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Ladies and gentlemen, thank you for standing by. Hello, and welcome to the MediaAlpha Inc. Q4 2025 Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the call over to our Investor Relations, Alex Liloia. Please go ahead.

Thanks, Dustin. Good afternoon, and thank you for joining us. With me are Co-Founder and CEO, Steve Yi; and CFO, Pat Thompson. On today's call, we'll make forward-looking statements relating to our business and outlook for future financial results, including our financial guidance for the first quarter of 2026. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings, including our annual report on Form 10-K and quarterly reports on Form 10-Q for a fuller explanation of those risks and uncertainties and the limits applicable to forward-looking statements. All the forward-looking statements we make on this call reflect our assumptions and beliefs as of today, and we disclaim any obligation to update such statements, except as required by law. Today's discussion will include non-GAAP financial measures, which are not a substitute for GAAP results. Reconciliations of these non-GAAP financial measures to the corresponding GAAP measures can be found in our press release and investor supplement issued today, which are available on the Investor Relations section of our website. I'll now turn the call over to Steve.

Thanks, Alex. Hi, everyone. Thank you for joining us. 2025 was a pivotal year for MediaAlpha. We delivered exceptional results in our P&C insurance vertical as auto insurance carriers and agents accelerated advertising spend, and we captured more than our fair share of that growth. At the same time, we narrowed the scope of our Under-65 health insurance business, improving our risk profile and sharpening our strategic focus. We generated significant free cash flow, reflecting the strength of our operating model and our disciplined approach to expense management. We returned a significant portion of that capital to shareholders, completing $47.3 million worth of share repurchases or roughly 7% of shares outstanding. Our fourth quarter results were strong with adjusted EBITDA above the high end of our guidance range. While transaction value came in modestly below guidance due to more normalized seasonality in our P&C vertical, open marketplace demand partners leaned in, driving solid revenue growth and a higher-than-expected take rate during the quarter. Our P&C business is off to a strong start in 2026, and we expect continued positive momentum for the full year and beyond. Carriers remain solidly profitable and are increasingly focusing on growing their customer base. As is typical in the early stages of a soft market, competition is beginning to intensify with many carriers lowering rates to gain share. Beyond pricing, advertising is the other primary growth lever available to carriers, and we expect advertising budgets to continue to increase. Given our unmatched scale and targeting capabilities across hundreds of supply partners, we expect carriers to allocate a growing share of wallet to our platform. We're particularly focused on the significant opportunity to scale underpenetrated carriers in our marketplace, helping them optimize their campaigns and drive profitable policy growth. As these partnerships ramp, we expect our transaction value mix to shift gradually to our open marketplace where we offer highly differentiated, predictive AI-driven optimizations for our partners. Looking ahead, I want to address the rapid pace of AI innovation and the tailwinds it's creating for our business. AI-driven search is emerging as an important new starting point for insurance shopping. Against the backdrop of accelerating LLM-driven traffic growth, we increased P&C click volume by more than 20% year-over-year in the fourth quarter, and we expect even stronger growth in Q1. This performance reflects our role as a core infrastructure layer, connecting carriers with high-intent shoppers regardless of where they start their journey. At the same time, we're embedding AI across our platform to price media with far greater precision, leveraging our massive proprietary data set as the largest marketplace in the category. This allows us to price traffic more granularly, improving publisher yield while simultaneously delivering strong return on ad spend for carriers and agents. Our industry-leading scale and data advantage make these AI systems increasingly more effective over time, further strengthening our already powerful network effects. As we think about the potential for AI to reshape the insurance shopping and purchase experience, it's important to distinguish between how a consumer initiates a search and how a transaction is ultimately completed. Quoting and binding require real-time integration with proprietary carrier rating systems and carriers are highly protective about how and where their rates are displayed. Major carriers invest billions each year in their brands, underwriting and distribution, and they have historically resisted any model that commoditizes their product into a side-by-side price comparison or transfers transactional control to a third-party technology platform. As a result, we believe that most major carriers will continue to keep their pricing from being freely accessible through third parties, including through LLMs. While AI is likely to influence where and how shopping begins and create incremental advertising-based acquisition channels, we believe the infrastructure we provide to connect online shoppers to carrier-controlled quoting and binding systems will remain essential and highly defensible. Taken together, we believe the current industry backdrop, including the evolution of AI, is strengthening our role in the ecosystem. As demand expands and distribution channels evolve, scale, data and performance will matter more, not less, and we believe we're well-positioned to capture that opportunity and to continue delivering sustainable, profitable growth in the years to come. With that, I'll hand it over to Pat.

