under the agreement to be probable.
Changes in TRA related liability for the year ended December 31, 2022 consist of $83.3 million of gain on reduction of liability pursuant to the TRA resulting from remeasuring of the non-current portion of liability to zero as we no longer consider the payments under the agreement to be probable.
Liabilities related to the tax receivables agreement As described in Part II, Item 8 “Financial Statements and Supplementary Data - Note 1 to the Consolidated Financial Statements - Organization and Background” of this Annual Report on Form 10-K, we are a party to the Tax Receivables Agreement (“TRA”), under which we are contractually committed to pay the non-controlling interest holders in QLH 85% of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize as a result of certain transactions.
Liabilities related to the tax receivables agreement As described in Part II, Item 8 “Financial Statements and Supplementary Data - Note 1 to the Consolidated Financial Statements - Organization and Background” of this Annual Report on Form 10-K, we are a party to the TRA, under which we are contractually committed to pay the non-controlling interest holders in QLH 85% of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize as a result of certain transactions.
Should this be the case or if we decide to proceed directly to the goodwill impairment, we identify whether a potential impairment exists by comparing the estimated fair value of the reporting unit with the carrying value, including goodwill.
Should this be the case or if we decide to proceed directly to the goodwill impairment test, we identify whether a potential impairment exists by comparing the estimated fair value of the reporting unit with the carrying value, including goodwill.
Though we continue to expect P&C insurance revenue to increase over the course of 2023 as more carriers reach rate adequacy and resume competing for market share, we are currently unable to accurately predict the duration of this cyclical downturn or its impact on our revenue from the P&C insurance vertical, or our profitability, beyond the first quarter of 2023.
Though we continue to expect P&C insurance revenue to increase over the course of 2024 as more carriers reach rate adequacy and resume competing for market share, we are currently unable to accurately predict the duration of this cyclical downturn or its impact on our revenue from the P&C insurance vertical, or our profitability, beyond the first quarter of 2024.
On April 1, 2022, we closed the acquisition of substantially all of the assets of Customer Helper Team, LLC ("CHT") for cash consideration of $49.7 million at closing, plus contingent consideration of up to $20.0 million based on CHT’s achievement of revenue and profitability targets for the two successive 12-month periods following the closing.
On April 1, 2022, we closed the acquisition of substantially all of the assets of Customer Helper Team, LLC ("CHT") for cash consideration of $49.7 million at closing, plus contingent consideration of up to $20.0 million based on CHT’s achievement of revenue and profitability targets for the two successive twelve-month periods following the closing.
The effect of a change in tax rates on deferred tax assets and liabilities is recognized on our consolidated statement of operations in the period in which the enactment date occurs. We record valuation allowances against our deferred tax assets when we determine that they are more likely than not to be realized.
The effect of a change in tax rates on deferred tax assets and liabilities is recognized on our consolidated statements of operations in the period in which the enactment date occurs. We record valuation allowances against our deferred tax assets when we determine that they are more likely than not to be realized.
Our relationships with our partners are deep and long standing and involve most of the top-tier insurance carriers in the industry. In terms of buyers, during the year ended December 31, 2022, 15 of the top 20 largest auto insurance carriers by customer acquisition spend were on our platform.
Our relationships with our partners are deep and long standing and involve most of the top-tier insurance carriers in the industry. In terms of buyers, during the year ended December 31, 2023, 15 of the top 20 largest auto insurance carriers by customer acquisition spend were on our platform.
We recognize revenue pursuant to the framework contained in Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606"), as issued by the Financial Accounting Standards Board (“FASB”): (i) identify the contract with a client; (ii) identify the performance obligations in the contract, including whether they are distinct in the context of the contract; (iii) determine the transaction price, including the constraint on variable consideration; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when we satisfy the performance obligations.
We recognize revenue pursuant to the framework contained in Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606"), as issued by the Financial Accounting Standards Board (“FASB”): (i) identify the contract with a client; (ii) identify the performance obligations in the contract, including whether they are distinct in the context of the contract; (iii) determine the transaction 54 Table of Contents price, including the constraint on variable consideration; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when we satisfy the performance obligations.
In such cases, the carrying value of these assets are adjusted to their estimated fair values and assets held for sale are adjusted to their estimated fair values less selling expenses. For the years ended December 31, 2022 and 2021, there were no impairments recognized for long-lived assets.
In such cases, the carrying value of these assets are adjusted to their estimated fair values and assets held for sale are adjusted to their estimated fair values less selling expenses. For the years ended December 31, 2023 and 2022, there were no impairments recognized for long-lived assets.
The majority of our accounts receivables are less than 60 days old. If we were to experience a delay in receiving a payment from a buyer within a quarter, our operating cash flows for that quarter could be adversely impacted.
The majority of our accounts receivable are less than 60 days old. If we were to experience a delay in receiving a payment from a buyer within a quarter, our operating cash flows for that quarter could be adversely impacted.
An impairment loss is recognized on long-lived assets in the consolidated statement of operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of the assets.
An impairment loss is recognized on long-lived assets in the consolidated statements of operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of the assets.
Sales and marketing Sales and marketing expenses consist primarily of an allocation of personnel expenses for employees engaged in demand side and supply side business development and marketing, and include salaries, wages, non-cash equity-based compensation, and the cost of health and other employee benefits.
Sales and marketing Sales and marketing expenses consist primarily of an allocation of personnel expenses for employees engaged in demand side and supply side business development and marketing, and include salaries, wages, equity-based compensation, and the cost of health and other employee benefits.
We believe the versatility and breadth of our offerings, coupled with our focus on high-quality products, provide significant value to insurance carriers and distributors, leading many of them to use our platform as their central hub for broadly managing digital customer acquisition and monetization, resulting in strong retention rates.
We believe the versatility and breadth of our offerings, coupled with our focus on high-quality products, provide significant value to insurance carriers and distributors, leading many of them to use our platform as their central hub for broadly managing digital customer 52 Table of Contents acquisition and monetization, resulting in strong retention rates.
