Health Insurance Innovations, Inc. (NASDAQ:HIIQ), a health
insurance technology company and leading distributor of
Medicare-related health insurance plans, today announced financial
results for the fourth quarter and year ended December 31, 2019.
The Company will host a live conference call on Wednesday, March 4,
2020, at 9:00 A.M. ET.
Commenting on the Company’s fourth quarter
operating results, Gavin Southwell, President and Chief Executive
Officer, said, “We are pleased with results in the fourth quarter,
particularly with our success in the Medicare Annual Election
Period. Medicare segment revenues represented approximately
35% of total revenues in the quarter, and full year Adjusted EBITDA
and Adjusted Net Income Per Share were in line with
expectations. We are excited about the opportunities to
continue to scale our Medicare business in 2020 via enhanced
digital capabilities, captive distribution and strategic outsourced
relationships.”
The Company also announced today that its
corporate name will change to Benefytt Technologies, Inc. effective
Friday, March 6, 2020. In connection with the Company’s new
corporate name, the Company’s NASDAQ ticker symbol will change to
BFYT effective March 6, 2020. The name change is intended to
highlight and emphasize the Company’s go-forward strategy to be a
premier health insurance technology company that offers a range of
Medicare-related insurance plans as well as other health and life
insurance products that meet the needs of
customers. Benefytt’s direct-to-consumer site is
healthinsurance.com, which offers seniors and Medicare-eligible
consumers the ability to access powerful online comparison tools
and educational resources that enable efficient self-guided
navigation of available Medicare health insurance options.
As previously announced, the Company’s Board of
Directors commenced in July 2019 a process for exploring,
reviewing, and evaluating strategic alternatives focused on
maximizing shareholder value. These alternatives could include,
among other things, a sale of the Company or a portion thereof, a
strategic business combination, changes in the Company’s operations
or strategy, or continuing to execute on the Company’s current
business plan. This review process is currently ongoing, and
the Company is meeting with interested parties, including both
strategic and financial institutions (1).
Fourth Quarter
2019 Consolidated Financial
HighlightsAll comparisons are to the three months
ended December 31, 2018
- Revenue was $160.9 million, compared to revenue of $131.9
million, an increase of 22.0%. Revenue from our Medicare segment
was $55.9 million and is new to the Company in 2019. Revenue from
our Individual and Family Plan (IFP) segment was $105.0 million, a
decrease of 20.4%.
- Net income of $26.5 million, compared to net income of $8.3
million, an increase of 219.3%.
- Adjusted EBITDA (earnings before interest, taxes, depreciation
and amortization) was $46.2 million, compared to adjusted EBITDA of
$21.6 million, an increase of 113.9%.
- Profit from our Medicare segment was $29.7 million. Profit from
our IFP segment was $22.2 million.
- GAAP diluted net income per share was $1.77, compared to GAAP
diluted net income per share of $0.40, an increase of 342.5%.
- Adjusted net income per share was $2.48 compared to adjusted
net income per share of $0.97, an increase of 155.7%.
- Net contract asset (contract asset receivable plus advanced
commissions less commission payable) at December 31, 2019 was
$258.8 million (2). $185.2 million related to the IFP segment and
$73.6 million related to the Medicare segment.
Adjusted EBITDA and adjusted net income per
share are non-GAAP financial measures. See the reconciliations of
these measures to their respective most directly comparable GAAP
measure below in this press release.
2019 Annual Consolidated Financial
HighlightsAll comparisons are to the year ended
December 31, 2018
- Revenue was $381.8 million, compared to revenue of $351.1
million, an increase of 8.7%. Revenue from our Medicare segment was
$67.8 million and is new to the Company in 2019. Revenue from our
IFP segment was $314.0 million, a decrease of 10.5%.
- Net income of $36.7 million, compared to net income of $19.0
million, an increase of 93.2%.
- Adjusted EBITDA was $82.1 million, compared to adjusted EBITDA
of $59.4 million, an increase of 38.2%.
- Profit from our Medicare segment was $32.1 million. Profit from
our IFP segment was $66.8 million.
- GAAP diluted net income per share was $2.47, compared to GAAP
diluted net income per share of $0.97, an increase of 154.6%.
- Adjusted net income per share was $4.24 compared to adjusted
net income per share of $2.60, an increase of 63.1%.
Adjusted EBITDA and adjusted net income per
share are non-GAAP financial measures. See the reconciliations of
these measures to their respective most directly comparable GAAP
measure below in this press release.
2019 Fourth Quarter Financial
Discussion
Fourth quarter revenues of $160.9 million
increased 22.0% compared to revenues of $131.9 million in the
fourth quarter of 2018.
Revenue from our Medicare segment was $55.9
million. We had no Medicare revenue in 2018. Revenue from our IFP
segment was $105.0 million, a 20.4% decrease compared to $131.9
million for the fourth quarter of 2018.
Third-party commission expense was $66.0 million
(62.9% of IFP revenues) in the fourth quarter of 2019, compared to
$94.9 million (71.9% of IFP revenues) in the same period in
2018.
Total selling, general & administrative
expense (“SG&A”) was $31.8 million (19.8% of net revenues) in
the fourth quarter, compared to $17.4 million (13.2% of net
revenues) in the same period in 2018. The increase is attributable
primarily to increased payroll and professional fees.
Marketing and Advertising expense was $23.7
million in the fourth quarter, compared to $2.8 million in the same
period in 2018. The increased expense is primarily related to
investments in Medicare consumer engagement.
Net income was $26.5 million in the fourth
quarter of 2019, compared to net income of $8.3 million in the same
period in 2018.
EBITDA was $41.3 million in the fourth quarter
of 2019, compared to $14.4 million in the same period in 2018, an
increase of 186.8%.
Adjusted EBITDA was $46.2 million (28.7% of net
revenues) in the fourth quarter of 2019 compared to $21.6 million
(16.4% of net revenues) in the same period in 2018. Adjusted EBITDA
is calculated by taking EBITDA and adjusting for items that are not
part of regular operating activities, including stock-based
compensation and related costs, transaction costs, tax receivable
adjustments, indemnity and other related legal costs, and
severance, restructuring, fair value adjustment to contingent
consideration and other charges.
