MediaAlpha (MAX) Q3 2025 Earnings Call Transcript

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DATE

Wednesday, October 29, 2025 at 5 p.m. ET

CALL PARTICIPANTS

Chief Executive Officer — Steve Yi

Chief Financial Officer — Patrick R. Thompson

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RISKS

Health Vertical Decline -- CFO Patrick R. Thompson reported a 40% year-over-year decline in health vertical transaction value in Q3 2025 and projected a further 45% year-over-year decline in the fourth quarter, without specifying whether it is calendar or fiscal, primarily driven by decreases in the under 65 sub-vertical.

Revenue Guidance -- Management forecasted revenue of $280 million to $300 million for Q4, representing a 4% year-over-year decrease at the midpoint, without specifying whether it is calendar or fiscal.

Adjusted EBITDA Drop -- Guidance called for adjusted EBITDA (non-GAAP) of $27.5 million to $29.5 million for Q4 2025, reflecting a 22% year-over-year decrease at the midpoint, without specifying whether it is calendar or fiscal, including an $8 million to $9 million impact from an expected year-over-year decline in under 65 Health contribution in Q4.

Take Rate Compression -- CFO Thompson stated the take rate decreased year over year due to mix shifts, including a higher share from private marketplace transactions that carry lower take rates.

TAKEAWAYS

Transaction Value -- $589 million in Q3 2025, up 30% year over year compared to Q3 2024, primarily driven by 41% year-over-year growth in the property and casualty (P&C) insurance vertical in Q3 2025.

Adjusted EBITDA -- Adjusted EBITDA was $29.1 million in Q3 2025, reflecting an 11% year-over-year increase and conversion of 64% of contribution to adjusted EBITDA in Q3 2025, up from 63% in Q3 2024.

Core Business Excluding Under 65 Health -- Saw 38% year-over-year growth in transaction value in Q3 2025 for the core business, excluding under 65 Health and 31% year-over-year growth in adjusted EBITDA in Q3 2025 for the core business, excluding under 65 Health.

Take Rate -- Take rate decreased year over year compared to Q3 2024; management expects a 7% take rate in Q4, with private marketplace transactions making up about 54% of total transaction value in Q4 2025.

P&C Transaction Value Guidance -- Management expects about 45% year-over-year growth in transaction value for the P&C vertical in Q4.

Health Vertical Guidance -- Anticipated transaction value and contribution from under 65 Health in Q4 2025 are expected to fall by $34 million to $38 million (61%-68%) year over year and $8 million to $9 million (80%-90%) in Q4 2025, respectively.

Fourth-Quarter Consolidated Guidance -- Projected consolidated transaction value of $620 million to $645 million in Q4 2025, up 27% year over year at the midpoint.

Free Cash Flow -- Generated $23.6 million of free cash flow in Q3 2025 and ended Q3 2025 with $39 million in cash plus $33.5 million in restricted cash (later used for initial FTC settlement payment).

Share Repurchase -- The company repurchased approximately 5% of outstanding shares at a discount to market for $32.9 million in Q3 2025; new $50 million repurchase authorization announced.

Net Debt Position -- Ended Q3 2025 with net debt to adjusted EBITDA of less than 1x.

AI Initiatives -- Management highlighted the ongoing integration of AI to enhance product offerings and automate compliance monitoring.

Carrier Demand Concentration -- Thirteen carriers spent over $1 million per month on the platform in Q3 2025, the highest in company history.

Overhead Expectations -- Overhead is projected to remain roughly flat compared to Q3 levels despite transaction value growth.

SUMMARY

CEO Steve Yi stated that current record results are driven by increased marketing investments from leading auto insurance carriers and a highly favorable operating environment. CFO Patrick R. Thompson projected a meaningful year-over-year decline in under 65 Health in Q4 2025, with transaction value stabilizing at a lower baseline and expected annual contribution in the mid-single-digit million range from under 65 Health. The company expects carrier advertising spend growth to be sustained for several years, as soft market cycles historically last about five to seven years, and digital advertising’s continued expansion in insurance distribution is expected. Management signaled a shift in marketplace mix, forecasting continued growth in private marketplace share in Q4 2025 and into 2026, but anticipating a gradual shift back to open marketplace transactions as demand broadens among more carriers. Cash generation and liquidity were reinforced, with recent share buybacks and additional repurchase authorization underscoring the company’s capital allocation confidence.

CEO Yi explained that a broadening of demand beyond leading carriers is expected to accelerate in 2026 and beyond.

