| FOR IMMEDIATE RELEASE | COMPANY CONTACT: Mike Hershberger | |
| November 1, 2017 | Chief Financial Officer | |
| (813) 397 1187 | ||
| mhershberger@hiiquote.com |
Health Insurance Innovations, Inc. Reports Record Third Quarter 2017
Financial and Operating Results
Increases 2017 Full Year Guidance
Record Revenues of $63.3 million, up 37% YOY
Diluted Earnings per Share of $0.30, up 20% YOY
Adjusted Earnings per Share of $0.46, up 39% YOY
Policies in Force totaled approximately 347,900, up 38% YOY
Tampa, FL—November 1, 2017 — (GLOBE NEWSWIRE) — Health Insurance Innovations, Inc. (NASDAQ:HIIQ), a leading developer, distributor, and cloud-based administrator of affordable health insurance and supplemental plans, today announced financial results for the third quarter ended September 30, 2017. The Company will host a live conference call on Thursday, November 2, 2017 at 8:30 A.M. EST.
Third Quarter 2017 Consolidated Financial Highlights
| ● | Record revenue was $63.3 million, compared to $46.1 million in the third quarter of 2016, an increase of 37.4%. | |
| ● | Record total collections from members (premium equivalents) of $99.4 million, compared to $78.5 million in the third quarter of 2016, an increase of 26.6%. | |
| ● | Net income was $6.0 million, compared to $5.1 million in the third quarter of 2016, an increase of 17.6%. | |
| ● | Record adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $12.8 million, compared to $8.1 million in the third quarter of 2016, an increase of 58.0%. | |
| ● | GAAP diluted earnings per share was $0.30, compared to $0.25 in the third quarter of 2016, an increase of 20.0%. | |
| ● | Adjusted earnings per share, also referred to as adjusted net income per share or adjusted EPS, was $0.46 compared to $0.33 in the third quarter of 2016, an increase of 39.4%. | |
| ● | Policies in force as of September 30, 2017, totaled approximately 347,900, compared to 252,100 as of September 30, 2016, an increase of 38.0%. |
| 1 |
Premium equivalents, adjusted EBITDA, and adjusted EPS are non-GAAP financial measures. See the reconciliations of these measures to their respective most directly comparable GAAP measure below in this press release.
Increasing 2017 Full Year Guidance
Given the record financial performance and long-term prospects, the Company is increasing its guidance for the full year 2017. The Company expects revenue to grow 27% to 30% year-over-year (with expected revenue of $235 million to $240 million), adjusted EBITDA to grow 48% to 58% year-over-year (with expected adjusted EBITDA of $41 million to $44 million) and adjusted EPS to grow 34% to 43% (with expected adjusted EPS of $1.50 to $1.60). The Company previously guided to full year revenue of $225 million to $230 million, adjusted EBITDA of $39 million to $42 million and adjusted EPS of $1.45 to $1.55.
“We are pleased to continue to deliver record results, which exceeded our revenue and profitability targets, reflecting the strength of our business and the successful execution of our strategy. We believe we are well positioned to continue to succeed and grow in the dynamic individual health insurance marketplace through our differentiated services. We are confident that we can deliver strong results and shareholder value through our successful expansion of innovative products, expansion of our distribution networks - including existing and new distributors, driving revenue growth and margins,” said Gavin Southwell, HIIQ’s Chief Executive Officer and President.
Third Quarter 2017 Financial Discussion
Third quarter revenues of $63.3 million increased 37.4%, compared to the third quarter of 2016, driven primarily by an increase in policies in force. Further, a sales mix shift to more Health Benefit Plans and favorable carrier negotiations have decreased risk premiums.
Total selling, general & administrative expense (“SG&A”) was $15.5 million (24.5% of revenues) in the third quarter of 2017, compared to $11.9 million (25.7% of revenues) in the same period in 2016. Core SG&A, defined as total SG&A adjusted for stock-based compensation, transaction costs, severance, restructuring and other costs, and marketing leads and advertising expense, for the quarter was $10.3 million (16.3% of revenues) in the third quarter of 2017, compared to $8.4 million (18.1% of revenues) in the same period of 2016. A reconciliation of SG&A to core SG&A for the three and nine months ended September 30, 2017 and 2016 is included within this press release.
| 2 |
Net income was $6.0 million in the third quarter of 2017, compared to $5.1 million in the third quarter of 2016, an increase of 17.6%. EBITDA was $9.9 million in the third quarter of 2017, compared to $7.4 million in the same period in 2016, an increase of 33.2%.