GAAP diluted net income per share was $1.77 in
the fourth quarter in 2019, compared to GAAP diluted net income per
share of $0.40 in the same period in 2018.
Adjusted net income per share was $2.48 in the
fourth quarter in 2019, compared to adjusted net income per share
of $0.97 in the same period in 2018.
2019 Annual Financial
Discussion
Revenues in 2019 of $381.8 million increased
8.7% compared to revenue of $351.1 million in 2018.
Revenue from our Medicare segment was $67.8
million. We had no Medicare revenue in 2018. Revenue from our IFP
segment was $314.0 million, a 10.5% decrease compared to $351.1
million for the year ended December 31, 2018.
Third-party commission expense was $188.7
million (60.1% of IFP revenues) in 2019, compared to $234.8 million
(66.9% of IFP revenues) in 2018.
SG&A was $88.4 million (23.2% of net
revenues) in 2019, compared to $68.0 million (19.4% of net
revenues) in 2018.
Marketing and Advertising expense was $37.9
million in 2019, compared to $6.3 million in the same period in
2018. The increased expense is primarily related to investments in
Medicare consumer engagement.
Net income was $36.7 million in 2019, compared
to net income of $19.0 million in 2018.
EBITDA was $64.3 million in 2019, compared to
$34.5 million in 2018.
Adjusted EBITDA was $82.1 million (21.5% of net
revenues) in 2019 compared to $59.4 million (16.9% of net revenues)
in 2018. Adjusted EBITDA is calculated by taking EBITDA and
adjusting for items that are not part of regular operating
activities, including stock-based compensation and related costs,
transaction costs, tax receivable adjustments, indemnity and other
related legal costs, and severance, restructuring, fair value
adjustment to contingent consideration and other charges.
GAAP diluted net income per share was $2.47 in
2019, compared to GAAP diluted net income per share of $0.97 in
2018.
Adjusted net income per share was $4.24 in 2019,
compared to adjusted net income per share of $2.60 in 2018.
Cash and cash equivalents totaled $3.8 million
as of December 31, 2019, a decrease of $5.5 million from
December 31, 2018. We ended the quarter with $178.6 million of
debt outstanding including $34.0 million drawn against our $65.0
million revolving credit facility. Net cash used in operating
activities for the year 2019 was $38.0 million, due to increased
marketing and advertising expense and a $16.2 million increase in
advanced commissions.
The Company did not repurchase shares of common
stock during the fourth quarter of 2019. The Company has $75.4
million remaining under its $200 million share repurchase
authorization.
2020 Full Year Guidance
The Company’s guidance for the full year ending
December 31, 2020 is based on information available as of March 3,
2020. These expectations are forward-looking statements, and the
Company assumes no obligation to update these statements. Actual
results may be materially different and are affected by the risk
factors and uncertainties identified in this release and in the
Company’s annual and quarterly filings with the Securities and
Exchange Commission.
The following is guidance for the full year
ending December 31, 2020.
- Total revenue is expected to be in the range of $290 million to
$350 million. Revenue from the Medicare segment is expected to be
in the range of $190 million to $210 million. Revenue from the IFP
segment is expected to be in the range of $100 million to $140
million.
- Adjusted net income per share is expected to be in the range of
$3.10 to $4.15.
- Adjusted EBITDA is expected to be in the range of $65.0 million
to $80.0 million.
- Profit from the Medicare (3) segment is expected to be in the
range of $70.0 million to $80.0 million. Profit from the IFP
segment is expected to be in the range of $15.0 million to $20.0
million.
- Corporate (4) expense is expected to be approximately $20.0
million.
- The company expects cashflow to be approximately breakeven in
2020.
(1) |
The Company’s Board of Directors has not set a timetable for
completing the strategic review nor has it made any decisions
related to strategic alternatives at this time. There can be
no assurance that the Board’s exploration of strategic
alternatives, including the current ongoing discussions with
potentially interested strategic and financial institutions, will
result in changes in strategy or any transaction or, if a
transaction is undertaken, as to its terms, structure or timing.
The Company does not expect to make further public comment
regarding these matters unless and until the Board has approved a
specific transaction or alternative or otherwise concludes its
review of strategic alternatives, or the Company otherwise deems
disclosure of significant developments to be appropriate. In
connection with the strategic review, BofA Securities is acting as
financial advisor and Weil, Gotshal & Manges LLP is acting as
legal advisor to the Company. |
(2) |
The net contract asset includes $45.3 million of advanced
commissions that reduce the commissions payable balance but are
required to be showed gross under GAAP. |
(3) |
Segment profit is calculated as total revenue for the applicable
segment less direct and allocated marketing and advertising,
customer care and enrollment, technology and content and general
and administrative operating expenses, excluding stock-based
compensation, depreciation and amortization expense and
amortization of intangible assets, before Corporate expenses. |
(4) |
Corporate consists of other indirect General and Administrative
operating expenses, excluding stock-based compensation and
depreciation and amortization expense, which are managed in a
corporate shared services environment and, since they are not the
responsibility of segment operating management, are not allocated
to the reportable segments. |
Conference Call and Webcast
The Company will host an earnings conference
call on March 4, 2020 at 9:00 A.M. Eastern time. All interested
parties can join the call by dialing (877) 451-6152 or (201)
389-0879; the conference ID is 13699483. An archive of the call
will be available on Health Insurance Innovations’ website,
HIIQ.com, for 30 days beginning on Wednesday, March 4, 2020, 12:00
PM ET.
About Health Insurance Innovations,
Inc.
Health Insurance Innovations, Inc., to be
renamed Benefytt Technologies, Inc., is a health insurance
technology company that primarily engages in the development and
operation of private e-commerce health insurance marketplaces,
consumer engagement platforms, agency technology systems, and
insurance policy administration platforms. By leveraging existing
and emerging platforms and technologies, the Company offers a range
of Medicare-related insurance plans from many of the nation’s
leading carriers as well as other types of health insurance and
supplemental products that meet the needs of consumers.