CFO Thompson indicated that the pressure on take rate “is primarily a function of mix shift,” and open marketplace rates have remained stable.

Management expects adjusted EBITDA in Q4, excluding under 65 Health, to be roughly flat year over year, despite guidance for a consolidated adjusted EBITDA decrease in Q4 2025.

Yi addressed industry trends, asserting that “AI may disrupt traffic patterns and monetization models,” but expects their ecosystem to adapt and benefit from scale and network effects over time.

Thompson confirmed that compliance changes in the health vertical have been completed without significant incremental costs due to AI-driven automation.

CEO Yi and CFO Thompson project leverage in overhead costs, with future operating expense discipline supporting continued margin expansion as the business grows.

Management reiterated that results and future guidance reflect a conservative planning approach, focusing only on high-visibility commitments from carriers.

INDUSTRY GLOSSARY

P&C (Property and Casualty): Insurance segment covering property loss and liability coverage for consumers and businesses, core to MediaAlpha’s platform volume.

Take Rate: The ratio of company contribution (revenue less transaction costs) to transaction value on its platform; reflects business model monetization efficiency.

Private Marketplace Transaction: Directly negotiated advertising transactions between specific carriers and publishers on the platform, typically recognized on a net revenue basis and carrying a lower take rate.

Open Marketplace Transaction: Advertiser and publisher transactions executed in the open exchange portion of the platform, most often at higher take rates and with broader carrier participation.

Under 65 Health: Health insurance vertical segment referring to policy sales for individuals under 65 years old, distinct from Medicare-aged consumers.

Medicare Advantage: A government-approved health insurance program provided by private insurers for individuals eligible for Medicare, highlighted as a strategic growth area.

Full Conference Call Transcript

Steve Yi: Hey, thanks, Alex. Hi, everyone. Thank you for joining us. I am pleased to report that we delivered record third-quarter results driven by continued momentum in our P&C insurance vertical. Growth in the quarter was fueled by increased marketing investments from leading auto insurance carriers who continue to lean into customer acquisition in what remains a highly favorable operating environment. With underwriting margins at unusually high levels, carriers are in a strong position to pursue policy growth. Importantly, peak underwriting profitability does not mean that carrier advertising spending has peaked.

To the contrary, we are seeing an increasing number of carriers turn their focus in earnest to capturing market share, and our marketplace continues to be the most efficient and scaled platform for them to acquire new customers. These dynamics give us significant runway for continued growth in the quarters ahead. In our health insurance vertical, our results were impacted by our recent reset in under 65, which was in line with expectations. Our partnerships with leading Medicare Advantage carriers continue to perform well, and we expect digital advertising to capture a larger share of health insurance distribution spend over time. As the secular tailwinds play out, we believe we are well-positioned to restart growth from this new baseline.

As we look ahead, we are encouraged by the strength of our P&C business, the long-term potential of our Medicare vertical, and the expanding opportunities we see across digital insurance distribution. In our TNC vertical, we believe we are in the early stages of a multiyear soft market characterized by strong carrier profitability and robust market share competition, which we expect to sustain healthy marketing spend for years to come. The combination of strong industry fundamentals, deep partnerships, and the efficiency of our platform gives us conviction in our ability to deliver sustainable growth. We will continue to balance investment and innovation with disciplined capital deployment, ensuring that we build enduring value for our partners and shareholders.

In addition to favorable industry fundamentals, powerful technology shifts, particularly those related to AI, are likely to reshape how consumers discover, evaluate, and purchase insurance. In the near to mid-term, it is foreseeable that AI may disrupt traffic patterns and monetization models for some of our publishers while also creating entirely new supply-side opportunities. Because our marketplace spans hundreds of publishers across multiple formats and media channels, we expect our ecosystem as a whole to adapt well to these changes, preserving a resilient and diversified supply base. With materially greater scale than our competitors and growing network effects, we expect to remain the partner of choice for both publishers and advertisers and to continue gaining share as AI adoption accelerates.

We are also highly focused on leveraging AI to enhance products of the hour of our organization and better serve our partners. We believe we are just scratching the surface here and look forward to keeping you updated in the coming quarters. With that, I will hand it over to Pat.

