Executive Summary / Key Takeaways

• MediaAlpha is strategically positioned to capitalize on a multi-year soft market in Property & Casualty (P&C) insurance, driven by robust carrier profitability and an accelerating secular shift towards direct-to-consumer digital acquisition.
• The company's proprietary technology platform, leveraging data science and AI, provides a significant competitive advantage by enabling highly efficient, real-time customer acquisition and optimizing spend for its insurance partners.
• Despite a strategic rebaselining of its under-65 health business and a temporary "hard market" in Medicare Advantage, the Health vertical presents a substantial long-term growth opportunity, particularly in Medicare Advantage, as more internet-savvy seniors seek online solutions.
• Recent financial results demonstrate strong momentum, with Q3 2025 revenue up 18.3% year-over-year to $306.5 million and P&C transaction value growing 31.4%, while disciplined expense management supports robust Adjusted EBITDA conversion.
• Management's Q4 2025 guidance projects continued P&C strength with transaction value growth of approximately 45% year-over-year, alongside a new $50 million share repurchase program, underscoring confidence in future cash flow generation and shareholder value creation.

The Digital Nexus of Insurance Acquisition

MediaAlpha, Inc. (MAX) stands at the forefront of the insurance industry's digital transformation, operating a sophisticated customer acquisition platform that seamlessly connects high-intent consumers with leading insurance carriers and distributors. Founded in 2014 and headquartered in Los Angeles, California, MediaAlpha has evolved into a critical nexus for digital customer acquisition across its core verticals: Property & Casualty (P&C) insurance, health insurance, and life insurance. The company's overarching strategy is to empower insurance partners to target and acquire customers more efficiently and at greater scale through advanced technology and data science. This foundational approach has enabled MediaAlpha to support $2 billion in Transaction Value across its platform over the twelve-month period ended September 30, 2025, solidifying its position as a significant online customer acquisition platform in its key markets.

The broader insurance industry is undergoing a profound secular shift, with customer acquisition spending by carriers steadily increasing as more consumers opt to shop for insurance online. Direct-to-consumer (DTC) marketing has emerged as the fastest-growing insurance distribution channel, a trend that directly fuels MediaAlpha's revenue. This shift is particularly significant given that approximately two-thirds of policies are still sold offline, where distribution expenses are primarily commissions paid to agents. MediaAlpha anticipates that a growing portion of these substantial commission dollars, estimated at $17 billion to $18 billion annually for U.S. personal auto, will convert into online advertising spend as carriers increasingly adopt DTC marketing as a core component of their distribution strategies.

Technological Edge: Precision and Performance

MediaAlpha's core competitive advantage lies in its proprietary technology platform, which serves as a real-time, programmatic, and transparent ecosystem. This platform is not merely a marketplace; it is a sophisticated engine that leverages data science to optimize customer acquisition. For instance, its P&C insurance carrier partners can target and price across over 35 separate consumer attributes, enabling highly customized and effective acquisition strategies. This granular targeting capability allows carriers to manage their customer acquisition spend with unparalleled precision, driving superior return on investment.

The tangible benefits of this technology are evident in its operational performance. The platform's automated, data-driven processes generate conversion probabilities for each unique consumer, facilitating the discovery of predicted return and cost per sale across the platform. This continuous feedback loop helps MediaAlpha to improve its platform technology and deliver consistent value to its partners. The company is also actively investing in new technological developments, particularly in artificial intelligence (AI). Management foresees AI reshaping how consumers discover, evaluate, and purchase insurance, and is focused on leveraging AI to enhance organizational productivity and better serve partners. For example, AI technologies have been embedded into the compliance framework for the under-65 health business to automate monitoring, demonstrating a commitment to operational efficiency and regulatory adherence. These technological differentiators contribute directly to MediaAlpha's competitive moat, enabling higher conversion rates, potentially lower costs for its partners, and ultimately, better margins for the company.