These cycles in the auto insurance industry are characterized by periods of “soft” market conditions, when carriers are profitable and are focused on increasing capacity and building market share, and “hard” market conditions, when carriers are experiencing lower or even negative underwriting profits and are seeking to increase their premium rates to improve their 50 Table of Contents profitability.
These cycles in the auto insurance industry are characterized by periods of “soft” market conditions, when carriers are profitable and are focused on increasing capacity and building market share, and “hard” market conditions, when carriers are experiencing lower or even negative underwriting profits and are seeking to increase their premium rates to improve their profitability.
The price and amount of Consumer Referrals purchased and sold on our platform vary based on a number of market conditions and consumer attributes, including (i) geographic location of consumers, (ii) demographic attributes of consumers, 51 Table of Contents (iii) the source of Consumer Referrals and quality of conversion by source, (iv) buyer bid levels and (v) buyer demand and budgets.
The price and amount of Consumer Referrals purchased and sold on our platform vary based on a number of market conditions and consumer attributes, including (i) geographic location of consumers, (ii) demographic attributes of consumers, (iii) the source of Consumer Referrals and quality of conversion by source, (iv) buyer bid levels and (v) buyer demand and budgets.
Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the consolidated financial statements and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse.
Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the consolidated financial statements and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are 68 Table of Contents expected to reverse.
Our chief operating decision maker is our chief executive officer, who reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. No expense or operating income is evaluated at a segment level.
Our chief operating decision maker is our chief executive officer, who reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. No expense or operating income is evaluated at a level below our consolidated financial statements.
The excess of the purchase price over the fair value of the identified assets and liabilities is recorded as goodwill. Operating results of the acquired entity are reflected in our consolidated financial statements from the date of acquisition.
The excess 67 Table of Contents of the purchase price over the fair value of the identified assets and liabilities is recorded as goodwill. Operating results of the acquired entity are reflected in our consolidated financial statements from the date of acquisition.
The accounting policies we believe to reflect our more significant estimates, judgments and assumptions that are most critical to understanding and evaluating our reported financial results are: business combination, goodwill and intangible assets, impairment of long-lived assets, equity-based compensation, income taxes, and liabilities related to the tax receivables agreement.
The accounting policies we believe to reflect our more significant estimates, judgments and assumptions that are most critical to understanding and evaluating our reported financial results are: business combination, goodwill and intangible assets, impairment of long-lived assets, equity-based compensation, income taxes, and liabilities related to the TRA.
Investing activities Our investing activities consist primarily of purchases of property and equipment, acquisitions of intangible assets as part of business acquisitions, and investments. Cash flows used in investing activities were $49.8 million for the year ended December 31, 2022, compared with $0.7 million for the year ended December 31, 2021.
Investing activities Our investing activities consist primarily of purchases of property and equipment, acquisitions of intangible assets as part of business acquisitions, and investments. Cash flows used in investing activities were $0.1 million for the year ended December 31, 2023, compared with $49.8 million for the year ended December 31, 2022.
Our 62 Table of Contents material cash requirements include our long-term debt, operating lease obligations, any payments under the TRA, and any contingent consideration payable in connection with our acquisition of CHT.
Our material cash requirements include our long-term debt, operating lease obligations, any payments under the TRA, and any contingent consideration payable in connection with our acquisition of CHT.
In such event, the Company would be required to make an immediate cash payment equal to the present value of the anticipated future tax benefits that are the subject of the TRA. 67 Table of Contents
In such event, the Company would be required to make an immediate cash payment equal to the present value of the anticipated future tax benefits that are the subject of the TRA.
The following table reconciles Contribution with gross profit, the most directly comparable financial measure calculated and presented in accordance with GAAP, for the years ended December 31, 2022, 2021 and 2020.
The following table reconciles Contribution with gross profit, the most directly comparable financial measure calculated and presented in accordance with GAAP, for the years ended December 31, 2023 and 2022.
We believe it is useful to investors to assess the overall level of activity on our platform and to better understand the sources of our revenue across our different transaction models and verticals. 60 Table of Contents The following table presents Transaction Value by platform model for the years ended December 31, 2022, 2021 and 2020.
We believe it is useful to investors to assess the overall level of activity on our platform and to better understand the sources of our revenue across our different transaction models and verticals. 62 Table of Contents The following table presents Transaction Value by platform model for the years ended December 31, 2023 and 2022.
(3) SOX implementation costs consist of $0.1 million and $1.2 million of expenses incurred by us for the years ended December 31, 2022 and 2021, respectively, for third-party consultants to assist us with the development, implementation, and documentation of new and enhanced internal controls and processes for compliance with SOX Section 404(b).
(2) SOX implementation costs consist of $0.1 million of expenses incurred by us for the year ended December 31, 2022 for third-party consultants to assist us with the development, implementation, and documentation of new and enhanced internal controls and processes for compliance with SOX Section 404(b).
As long as 49 Table of Contents these secular trends persist, we expect digital insurance customer acquisition spending to continue to grow over time, and we believe we are well-positioned to benefit from this growth.
As long as these secular trends persist, we expect digital insurance customer acquisition spending to continue to grow over time, and we believe we are well-positioned to benefit from this growth.
For the year ended December 31, 2022, 92% of total Transaction Value executed on our platform came from demand partner relationships in existence during 2021. Our demand and supply partners Our success depends on our ability to retain and grow the number of demand and supply partners on our platform.
For the year ended December 31, 2023, 93% of total insurance Transaction Value executed on our platform came from demand partner relationships in existence during 2022. Our demand and supply partners Our success depends on our ability to retain and grow the number of demand and supply partners on our platform.
Cost of revenue Our cost of revenue is comprised primarily of revenue share payments to suppliers and traffic acquisition costs paid to search engines and social media platforms, as well as telephony infrastructure costs, internet and hosting costs, and merchant fees, and includes salaries, wages, non-cash equity-based compensation, the cost of health and other employee benefits, and other expenses including allocated portion of rent and facilities expenses.