Patrick R. Thompson: Thanks, Steve. I will start by walking through the key drivers of our Q3 results. Transaction value was $589 million, up 30% year over year, driven by 41% year-over-year growth in our P&C vertical. Our Health vertical transaction value declined 40% year over year, consistent with our expectations. Adjusted EBITDA for the quarter was $29.1 million, an increase of 11% year over year. Our efficient operating model and disciplined expense management allowed us to convert 64% of contribution to adjusted EBITDA, up from 63% in the prior year. Excluding under 65 Health, our core business performance was very strong, with year-over-year transaction value and adjusted EBITDA growth of 38% and 31%, respectively.

Our take rate, defined as contribution divided by transaction value, decreased year over year as expected for three main reasons. First, our under 65 sub-vertical, which was historically at high take rates, has declined. Second, our largest P&C carrier partners have continued to represent an outsized share of spend in our marketplace. These carriers were among the first to restore underwriting profitability, which has given them a head start, but we are confident that other carriers will enter the race in a more meaningful way. Lastly, our take rate was impacted by large-scale new supply partner wins. These factors together have increased the percentage of transaction value from private marketplace transactions, which carry lower take rates.

Importantly, our open marketplace take rates have remained relatively stable. The pressure we are seeing is primarily a function of mix shift. Looking ahead, we expect our Q4 take rate to be approximately 7%, with private marketplace transactions representing approximately 54% of total transaction value. As we plan for 2026, our current base case assumes we will start the year with a take rate roughly consistent with Q4 levels before the broadening of carrier demand has a meaningful impact on our take rate. Given the strong momentum we are seeing in carrier spend and our usual OpEx discipline, we believe we are well-positioned to deliver adjusted EBITDA growth and maintain strong free cash flow generation next year.

Longer term, we expect an uplift in take rates as more of our carrier partners ramp up their marketing spend to compete for policy growth, resulting in an increasing percentage of spend being transacted on our open marketplace. We expect record fourth-quarter transaction value to benefit from continued strong demand from the largest carriers in our marketplace. Accordingly, we expect P&C transaction value to grow approximately 45% year over year. In our health vertical, which includes both Medicare and under 65 health, we expect transaction value to decline approximately 45% year over year, driven primarily by under 65, which is stabilizing at a lower baseline.

On a year-over-year basis, we expect fourth-quarter transaction value and contribution from under 65 Health to decline by $34 million to $38 million or 61% to 68% and $8 million to $9 million or 80% to 90%, respectively. To provide additional insight into the new baseline for our health vertical, similar to last quarter, we have included in this quarter's shareholder letter both transaction value and contribution for our under 65 business. As a reminder, we expect 2025 under 65 transaction value of $95 million to $100 million and contribution of about $10 million to $11 million, with around $1 million to $2 million of that contribution coming in the fourth quarter.

Looking ahead, we expect that under 65 will generate annual contribution dollars in the mid-single-digit million, reflecting the reset in both scale and profitability for this sub-vertical. Moving to our consolidated financial guidance, we expect Q4 transaction value to be between $620 million and $645 million, representing a year-over-year increase of 27% at the midpoint. We expect revenue to be between $280 million and $300 million, representing a year-over-year decrease of 4% at the midpoint. We expect revenue as a percentage of transaction value to decrease meaningfully year over year as private marketplace transactions, which are recognized on a net basis, are expected to represent around 54% of transaction value, up from 41% in Q4 of last year.

Adjusted EBITDA is expected to be between $27.5 million and $29.5 million, representing a year-over-year decrease of 22% at the midpoint, including $8 million to $9 million of impact from an expected year-over-year decline in under 65 contribution. Excluding under 65 Health, we expect adjusted EBITDA to be roughly flat year over year. Finally, we expect overhead to be roughly flat to Q3 levels. Turning to the balance sheet, we generated $23.6 million of free cash flow in the third quarter. We ended the quarter with a net debt to adjusted EBITDA ratio below 1x, and cash of $39 million plus restricted cash of $33.5 million.

Earlier this month, the restricted cash was used to make the initial FTC settlement payment, and the remaining $11.5 million is payable in 2026. Excluding these settlement payments, we expect to convert a substantial portion of adjusted EBITDA into free cash flow, providing us with continued financial flexibility to support our strategic priorities. Given our confidence in our strategy and long-term growth, we think our stock is an attractive investment, and share buybacks are an accretive use of excess cash, particularly at current levels. During the quarter, we repurchased approximately 5% of our outstanding shares at a discount to market for $32.9 million.

In addition, earlier today, we announced a new share repurchase authorization of up to $50 million, consistent with our disciplined approach to capital allocation and focus on maximizing shareholder value. With that, operator, we are ready to take the first question.