Adjusted EBITDA was $12.8 million in the third quarter of 2017, an increase of 58.0% over $8.1 million in the same period in 2016. Adjusted EBITDA as a percentage of revenue was 20.3% in the third quarter of 2017, compared to 17.6% in the same period in 2016. Adjusted EBITDA is calculated by taking EBITDA and adjusting for items that are not part of regular operating activities, including tax receivable adjustments, severance, restructuring costs, and other non-cash items such as stock-based compensation. A reconciliation of net income to EBITDA and adjusted EBITDA for the three and nine months ended September 30, 2017 and 2016 is included within this press release.
GAAP diluted earnings per share for the third quarter was $0.30, compared to $0.25 in the third quarter of 2016.
Adjusted EPS for the third quarter of 2017 was $0.46, compared to $0.33 in the prior year. A reconciliation of net income to adjusted net income per share is included within this press release.
The Company continued to make short-term loans to distributors, based on actual sales, that we refer to as advanced commissions. These advanced commissions assist distributors with working capital. We recover these short-term loans on an ongoing basis from future commissions earned on premiums, which are collected over the period in which policies renew. Thethirdquarter advanced commission balanceof $27.0 million is a decrease of $10.0 million from December 31, 2016 and a decrease of $3.7 million sequentially.
Cash and cash equivalents totaled $43.1 million at September 30, 2017, an increase of $30.8 million from December 31, 2016 and an increase of $15.5 million sequentially.
Customer Service and Compliance
Since 2016, HIIQ has invested more than $9 million in enhancing and upholding the highest standards in customer service and compliance. The Company has expanded its customer service team from 26 representatives in 2015 to more than 220 at its peak in response to seasonality in volume from the open enrollment period.
Highlights of Customer Service Investment Results
The Company has arranged insurance for more than a million people thus far in 2017, experienced a 13.2% growth in member calls over the prior year, and despite this increase in volume, maintained an Average Speed of Answer (“ASA”) of two seconds in the most recent quarter. This compares to an ASA of 1 minute and 55 seconds over the same time period last year and an ASA of 1 minute 17 seconds in 2015. Service levels, defined as the percentage of calls answered within 30 seconds, have also shown significant improvement. Service levels have averaged 99.4% in the third quarter, compared to 55.4% and 63.6% for the same periods in the prior two years.
| 3 |
Compliance
In 2016, HIIQ launched the Call Center Quality (“CCQ”) team and a distributor-performance scorecard. The CCQ team visits third-party distributors to provide on-site training as well as online and webinar training. The CCQ team is also responsible for secret shopping to ensure adherence to HIIQ’s best-in-class process and procedures. The distributor scorecard measures key metrics such as member complaints, escalations and chargebacks monthly. HIIQ has improved in these key metrics and continues to enforce the Company’s policies and procedures with third-party distributors. In 2016, the Company terminated two distributors for not meeting compliance metrics and benchmarks. At the time of termination, these distributors represented approximately 16% of IFP sales.
Retaining Prominent Regulatory Experts
Reinforcing the Company’s compliance department are Ben Nelson, former U.S. Senator (D-NE) and Governor of Nebraska as well as the former Nebraska Director of Insurance and former Chief Executive Officer of the National Association of Insurance Commissioners (“NAIC”), as well as Wayne Goodwin, the former Commissioner of Insurance for North Carolina. Both joined the Company’s team in January to help HIIQ navigate today’s complex regulatory environment.
Improved Customer Experience
This investment in compliance has generated a measuredly stronger customer experience. Complaints, specific to HIIQ, upheld by the Department of Insurance as a percentage of policies in force was 0.00% in Q3 2017, down from 0.01% in Q3 2016. Additionally, HIIQ-specific Better Business Bureau complaints have reduced by 90% since Q1 2016. In Q3 2017, HIIQ-specific complaints were effectively 0.00% of policies in force. Chargebacks as a percentage of transactions have decreased by more than 50% from Q1 2016.
$50 Million Share Repurchase Authorization
As announced on October 16, 2017, the HIIQ Board of Directors has authorized up to $50 million in a new share repurchase program through October 2019.