Cost of revenue Our cost of revenue is comprised primarily of revenue share payments to suppliers and traffic acquisition costs paid to search engines and social media platforms, as well as telephony infrastructure costs, internet and hosting costs, and merchant fees, and includes salaries, wages, equity-based compensation, the cost of health and other employee benefits for employees engaged in media buying, and other expenses including allocated portion of rent and facilities expenses.
These limitations include the fact that Adjusted EBITDA excludes interest expense on debt, income tax benefit (expense), equity-based compensation expense, depreciation and amortization, and certain other adjustments that we consider useful information to investors and others in understanding and evaluating our operating results.
These limitations include the fact that Adjusted EBITDA excludes interest expense on debt, income tax benefit (expense), equity-based compensation expense, depreciation and amortization, and certain other adjustments that we 60 Table of Contents consider to be useful to investors and others in understanding and evaluating our operating results.
Consumer Referrals Our results depend in large part on the number of Consumer Referrals purchased on our platform. The aggregate number of consumer clicks, calls and leads purchased by insurance buyers on our platform declined to 90.4 million for the year ended December 31, 2022 from 98.3 million for the year ended December 31, 2021.
Consumer Referrals Our results depend in large part on the number of Consumer Referrals purchased on our platform. The aggregate number of consumer clicks, calls and leads purchased by insurance buyers on our platform increased to 98.8 million for the year ended December 31, 2023 from 90.4 million for the year ended December 31, 2022.
Other (income) expense, net for the year ended December 31, 2022 consisted primarily of a gain on reduction of liability pursuant to the Tax Receivables Agreement (“TRA”) and an impairment charge related to our cost method investment.
Other (income), net for the year ended December 31, 2022 consisted primarily of a gain on reduction of liability pursuant to the Tax Receivables Agreement (“TRA”) offset in part by an impairment charge related to our cost method investment.
Transaction Value on our platform declined to $737.5 million for the year ended December 31, 2022 from $1.0 billion for the year ended December 31, 2021, due primarily to a decrease in customer acquisition spending by P&C insurance carriers in response to significant reductions in their underwriting profitability.
Transaction Value on our platform declined to $593.4 million for the year ended December 31, 2023 from $737.5 million for the year ended December 31, 2022, due primarily to a decrease in customer acquisition spending by P&C insurance carriers in response to significant reductions in their underwriting profitability.
The applicable margins will be based on our consolidated total net leverage ratio as calculated under the terms of the Amended Credit Agreement (the “Leverage Ratio”) for the prior fiscal quarter and range from 2.00% to 2.75% with respect to the London Interbank Offered Rate and from 1.00% to 1.75% with respect to the base rate.
The applicable margins will be based on our consolidated total net leverage ratio as calculated under the terms of the Amended Credit Agreement (the “Leverage Ratio”) for the prior fiscal quarter and range from 2.00% to 2.75% with respect to the Term SOFR or Daily Simple SOFR and from 1.00% to 1.75% with respect to the base rate.
As of December 31, 2022, in conjunction with recording a valuation allowance on our deferred tax assets and projections of future taxable income, we determined that we no longer consider the payments under the agreement to be probable, and so remeasured our liabilities pursuant to the TRA, net of current portion, to be zero.
As of December 31, 2023, we had no payments due pursuant to the TRA, as in conjunction with recording a valuation allowance on our deferred tax assets and projections of future taxable income we determined that we no longer consider the payments under the TRA to be probable, and so remeasured our liabilities pursuant to the TRA to be zero.
We are investing in diversifying our paid media sources to extend beyond search engine marketing, which has historically represented the bulk of our paid media spend, into other online media sources, including native, social, and display advertising. Seasonality Our results are subject to fluctuations as a result of seasonality.
We continuously look to diversify our paid media sources to extend beyond search engine marketing, which has historically represented the bulk of our paid media spend, into other online media sources, such as native, social, and display advertising. Seasonality Our results are subject to fluctuations as a result of seasonality.
The TRA also requires us to pay White Mountains 85% of the amount of the cash savings, if any, in U.S. federal, state and local income tax that we realize (or are deemed to realize) as a result of the utilization of the net operating losses of Intermediate Holdco attributable to periods prior to the IPO and the deduction of any imputed interest attributable to our payment obligations under the TRA. 64 Table of Contents In addition to tax expenses, we may also make payments under the TRA, which could be significant.
The TRA also requires us to pay White Mountains 85% of the amount of the cash savings, if any, in U.S. federal, state and local income tax that we realize (or are deemed to realize) as a result of the utilization of the net operating losses of Intermediate Holdco attributable to periods prior to the IPO and the deduction of any imputed interest attributable to our payment obligations under the TRA.
The 2021 Revolving Credit Facility does not require amortization of principal and will mature on July 29, 2026. As of December 31, 2022, we had $178.1 million of outstanding borrowings, net of deferred debt issuance costs of $2.4 million and $5.0 million under the 2021 Term Loan Facility and 2021 Revolving Credit Facility, respectively.
The 2021 Revolving Credit Facility does not require amortization of principal and will mature on July 29, 2026. As of December 31, 2023, we had $169.3 million of outstanding borrowings, net of deferred debt issuance costs of $1.7 million, under the 2021 Term Loan Facility, and $5.0 million of borrowings outstanding under the 2021 Revolving Credit Facility.
(7) Changes in Tax Indemnification Receivable consists of $0.1 million of income, $1.4 million of expense, and $0.3 million of expense incurred by us for the years ended December 31, 2022, 2021, and 2020, respectively, related to changes in the tax indemnification receivable recorded in connection with the Reorganization Transactions.
(5) Changes in Tax Indemnification Receivable consists of $0.6 million of expense and $0.1 million of income incurred by us for the years ended December 31, 2023 and 2022, respectively, related to changes in the tax indemnification receivable recorded in connection with the Reorganization Transactions.
We generate revenue by earning a fee for each Consumer Referral sold on our platform. A transaction becomes payable upon a qualifying consumer action, such as a click, call or lead, and is generally not contingent on the sale of a product to the consumer. We believe in the disruptive power of transparency.