Forward-Looking Statements
This press release contains "forward-looking
statements" within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995. Forward-looking statements are
statements other than historical fact, and may include statements
relating to goals, plans and projections regarding new markets,
products, services, growth strategies, anticipated trends in our
business and anticipated changes and developments in the United
States health insurance system and laws. Forward-looking statements
are based on Health Insurance Innovations, Inc.’s (the “Company’s”)
current assumptions, expectations and beliefs are generally
identifiable by use of words “may,” “might,” “will,” “should,”
“expects,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “potential” or “continue,” or similar expressions and
involve significant risks and uncertainties that could cause actual
results, developments and business decisions to differ materially
from those contemplated by these statements. These risks and
uncertainties include, among other things, our focus on the
Medicare market, our ability to maintain relationships and develop
new relationships with health insurance carriers and distributors,
our ability to retain our members, the demand for products offered
through our platform, regulatory oversight and examinations of us
and our carriers and distributors, legal and regulatory compliance
by our carriers and distributors, the amount of commissions paid to
us or changes in health insurance plan pricing practices,
competition, changes and developments in the United States health
insurance system and laws, and the Company’s ability to adapt to
them, the ability to maintain and enhance our name recognition,
difficulties arising from acquisitions or other strategic
transactions, and our ability to build the necessary infrastructure
and processes to maintain effective controls over financial
reporting. These and other risk factors that could cause actual
results to differ materially from those expressed or implied in our
forward-looking statements will be discussed in the Company’s
Annual Report on Form 10-K filed with the Securities and Exchange
Commission (SEC) as well as other documents that may be filed by
the Company from time to time with the Securities and Exchange
Commission, which are available at www.sec.gov. Any forward-looking
statement made by us in this press release is based only on
information currently available to us and speaks only as of the
date on which it is made. You should not rely on any
forward-looking statement as representing our views in the future.
We undertake no obligation to publicly update any forward-looking
statement, whether written or oral, that may be made from time to
time, whether as a result of new information, future developments
or otherwise.
Non-GAAP Financial
Information
To supplement the Company’s financial
information presented in accordance with generally accepted
accounting principles in the United States of America, or GAAP, the
Company presents certain financial measures that are not prepared
in accordance with GAAP, which are adjusted EBITDA, and adjusted
net income per share. These non-GAAP financial measures, which are
defined below, should not be considered in isolation from, or as a
substitute for, financial information prepared in accordance with
GAAP. These non-GAAP financial measures are not based on any
standardized methodology prescribed by GAAP and are not necessarily
comparable to similarly titled measures presented by other
companies.
The Company is presenting these non-GAAP
financial measures to assist investors in seeing the Company’s
operating results through the eyes of management and because
the Company believes that these measures provide a useful tool for
investors to use in assessing the Company’s operating performance
against prior period operating results and against business
objectives. The Company uses the non-GAAP financial measures in
evaluating its operating results and for financial and operational
decision-making purposes.
The accompanying tables provide more detail on
the GAAP financial measures that are most directly comparable to
the non-GAAP financial measures described above and the related
reconciliations between these financial measures. The Company has
not reconciled adjusted EBITDA guidance or adjusted net income per
share guidance to GAAP net income or GAAP net income per diluted
share, respectively, because the Company does not provide guidance
for the reconciling items between these measures and GAAP net
income or GAAP net income per diluted share, respectively. As
certain of the items that impact GAAP net income and/or GAAP net
income per diluted share cannot be reasonably predicted at this
time, the Company is unable to provide such guidance. Accordingly,
a reconciliation to GAAP net income or GAAP net income per diluted
share is not available without unreasonable effort.
HEALTH INSURANCE INNOVATIONS,
INC.Consolidated Balance Sheets($
in thousands, except share and per share data)
|
December 31, |
|
2019 |
|
2018 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
3,771 |
|
|
$ |
9,321 |
|
Restricted cash |
17,788 |
|
|
16,678 |
|
Accounts receivable, net, prepaid expenses and other current
assets |
2,911 |
|
|
2,108 |
|
Income taxes receivable |
18,210 |
|
|
— |
|
Advanced commissions, net |
45,250 |
|
|
29,867 |
|
Contract asset |
184,474 |
|
|
165,494 |
|
Total current assets |
272,404 |
|
|
223,468 |
|
Long-term contract asset |
209,239 |
|
|
132,566 |
|
Property and equipment, net |
5,415 |
|
|
5,134 |
|