Operator: Thank you. And as of this moment, I will now go ahead and proceed with the question and answer session. At this time, I would like to ask everybody to please press 1 if you want to join the queue. And if you would like to withdraw your question, simply press 1. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when your question. And your first question comes from the line of Melia Wicks from Canaccord. Please go ahead.

Maria Ripps: Hi. Good afternoon. This is Maria Ripps. Thanks for taking my questions. It seems like a lot of investors are focused on carriers' profitability instead of peak margins currently. And as you know, one of the largest carriers recently recorded a sizable credit expense to reflect excess profits. Can you maybe talk about sort of your view on how sustainable current profitability levels are and what that might mean for customer acquisition spend overall?

Steve Yi: Hey, Maria. Appreciate that question. Yeah, as you are alluding to, I mean, we have been getting that question a lot as well. And so it is good to be able to clear things up with, you know, what people are doing with regard to, like, inflating, you know, peak profitability for carriers with, you know, either peak of the soft market cycle or peak of advertising spend. And so the short answer to that is, you know, conflating those things, like, could not be further from the truth. Because to understand this, I think you really need to take a step back and, like, think about hard market and soft markets, how they work.

And so we just emerged from, what, a two and a half, three-year hard market cycle. Hard markets are, you know, get kicked off when there is reduced profitability because of higher than expected loss ratios. And so what ends up happening is carriers start to get tighter underwriting restrictions. As they raise rates, they pull back on marketing spend. And so what happens during a hard market is actually you have a baseline where you start from low margins, and then you see margin expansion as the hard market progresses.

Now it starts to tip over into a soft market, and when those margins sort of start to peak and get to adequate levels, you know, carriers then start to get more competitive, you know, they get looser with the underwriting guidelines, start to reduce pricing, and then invest in customer acquisition. And so all of that has the impact of actually compressing margins during the course of a soft market cycle. So when we hear things about carriers being at peak profitability, in a lot of ways, what that tells us is that we are just kicking off the meat of or the heart of the soft market cycle.

And what you can see from our marketplace is that demand remains very, very top-heavy. On one hand, we have 13 carriers who spent more than a million dollars a month this quarter. That is the greatest number that we have had in history. And so we are seeing a lot of nascent broadening of demand. But, again, we are as top-heavy as ever with some of the leading carriers who are early to take rate stepping on the gas in terms of marketing spend that continue to dominate our marketplace.

And so with rates starting to come down, right, with profitability starting to come down as well, I think what you are going to start to see are a lot more carriers really stepping on the gas in 2026 and beyond, right, as we really enter into the meat of the soft market cycle. And a broadening of demand that I think will continue and be a tailwind for us for the years to come. I do think it is worth pointing out that soft market cycles tend to last a lot longer than hard market cycles.

Hard market cycles tend to be in about two to three-year increments, and soft market cycles historically have been two to three times that, so about five to seven years on average. And so what we are expecting is several years of tailwind in terms of carrier advertising spend growth. We also expect to see the next level of growth in advertising spend really being from a broader set of top carriers in the top 25, with a lot of that spend, as Pat mentioned, coming through the open exchange. Again, as demand broadens out. And so I hope that explains sort of our position and what we are hearing in the marketplace about peak carrier profitability.

Certainly, that does not concern us at all. And if anything, that gets us excited that really the heart of the soft market is just beginning.

Patrick R. Thompson: Yeah, and Maria, this is Pat. I will just add kind of one thing to what Steve said there, which is that, you know, we are kind of, you know, two years into an improving operating environment. And our guidance for Q4 envisions 45% year-over-year transaction value growth for P&C. So we feel like we have got the wind at our back right now, and we have got pretty nice operating momentum going into 2026.

Maria Ripps: Yeah, that is great, and that is very helpful. Thank you. And then can you maybe share a little bit more color on the transition within your health vertical? Is that largely complete at this point? And I guess how are you thinking about the long-term opportunity within that vertical sort of outside of under 65?

Steve Yi: Yeah, I will take that. I will take the second part first. I think back into the first part of your question, which is, I mean, what we are looking with in the health insurance vertical is really focused on Medicare Advantage. We think that is a very strategic vertical. Again, I will reiterate that it is a half a trillion dollar industry really new to direct-to-consumer advertising. So we see a ton of opportunities there over the long term. You know, it is a challenging market environment right now with medical loss ratios being elevated because of high utilization rates. And so what you are seeing is a lot of plan redesigns and carriers pulling out of certain markets.