We generate revenue by earning a fee for each Consumer Referral sold on our platform. A transaction becomes payable upon a qualifying consumer action, such as a click, call or lead, and is generally not contingent on the sale of a product to the consumer. We believe our technology is a key differentiator and a powerful driver of our performance.
(10) Settlement of federal and state tax refunds consist of $0.1 million and $2.1 million of expenses incurred by us for the years ended December 31, 2022 and 2021, respectively, related to reimbursement to White Mountains for federal and state tax refunds for the period prior to the Reorganization Transaction related to 2020 federal and state tax returns.
(6) Settlement of federal and state tax refunds consist of immaterial expense and $0.1 million of expenses incurred by us for the years ended December 31, 2023 and 2022, respectively, related to reimbursement to White Mountains for federal and state tax refunds for the period prior to the Reorganization Transactions related to 2020 federal and state tax returns.
Financing activities Our financing activities consist primarily of proceeds from and repayments on our term debt facilities and revolving line of credit, payments of debt issue costs, transactions related to our common stock, and, prior to the IPO, member contributions and distributions of QLH.
Financing activities Our financing activities consist primarily of proceeds from and repayments on our term debt facilities and revolving line of credit, payments of debt issue costs, and transactions related to our common stock.
Cash flows used in financing activities were $14.5 million for the year ended December 31, 2022, compared with $1.0 million for the year ended December 31, 2021.
Cash flows used in financing activities were $17.4 million for the year ended December 31, 2023, compared with $14.5 million for the year ended December 31, 2022.
Interest expense Interest expense consists primarily of interest expense associated with outstanding borrowings under our 2021 Credit Facilities and the amortization of deferred financing costs associated with these arrangements. See “-Liquidity and capital resources-Financing activities” below.
Interest expense Interest expense consists primarily of interest expense associated with outstanding borrowings under our 2021 Credit Facilities and the amortization of deferred financing costs associated with these arrangements.
During the year ended December 31, 2022, an average of 26.0 million consumers shopped for insurance products through the websites of our diversified group of supply partners and our proprietary websites each month, driving an average of 7.5 million Consumer Referrals on our platform each month.
During the year ended December 31, 2023, an average of 36.9 million consumers shopped for insurance products through the websites of our diversified group of supply partners and our proprietary websites each month, driving an average of 8.2 million Consumer Referrals on our platform each month.
(4) Fair value adjustment to contingent consideration for the year ended December 31, 2022 consists of $7.0 million of gain in connection with the remeasurement of the contingent consideration for the acquisition of CHT as of December 31, 2022.
(3) Fair value adjustment to contingent consideration for the year ended December 31, 2022 consists of $7.0 million of gain in connection with the remeasurement of the contingent consideration for the acquisition of CHT as of December 31, 2022. (4) Changes in TRA related liability for the year ended December 31, 2023 consist of immaterial expense.
The following table presents the percentages of total Transaction Value generated from clicks, calls and leads for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 Clicks 75.3 % 79.3 % Calls 15.3 % 9.5 % Leads 9.4 % 11.3 % 61 Table of Contents Segment information We operate in the United States and in a single operating segment.
The following table presents the percentages of total Transaction Value generated from clicks, calls and leads for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 Clicks 69.4 % 75.3 % Calls 18.6 % 15.3 % Leads 12.0 % 9.4 % 63 Table of Contents Segment information We operate primarily in the United States and in a single operating segment.
Cash flows The following table presents a summary of our cash flows for the years ended December 31, 2022 and 2021, and the dollar and percentage changes between the periods: (in thousands) Year ended December 31, 2022 $ % Year ended December 31, 2021 Net cash provided by operating activities $ 28,274 (347) (1.2) % $ 28,621 Net cash used in investing activities $ (49,775) (49,125) 7,557.7 % $ (650) Net cash used in financing activities $ (14,521) (13,560) 1,411.0 % $ (961) Operating activities Net cash provided by operating activities primarily consists of net loss, adjusted for certain (i) non-cash items including equity-based compensation expense, changes in deferred taxes, amortization of intangible assets, and deferred debt issuance costs, and (ii) changes in operating assets and liabilities (accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and deferred rent).
Cash flows The following table presents a summary of our cash flows for the years ended December 31, 2023 and 2022, and the dollar and percentage changes between the periods: (in thousands) Year ended December 31, 2023 $ % Year ended December 31, 2022 Net cash provided by operating activities $ 20,231 (8,043) (28.4) % $ 28,274 Net cash used in investing activities $ (73) 49,702 (99.9) % $ (49,775) Net cash used in financing activities $ (17,429) (2,908) 20.0 % $ (14,521) Operating activities Net cash provided by operating activities consists primarily of net loss, adjusted for certain (i) non-cash items including equity-based compensation expense, changes in deferred taxes, amortization of intangible assets, and deferred debt issuance costs, and (ii) changes in operating assets and liabilities (accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and deferred rent).
For example, the California Consumer Privacy Act ("CCPA"), became effective on January 1, 2020 and has been amended by the California Privacy Rights Act ("CPRA"), which became effective January 1, 2023, and a number of other states, including Colorado, Connecticut, Utah, and Virginia, have enacted or are considering similar laws, all of which may affect our business.
In addition, the California Consumer Privacy Act ("CCPA"), became effective on January 1, 2020 and has been amended by the California Privacy Rights Act ("CPRA"), which became effective January 1, 2023, and a number of other states, including Colorado, Connecticut, Delaware, Florida, Indiana, Iowa, Montana, New Jersey, Oregon, Tennessee, Texas, Utah, Virginia, and Washington, have enacted or are considering similar laws, all of which may affect our business.
We believe that our current sources of liquidity will be sufficient to meet our projected operating and debt service requirements, and to continue to comply with our financial covenants under the 2021 Credit Facilities, for at least the next 12 months.
We believe that our current sources of liquidity, which include cash flow generated from operations, cash and funds available under the 2021 Credit Facilities, will be sufficient to meet our projected operating and debt service requirements, and we expect that we will continue to comply with our financial covenants under the 2021 Credit Facilities, for at least the next twelve months.