Conference Call and Webcast
The Company will host an earnings conference call on November 2, 2017 at 8:30 A.M. Eastern time. All interested parties can join the call by dialing(877) 407-9039 or (201) 689-8470; the conference ID is 13672449. A webcast of the call may be accessed in the Investor Relations section of Health Insurance Innovations’ website athttp://investor.hiiquote.com/events.cfm. An archive of the call will be available for 30 days through the same website.
| 4 |
About Health Insurance Innovations, Inc. (HIIQ)
HIIQ is a market leader in developing innovative health insurance products that are affordable and meet the needs of health insurance plan shoppers. HIIQ develops insurance products through our relationships with best-in-class insurance companies and markets them via its broad distribution network of licensed insurance agents across the nation, its call center network and its unique online capability. Additional information about HIIQ can be found atHiiQuote.com. HIIQ’s Consumer Division includesAgileHealthInsurance.com, a website for researching, comparing and purchasing short-term health insurance products online andHealthPocket.com, a free website that compares and ranks all health insurance plans, and uses objective data to publish unbiased health insurance market analyses and other consumer advocacy research.
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 HIIQ’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 ability to maintain relationships and develop new relationships with health insurance carriers and distributors, our ability to retain our members, the demand for our products, state 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 HIIQ’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 are discussed in HIIQ’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) as well as other documents that may be filed by HIIQ 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.
| 5 |
Non-GAAP Financial Information
To supplement HIIQ’s financial information presented in accordance with generally accepted accounting principles in the United States of America, or GAAP, HIIQ presents certain financial measures that are not prepared in accordance with GAAP, including premium equivalents, adjusted EBITDA, and adjusted EPS. 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.
HIIQ is presenting these non-GAAP financial measures to assist investors in seeing HIIQ’s operating results through the eyes of management and because HIIQ’s believes that these measures provide a useful tool for investors to use in assessing HIIQ’s operating performance against prior period operating results and against business objectives. HIIQ uses the non-GAAP financial measures in evaluating its operating results and for financial and operational decision-making purposes.
The accompanying tables provide more details 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. HIIQ has not reconciled adjusted EBITDA guidance or adjusted EPS guidance to GAAP net income or GAAP net income per diluted share, respectively, because HIIQ 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, HIIQ is unable to provide such guidance. Accordingly, a reconciliation to net income is not available without unreasonable effort.
| 6 |
HEALTH INSURANCE INNOVATIONS, INC.
Condensed Consolidated Balance Sheets
($ in thousands, except share and per share data)
| September 30, 2017 | December 31, 2016 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 43,060 | $ | 12,214 | ||||
| Restricted cash | 13,747 | 11,938 | ||||||
| Accounts receivable, net, prepaid expenses and other current assets | $ | 2,585 | 2,815 | |||||
| Advanced commissions, net | 27,010 | 37,001 | ||||||
| Total current assets | 86,402 | 63,968 | ||||||
| Property and equipment, net | 4,909 | 4,022 | ||||||
| Goodwill | 41,076 | 41,076 | ||||||
| Intangible assets, net | 6,405 | 7,907 | ||||||
| Deferred tax assets | 27,834 | 8,181 | ||||||
| Other assets | 110 | 193 | ||||||
| Total assets | $ | 166,736 | $ | 125,347 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 31,516 | $ | 29,680 | ||||
| Deferred revenue | 257 | 430 | ||||||
| Income taxes payable | 1,186 | 2,121 | ||||||
| Due to member | 521 | 3,282 | ||||||
| Other current liabilities | 3 | 126 | ||||||
| Total current liabilities | 33,483 | 35,639 | ||||||
| Due to member | 28,078 | 9,460 | ||||||
| Other liabilities | 43 | 170 | ||||||
| Total liabilities | 61,604 | 45,269 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Class A common stock (par value $0.001 per share, 100,000,000 shares authorized; 12,700,986 and 8,156,249 shares issued as of September 30, 2017 and December 31, 2016, respectively; and 12,559,552 and 8,036,705 shares outstanding as of September 30, 2017 and December 31, 2016, respectively) | 13 | 8 | ||||||
| Class B common stock (par value $0.001 per share, 20,000,000 shares authorized; 3,841,667 and 6,841,667 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively) | 4 | 7 | ||||||
| Preferred stock (par value $0.001 per share, 5,000,000 shares authorized; no shares issued and outstanding as of September 30, 2017 and December 31, 2016) | — | — | ||||||
| Additional paid-in capital | 68,802 | 47,849 | ||||||
| Treasury stock, at cost (141,434 and 119,544 shares as of September 30, 2017 and December 31, 2016, respectively) | (1,570 | ) | (1,122 | ) | ||||
| Retained earnings | 15,522 | 1,420 | ||||||
| Total Health Insurance Innovations, Inc. stockholders’ equity | 82,771 | 48,162 | ||||||
| Noncontrolling interests | 22,361 | 31,916 | ||||||
| Total stockholders’ equity | 105,132 | 80,078 | ||||||
| Total liabilities and stockholders’ equity | $ | 166,736 | $ | 125,347 | ||||
| 7 |
HEALTH INSURANCE INNOVATIONS, INC.