Thanks, Steve. I'll start with some full year highlights, followed by key drivers of our Q4 results and then cover our outlook. 2025 was a record year. We crossed several significant milestones, $2 billion of transaction value, $1 billion of revenue and $100 million of adjusted EBITDA, all for the first time. Transaction value grew 45%, driven by 65% growth in our P&C vertical, which was more than -- which more than offset the expected reset in Under-65 Health. Excluding contribution from Under-65 Health, our core business delivered adjusted EBITDA growth of approximately 55%. Turning to the fourth quarter. Transaction value was $613 million, up 23% year-over-year. Our P&C vertical grew 38% year-over-year, while our health vertical declined 40%. Revenue was $291 million, down 3% year-over-year as reported, but up 9%, excluding Under-65 Health. Health declines were mostly offset by P&C growth. Under-65 Health contributed approximately $7 million of revenue in 2025, down from $41 million in 2024. Adjusted EBITDA was $30.8 million, down 16% year-over-year. Excluding contribution from Under-65 Health, our core business delivered adjusted EBITDA growth of approximately 10%, reflecting the strong momentum in our P&C vertical. We converted 66% of contribution to adjusted EBITDA, which reflects our efficient operating model. Our Q4 take rate was 7.6%, slightly above expectations, driven by favorable open marketplace mix. We expect take rates in Q1 to be above Q4 levels. Moving to the balance sheet and cash flow. In 2025, we generated $99 million of free cash flow, which for us is operating cash flow less CapEx, excluding the FTC payment of $34 million or $65 million on a net basis. We ended the year with $47 million in cash, providing us with continued financial flexibility to support our strategic priorities. Also on the balance sheet, we met the U.S. GAAP requirements to release the valuation allowance on our deferred tax assets and recognize the related tax receivable agreement liability, resulting in a gross up to our balance sheet. As a reminder, our long-standing Up-C structure generates tax benefits from which we retain 15% of the savings through basis step-ups over the next 15 years. On capital allocation, we remain committed to returning capital to shareholders through share repurchases. In Q4, we repurchased approximately 1.1 million shares for $14 million. Full year share repurchases were $47 million, representing approximately 7% of the company. Based on our strong and growing free cash flow outlook, our Board has authorized a $50 million increase in our share repurchase program to $100 million. We expect to complete the vast majority of this program in 2026. Now turning to Q1 guidance. We expect transaction value of $570 million to $595 million. up approximately 23% year-over-year at the midpoint, with P&C growing approximately 35% year-over-year, driven by strong carrier demand and continued share gains. We expect first quarter transaction value in our health insurance vertical to decline approximately 50% year-over-year, driven primarily by Under-65 Health. Revenue, we expect to be $285 million to $305 million, up approximately 12% year-over-year at the midpoint. We expect adjusted EBITDA of $29.5 million to $31.5 million, up approximately 4% at the midpoint. Excluding contribution from Under-65 Health, adjusted EBITDA is expected to grow approximately 25% year-over-year at the midpoint of the guidance range. And finally, we expect contribution less adjusted EBITDA to be approximately $500,000 to $1 million higher than in the fourth quarter of 2025. And while we're not giving formal 2026 annual guidance today, let me frame how we're thinking about the year. We expect P&C transaction value will continue driving growth with healthy year-over-year gains as carriers increasingly seek to grow in this attractive soft market operating environment. In Health, our transformation into a smaller, more focused operation is ongoing. While we expect this vertical to account for a mid-single-digit percentage of total transaction value this year, we continue to believe Medicare Advantage represents a meaningful long-term growth opportunity. Finally, we expect to generate $90 million to $100 million in free cash flow, including the final $11.5 million FTC payment we made in January. This gives us plenty of firepower as we look to execute on the vast majority of our $100 million buyback program in 2026. With that, operator, we are ready to take the first question.