Product development Product development expenses consist primarily of an allocation of personnel expenses for employees engaged in technology, engineering and product development and include salaries, wages, non-cash equity-based compensation, and the cost of health and other employee benefits.
Product development Product development expenses consist primarily of an allocation of personnel expenses for employees engaged in technology, engineering and product development and include salaries, wages, equity-based compensation, and the cost of health and other employee benefits. Product development expenses also include an allocated portion of rent and facilities expenses and depreciation and amortization expense.
Impairment of long-lived assets Long-lived assets such as property and equipment and finite lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable.
For the years ended December 31, 2023 and 2022, there were no impairments recognized for goodwill. Impairment of long-lived assets Long-lived assets such as property and equipment and finite lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable.
The settlement also resulted in a benefit of the same amount which has been recorded within income tax (benefit). 59 Table of Contents Contribution and Contribution Margin We define “Contribution” as revenue less revenue share payments and online advertising costs, or, as reported in our consolidated statement of operations, revenue less cost of revenue (i.e., gross profit), as adjusted to exclude the following items from cost of revenue: equity-based compensation; salaries, wages, and related costs; internet and hosting costs; amortization; depreciation; other services; and merchant-related fees.
Contribution and Contribution Margin We define “Contribution” as revenue less revenue share payments and online advertising costs, or, as reported in our consolidated statements of operations, revenue less cost of revenue (i.e., gross profit), as adjusted to exclude the following items from cost of revenue: equity-based compensation; salaries, wages, and related costs; internet and hosting costs; 61 Table of Contents amortization; depreciation; other services; and merchant-related fees.
Significant judgment is required in determining our provision or benefit for income taxes and in evaluating uncertain tax positions. We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events included in our consolidated financial statements.
We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events included in our consolidated financial statements.
The decrease in life insurance revenue for the year ended December 31, 2022, compared with the year ended December 31, 2021, was driven by a continued reduction in consumers shopping for life insurance as concerns related to the COVID-19 pandemic eased.
The decrease in life insurance revenue for the year ended December 31, 2023, compared with the year ended December 31, 2022, was driven by a continued reduction in consumers shopping for life insurance as concerns related to the COVID-19 pandemic eased, as well as by a shift in focus by a key supply partner from Life insurance to our Health vertical.
We obtain these Consumer Referrals from our diverse network of supply partners as well as from our proprietary properties. We seek to increase the number and scale of our supply relationships and drive consumers to our proprietary properties through a variety of paid traffic acquisition sources.
We seek to increase the number and scale of our supply relationships and drive consumers to our proprietary properties through a variety of paid traffic acquisition sources.
Product development expenses also include an allocated portion of rent and facilities expenses and depreciation and amortization expense. 52 Table of Contents General and administrative General and administrative expenses consist primarily of an allocation of personnel expenses for executive, finance, legal, people operations, and business analytics employees, and include salaries, wages, non-cash equity-based compensation, and the cost of health and other employee benefits.
General and administrative General and administrative expenses consist primarily of an allocation of personnel expenses for executive, finance, legal, people operations, and business analytics employees, and include salaries, wages, equity-based compensation, and the cost of health and other employee benefits.
As of December 31, 2022 and December 31, 2021, our cash and cash equivalents totaled $14.5 million and $50.6 million, respectively. As of December 31, 2022, the aggregate principal amount outstanding under the 2021 Term Loan Facility was $180.5 million and our borrowing capacity under the 2021 Revolving Credit Facility was $45.0 million.
As of December 31, 2023, the aggregate principal amount outstanding under the 2021 Term Loan Facility was $171.0 million and our borrowing capacity available under the 2021 Revolving Credit Facility was $45.0 million.
Other (income) expense, net The following table presents our other expenses for the years ended December 31, 2022 and 2021, and the dollar and percentage changes between the periods: (in thousands) Year ended December 31, 2022 $ % Year ended December 31, 2021 Other (income) expense, net $ (75,094) (78,935) n/m $ 3,841 Percentage of revenue (16.4) % 0.6 % For the year ended December 31, 2022, other (income), net consisted primarily of a gain on reduction of our liability pursuant to the TRA of $83.3 million resulting from remeasuring of the non-current portion of liability to zero as of December 31, 2022 after we concluded that payments under the agreement are no longer probable, offset in part by charges related to the impairment of our cost method investment of $8.6 million.
For the year ended December 31, 2022, other expense (income), net consisted primarily of a gain on reduction of our liability pursuant to the TRA of $83.3 million resulting from remeasuring of the non-current portion of liability to zero as of December 31, 2022 after we concluded that payments under the agreement are no longer probable, offset in part by charges related to the impairment of our cost method investment of $8.6 million. 59 Table of Contents Interest expense The following table presents our interest expense for the years ended December 31, 2023 and 2022, and the dollar and percentage changes between the periods: (in thousands) Year ended December 31, 2023 $ % Year ended December 31, 2022 Interest expense, net $ 15,315 6,070 65.7 % $ 9,245 Percentage of revenue 3.9 % 2.0 % The increase in interest expense for the year ended December 31, 2023, compared with the year ended December 31, 2022, was driven by an increase in the interest rate payable on amounts borrowed under the 2021 Credit Facilities, offset in part by the impact of lower outstanding balances in the current year period.
We have multi-faceted relationships with top-tier insurance carriers and distributors. A buyer or a demand partner within our ecosystem is generally an insurance carrier or distributor seeking to reach high-intent insurance consumers.
A buyer or a demand partner within our ecosystem is generally an insurance carrier or distributor seeking to reach high-intent insurance consumers.