And so you have our own version within the Medicare Advantage space of the hard market that we saw in the P&C space. And so I think most people are expecting that the market to recover, I think, starting next enrollment period. And certainly, we anticipate carriers starting to reinvest in growth during that time. But really for us, it is about the long-term opportunity that Medicare Advantage offers just because of the market size and really where the carriers are in terms of their adoption cycle of direct-to-consumer advertising and direct-to-consumer platforms, and we see a lot of opportunities for integrated solutions to really help that space navigate the transition to a direct-to-consumer distribution model.

Patrick R. Thompson: And, Maria, I will tackle the shorter-term portion of that question and kind of the nearer-term financial outlook. So I think in under 65, you know, we have taken a number of actions to kind of rebaseline that business. We think Q4 is kind of approximating that new baseline for us. And so for the quarter, we are expecting plus or minus 65% year-over-year decline in transaction value with contribution down 80% to 90%. And so it is a business that should make us $1 or $2 million in Q4, and we believe it will be kind of a mid-single-digit million-dollar contribution business for us next year.

And kind of from a compliance standpoint, we have already implemented effectively all of the necessary changes. There has not been a whole lot of cost that we have had to layer on to do that. And actually, we have embedded some AI technologies into that framework, which has allowed us to automate a lot of the monitoring that historically would have been labor-intensive. So we feel like we are in a spot where, you know, kind of towards the middle of next year, the comps for the health vertical will start to normalize.

Maria Ripps: Great. That is very helpful. Thank you very much.

Steve Yi: Thanks, Maria.

Operator: And your next question comes from Cory Carpenter from JPMorgan. Please go ahead.

Cory Carpenter: Hey, Steve and Pat. Thanks for the question. I just wanted to dig a bit more into what you are seeing in the discussions you are having with carriers. I think, Steve, last time we talked, carriers kind of hit the pause button a little bit just given the tariff uncertainty. Started ramping in March. And now you are guiding to accelerating growth in Q4. So maybe just talk about some of the dynamics you saw intra-quarter and then also how much visibility do you have into year-end budgets at this point in the cycle? Thank you.

Steve Yi: Sure. Hey, Cory. Yeah. And so I think that, you know, when carriers had paused, it was related to the uncertainties around tariffs. I think that pause was relatively short-lived. And I think the carriers who were spending aggressively, you know, prior to Q3, I think resumed their levels of spend, and we are continuing to see them grow their spend right now, as you can see from our estimate and our forecast. I think in terms of visibility, Q4, I mean, obviously, we are sharing that with the guidance that we have.

You know, there has been a tendency in these types of markets for there to be sort of excess budget, you know, being kind of, you know, made available to us as the quarter starts to wind down. And, again, because we are a very source and very tractable source, you know, that excess budget does tend to accrue to us. But it is not something that we are planning on right now. And so our Q4 estimates really have our best estimate of what the carrier budgets are going to be for the remainder of the year. We are starting to have some early discussions about 2026 budgets, and those discussions have been highly encouraging.

Again, they really support the narrative that, you know, up to this point, really, the recovery of the ad spend market, you know, coming out of the hard market has been very narrow and robustly driven by a narrow set of carriers. Really, what we are doing is having discussions with everyone else and starting to see that there really will be a meaningful broadening of demand in 2026. The timing of that, I think, is going to be hard to gauge. You know, certainly, those carriers that we are talking about who have an early lead have taken a sizable lead.

So it will take a bit of time and a few quarters for the expansion or the broadening of demand to really start to have a positive impact on our take rate. But certainly, we have been very encouraged by early discussions that we have had with a lot of the major carriers, again, outside the top couple. And really do anticipate that 2026 is going to be a year where we are seeing meaningful broadening of demand within our TNC market.

Cory Carpenter: You answered my second question, which was in the early 2026. So I will turn it back over. Thank you.

Steve Yi: Thanks, Cory.

Operator: And your next question comes from Tommy McJoynt from KBW. Please go ahead.

Tommy McJoynt: Hey, guys. Thanks. A couple of questions. On your comments around the take rate, can you remind us, is there seasonality in Q4? And then just want to confirm that you are expecting both those quarters or the fourth quarter and then 2026 to be 7% take rate? And then just your expectation about increasing the take rate over time, is that a function of a broader array of demand partners or supply partners or both?