[Operator Instructions] And we will take our first question from Tommy McJoynt of KBW.

Yes. My first question, I appreciate some of your comments around some of the changes that are happening through the developments in AI. I want to expand on that. Does anything functionally or financially change with your role and your value proposition to carriers when a consumer starts their search with an LLM rather than through Google?

Well, yes, I'll take that, Tommy. I mean the short answer is no. What we expect AI -- the impact that we expect AI to have is really focused on the upper part of the funnel, the research and shopping experience. I think what really what you have to understand is that no matter really where they start their shopping experience, ultimately, as they start to get closer to the quote and the buying, that's where the carriers really want to maintain control over where their quotes are displayed and obviously, where their policies are bound. And so typically and historically, well over 2/3 of the marketplace made up by direct -- the big direct-to-consumer carriers, as well as the captive agent carriers, have been very reluctant to let their rates be shown anywhere else on third-party sites, particularly in a side-by-side rate comparison environment. And certainly, they've been very reluctant to let anyone bind their policies anywhere other than through their agents or their websites. And so ultimately, we're the infrastructure that facilitates that handoff between the insurance shoppers and the publishers where that insurance shopping activity takes place with the quoting and binding infrastructure that the carriers maintain. And regardless of whether they start their search on Google or on an insurance comparison site or on an LLM, ultimately, that connection and handoff has to be made. And so at the end of the day, we believe that the ecosystem with the LLMs, again, being an important starting point for insurance search is going to look a lot more like the current system than not.

And to clarify, so did the LLMs become their own supply partners, or did the supply partners that you currently partner with, perhaps they will integrate within the LLMs directly?

I think it's a good question. I see either possibilities happening. I think, we think it's more likely that it's more of the latter, that the LLMs become a traffic source for most of our existing supply partners. I mean, certainly, some of our supply partners may not make the adjustment and are not able to acquire traffic in an efficient way from the LLMs. But once the LLMs layer on an advertising model, we think that, that could be a tremendous tailwind for our supply partners as that introduces an incremental advertising traffic acquisition source for them. Right now, I think they're making some good headway in acquiring traffic from the LLMs. I think anecdotally, our supply partners are telling us that somewhere in the mid- to high single digits of their traffic is coming from the LLMs, and this is in the early stages. I think as you've seen a couple of our supply partners have introduced apps for the LLMs. We're certainly benefiting from that because the traffic is hitting their site ultimately that we're monetizing on their behalf. And so as our publishers and the supply partners get smarter about doing that and building more apps, finding ways to be discovered by the LLMs and then ultimately, taking advantage of the advertising ecosystem that the LLMs are going to create, we think that ecosystem is going to look a lot more like the current Google ecosystem than one where the LLMs are connecting directly with us as a supply partner. I mean, certainly, we've had discussions with them. And if they are open to doing that, we would welcome that. But again, our guess is that the LLMs will evolve into something more like Google than one of our supply partners.

Got it. That all makes sense. And then just my second topic of questions here. You made some encouraging remarks about continuing to scale with the underpenetrated carriers in the marketplace. Is there anything different about your go-to-market strategy or sales pitch that's getting more of these underpenetrated carriers to sign up? What's resonating with them that, that works around the cycle?