Net loss attributable to non-controlling interests was $14.8 million, $3.2 million, and $4.2 million for the years ended December 31, 2022, 2021, and 2020, respectively. 53 Table of Contents Results of operations The following table sets forth our operating results in absolute dollars and as a percentage of revenue for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 (in thousands) Revenue $ 459,072 100.0 % $ 645,274 100.0 % Costs and operating expenses Cost of revenue 389,013 84.7 % 543,750 84.3 % Sales and marketing 28,816 6.3 % 22,823 3.5 % Product development 21,077 4.6 % 15,195 2.4 % General and administrative 55,556 12.1 % 61,357 9.5 % Total costs and operating expenses 494,462 107.7 % 643,125 99.7 % (Loss) income from operations (35,390) (7.7) % 2,149 0.3 % Other (income) expense, net (75,094) (16.4) % 3,841 0.6 % Interest expense 9,245 2.0 % 7,830 1.2 % Total other (income) expense, net (65,849) (14.3) % 11,671 1.8 % (Loss) before income taxes 30,459 6.6 % (9,522) (1.5) % Income tax expense (benefit) 102,905 22.4 % (1,047) (0.2) % Net (loss) $ (72,446) (15.8) % $ (8,475) (1.3) % Net (loss) attributable to non-controlling interest (14,780) (3.2) % (3,200) (0.5) % Net (loss) attributable to MediaAlpha, Inc. $ (57,666) (12.6) % $ (5,275) (0.8) % Net (loss) per share of Class A common stock -Basic $ (1.37) $ (0.14) -Diluted $ (1.37) $ (0.19) Weighted average shares of Class A common stock outstanding -Basic 41,944,874 37,280,533 -Diluted 41,944,874 61,255,925 Revenue The following table presents our revenue, disaggregated by vertical, for the years ended December 31, 2022 and 2021, and the dollar and percentage changes between the periods: (in thousands) Year ended December 31, 2022 $ % Year ended December 31, 2021 Property & casualty insurance $ 224,366 (193,349) (46.3) % $ 417,715 Percentage of revenue 48.9 % 64.7 % Health insurance 187,392 10,933 6.2 % 176,459 Percentage of revenue 40.8 % 27.3 % Life insurance 26,711 (1,875) (6.6) % 28,586 Percentage of revenue 5.8 % 4.4 % Other 20,603 (1,911) (8.5) % 22,514 Percentage of revenue 4.5 % 3.5 % Revenue $ 459,072 (186,202) (28.9) % $ 645,274 54 Table of Contents The decrease in P&C insurance revenue for the year ended December 31, 2022, compared with the year ended December 31, 2021, was due primarily to a decrease in customer acquisition spending by P&C carriers in response to lower than expected underwriting profitability.
Results of operations The following table sets forth our operating results in absolute dollars and as a percentage of revenue for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 (in thousands) Revenue $ 388,149 100.0 % $ 459,072 100.0 % Costs and operating expenses Cost of revenue 321,437 82.8 % 389,013 84.7 % Sales and marketing 25,432 6.6 % 28,816 6.3 % Product development 18,458 4.8 % 21,077 4.6 % General and administrative 62,746 16.2 % 55,556 12.1 % Total costs and operating expenses 428,073 110.3 % 494,462 107.7 % (Loss) from operations (39,924) (10.3) % (35,390) (7.7) % Other expense (income), net 1,779 0.5 % (75,094) (16.4) % Interest expense 15,315 3.9 % 9,245 2.0 % Total other expense (income), net 17,094 4.4 % (65,849) (14.3) % (Loss) income before income taxes (57,018) (14.7) % 30,459 6.6 % Income tax (benefit) expense (463) (0.1) % 102,905 22.4 % Net (loss) $ (56,555) (14.6) % $ (72,446) (15.8) % Net (loss) attributable to non-controlling interest (16,135) (4.2) % (14,780) (3.2) % Net (loss) attributable to MediaAlpha, Inc. $ (40,420) (10.4) % $ (57,666) (12.6) % Net (loss) per share of Class A common stock -Basic and diluted $ (0.89) $ (1.37) Weighted average shares of Class A common stock outstanding -Basic and diluted 45,573,416 41,944,874 56 Table of Contents Revenue The following table presents our revenue, disaggregated by vertical, for the years ended December 31, 2023 and 2022, and the dollar and percentage changes between the periods: (in thousands) Year ended December 31, 2023 $ % Year ended December 31, 2022 Property & casualty insurance $ 164,234 (60,132) (26.8) % $ 224,366 Percentage of revenue 42.3 % 48.9 % Health insurance 186,275 (1,117) (0.6) % 187,392 Percentage of revenue 48.0 % 40.8 % Life insurance 24,287 (2,424) (9.1) % 26,711 Percentage of revenue 6.3 % 5.8 % Other 13,353 (7,250) (35.2) % 20,603 Percentage of revenue 3.4 % 4.5 % Revenue $ 388,149 (70,923) (15.4) % $ 459,072 The decrease in P&C insurance revenue for the year ended December 31, 2023, compared with the year ended December 31, 2022, was due primarily to a decrease in customer acquisition spending by P&C carriers in response to lower than expected underwriting profitability.
The increase resulted primarily from the payment of cash consideration of $49.7 million for our acquisition of CHT, which closed on April 1, 2022.
The decrease resulted primarily from the payment of cash consideration of $49.7 million for our acquisition of CHT in April 2022, which did not recur in 2023.
In connection with the IPO, we entered into the Tax Receivables Agreement (“TRA”) with Insignia, the Senior Executives, and White Mountains related to the tax basis step-up of the assets of QLH and certain net operating losses of Intermediate Holdco.
This increase in tax basis may also decrease gain (or increase loss) on future dispositions of certain assets to the extent tax basis is allocated to those assets. 66 Table of Contents In connection with the IPO, we entered into the Tax Receivables Agreement (“TRA”) with Insignia, the Senior Executives, and White Mountains related to the tax basis step-up of the assets of QLH and certain net operating losses of Intermediate Holdco.
These reductions continue to impact revenue from our P&C insurance vertical and we are currently unable to estimate their impact beyond the first quarter of 2023. We have historically not used funds available under our credit facilities to fund our operations and payments under the credit facilities.
These reductions continue to impact revenue from our P&C insurance vertical, and we are currently unable to estimate their impact beyond the first quarter of 2024.
Other (income) expense, net Other (income) expense, net consists primarily of expenses not incurred by us in our ordinary course of business and that are not included in any of the captions above.