Patrick R. Thompson: Perfect. And, Tommy, I can get started on that question, and then Steve and I can potentially tag team the last one. So on seasonality, historically, we had a good bit of seasonality in our business on take rate, and that was when P&C was a smaller percentage of the total VEX and our health vertical was significantly larger. You know, now we are in a spot in Q4 with under 65 having stepped down pretty meaningfully, where there is a lot less take rate seasonality in the business because the Medicare portion of that looks pretty similar to P&C overall.

And to tackle the second part of the question, yes, our guidance for Q4 is for around a 7% take rate. As a reminder, for us, take rate is contribution divided by transaction value. And our view is that, you know, 7% plus or minus is kind of the right benchmark for the next couple of quarters. And, you know, kind of moving to the overtime and the to drive take rate from to drive take rate over time, a broadening of demand would be kind of the primary driver of that happening. Obviously, broadening supply could help as well, but we believe that the demand side is the bigger opportunity.

As a reminder, you know, the largest advertisers with us tend to be, you know, relatively more private. Smaller advertisers tend to be, you know, either fully open or very, very heavily open. And so as we see, you know, more people come into the marketplace and more people, you know, start to spend seven figures a month, we would expect to see the business start to shift more to open over time.

Steve Yi: Yeah. And what I will add is that as the demand starts to broaden out, which will be the key driver of take rate and growth on our end, one of the reasons that will primarily flow through the open marketplace is that the next set of carriers, right, who are underrepresented in our marketplace, you know, need a lot of help from us. Right? So they leverage our managed services, a machine learning algorithm to optimize their campaigns on their path. They leverage our platform solutions and integrated platform solutions in order to help host and optimize certain parts of the conversion experience.

And so we are putting a lot of effort behind those services that will better support and accelerate a lot of these carriers' journeys to really, like, embracing direct-to-consumer and embracing our channel, being successful on our channel. And all of those services are available really only through the open. And so that is why, as demand starts to broaden now, and we see, you know, other carriers within the top 25 really start to punch their weight in terms of advertising dollars to us, the way we make them successful is through these integrated solutions and managed services.

And, again, most of that spend is going to flow through the open exchange, which will have over time a very positive impact on our take rates.

Tommy McJoynt: Got it. Thanks for that. Then switching over to, you know, some of our expectations for the overhead expenses. Do you guys have any plans to, you know, either add or account managers or, you know, technology headcount or make any other major new technology investments that we should be, you know, thinking about as we enter 2026 and think about the fixed expense leverage in the business next year?

Patrick R. Thompson: Yeah. And, Tommy, thanks for the question. I would say, you know, over the last couple of years, we have been consistently investing in the business but doing so in a thoughtful and measured way. And, you know, we are a business that we have always run lean. We have got about 150 employees today. You know, we were a bootstrap business, you know, efficiency is in our DNA. We will continue to invest to support the growth in our business, but we would expect to be a business where we would see leverage on those overhead items over time. And when I say leverage, I mean, the mapping from contribution to EBITDA being flat to increasing over time.

Steve Yi: Thanks, Pat.

Tommy McJoynt: Thanks, Tommy.

Operator: And your next question comes from Andrew Kligerman from TD Cowen. Please go ahead.

Andrew Kligerman: Hi. Good evening. First question is around open versus private. And as private becomes a bigger proportion, I think first nine months it is now 48%. Steve and Pat, how do you see that kind of playing out long term, maybe three years out, five years out? Like, where does that mix kind of settle down if it ever settles down?

Steve Yi: Yeah. I think it is a good question. I think we are at an unusually high level, you know, favoring the private marketplace right now. And, again, I think that really the nature of how the market has recovered on the heels of this generationally hard market cycle. What we had was a couple of leading carriers, you know, who were early to take rate, right, step on the gas, you know, a full year and a half or so, you know, ahead of everyone else. And these carriers are very sophisticated in direct-to-consumer advertising, very sophisticated and well-experienced in our marketplace.

And the private marketplace product was, like, you know, was designed to support advertisers like this and their relationships with some of our big publishers. And so I think the way that the market has recovered has really lent itself to helping over-index on the private side.

And I think as, you know, as the long term plays out, again, as the industry and the recovery and the demand starts to broaden out, not just because carriers who are later to take rate and get to rate adequacy start to spend in advertising and growth again, but because the whole secular trend towards direct-to-consumer advertising, which means online advertising, and greater budgets allocated to measurable sources like us, that starts to really take foot again, right, or take hold again, what we expect are just more and more of the top 25 carriers allocating a greater percentage of their overall customer acquisition spend and converting it in effect, right, a lot of commissions that they are paying to agents and to advertising dollars they spend with us as they prioritize our direct channels.