Well, I think that's a great question, and I appreciate that. It's -- there is a different message, right? And that's where we're investing heavily into our platform solutions capabilities. And really, what that means is that we're moving beyond just creating a marketplace layer for the media that's transacted and really working directly with these carriers who have been, again, historically underpenetrated in our channel to provide more of a platform where we own parts of the pre-quote conversion process so that we can optimize more of that conversion funnel for them. As you can imagine, we have capabilities and we have access to data that enable us to do that very well and oftentimes better than a lot of carriers who are less experienced in that area. And so the ability for us to really go in and again, not just offer media from our marketplace, but also to offer a hosted optimized conversion experience that, again, takes the first 1 to 2 to 3 steps of that conversion process and really optimize that on behalf of a lot of these historically underpenetrated carriers, I think has gone over really well, has enabled us to optimize their campaigns in our marketplace really well and enable them to be a lot more competitive in our marketplace than they otherwise would have been had we not offered these types of solutions.

Our next question comes from the line of Mike

First question is on the P&C side, on seasonality, and I appreciating it's already late February. So I'm just -- so your guidance is clearly robust. But are we not seeing as much seasonality as you had maybe thought 6 months ago or 3 months ago? Or is this kind of the normal expectations you'd say?

Yes. And Mike, this is Pat. I would say that I think the last few years, we've seen pretty robust volume in Q4. I would say Q4 of this year maybe was a little bit less robust than we maybe thought it would be, but it was robust. And kind of what we've seen in Q1 is probably a little bit muted versus what we maybe have seen in some past years. Having said that, what we've seen is some of the smaller carriers that have underpunched their weight historically in our marketplace, being the ones that have really been leaning in so far in Q1 and some of the bigger ones have maybe taken their foot off the gas just a tiny bit on it. And we're in a spot where it's been probably a number of years since we've had a really normal year from a seasonality standpoint. And we feel like Q1 is off to a good start. We're feeling pretty good about where the rest of February and March are going to end up, and we're feeling optimistic about the year. So we're obviously feeling pretty good, although it's still early overall in the year.

Got it. That's helpful. And moving back to, I know it's not easy to forecast the future in regards to AI and your comments have been very thoughtful so far. If we were to kind of bucket up into a profile of insurance carrier that was much more sophisticated data-wise than peers and also offered on average, a much lower cost or a lower cost policy on average, would that profile make that insurance carrier more likely to test the waters to offer their pricing to third parties and LLMs? Or I don't know if there's any kind of way to maybe differentiate your broad strokes to kind of a certain subset of insurance carriers?

Yes, and infact -- yes, I think the I think you can think about the universe of auto insurance carriers as being split up into the captive agent carriers where you have exclusive agents. The State Farm is a typical example that you think of that a network of agents who only sell State Farm policies. And so you have the captive agent carriers, you have the direct-to-consumer carriers or the direct writers, again, big brands like GEICO and Progressive. And then typically, you have a lot of smaller carriers that write through independent agents. And so it's as you think about historically, the carriers that have allowed their rates to be aggregated and put into a comparison environment, something akin to a kayak for auto insurance, right? It's really been those smaller midsized independent agent carriers that are used to selling in, in a multi-carrier environment through independent agents. And so what we expect is that to the extent that the LLMs start to pull in rates, right, typically by working with an insurance agency, right, that the rates that they'll be pulling in are going to be limited largely to those rates from independent agent carriers. And again, the captive agents and the direct agents -- direct-to-consumer model make up over 2/3 of the overall ecosystem. And so what you'll see is some rates, but you'll see really a subset of the carriers that the typical consumer is looking for. And to analogize it back to Kayak, it would be like doing a search on Kayak for airfare and seeing rates from a couple of -- a handful of carriers, but really missing the rates from an American Airlines, United Airlines and Delta Airlines. And so it's a good consumer experience. Some of our publishers have that type of consumer experience. But by no means is it a complete and holistic search. And so to the extent that rates are pulled into an LLM environment, we expect that it's going to remain similar to what it is now, which is -- and being limited to those independent agency carriers. Patrick Thompson That's helpful. And just lastly for Pat, on some free cash flow, quick clarification. The $90 million to $100 million, is that subtracting the final payment? So we should -- and also, is there any cash taxes or cash receivable payments within the $90 million or whatever that's the number you're guiding.