Other expense (income), net Other expense (income), net consists primarily of income and expenses not incurred by us in our ordinary course of business and that are not included in any of the captions above. Other expense, net for the year ended December 31, 2023 consisted primarily of an impairment charge related to our cost method investment.
We may in the future engage in additional merger and acquisition or other activities, including share repurchases, that could require us to draw on our existing credit facilities or raise additional capital through the sale of equity securities or through debt financing arrangements.
As of December 31, 2023, we have repaid $20.0 million of the amounts drawn under the 2021 Revolving Credit Facility to fund the purchase price for this acquisition. 64 Table of Contents We may in the future engage in additional merger and acquisition or other activities, including share repurchases, that could require us to draw on our existing credit facilities or raise additional capital through the sale of equity securities or through debt financing arrangements.
Sales and marketing The following table presents our sales and marketing expenses for the years ended December 31, 2022 and 2021 and the dollar and percentage changes between the periods: (in thousands) Year ended December 31, 2022 $ % Year ended December 31, 2021 Sales and marketing $ 28,816 5,993 26.3% $ 22,823 Percentage of revenue 6.3 % 3.5 % The increase in sales and marketing expenses for the year ended December 31, 2022, compared with the year ended December 31, 2021, was driven primarily by an increase in equity-based compensation expense of $2.7 million, an increase in 55 Table of Contents amortization expense of $2.3 million related to intangible assets arising from our acquisition of CHT, and an increase in other personnel-related costs of $1.1 million related to the employees added in connection with our acquisition of CHT.
Sales and marketing The following table presents our sales and marketing expenses for the years ended December 31, 2023 and 2022 and the dollar and percentage changes between the periods: (in thousands) Year ended December 31, 2023 $ % Year ended December 31, 2022 Sales and marketing $ 25,432 (3,384) (11.7) % $ 28,816 Percentage of revenue 6.6 % 6.3 % The decrease in sales and marketing expenses for the year ended December 31, 2023, compared with the year ended December 31, 2022, was driven primarily by a decrease in equity-based compensation expense of $1.8 million and a decrease in other personnel-related costs of $2.1 million, which were related to lower employee headcount resulting primarily from the reduction in force plan implemented by us in May 2023 (RIF Plan), offset in part by an increase in amortization expense of $0.9 million related to the amortization of intangible assets arising from our acquisition of CHT.
Income tax expense (benefit) MediaAlpha, Inc. is taxed as a corporation and pays corporate federal, state and local taxes on income allocated to it from QLH based upon MediaAlpha, Inc.’s economic interest held in QLH. QLH is treated as a pass-through partnership for income tax reporting purposes and is not subject to federal income tax.
See “ Liquidity and capital resources-Financing activities” below. 55 Table of Contents Income tax expense (benefit) MediaAlpha, Inc. is taxed as a corporation and pays corporate federal, state and local taxes on income allocated to it from QLH based upon MediaAlpha, Inc.’s economic interest held in QLH.
Transaction Value is a driver of revenue, with differing revenue recognition based on the economic relationship we have with our partners. Our partners use our platform to transact via Open and Private Marketplace transactions. In our Open Marketplace model, Transaction Value is equal to revenue recognized and revenue share payments to our supply partners represent costs of revenue.
Transaction Value is an operating metric not presented in accordance with GAAP, and is a driver of revenue based on the economic relationships we have with our partners. Our partners use our platform to transact via Open and Private Marketplace transactions.
If, however, the fair value of the reporting unit is less than its carrying value, then the amount of the impairment loss is the amount by which the reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. For the years ended December 31, 2022 and 2021, there were no impairments recognized for goodwill.
If, however, the estimated fair value of the reporting unit is less than its carrying value, then we recognize an impairment loss equal to the amount by which the reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.
Year Ended December 31, (in thousands) 2022 2021 2020 Revenue $ 459,072 $ 645,274 $ 584,814 Less cost of revenue (389,013) (543,750) (499,434) Gross profit $ 70,059 $ 101,524 $ 85,380 Adjusted to exclude the following (as related to cost of revenue): Equity-based compensation 3,634 1,665 2,809 Salaries, wages, and related 3,556 2,004 2,188 Internet and hosting 496 419 438 Amortization — — — Depreciation 41 29 24 Other expenses 720 451 284 Other services 2,171 1,213 902 Merchant-related fees 109 309 585 Contribution $ 80,786 $ 107,614 $ 92,610 Gross Margin 15.3 % 15.7 % 14.6 % Contribution Margin 17.6 % 16.7 % 15.8 % Transaction Value We define “Transaction Value” as the total gross dollars transacted by our partners on our platform.
Year Ended December 31, (in thousands) 2023 2022 Revenue $ 388,149 $ 459,072 Less cost of revenue (321,437) (389,013) Gross profit $ 66,712 $ 70,059 Adjusted to exclude the following (as related to cost of revenue): Equity-based compensation 3,875 3,634 Salaries, wages, and related 3,682 3,556 Internet and hosting 579 496 Depreciation 38 41 Other expenses 692 720 Other services 2,491 2,171 Merchant-related fees 32 109 Contribution $ 78,101 $ 80,786 Gross Margin 17.2 % 15.3 % Contribution Margin 20.1 % 17.6 % Transaction Value We define “Transaction Value” as the total gross dollars transacted by our partners on our platform.
Our obligations under the 2021 Credit Facilities are guaranteed by QLH and secured by substantially all assets of QLH and QuoteLab, LLC. Borrowings under the 2021 Credit Facilities bear interest at a rate equal to, at our option, the London Interbank Offered Rate plus an applicable margin, with a floor of 0.00%, or a base rate plus an applicable margin.
Borrowings under the 2021 Credit Facilities bear interest at a rate equal to, at our option, the Term SOFR or Daily Simple SOFR, plus an applicable margin, with a floor of 0.00%, or a base rate plus an applicable margin.
Our estimates of fair value are based on assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.
Our estimates of fair value are based on assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. For material acquisitions, we engage the assistance of valuation specialists in concluding on fair value measurements of certain assets acquired or liabilities assumed in a business combination.