And, again, this growth is based on the support that they will need, right, and being relatively new to this channel, you know, the services and the platform support that they are going to require to be successful on our channel. We believe that it is predominantly going to flow through the open exchanges. So I think what you are going to see over time is the shift, you know, back to the open exchange. And, again, we do not have any views to exactly what that level should be.

Certainly, I think, you know, internally what we think is that the private open mix is kind of at a high watermark because of the unusual nature of the head heaviness of demand right now, which is really a byproduct of how this market recovered after the most recent hard market cycle.

Andrew Kligerman: I see. So maybe even next year, it could start to inflect more toward open again?

Steve Yi: I think that is our anticipation. And I think what we are expecting is that for the next few quarters, take rates will stay about where they are. Right? But we do anticipate that next year, the demand will start to broaden out, and so you are going to see carriers ten and eleven and twelve and fifteen and twenty really start to spend more in our marketplace. And, again, that is going to flow through the open exchange. And over time, that is really going to start to skew that mix back towards open from, I think, what we internally see as a high watermark right now.

Andrew Kligerman: Got it, Steve. Thank you for that. And then in your shareholder letter, you talked about, you know, how most carriers were investing well below their full potential, and there is this kind of analysis where you say, you know, that the investing was below 2019 levels last year, 2024, even though premium was up 44%. So I am kind of, you know, here we are a year later, premium has kind of leveled out year over year, I think. You know, where are we versus 2019? And where carriers are investing? I am kind of curious as to where we are now as opposed to the '24 number.

Steve Yi: Sure. And let me try to answer this question. Tell me if I am not answering it, the question that you are asking. But I think where we are versus 2019, I think what we have highlighted that stat just to show that even though the overall volume has gone up within our marketplace, with a couple of leading carriers really investing heavily in growth in '24 and '25, that the vast majority of other carriers, again, top 25 carriers, really were not back to the pre-hard market levels of 2019 and 2020. And that is one of the reasons that we are still top heavier now than we were in 2020.

Now exactly where the carriers are, like, now versus 2019, I will tell you is that I will point back to the stat of having 13 carriers spending more than a million dollars a month. That is an all-time high for us. I know that sounds a bit paradoxical with what I just said, but what that means is that, a, our marketplace has scaled tremendously, as everyone knows. But, b, we do see more carriers now in 2019 and 2020 who are really ready to adopt this channel. We have more integrations with more carriers than before to enable them to be successful in this channel.

And so we see the nascent broadening of demand, and we see a lot of encouraging signs from the discussions that we are having with these carriers. And so we see more carriers than ever before really poised to be able to grow in this channel and to advertise and punch their weight in this channel than we have ever seen and certainly a lot more than what we saw in 2019 or 2020. Now, Andrew, did that answer your question?

Andrew Kligerman: Yeah, it did. It feels like directionally, there is still a lot of momentum there. Is that kind of the right take on what you are saying?

Steve Yi: I mean, I would 100%. Yeah. That is absolutely right. I mean, I think because of what happened with the pandemic-related hard market cycle and that transition into a soft market cycle, what in some ways got lost in a lot of that is just the secular shift that the whole industry is undergoing. Right? And so, really, at the heart of it is really that people are shopping for insurance online. Right? The best way to connect with these consumers and sell policies to these consumers is through advertising online, enabling policy sales online. Yet, still two-thirds of policies are still sold offline, where the main expense distribution expense is commissions paid to agents.

And so what you would expect to see are the advertising budgets continue to go up, right, over time because what you are essentially doing is converting commissions that are paid to agents, which are in the neighborhood of, you know, for US personal auto, like, $17 billion to $18 billion a year. You would expect to see more of that being converted into advertising dollars that more and more carriers see as a necessary part of their distribution strategy. And so it is that secular story that I think got lost in the cyclical story that we have had over the past few years.

And we are seeing that play out, and again, we are seeing that play out in the form of having thirteen, fifteen, twenty carriers at this point, I think, are really well poised to start to grow in our channel over the next couple of years during the upcoming soft market cycle.

Andrew Kligerman: Super helpful. And if I could just sneak one last one in. Do you, you know, with all the turbulence in Medicare, Medicare Advantage over the last three to four years, and it has been brutal, do you ever see that business getting back to, you know, like, because I think a lot has shifted to med supplement now. Do you ever see that business getting back to what it looked like in 2021 or 2020 or 2019? I forget. What year, but it has been a rough number of years.