Condensed Consolidated Statements of Income (unaudited)
($ in thousands, except share and per share data)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Revenues (premium equivalents of $99,407 and $78,548 for the three months ended September 30, 2017 and 2016, respectively and $289,243 and $226,265 for the nine months ended September 30, 2017 and 2016, respectively) | $ | 63,335 | $ | 46,108 | $ | 180,986 | $ | 133,092 | ||||||||
| Operating expenses: | ||||||||||||||||
| Third-party commissions | 36,603 | 25,860 | 103,146 | 77,709 | ||||||||||||
| Credit card and ACH fees | 1,289 | 921 | 3,704 | 2,778 | ||||||||||||
| Selling, general and administrative | 15,503 | 11,853 | 45,457 | 35,520 | ||||||||||||
| Depreciation and amortization | 1,028 | 835 | 2,958 | 2,367 | ||||||||||||
| Total operating expenses | 54,423 | 39,469 | 155,265 | 118,374 | ||||||||||||
| Income from operations | 8,912 | 6,639 | 25,721 | 14,718 | ||||||||||||
| Other expense: | ||||||||||||||||
| Interest (income) expense | (2 | ) | (102 | ) | (2 | ) | 53 | |||||||||
| Tax Receivable Agreement expense | — | — | — | 429 | ||||||||||||
| Fair value adjustment to contingent acquisition consideration | — | — | — | 15 | ||||||||||||
| Other expense | 23 | 27 | 27 | 30 | ||||||||||||
| Income before income taxes | 8,891 | 6,714 | 25,696 | 14,191 | ||||||||||||
| Provision for income taxes | 2,889 | 1,580 | 4,220 | 2,501 | ||||||||||||
| Net income | 6,002 | 5,134 | 21,476 | 11,690 | ||||||||||||
| Net income attributable to noncontrolling interests | 2,117 | 3,195 | 7,374 | 6,989 | ||||||||||||
| Net income attributable to Health Insurance Innovations, Inc. | $ | 3,885 | $ | 1,939 | $ | 14,102 | $ | 4,701 | ||||||||
| Per share data: | ||||||||||||||||
| Net income per share attributable to Health Insurance Innovations, Inc. | ||||||||||||||||
| Basic | $ | 0.33 | $ | 0.25 | $ | 1.31 | $ | 0.62 | ||||||||
| Diluted | $ | 0.30 | $ | 0.25 | $ | 1.21 | $ | 0.61 | ||||||||
| Weighted average Class A common shares outstanding | ||||||||||||||||
| Basic | 11,700,941 | 7,614,252 | 10,724,750 | 7,590,347 | ||||||||||||
| Diluted | 12,742,952 | 7,723,196 | 11,692,755 | 7,724,168 | ||||||||||||
| 8 |
HEALTH INSURANCE INNOVATIONS, INC.
Condensed Consolidated Statements of Cash Flows (unaudited)
($ in thousands, except share and per share data)
| Three Months Ended September 30, 2017 | Nine Months Ended September 30, 2017 | |||||||
| Operating activities: | ||||||||
| Net income | $ | 6,002 | $ | 21,476 | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Stock-based compensation | 2,682 | 4,437 | ||||||
| Depreciation and amortization | 1,028 | 2,958 | ||||||
| Deferred income taxes | 317 | 1,079 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease (Increase) in restricted cash | 415 | (1,809 | ) | |||||
| (Increase) Decrease in accounts receivable, prepaid expenses and other assets | (460 | ) | 313 | |||||
| Decrease in advanced commissions | 3,696 | 9,991 | ||||||
| Decrease in income taxes receivable | 1,282 | — | ||||||
| Increase (Decrease) in income taxes payable | 1,186 | (935 | ) | |||||
| Increase in accounts payable, accrued expenses and other liabilities | 1,385 | 1,682 | ||||||
| Decrease in deferred revenue | (41 | ) | (173 | ) | ||||
| Net cash provided by operating activities | 17,492 | 39,019 | ||||||
| Investing activities: | ||||||||
| Capitalized internal-use software and website development costs | (694 | ) | (2,104 | ) | ||||
| Purchases of property and equipment | (192 | ) | (239 | ) | ||||
| Net cash used in investing activities | (886 | ) | (2,343 | ) | ||||
| Financing activities: | ||||||||
| Payments for noncompete obligation | — | (96 | ) | |||||
| Class A common stock withheld in treasury from restricted share vesting | (263 | ) | (448 | ) | ||||
| Issuances of Class A common stock under equity compensation plans | 12 | 32 | ||||||