Goodwill |
135,182 |
|
|
41,076 |
|
Intangible assets, net |
28,963 |
|
|
4,217 |
|
Deferred tax assets, net |
— |
|
|
25,967 |
|
Other assets |
655 |
|
|
61 |
|
Total assets |
$ |
651,858 |
|
|
$ |
432,489 |
|
Liabilities and stockholders' equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable and accrued expenses |
$ |
51,477 |
|
|
$ |
32,397 |
|
Commissions payable |
97,785 |
|
|
106,608 |
|
Income taxes payable, net |
— |
|
|
15,586 |
|
Short-term debt |
10,684 |
|
|
— |
|
Due to member |
— |
|
|
7,978 |
|
Other current liabilities |
794 |
|
|
422 |
|
Total current liabilities |
160,740 |
|
|
162,991 |
|
Long-term commissions payable |
82,369 |
|
|
84,716 |
|
Long-term contingent consideration |
65,171 |
|
|
— |
|
Long-term debt, net |
167,947 |
|
|
15,000 |
|
Due to member |
29,121 |
|
|
25,693 |
|
Deferred tax liability, net |
5,722 |
|
|
— |
|
Other liabilities |
814 |
|
|
621 |
|
Total liabilities |
511,884 |
|
|
289,021 |
|
Stockholders' equity: |
|
|
|
Class A common stock (par value $0.001 per share, 100,000,000
shares authorized; 16,219,217 and 14,425,824 shares issued as of
December 31, 2019 and 2018, respectively; 12,273,630 and 12,387,349
shares outstanding as of December 31, 2019 and 2018,
respectively) |
16 |
|
|
14 |
|
Class B common stock (par value $0.001 per share, 20,000,000 shares
authorized; 1,916,667 and 2,541,667 shares issued and outstanding
as of December 31, 2019 and 2018, respectively) |
2 |
|
|
3 |
|
Preferred stock (par value $0.001 per share, 5,000,000 shares
authorized; no shares issued and outstanding as of December 31,
2019 and 2018, respectively) |
— |
|
|
— |
|
Additional paid-in
capital |
118,465 |
|
|
94,194 |
|
Treasury stock, at cost (3,945,587 and 2,038,475 shares as of
December 31, 2019 and 2018, respectively) |
(127,400 |
) |
|
(67,185 |
) |
Retained earnings |
110,418 |
|
|
80,804 |
|
Total Health Insurance Innovations, Inc. stockholders' equity |
101,501 |
|
|
107,830 |
|
Noncontrolling interests |
38,473 |
|
|
35,638 |
|
Total stockholders' equity |
139,974 |
|
|
143,468 |
|
Total liabilities and stockholders' equity |
$ |
651,858 |
|
|
$ |
432,489 |
|
|
Health Insurance Innovations,
Inc.Consolidated Statements of
Income($ in thousands, except share and per share
data)
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
Revenues |
$ |
160,854 |
|
|
$ |
131,917 |
|
|
$ |
381,808 |
|
|
$ |
351,097 |
|
Operating expenses: |
|
|
|
|
|
|
|
Third-party commissions |
65,974 |
|
|
94,945 |
|
|
188,742 |
|
|
234,777 |
|
Selling, general and administrative |
31,763 |
|
|
17,386 |
|
|
88,393 |
|
|
68,043 |
|
Marketing and Advertising |
23,730 |
|
|
2,768 |
|
|
37,896 |
|
|
6,307 |
|
Credit card and ACH fees |
1,572 |
|
|
1,591 |
|
|
6,150 |
|
|
5,909 |
|
Depreciation and amortization |
4,266 |
|
|
1,144 |
|
|
11,842 |
|
|
4,799 |
|
Total operating expenses |
127,305 |
|
|
117,834 |
|
|
333,023 |
|
|
319,835 |
|
Income from operations |
33,549 |
|
|
14,083 |
|
|
48,785 |
|
|
31,262 |
|
Other expense (income): |
|
|
|
|
|
|
|
Interest expense |
1,953 |
|
|
64 |
|
|
5,646 |
|
|
25 |
|
Fair value adjustment to contingent acquisition consideration |
(3,472 |
) |
|
— |
|
|
(3,472 |
) |
|
— |
|
TRA expense (income) |
— |
|
|
750 |
|
|
(212 |
) |
|
1,471 |
|
Other expense |
— |
|
|
42 |
|
|
— |
|
|
130 |
|
Net income before income
taxes |
35,068 |
|
|
13,227 |
|
|
46,823 |
|
|
29,636 |
|
Provision for income taxes |
8,590 |
|
|
4,935 |
|
|
10,093 |
|
|
10,672 |
|
Net income |
26,478 |
|
|
8,292 |
|
|
36,730 |
|
|
18,964 |
|
Net income attributable to noncontrolling interests |
5,283 |
|
|
2,845 |
|
|
7,116 |
|
|
5,970 |
|
Net income attributable to
Health Insurance Innovations, Inc. |
$ |
21,195 |
|
|
$ |
5,447 |
|
|
$ |
29,614 |
|
|
$ |
12,994 |
|
|
|
|
|
|
|
|
|
Per share
data: |
|
|
|
|
|
|
|
Net income per share
attributable to Health Insurance Innovations, Inc. |
|
|
|
|
|
|
|
Basic |
$ |
1.89 |
|
|
$ |
0.44 |
|
|
$ |
2.67 |
|
|
$ |
1.07 |
|
Diluted |
$ |
1.77 |
|
|
$ |
0.40 |
|
|
$ |
2.47 |
|
|
$ |
0.97 |
|
Weighted average Class
A common shares outstanding |
|
|
|
|
|
|
|
Basic |
11,196,665 |
|
|
12,408,169 |
|
|
11,084,356 |
|
|
12,200,654 |
|
Diluted |
12,002,983 |
|
|
13,594,340 |
|
|
11,966,542 |
|
|
13,376,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Insurance Innovations,
Inc.Consolidated Statements of Cash
Flows($ in thousands)
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
Operating activities: |
|
|
|
|
|
|
|
Net income |
26,479 |
|
|
8,293 |
|
|
36,730 |
|
|
18,964 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
Stock-based compensation |
2,875 |
|
|
2,080 |
|
|
10,595 |
|
|
12,583 |
|
Fair value adjustment to contingent acquisition consideration |
(3,472 |
) |
|
— |
|
|
(3,472 |
) |
|
— |
|
Provision for allowance for doubtful accounts |
1,200 |
|
|
— |
|
|
1,200 |
|
|
137 |
|
Depreciation and amortization |
4,266 |
|
|
1,144 |
|
|
11,842 |
|
|
4,799 |
|
Deferred financing costs |
307 |
|
|
— |
|
|
307 |
|
|
— |
|
Deferred income taxes |
11,766 |
|
|
(14,595 |
) |
|
34,665 |
|
|
(14,135 |
) |
Deferred income taxes related to the Tax Act |
— |
|
|
(250 |
) |
|
— |
|
|
(250 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
Decrease (increase) in accounts receivable, prepaid expenses and
other assets |
308 |
|
|
569 |
|
|
(1,565 |
) |
|
171 |
|
(Increase) decrease in advanced commissions |
(17,217 |
) |
|
(1,762 |
) |
|
(17,427 |
) |
|
6,288 |
|
(Increase) decrease in income taxes receivable |
(3,198 |
) |
|
2,542 |
|
|
(18,210 |
) |
|
— |
|
Increase in contract asset |
(82,437 |
) |
|
(54,296 |
) |
|
(82,147 |
) |
|