Competitive Landscape: Scale, Specialization, and Strategic Positioning

MediaAlpha operates in a dynamic competitive landscape, facing both direct and indirect rivals. Direct competitors in the digital insurance customer acquisition space include publicly traded entities like EverQuote (EVER), Verisk Analytics (VRSK), and SelectQuote (SLQT), alongside numerous private players and internal customer acquisition strategies of large carriers.

Compared to EverQuote, which operates a broader online marketplace for insurance quotes, MediaAlpha differentiates itself through its specialized programmatic technology. MediaAlpha's integrated platform is often viewed as more efficient in handling complex insurance data and facilitating real-time bidding and lead matching. This specialization allows MediaAlpha to offer tailored solutions, potentially leading to deeper customer retention and stronger partnerships, though EverQuote may possess a wider market reach.

Against Verisk Analytics, a provider of data analytics and technology solutions for the broader insurance industry, MediaAlpha's platform is more narrowly focused on customer acquisition. While Verisk excels in comprehensive data insights and risk assessment, MediaAlpha's strength lies in the speed and efficiency of lead generation and campaign deployment. MediaAlpha's programmatic ad optimization can exploit Verisk's potential weakness in real-time execution for customer acquisition, though Verisk's extensive data resources provide a formidable advantage in depth of insights.

When contrasted with SelectQuote, a direct-to-consumer insurance agency relying on a hybrid agent-based and digital sales model, MediaAlpha's purely digital, technology-driven approach offers potentially lower operating costs and greater scalability. MediaAlpha leads in technological innovation for ad targeting, while SelectQuote's direct engagement model might foster greater customer trust. MediaAlpha's digital edge positions it for faster growth in online channels, while SelectQuote might excel in retention through personalized service.

MediaAlpha's competitive advantages stem from its proprietary technology and its integrated platform, which allows PC insurance carriers to target and price across over 35 consumer attributes. This leads to superior margins through better conversion rates and recurring revenue. The company's backing by White Mountains Insurance Group (WTM) also provides unique distribution channels and regulatory expertise. However, MediaAlpha's smaller scale compared to some larger competitors could lead to higher customer acquisition costs and limit diversification. Despite these vulnerabilities, the company's focus on efficiency and its strong relationships with 15 of the top 20 largest auto insurance carriers by customer acquisition spend underscore its robust market positioning. Management believes its "materially greater scale than our competitors and growing network effects" will allow it to remain the partner of choice and continue gaining share, especially as AI adoption accelerates.

Financial Performance and Operational Momentum

MediaAlpha's recent financial performance underscores its strong operational momentum, particularly in its P&C vertical. For the three months ended September 30, 2025, the company reported revenue of $306.5 million, an 18.3% increase year-over-year. Net income for the quarter was $17.6 million, a significant improvement from $11.9 million in the prior year, driven by increased gross profit, higher cash balances, and lower interest expense.

Adjusted EBITDA for the same period reached $29.1 million, an increase of 10.7% year-over-year. Excluding the impact of the under-65 Health sub-vertical, MediaAlpha's core business delivered even stronger performance, with year-over-year transaction value and Adjusted EBITDA growth of 38% and 31%, respectively, in Q3 2025. The company's efficient operating model is evident in its ability to convert 64% of contribution to Adjusted EBITDA in Q3 2025, up from 63% in the prior year.

The P&C insurance vertical was the primary growth engine, with revenue increasing by 31.4% to $287.8 million for the three months ended September 30, 2025. This was fueled by increased marketing investments from leading auto insurance carriers responding to improving underwriting profitability and a greater supply of Consumer Referrals. In contrast, the Health insurance vertical experienced a 60.9% decrease in revenue to $12.9 million, primarily due to the strategic decision to scale back the under-65 health sub-vertical and address FTC concerns. The Life insurance vertical saw a modest 6.5% increase in revenue to $5.6 million for the quarter, driven by an increased supply of Consumer Referrals.

MediaAlpha's liquidity remains solid, with cash and cash equivalents and restricted cash totaling $72.3 million as of September 30, 2025. Operating cash flows were robust, providing $73.0 million for the nine months ended September 30, 2025.

The company has also demonstrated a commitment to shareholder returns, repurchasing 3.23 million shares of Class A common stock for $32.9 million from Insignia Capital Group in September 2025 and authorizing a new $50 million share repurchase program in October 2025.