Yes. And Mike, the guidance is for $90 million to $100 million of free cash flow this year, and that includes the $11.5 million payment that was made to the FTC. So kind of absent that, we would be at $101 million to $111 million. And from a cash tax standpoint, there is a TRA payment that's going out in Q1. It's kind of a mid-single-digit millions payment going out, and that's kind of the star of the show from a cash tax standpoint for calendar 2026.

Our next question comes from the line of Andrew Kligerman from TD Cowen.

And I'm a little confused still from your response to Mike's question about 2/3 of the market being tied up in captive and direct -- and that it would be just focused on the LLMs would be just focused on the smaller midsized independent carriers. Because if I think of the large ones, that do go independent. And I'm not necessarily pointing to them, but Progressive has a big independent channel. Allstate has a growing independent channel. I think GEICO might be starting to dip into that. So my question is, is it possible down the road, or is it actually happening now that big names such as the ones that I mentioned, and it doesn't have to be those specifically. Is it possible that they're already in the mix and starting in these early stages with the LLMs? And why wouldn't that be the case a few years from now regardless?

Sure. It's a great question. And so we talk to our carrier partners. And by and large, most of them -- and these are the carriers that, again, are the typical large brand captive agent carriers as well as the primarily direct-to-consumer direct writing model that you referred to. And really, I don't think that they're in any hurry to make their rates available through the LLMs. Again, I think that what you have to understand is that these carriers spend billions of dollars, right, every year in being part of a small consideration set through brand advertising. And they invest similar amounts, right, in building their underwriting capabilities and the distribution capabilities. And to the extent that they make their rates available through the LLMs, really the only reason that they would want to do that or an LLM would want to do that is to make that comparison, that rate comparison model right, much more readily available. And that's really the model that the carriers have really fought strenuously against for the past 20 years. The technology to be able to pull in rates into a third-party environment has been there for 20-plus years, right? The technology to actually have rates be compared side by side has been there for 20-some years. It's really the carriers and those carriers that I mentioned and their reluctance to see that type of a model really evolve in the United States, which has been the limiting factor in actually offering a Kayak for auto insurance model. And there's some real good business reasons for that as well because it's extraordinarily hard to actually get a bindable rate across multiple carriers through one user experience. And I think the carriers are justifiably concerned not just about being commoditized just to the lowest price, right, but also making sure that the consumers aren't being shown one price when really after all the inputs have been answered that the carrier specifically needs to deliver a bindable quote that there is no significant change from the quote that they saw when they started that process. And so overall, you're right in that some of these carriers are building independent agency capabilities or the capability of selling through those agencies. But I think at the end of the day, those big direct writers, the big captive agent carriers are going to prevent rates from their major brands, right? Maybe their subsidiary brands might be included, but they're certainly going to prevent rates from their big brands from being aggregated onto the LLMs.

And then the other question, I think Pat mentioned earlier that he sees Med Advantage being a strong long-term growth opportunity. And I know it's been a tough -- I don't know, I want to say 3, maybe 4 years -- no probably 3 -- yes, 3 or 4 years of pressures in that area for distribution. Could you talk a little bit about why you kind of -- it sounds like you're seeing an inflection point now. And why do you see that? And how do you see the trajectory of Med Advantage business on your platform?