(59,989 |
) |
Increase (decrease) in accounts payable, accrued expenses and other
liabilities |
18,250 |
|
|
(3,298 |
) |
|
16,818 |
|
|
3,078 |
|
Increase (decrease) in commission payable |
18,908 |
|
|
45,914 |
|
|
(10,148 |
) |
|
33,856 |
|
Increase (decrease) in income taxes payable, net |
— |
|
|
14,606 |
|
|
(15,586 |
) |
|
14,799 |
|
(Decrease) increase in due to member pursuant to tax receivable
agreement |
(1,047 |
) |
|
750 |
|
|
(1,259 |
) |
|
1,471 |
|
Net cash (used in) provided by operating activities |
(23,012 |
) |
|
1,697 |
|
|
(37,657 |
) |
|
21,772 |
|
Investing activities: |
|
|
|
|
|
|
|
Business acquisitions, net of cash acquired |
— |
|
|
— |
|
|
(49,895 |
) |
|
— |
|
Acquisition of domain name |
— |
|
|
— |
|
|
(8,133 |
) |
|
— |
|
Capitalized internal-use software and website development
costs |
(384 |
) |
|
(311 |
) |
|
(1,616 |
) |
|
(1,601 |
) |
Purchases of property and equipment |
(801 |
) |
|
(79 |
) |
|
(1,160 |
) |
|
(613 |
) |
Net cash used in investing activities |
(1,185 |
) |
|
(390 |
) |
|
(60,804 |
) |
|
(2,214 |
) |
Financing activities: |
|
|
|
|
|
|
|
Proceeds from borrowings under credit agreement |
23,713 |
|
|
15,000 |
|
|
234,000 |
|
|
15,000 |
|
Payments on borrowings under credit agreement |
(3,801 |
) |
|
— |
|
|
(70,676 |
) |
|
— |
|
Payments related to tax withholding for share-based
compensation |
(691 |
) |
|
(945 |
) |
|
(2,820 |
) |
|
(4,415 |
) |
Issuances of Class A common stock under equity compensation
plans |
— |
|
|
— |
|
|
— |
|
|
6 |
|
Purchases of Class A common stock pursuant to share repurchase
plan |
— |
|
|
(36,381 |
) |
|
(63,916 |
) |
|
(55,883 |
) |
Distributions to member |
(232 |
) |
|
(1,257 |
) |
|
(2,567 |
) |
|
(4,094 |
) |
Net cash provided by (used in) financing activities |
18,989 |
|
|
(23,583 |
) |
|
94,021 |
|
|
(49,386 |
) |
Net decrease in cash and cash equivalents, and restricted cash |
(5,208 |
) |
|
(22,276 |
) |
|
(4,440 |
) |
|
(29,828 |
) |
Cash and cash equivalents, and restricted cash at beginning of
period |
26,767 |
|
|
48,275 |
|
|
25,999 |
|
|
55,827 |
|
Cash and cash equivalents, and restricted cash at end of
period |
21,559 |
|
|
25,999 |
|
|
21,559 |
|
|
25,999 |
|
|
Reconciliation of Net Income to EBITDA
and Adjusted EBITDA(unaudited)($
in thousands)
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net income |
$ |
26,479 |
|
|
$ |
8,293 |
|
|
$ |
36,730 |
|
|
$ |
18,964 |
|
Interest expense |
1,953 |
|
|
$ |
64 |
|
|
5,646 |
|
|
25 |
|
Depreciation and
amortization |
4,266 |
|
|
1,144 |
|
|
11,842 |
|
|
4,799 |
|
Provision for income
taxes |
8,590 |
|
|
4,935 |
|
|
10,093 |
|
|
10,672 |
|
EBITDA |
41,288 |
|
|
14,436 |
|
|
64,311 |
|
|
34,460 |
|
Non-cash stock-based
compensation |
2,895 |
|
|
2,112 |
|
|
10,731 |
|
|
12,878 |
|
Fair value adjustment to
contingent consideration |
(3,472 |
) |
|
— |
|
|
(3,472 |
) |
|
— |
|
Transaction costs |
295 |
|
|
38 |
|
|
1,986 |
|
|
321 |
|
Tax receivable agreement
liability adjustment |
— |
|
|
750 |
|
|
(212 |
) |
|
1,471 |
|
Indemnity and other related
legal costs |
4,531 |
|
|
4,280 |
|
|
7,721 |
|
|
6,614 |
|
Severance, restructuring and
other charges |
702 |
|
|
29 |
|
|
1,043 |
|
|
3,687 |
|
Adjusted EBITDA |
$ |
46,239 |
|
|
$ |
21,645 |
|
|
$ |
82,108 |
|
|
$ |
59,431 |
|
|
Reconciliation of Net Income to Adjusted
Net Income per
Share(unaudited) ($ in
thousands except per share data)
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net income |
$ |
26,479 |
|
|
$ |
8,293 |
|
|
$ |
36,730 |
|
|
$ |
18,964 |
|
Interest expense |
1,953 |
|
|
64 |
|
|
5,646 |
|
|
25 |
|
Amortization |
3,481 |
|
|
334 |
|
|
8,704 |
|
|
1,725 |
|
Provision for income
taxes |
8,590 |
|
|
4,935 |
|
|
10,093 |
|
|
10,672 |
|
Stock-based compensation and
related costs |
2,895 |
|
|
2,112 |
|
|
10,731 |
|
|
12,878 |
|
Fair value adjustment to
contingent consideration |
(3,472 |
) |
|
— |
|
|
(3,472 |
) |
|
— |
|
Transaction costs |
295 |
|
|
38 |
|
|
1,986 |
|
|
321 |
|
Tax receivable agreement
liability adjustment |
— |
|
|
750 |
|
|
(212 |
) |
|
1,471 |
|
Indemnity and other related
legal costs |
4,531 |
|
|
4,280 |
|
|
7,721 |
|
|
6,614 |
|
Severance, restructuring and
other charges |
702 |
|
|
29 |
|
|
1,043 |
|
|
3,687 |
|
Adjusted pre-tax income |
45,454 |
|
|
20,835 |
|
|
78,970 |
|
|
56,357 |
|
Pro forma income taxes |
(10,909 |
) |
|
(5,001 |
) |
|
(18,953 |
) |
|
(13,526 |
) |
Adjusted net income |
$ |
34,545 |
|
|
$ |
15,834 |
|
|
$ |
60,017 |
|
|
$ |
42,831 |
|
Total weighted average diluted
share count |
13,920 |
|
|
16,393 |
|
|
14,161 |
|
|
16,477 |
|
Adjusted net income per
share |
$ |
2.48 |
|
|
$ |
0.97 |
|
|
$ |
4.24 |
|
|
$ |
2.60 |
|
(1) EBITDA is defined as net income
before interest, income taxes and depreciation and amortization. We
have included EBITDA in this report because it is a key measure
used by our management and board of directors to understand and
evaluate our core operating performance and trends, to prepare and
approve our annual budget and to develop short- and long-term
operational plans. In particular, the exclusion of certain expenses
in calculating EBITDA can provide a useful measure for
period-to-period comparisons of our business. However, EBITDA does
not represent, and should not be considered as, an alternative to
net income or cash flows from operations, each as determined in
accordance with GAAP. Other companies may calculate EBITDA
differently than we do. EBITDA has limitations as an analytical
tool, and you should not consider it in isolation or as a
substitute for analysis of our results as reported under GAAP.