| Distributions to member | (824 | ) | (5,318 | ) | ||||
| Net cash used in provided by financing activities | (1,075 | ) | (5,830 | ) | ||||
| Net increase in cash and cash equivalents | 15,531 | 30,846 | ||||||
| Cash and cash equivalents at beginning of period | 27,529 | 12,214 | ||||||
| Cash and cash equivalents at end of period | $ | 43,060 | $ | 43,060 | ||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Change in due to member related to Exchange Agreement | $ | 18,619 | $ | 18,619 | ||||
| Change in deferred tax asset related to Exchange Agreement | (20,732 | ) | (20,732 | ) | ||||
| Issuance of Class A common stock in a private offering related to Exchange Agreement | 16,487 | 16,487 | ||||||
| Exchange of Class B membership interests related to Exchange Agreement | (14,374 | ) | (14,374 | ) | ||||
| Declared but unpaid distribution to member of Health Plan Intermediaries Holdings, LLC | — | |||||||
| 9 |
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(unaudited)
($ in thousands)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net income | $ | 6,002 | $ | 5,134 | $ | 21,476 | $ | 11,690 | ||||||||
| Interest (income) expense | (2 | ) | (102 | ) | (2 | ) | 53 | |||||||||
| Depreciation and amortization | 1,028 | 835 | 2,958 | 2,367 | ||||||||||||
| Provision for income taxes | 2,889 | 1,580 | 4,220 | 2,501 | ||||||||||||
| EBITDA (1) | 9,917 | 7,447 | 28,652 | 16,611 | ||||||||||||
| Non-cash stock-based compensation | 2,682 | 393 | 4,437 | 1,362 | ||||||||||||
| Fair value adjustment to contingent consideration | — | — | — | 15 | ||||||||||||
| Transaction costs | 5 | — | 761 | — | ||||||||||||
| Tax receivable agreement liability adjustment | — | 29 | — | 458 | ||||||||||||
| Severance, restructuring and other charges | 238 | 224 | 1,133 | 446 | ||||||||||||
| Adjusted EBITDA (2) | $ | 12,842 | $ | 8,093 | $ | 34,983 | $ | 18,892 | ||||||||
Reconciliation of Net Income to Adjusted Net Income per Share
(unaudited)
($ in thousands except per share data)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net income | $ | 6,002 | $ | 5,134 | $ | 21,476 | $ | 11,690 | ||||||||
| Interest (income) expense | (2 | ) | (102 | ) | (2 | ) | 53 | |||||||||
| Amortization | 479 | 527 | 1,502 | 1,642 | ||||||||||||
| Provision for income taxes | 2,889 | 1,580 | 4,220 | 2,501 | ||||||||||||
| Non-cash stock-based compensation | 2,682 | 393 | 4,437 | 1,362 | ||||||||||||
| Fair value adjustment to contingent consideration | — | — | — | 15 | ||||||||||||
| Transaction costs | 5 | — | 761 | — | ||||||||||||
| Tax receivable agreement liability adjustment | — | 29 | — | 458 | ||||||||||||
| Severance, restructuring and other charges | 238 | 224 | 1,133 | 446 | ||||||||||||
| Adjusted pre-tax income | 12,293 | 7,785 | 33,527 | 18,167 | ||||||||||||
| Pro forma income taxes | (4,671 | ) | (2,958 | ) | (12,740 | ) | (6,903 | ) | ||||||||
| Adjusted net income (3) | $ | 7,622 | $ | 4,827 | $ | 20,787 | $ | 11,264 | ||||||||
| Total weighted average diluted share count | 16,585 | 14,565 | 16,260 | 14,566 | ||||||||||||
| Adjusted net income per share (4) | $ | 0.46 | $ | 0.33 | $ | 1.28 | $ | 0.77 | ||||||||
| 10 |
| (1) | EBITDA is defined as net income before interest expense, 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 generally accepted accounting principles in the United States of America (“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 that are not part of regular operating activities, including acquisition costs, and other non-cash items such as non-cash stock-based compensation. 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 and other items that are not part of regular operating activities, including acquisition costs, restructuring costs, contract termination costs, tax receivable agreement liability adjustments, and other non-cash items such as non-cash stock-based compensation and fair value adjustment to contingent consideration. From adjusted pre-tax net income we apply a pro forma tax expense calculated at an assumed rate of 38%. 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 our 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 diluted Class A and 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. |