Yes. And this is Pat. I'm happy to take that one. So I think we're probably now in the fourth year of a challenging market for Medicare. I think '23 was probably when it started. And I think this year is going to be another challenging year in Medicare. And looking at the crystal ball, I think early signs point to next year being challenging as well given some of the reimbursement news that's out there. And I would say for our health vertical, we've given the guidance for this year that we expect it to be a mid-single-digit percentage of total transaction value, so a very small portion of the mix. Having said that, when we look at Medicare Advantage, this is a large product that there are tens of millions of consumers that have opted into Medicare Advantage. It is a product set where the number of eligible people is growing and the number of people opting in are growing. In terms of total spend on Medicare Advantage premiums, it's a bigger market than personal auto. And it's a market that has the wind at its back in terms of seniors aging into Medicare, you are much more likely to look to the Internet either as part of their shopping journey or their first port of call when it comes to shopping. And so while the market backdrop for Medicare has been and likely will continue to be challenging for the next year or 2, we look at all of these market dynamics and all of these wins are blowing in the right direction and in a direction that suits us very well. And so as a result, we're long-term bullish, but not banking on kind of significant financial contribution from that business in the short term.

Got it. And maybe I could sneak one more in. Do you see the proprietary component kind of continuing to pick up? Or do you see that -- because I guess private this quarter was about 53.7%, up from 41% last year and the full year was a similar pickup. So it's been happening. Where do you see the private percentage of transaction value leveling out? Are we there yet? Or does it get bigger?

Yes. And we're in a spot where I think the trend is the guidance for Q1 envisions the business move shifting a bit private or a bit open, apologies, towards the open marketplace and away from private. And I think we talked pretty consistently in our earnings calls and our materials last year that we have this view that as kind of more carriers caught up in terms of rate adequacy that we would see some of the smaller and midsized carriers and some of the folks that historically underpunch their weight in our marketplace start to lean in. And we saw that kind of happen as we went through Q4 of this year, and we've seen kind of a furtherance of that trend thus far in Q1, and we've envisaged that in our guidance for Q1. And so we're feeling like we're in a pretty good spot as far as that goes. We, as a company, go quarter-to-quarter with guidance, so we don't give long-term numbers on that, but we feel pretty good kind of about where we're at, at this point in time.

I see. So that would be the driver of why guidance in revenue is like $285 million to $305 million against a consensus number that's lower than the lower end of the range. That's kind of the bigger piece of why you have such really solid guidance going forward, correct? Yeah.

That would be correct. Yes, that the business is effectively more open than folks may have been expecting.

Our next question comes from the line of Eric Sheridan from Goldman Sachs.

I'll just really ask one. As you see this underpenetrated opportunity playing out in the coming quarters, how much of it is a dynamic in which you need to execute on putting the right tools and mechanisms in place of folks across the carrier landscape to incent them to come on to the platform, invest in the platform? And how much of it is just an output of some of the competitive environment we're seeing today? It's sort of the in your control, out of your control component of scaling the underpenetrated opportunity.

Yes, Eric, that's a great question. I think ultimately, it's both, but I would say that the more important factor is the fact that just the overall market ecosystem, the competitive dynamics at play there. I think that the -- as our numbers are starting to reflect, I think it is a broadly growth-oriented marketplace, and it's to an extent that I certainly haven't seen in my history at a company. And so I think that after several years of really not acquiring new policies and over the last 1.5 years to 2 years, we've really seen a softening of the market as a very small number of carriers started to lean into growth and spend heavily to acquire new policies. The vast majority of carriers just didn't do that. And so I think this year, what you're seeing is that the overall personal auto marketplace is firmly in a soft market cycle. And you have essentially every single carrier really leaning into growth and finding ways to actually increase their policy count and being open to new ways of doing that and new partnerships to really accelerate their -- the impact that they can have by investing in a channel like ours. And so really, where we come in with our platform solutions, as well as the AI that we apply to enable these carriers to bid far more efficiently than they could on their own, right, in our marketplace. That really stems from our ability and our willingness to really help them scale up their spend once they make the decisions to really lean in. And so I don't know which one is more important. I would say maybe the latter is more important and that market forces are certainly driving them to lean into marketing and customer acquisition, and we expect those market forces to last for the next 2 to 3 years. But certainly, I think our capabilities, both with predictive AI and the experience that we have and the scale that we have to be able to offer the platform solutions that no one else can, certainly is, I think, has a really big part in helping these advertisers and these carriers, these underpenetrated carriers really scale much more effectively than they would otherwise on their own.