(2) To calculate adjusted EBITDA, we
calculate EBITDA, which is then further adjusted for items such as
stock-based compensation and related costs, and items that are not
generally a part of regular operating activities, including tax
receivable adjustments, indemnity and other related legal costs,
and severance, restructuring, and acquisition costs. Adjusted
EBITDA does not represent, and should not be considered as, an
alternative to net income or cash flows from operations, each as
determined in accordance with GAAP. We have presented adjusted
EBITDA because we consider it an important supplemental measure of
our performance and believe that it is frequently used by analysts,
investors and other interested parties in the evaluation of
companies. Other companies may calculate adjusted EBITDA
differently than we do. Adjusted EBITDA has limitations as an
analytical tool, and you should not consider it in isolation or as
a substitute for analysis of our results as reported under
GAAP.
(3) To calculate adjusted net income,
we calculate net income then add back amortization (but not
depreciation), interest, tax expense, items such as stock-based
compensation and related costs, and other items that are not
generally a part of regular operating activities, including, tax
receivable adjustments, indemnity and other related legal costs,
severance, restructuring, and acquisition costs. From adjusted
pre-tax net income, we apply a pro forma tax expense calculated at
an assumed rate of 24%, which consists of the maximum federal
corporate rate of 21%, with an assumed 3% state tax rate. We
believe that when measuring Company and executive performance
against the adjusted net income measure, applying a pro forma tax
rate better reflects the performance of the Company without regard
to the Company’s organizational tax structure. We have included
adjusted net income in this report because it is a key performance
measure used by our management to understand and evaluate our core
operating performance and trends and because we believe it is
frequently used by analysts, investors, and other interested
parties in their evaluation of the Company. Other companies may
calculate this measure differently than we do. Adjusted net income
has limitations as an analytical tool, and you should not consider
it in isolation or substitution for earnings per share as reported
under GAAP.
(4) Adjusted net income per share is
computed by dividing adjusted net income by the total number of
weighted-average diluted Class A and weighted-average Class B
shares of our common stock for each period. We have included
adjusted net income per share in this report because it is a key
measure used by our management to understand and evaluate our core
operating performance and trends and because we believe it is
frequently used by analysts, investors and other interested parties
in the evaluation of companies. Other companies may calculate this
measure differently than we do. Adjusted net income per share has
limitations as an analytical tool, and you should not consider it
in isolation or as a substitute for earnings per share as reported
under GAAP.
The following table presents revenues and profit from our
operating segments for the three months and year ended December 31,
2019 ($ in thousands):
|
Three Months Ended December 31, 2019 |
|
Year Ended December 31, 2019 |
Revenue |
|
|
|
Medicare (1) |
$ |
55,868 |
|
|
$ |
67,770 |
|
IFP |
104,986 |
|
|
314,038 |
|
Total Revenue |
$ |
160,854 |
|
|
$ |
381,808 |
|
|
|
|
|
Segment
profit |
|
|
|
Medicare segment profit |
$ |
29,669 |
|
|
$ |
32,078 |
|
IFP segment profit |
22,231 |
|
|
66,784 |
|
Total segment profit |
51,900 |
|
|
98,862 |
|
|
|
|
|
Corporate |
$ |
(5,662 |
) |
|
$ |
(16,754 |
) |
Interest expense |
(1,953 |
) |
|
(5,646 |
) |
Depreciation and amortization |
(4,266 |
) |
|
(11,842 |
) |
Provision for income taxes |
(8,590 |
) |
|
(10,093 |
) |
Stock-based compensation and related costs |
(2,895 |
) |
|
(10,731 |
) |
Fair value adjustment to contingent consideration |
3,472 |
|
|
3,472 |
|
Transaction costs |
(295 |
) |
|
(1,986 |
) |
Tax receivable agreement liability adjustment |
— |
|
|
212 |
|
Indemnity and other related legal costs |
(4,531 |
) |
|
(7,721 |
) |
Severance, restructuring and other |
(702 |
) |
|
(1,043 |
) |
Net income |
$ |
26,479 |
|
|
$ |
36,730 |
|
(1) Medicare revenue is net of Customer Care and
Enrollment (CC&E) expenses with certain Medicare Business
Process Outsourcing (BPO) partners who are deemed a customer under
ASC 606. CC&E netted against revenue for the three months ended
December 31, 2019 was $5.8 million and for the year ended December
31, 2019 was $8.5 million.