Reconciliation of Premium Equivalents to Revenues
(unaudited)
($ in thousands)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Premium equivalents (1) | $ | 99,407 | $ | 78,548 | $ | 289,243 | $ | 226,265 | ||||||||
| Less risk premium | 34,502 | 31,056 | 103,545 | 88,880 | ||||||||||||
| Less amounts earned by third party obligors | 1,570 | 1,384 | 4,712 | 4,293 | ||||||||||||
| Revenues | $ | 63,335 | $ | 46,108 | $ | 180,986 | $ | 133,092 | ||||||||
| 11 |
| (1) | Premium equivalents is defined as our total collections, including the combination of premiums, fees for discount benefit plans, enrollment fees, and third-party commissions and referral fees. All amounts not paid out as risk premium to carriers or paid out to other third-party obligors are considered to be revenues for financial reporting purposes. We have included premium equivalents in this report because it is a key measure used by our management 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 inclusion of premium equivalents can provide a useful measure for period-to-period comparisons of our business. This financial measurement is considered a non-GAAP financial measure and is not recognized under generally accepted accounting principles in the United States of America (“GAAP”) and should not be used as, and is not an alternative to, revenues as a measure of our operating performance. |
Summary of Selected Metrics
(unaudited)
($ in thousands)
| Submitted Applications | ||||||||||||
| Three Months Ended September 30, | ||||||||||||
| 2017 | 2016 | Change (%) | ||||||||||
| IFP | 93,100 | 66,800 | 39.4 | % | ||||||||
| Supplemental products | 60,800 | 59,500 | 2.2 | % | ||||||||
| Total | 153,900 | 126,300 | 21.9 | % | ||||||||
| Policies in Force | ||||||||||||
| As of September 30, | ||||||||||||
| 2017 | 2016 | Change (%) | ||||||||||
| IFP | 176,088 | 120,901 | 45.6 | % | ||||||||
| Supplemental products | 171,838 | 131,241 | 30.9 | % | ||||||||
| Total | 347,926 | 252,142 | 38.0 | % | ||||||||
| Submitted IFP Applications by Channel | ||||||||||||||||||||
| Q3’16 | Q4’16 | Q1’17 | Q2’17 | Q3’17 | ||||||||||||||||
| Agile | 21,100 | 22,400 | 31,800 | 13,500 | 20,600 | |||||||||||||||
| All Others | 45,700 | 62,900 | 85,300 | 82,400 | 72,500 | |||||||||||||||
| Total | 66,800 | 85,300 | 117,100 | 95,900 | 93,100 | |||||||||||||||
| 12 |
| Core SG&A as a Percentage of Revenue | ||||||||||||||||||||
| Q3’16 | Q4’16 | Q1’17 | Q2’17 | Q3’17 | ||||||||||||||||
| Total SG&A | $ | 11,853 | $ | 16,007 | $15,257 | $ | 14,697 | $ | 15,503 | |||||||||||
| Less: Stock-based compensation | 393 | 2,430 | 821 | 934 | 2,682 | |||||||||||||||
| Less: Transaction costs | — | — | 306 | 450 | 5 | |||||||||||||||
| Less: Severance, restructuring and other charges | 224 | 2,163 | 533 | 363 | 238 | |||||||||||||||
| Less: Marketing and Advertising | 2,875 | 2,912 | 3,787 | 1,800 | 2,249 | |||||||||||||||
| Core SG&A (1) | $ | 8,361 | $ | 8,502 | $ | 9,810 | $ | 11,150 | $ | 10,329 | ||||||||||
| % of Revenue | 18.1 | % | 16.5 | % | 17.6 | % | 18.0 | % | 16.3 | % | ||||||||||
| (1) | Core SG&A is defined as total SG&A adjusted for stock-based compensation, transaction costs, severance, restructuring and other costs, and marketing leads and advertising expense. |
| 13 |
Contacts:
Health Insurance Innovations, Inc.:
Michael Hershberger
Chief Financial Officer
(813) 397-1187
mhershberger@hiiquote.com
Investor Contact:
John Evans
PIR Communications
(415) 309-0230
IR@hiiquote.com
Media Contact for AgileHealthInsurance.com & HealthPocket.com:
Amy Fletcher
(720) 350-3144
info@afmcommunications.com
| 14 |