Outlook and Strategic Initiatives

Management is highly optimistic about the company's future, particularly in the P&C vertical. MediaAlpha believes it is in the early stages of a multi-year soft market in P&C insurance, historically lasting 5 to 7 years, characterized by strong carrier profitability and intense market share competition. This environment is expected to sustain healthy marketing spend for years to come. The company anticipates a significant broadening of demand in 2026 and beyond, as more carriers, beyond the current top-heavy spenders, increase their customer acquisition efforts. This broadening demand is expected to flow predominantly through the Open Marketplace, where MediaAlpha's managed services and integrated platform solutions are most leveraged, leading to an uplift in take rates over the longer term.

For the fourth quarter of 2025, MediaAlpha projects Transaction Value between $620 million and $645 million, representing a 27% year-over-year increase at the midpoint. Revenue is expected to be between $280 million and $300 million, with Adjusted EBITDA guided to be between $27.5 million and $29.5 million. This guidance includes an anticipated $8 million to $9 million year-over-year decline in under-65 health contribution. P&C transaction value is expected to grow approximately 45% year-over-year in Q4 2025.

In the Health vertical, the under-65 business has been rebaselined, with Q4 2025 expected to approximate this new, lower baseline, generating annual contribution in the mid-single-digit millions going forward. The primary long-term focus remains on Medicare Advantage, a $0.5 trillion industry that is still in its nascent stages of online advertising adoption. Despite current headwinds from elevated Medical Loss Ratios and plan redesigns, management anticipates a market recovery, potentially starting with the next enrollment period, driven by increasing consumer penetration and a growing cohort of internet-savvy seniors.

MediaAlpha continues to operate with a lean cost structure, with approximately 150 employees, and expects overhead to remain relatively flat to Q3 levels. Strategic investments will focus on enhancing data science capabilities to drive greater efficiencies for both publishers and advertisers, and exploring new insurance protocols like commercial and expanding its agent business.

Risks and Considerations

While the outlook is positive, several risks warrant investor attention. The recently resolved FTC matter, which resulted in a $45 million settlement and additional compliance measures for the under-65 health sub-vertical, will impact its contribution and transaction value for 2025 compared to 2024. Although the matter is settled, other government authorities or private claimants could still raise concerns.

The P&C insurance market remains cyclical. While currently in a soft market, a resumption of hard market conditions, potentially triggered by factors like new U.S. import tariffs on automobiles and parts, could increase claims costs and carrier loss ratios, leading to a reduction in customer acquisition spending. The Medicare Advantage market is also experiencing a "temporary hard market cycle" with elevated medical loss ratios and plan redesigns, leading to lighter carrier budgets for the upcoming Annual Enrollment Period (AEP). While consumer shopping activity is currently high due to past rate increases, a slowdown could necessitate increased advertising spend by carriers to maintain growth. Furthermore, customer concentration, with a limited number of Demand and Supply Partners accounting for a significant portion of revenue and purchases, presents a business risk.

Conclusion

MediaAlpha, Inc. is charting a compelling course for growth, underpinned by its advanced technological platform and a favorable shift in the insurance industry's market dynamics. The company's ability to drive efficient, data-driven customer acquisition positions it strongly within the P&C sector, which is entering a multi-year soft market characterized by robust carrier spending and increasing competition for market share. Concurrently, MediaAlpha is strategically optimizing its Health vertical, rebaselining its under-65 business while sharpening its focus on the significant long-term opportunity in Medicare Advantage.

Despite facing regulatory challenges and market cyclicality, MediaAlpha's disciplined operational execution, evidenced by strong Adjusted EBITDA conversion and a lean cost structure, provides a solid foundation. The company's commitment to leveraging AI and expanding its data science capabilities further reinforces its competitive moat. With a clear strategic roadmap, a strong financial position, and a proactive approach to capital allocation through share repurchases, MediaAlpha appears well-equipped to capitalize on the evolving digital insurance landscape and deliver sustained value for its shareholders.