Disaggregated Revenue
The following table presents our revenue,
disaggregated by major product type and timing of revenue
recognition ($ in thousands):
|
Three Months Ended December 31, 2019 |
|
Three Months Ended December 31, 2018 |
|
Sales and marketing services |
|
Member management |
|
Total |
|
Sales and marketing services |
|
Member management |
|
Total |
Revenue by
Source |
|
|
|
|
|
|
|
|
|
|
|
Commission revenue(1) |
|
|
|
|
|
|
|
|
|
|
|
STM |
$ |
35,765 |
|
|
$ |
1,040 |
|
|
$ |
36,805 |
|
|
$ |
45,257 |
|
|
$ |
742 |
|
|
$ |
45,999 |
|
HBIP |
30,641 |
|
|
1,687 |
|
|
|
32,328 |
|
|
48,608 |
|
|
2,064 |
|
|
|
50,672 |
|
Supplemental |
33,984 |
|
|
1,106 |
|
|
|
35,090 |
|
|
32,012 |
|
|
1,184 |
|
|
|
33,196 |
|
Medicare |
48,086 |
|
|
— |
|
|
|
48,086 |
|
|
— |
|
|
— |
|
|
|
— |
|
Other |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
17 |
|
|
|
17 |
|
Services revenue |
— |
|
|
736 |
|
|
|
736 |
|
|
251 |
|
|
1,666 |
|
|
|
1,917 |
|
Consumer engagement
revenue |
7,486 |
|
|
— |
|
|
|
7,486 |
|
|
116 |
|
|
— |
|
|
|
116 |
|
Other revenues |
323 |
|
|
— |
|
|
|
323 |
|
|
— |
|
|
— |
|
|
|
— |
|
Total revenue |
$ |
156,285 |
|
|
$ |
4,569 |
|
|
$ |
160,854 |
|
|
$ |
126,244 |
|
|
$ |
5,673 |
|
|
$ |
131,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of Revenue
Recognition |
|
|
|
|
|
|
|
|
|
|
|
Transferred at a point in
time |
$ |
156,285 |
|
|
$ |
— |
|
|
$ |
156,285 |
|
|
$ |
126,244 |
|
|
$ |
— |
|
|
$ |
126,244 |
|
Transferred over time |
— |
|
|
4,569 |
|
|
4,569 |
|
|
— |
|
|
5,673 |
|
|
|
5,673 |
|
Total revenue |
$ |
156,285 |
|
|
$ |
4,569 |
|
|
$ |
160,854 |
|
|
$ |
126,244 |
|
|
$ |
5,673 |
|
|
$ |
131,917 |
|
|
For the Year Ended December 31, 2019 |
|
For the Year ended December 31, 2018 |
|
Sales and marketing services |
|
Member management |
|
Total |
|
Sales and marketing services |
|
Member management |
|
Total |
Revenue by
Source |
|
|
|
|
|
|
|
|
|
|
|
Commission revenue(1) |
|
|
|
|
|
|
|
|
|
|
|
STM(2) |
$ |
111,239 |
|
|
$ |
3,934 |
|
|
$ |
115,173 |
|
|
$ |
87,489 |
|
|
$ |
2,824 |
|
|
$ |
90,313 |
|
HBIP |
92,343 |
|
|
6,619 |
|
|
98,962 |
|
|
149,986 |
|
|
8,202 |
|
|
158,188 |
|
Supplemental(2) |
90,592 |
|
|
4,434 |
|
|
95,026 |
|
|
92,523 |
|
|
4,568 |
|
|
97,091 |
|
Medicare |
57,087 |
|
|
— |
|
|
57,087 |
|
|
— |
|
|
— |
|
|
— |
|
Other |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
74 |
|
|
74 |
|
Services revenue |
— |
|
|
3,715 |
|
|
3,715 |
|
|
— |
|
|
4,762 |
|
|
4,762 |
|
Consumer engagement
revenue |
11,306 |
|
|
— |
|
|
11,306 |
|
|
669 |
|
|
— |
|
|
669 |
|
Other revenues |
539 |
|
|
— |
|
|
539 |
|
|
— |
|
|
— |
|
|
— |
|
Total revenue |
$ |
363,106 |
|
|
$ |
18,702 |
|
|
$ |
381,808 |
|
|
$ |
330,667 |
|
|
$ |
20,430 |
|
|
$ |
351,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of Revenue
Recognition |
|
|
|
|
|
|
|
|
|
|
|
Transferred at a point in
time |
$ |
363,106 |
|
|
$ |
— |
|
|
$ |
363,106 |
|
|
$ |
330,667 |
|
|
$ |
— |
|
|
$ |
330,667 |
|
Transferred over time |
— |
|
|
18,702 |
|
|
18,702 |
|
|
— |
|
|
20,430 |
|
|
20,430 |
|
Total revenue |
$ |
363,106 |
|
|
$ |
18,702 |
|
|
$ |
381,808 |
|
|
$ |
330,667 |
|
|
$ |
20,430 |
|
|
$ |
351,097 |
|
(1) For the purposes of disaggregated
revenue presentation, when additional Discount Benefit products are
sold with an STM, HBIP, or supplemental product, the associated
revenue for the Discount Benefit products are reported within the
STM, HBIP, or supplemental product category depicted within the
table.(2) The Company changed its presentation of
brokerage revenue during the fourth quarter of 2019. Previously
brokerage revenue was reported as a separate line item with the
disaggregated revenue table however the Company has reclassified
the revenue into the respective STM or supplemental category that
the brokerage sales were associated with.