Steve Yi: Yeah. I mean, I think that is a great question. I think that people in the industry do not expect a return to, I think, the frothiness that you saw in those markets when, quite honestly, the Medicare Advantage payers or the carriers in this case, you know, were probably making a little bit too much from Medicare Advantage policy. And, again, there has been a resetting of payment rates, right, a resetting of a lot of the plan. And the fact remains that it is a half a trillion dollar industry, right?

You know, Medicare Advantage policies are still profitable and big profit centers for these major carriers like you like to see in Humana, just because it is, you know, in the past, it used to be two to three times as profitable to sell a Medicare Advantage policy as another policy. You know, the fact that it is probably going to come down into the maybe nearly as profitable as other health insurance policies they see, mean, certainly, I think the process will go away.

But I do think that, as that market matures, you are going to start to see it evolve more like the auto insurance industry, where a lot of the carriers, depending on how they are feeling about their plan design, start to get aggressive about advertising and taking market share away from other carriers. And so we do see the market start, you know, settling down over time. And, again, one that is going to look a lot more like the auto insurance industry than it does today. But certainly, I think a lot of the frothiness that you saw in the early period, I think, probably will be gone for a while.

Patrick R. Thompson: Yep. And, Andrew, this is Pat. I will probably just add one or two things to what Steve said on that, which is I think the consumer penetration of Medicare Advantage plans continues to tick up a point or two every year. I think this year, for this plan year, 54% of the enrollees chose it. And the estimates show that number going up to about 64% by 2034. And the other nice tailwind we think we have in the Medicare market for a number of years to come is online shopping. And so, you know, as you get 65-year-olds aging into Medicare, they are much more Internet savvy than the average Medicare consumer.

And so, you know, we think that trend is going to be continuing every year, and we are going to have, you know, more and more Internet-native seniors, you know, coming into the market, which should be very, very good for our business over time.

Andrew Kligerman: Super helpful. Thank you.

Steve Yi: Thanks, Andrew.

Operator: Before we proceed, again, if you want to join the queue, simply press 1. And your next question comes from Ben Hendrix from RBC Capital Markets. Please go ahead.

Michael Murray: Hi. This is Michael Murray on for Ben. Congrats on the strong results. It looks like normalizing for the 65 segment, adjusted EBITDA grew 31%. But then looking at your guidance, you expect EBITDA to be flat on transaction value growth of 38%, excluding the 65 segment. So is there a level of conservatism baked in there? Any color on the puts and takes would be helpful. Thanks.

Patrick R. Thompson: Yeah. And, Michael, this is Pat. I would say that, you know, our philosophy from a guidance standpoint is we guide to, you know, kind of based on what we know as of today and what we have a high degree of confidence in. And, you know, I think our track record against guidance has been, you know, pretty good over time, and, you know, we are guiding based on, you know, twenty-eight days of what we have seen in this quarter. And, you know, our view on how things are going to play out.

So, you know, I think our goal is always to deliver the best numbers that we can, and we are going to be looking to do that this quarter. And, you know, I think we will have more to report when we come out with earnings in February. But we try to be, you know, realistic and put out numbers that we believe we can achieve.

Michael Murray: Okay. Just shifting gears. So a large MA payer indicated that they would be suspending their relationship with a large telebroker, which had high complaints to Medicare and also, you know, the least engaged members. Do you see any opportunity to gain share here just given payers' increased focus on quality leads? Thanks.

Steve Yi: Yeah. I do. And I think the way I see it is that there is a growing trend with payers to actually start to acquire customers directly and rely less on brokers and telebrokers. And so, again, it is unfortunate that these types of things happen. Right? Certainly, I think one of the reliance on telebrokers of this industry is that a lot of the carriers within the Medicare space are relatively new to direct-to-consumer. It is certainly new to online customer acquisition. So I think as an industry gets, you know, more well-versed in that area, I think there will be a shift from reliance almost entirely on brokers and telebrokers and e-brokers to sell policies.

And, again, it is a greater shift to carriers selling policies directly. And that is something that you saw in the insurance industry in the early days, and we expect that trend to take hold within the Medicare Advantage space over time.

Michael Murray: Alright. Thank you.

Operator: Okay. There are no further questions at this time, and that is all for now, ladies and gentlemen. Thank you all for joining. And that concludes today's conference call. All participants may now disconnect.

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