Year Ended December 31, (in thousands) 2022 2021 2020 Net (loss) income $ (72,446) $ (8,475) $ 10,562 Equity-based compensation expense 58,472 45,713 25,536 Interest expense 9,245 7,830 7,938 Income tax expense (benefit) 102,905 (1,047) (1,267) Depreciation expense on property and equipment 392 369 289 Amortization of intangible assets 5,755 2,984 3,201 Transaction expenses (1) 636 4,128 11,511 Employee-related costs (2) — 674 — SOX implementation costs (3) 110 1,168 — Fair value adjustment to contingent consideration (4) (7,007) — — Impairment of cost method investment 8,594 — — Settlement costs (5) — 859 — Changes in TRA related liability (6) (83,832) 911 — Changes in Tax Indemnification Receivable (7) (58) 1,360 304 Non-cash compensation (8) — 880 — Employee retention credits (9) — (1,303) — Settlement of federal and state income tax refunds (10) 92 2,116 — Adjusted EBITDA $ 22,858 $ 58,167 $ 58,074 (1) Transaction expenses for the year ended December 31, 2022 consist of $0.6 million of legal, accounting and other consulting fees incurred by us in connection with our acquisition of CHT.
Year Ended December 31, (in thousands) 2023 2022 Net (loss) $ (56,555) $ (72,446) Equity-based compensation expense 53,321 58,472 Interest expense 15,315 9,245 Income tax (benefit) expense (463) 102,905 Depreciation expense on property and equipment 353 392 Amortization of intangible assets 6,917 5,755 Transaction expenses (1) 641 636 SOX implementation costs (2) — 110 Fair value adjustment to contingent consideration (3) — (7,007) Impairment of cost method investment 1,406 8,594 Changes in TRA related liability (4) 6 (83,832) Changes in Tax Indemnification Receivable (5) 639 (58) Settlement of federal and state income tax refunds (6) 5 92 Legal expenses (7) 4,303 — Reduction in force costs (8) 1,233 — Adjusted EBITDA $ 27,121 $ 22,858 (1) Transaction expenses for the year ended December 31, 2023 consist of $0.6 million of legal and accounting fees incurred by us in connection with the amendment to the 2021 Credit Facilities, the tender offer filed by the Company's largest shareholder in May 2023, and a resale registration statement filed with the SEC.
As a result of many factors, such as those set forth in “Risk Factors,” our actual results may differ materially from the results described in, or implied by, these forward-looking statements. Management overview Our mission is to help insurance carriers and distributors target and acquire customers more efficiently and at greater scale through technology and data science.
As a result of many factors, such as those set forth in “Risk Factors,” our actual results may differ materially from the results described in, or implied by, these forward-looking statements.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeCustomer concentrations consisted of the below: 2022 2021 Number of customers exceeding 10% Aggregate Value (in millions) % of Total Number of customers exceeding 10% Aggregate Value (in millions) % of Total Revenue 1 $ 48 10 % 2 $ 171 27 % Accounts receivable — $ — — % 1 $ 7 10 % Our supplier concentration can expose us to business risks.
Biggest changeCustomer concentrations consisted of the below: 2023 2022 Number of customers exceeding 10% Aggregate Value (in millions) % of Total Number of customers exceeding 10% Aggregate Value (in millions) % of Total Revenue — $ — — % 1 $ 48 10 % Accounts receivable 1 $ 7 14 % — $ — — % Our supplier concentration can expose us to business risks.
We control credit risk by investigating the creditworthiness of all customers prior to establishing relationships with them, performing periodic reviews of the credit activities of those customers during the course of the business relationship, and regularly analyzing the collectability of accounts receivable, and recording allowances for credit losses.
We control credit risk by investigating the creditworthiness of all customers prior to establishing relationships with them, performing periodic reviews of the credit activities of those customers during the course of the business relationship, regularly analyzing the collectability of accounts receivable, and recording allowances for credit losses.
We have not experienced any losses in these accounts and believe we are not exposed to unusual credit risk beyond the normal risk in this area based on the financial strength of the institutions with which we maintain our deposits. Our accounts receivable, which are unsecured, may expose us to credit risks based on their collectability.
We have not experienced any losses in these accounts and believe we are not exposed to unusual risk beyond the normal credit risk in this area based on the financial strength of the institutions with which we maintain our deposits. Our accounts receivable, which are unsecured, may expose us to credit risk based on their collectability.
Concentrations of credit risk and of significant demand and supply partners Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. We maintain cash balances that can, at times, exceed amounts insured by the Federal Deposit Insurance Corporation.
Concentrations of credit risk and of significant demand and supply partners Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. We maintain cash balances that can, at times, exceed amounts insured by the 69 Table of Contents Federal Deposit Insurance Corporation.
As a result, we may be exposed to fluctuations in interest rates to the extent of our outstanding borrowings under the 2021 Credit Facilities. A hypothetical 1.0% increase or decrease in the interest rate associated with the 2021 Credit Facilities would have resulted in a $2.0 million impact on interest expense for the year ended December 31, 2022.
As a result, we may be exposed to fluctuations in interest rates to the extent of our outstanding borrowings under the 2021 Credit Facilities. A hypothetical 1.0% increase or decrease in the interest rate associated with the 2021 Credit Facilities would have resulted in a $1.8 million impact on interest expense for the year ended December 31, 2023.
Supplier concentrations consisted of the below: 2022 2021 Number of suppliers exceeding 10% Aggregate Value (in millions) % of Total Number of suppliers exceeding 10% Aggregate Value (in millions) % of Total Purchases 1 $ 46 11 % 1 $ 55 10 % Accounts payable 2 $ 22 40 % 2 $ 21 34 % 68 Table of Contents
Supplier concentrations consisted of the below: 2023 2022 Number of suppliers exceeding 10% Aggregate Value (in millions) % of Total Number of suppliers exceeding 10% Aggregate Value (in millions) % of Total Purchases 1 $ 41 13 % 1 $ 46 11 % Accounts payable 1 $ 12 21 % 2 $ 22 40 % 70 Table of Contents

Other MAX 10-K year-over-year comparisons