Summary of Selected
Metrics(unaudited)
The following table presents submitted
applications by product type:
|
Submitted Applications by Product Type |
|
Submitted Applications by Product
Type |
|
During the Three Months Ended December 31, |
|
During the Year Ended December
31, |
|
2019 |
|
2018 |
|
Change (%) |
|
2019 |
|
2018 |
|
Change (%) |
Medicare |
|
|
|
|
|
|
|
|
|
|
Medicare Advantage |
44,500 |
|
|
— |
|
|
|
— |
|
|
53,900 |
|
— |
|
— |
|
Medicare Supplement |
1,000 |
|
|
— |
|
|
|
— |
|
|
1,200 |
|
— |
|
— |
|
Medicare Part D |
2,700 |
|
|
— |
|
|
|
— |
|
|
3,000 |
|
— |
|
— |
|
Supplementals |
300 |
|
|
— |
|
|
|
— |
|
|
300 |
|
— |
|
— |
|
Total Medicare |
48,500 |
|
|
— |
|
|
|
— |
|
|
58,400 |
|
— |
|
— |
|
IFP |
|
|
|
|
|
|
|
|
|
|
|
|
STM <12 Months |
8,500 |
|
|
15,500 |
|
|
|
(45 |
)% |
|
38,000 |
|
117,200 |
|
(68 |
)% |
STM ≥ 12 Months |
34,100 |
|
|
34,600 |
|
|
|
(1 |
)% |
|
105,800 |
|
35,600 |
|
197 |
% |
Total STM |
42,600 |
|
|
50,100 |
|
|
|
(15 |
)% |
|
143,800 |
|
152,800 |
|
(6 |
)% |
HBP |
34,900 |
|
|
53,600 |
|
|
|
(35 |
)% |
|
126,400 |
|
190,100 |
|
(34 |
)% |
Supplementals |
81,100 |
|
|
92,500 |
|
|
|
(12 |
)% |
|
257,400 |
|
278,700 |
|
(8 |
)% |
Total IFP |
158,600 |
|
|
196,200 |
|
|
|
(19 |
)% |
|
527,600 |
|
621,600 |
|
(15 |
)% |
Total Submitted Applications |
207,100 |
|
|
196,200 |
|
|
|
6 |
% |
|
586,000 |
|
621,600 |
|
(6 |
)% |
|
The following table presents approved
applications by product type:
|
Approved Applications by Product Type |
|
Approved Applications by Product
Type |
|
During the Three Months Ended December 31, |
|
During the Year Ended December
31, |
|
2019 |
|
2018 |
|
Change (%) |
|
2019 |
|
2018 |
|
Change (%) |
Medicare |
|
|
|
|
|
|
|
|
|
|
|
Medicare Advantage |
40,900 |
|
|
— |
|
|
|
— |
|
|
49,600 |
|
— |
|
— |
|
Medicare Supplement |
900 |
|
|
— |
|
|
|
— |
|
|
1,100 |
|
— |
|
— |
|
Medicare Part D |
2,500 |
|
|
— |
|
|
|
— |
|
|
2,800 |
|
— |
|
— |
|
Supplementals |
300 |
|
|
— |
|
|
|
— |
|
|
300 |
|
— |
|
— |
|
Total Medicare |
44,600 |
|
|
— |
|
|
|
— |
|
|
53,800 |
|
— |
|
— |
|
IFP |
|
|
|
|
|
|
|
|
|
|
|
|
STM <12 Months |
8,500 |
|
|
15,500 |
|
|
|
(45 |
)% |
|
38,000 |
|
117,200 |
|
(68 |
)% |
STM ≥ 12 Months |
34,100 |
|
|
34,600 |
|
|
|
(1 |
)% |
|
105,800 |
|
35,600 |
|
197 |
% |
Total STM |
42,600 |
|
|
50,100 |
|
|
|
(15 |
)% |
|
143,800 |
|
152,800 |
|
(6 |
)% |
HBP |
34,900 |
|
|
53,600 |
|
|
|
(35 |
)% |
|
126,400 |
|
190,100 |
|
(34 |
)% |
Supplementals |
81,100 |
|
|
92,500 |
|
|
|
(12 |
)% |
|
257,400 |
|
278,700 |
|
(8 |
)% |
Total IFP |
158,600 |
|
|
196,200 |
|
|
|
(19 |
)% |
|
527,600 |
|
621,600 |
|
(15 |
)% |
Total Approved Applications |
203,200 |
|
|
196,200 |
|
|
|
4 |
% |
|
581,400 |
|
621,600 |
|
(6 |
)% |
|
Approved applications represent the number of submitted
applications that were approved by the relevant insurance carrier
for the identified product during the relevant period. Medicare
approved applications are calculated assuming a 92% conversion of
submitted applications.
The following tables present the Constrained
Lifetime Value (CLTV) per approved application, by product
type:
|
CLTV per Approved Application by Product
TypeDuring the Three Months Ended December
31, |
|
CLTV per Approved Application by Product
TypeDuring the Year Ended December
31, |
|
|
|
2019 |
|
|
2018 |
|
|
Change (%) |
|
|
2019 |
|
|
|
2018 |
|
|
Change (%) |
|
Medicare (1) |
$ |
1,148 |
|
$ |
— |
|
|
— |
% |
|
$ |
1,155 |
|
|
$ |
— |
|
|
— |
% |
|
Short Term Medical <12 months |
|
367 |
|
|
359 |
|
|
2 |
% |
|
|
342 |
|
|
|
437 |
|
|
(22 |
%) |
|
Short Term Medical ≥12
months |
|
947 |
|
|
1,241 |
|
|
(24 |
%) |
|
|
934 |
|
|
|
1,203 |
|
|
(22 |
%) |
|
Total STM |
|
838 |
|
|
968 |
|
|
(14 |
%) |
|
|
787 |
|
|
|
625 |
|
|
26 |
% |
|
Health Benefit Plans |
|
809 |
|
|
926 |
|
|
(13 |
%) |
|
|
759 |
|
|
|
829 |
|
|
(8 |
%) |
|
Supplemental |
|
387 |
|
|
358 |
|
|
8 |
% |
|
|
350 |
|
|
|
340 |
|
|
3 |
% |
|
(1) CLTV per approved application for Medicare is
presented gross of CC&E expenses. Including CC&E, Medicare
CLTV per approved application for the three months ended December
31, 2019 was $1,019 and for the year ended December 31, 2019 was
$996.
The following tables present expense metrics per
approved application, by product type:
|
Medicare Variable Cost per Approved
Application |
|
Three Months Ended December 31, 2019 |
|
Year Ended December 31, 2019 |
Medicare variable marketing cost per approved application (1) |
$ |
375 |
|
|
$ |
374 |
|
Medicare variable CC&E cost per approved application (2) |
|
209 |
|
|
|
246 |
|
Total Medicare cost per approved member |
$ |
584 |
|
|
$ |
620 |
|
(1) Medicare variable marketing cost per approved
application includes direct costs incurred in member acquisition
for all Medicare products from our direct marketing partners and
online advertising channels divided by Medicare approved
applications in each period.(2) Medicare CC&E cost
per approved application includes compensation and benefits costs
for personnel engaged in assistance to applicants during the
enrollment process divided by Medicare approved applications in
each period. CC&E costs include amounts netted against revenue
for certain Medicare BPO relationships.
Contacts:
Health Insurance Innovations,
Inc.: Michael
DeVries Senior Vice
President Finance
(813) 906-5314
mdevries@bfyt.com
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