MediaAlpha, Inc. (MAX) Earnings

Management highlights

### Market & Demand Growth - The company delivered record Q2 2026 results, driven by broadening demand across its insurance advertising marketplace, with growth expanding beyond just the top 2 carrier partners to a wider base of participating carriers. - Historically strong personal auto underwriting profitability has led carriers to compete more aggressively by lowering rates and increasing advertising spend to acquire new customers, boosting demand for the company's services. - The top 3-5 largest carrier partners nearly quadrupled their spend on the platform in H1 2026 compared to H1 2025, while the rest of the top 10 carriers collectively only allocate ~3% of their total ad budgets to Media Alpha, leaving large room for future growth. ### Industry Transition Tailwinds - The broader P&C insurance industry is transitioning from legacy agent-based distribution supported by brand advertising to direct consumer distribution supported by targeted, performance-based digital advertising. Media Alpha's scale and proprietary data positions it to capture this shift. - Carriers still spend over $2 on agent commissions for every $1 spent on advertising, and only 40% of current ad spend is allocated to digital, giving the company a long runway for growth. ### AI Impacts and Investments - Recent AI advances are accelerating the pace of the industry's transition to direct-to-consumer distribution: AI allows more consumers to purchase policies without live agent interaction, lowering acquisition costs and improving conversion for carriers. - AI-powered search is producing higher-intent, higher-quality online insurance shoppers, expanding the qualified consumer pool for the marketplace. - Media Alpha leverages predictive AI across its platform to improve consumer-carrier matching, boost carrier return on ad spend, and increase publisher yield, strengthening its competitive position. - Generative AI is also used to improve product intuitiveness, scale agent partnerships without proportionally increasing headcount, and accelerate internal product development, allowing the company to grow geometrically with only incremental headcount increases. ### Capital Allocation - In Q2 2026, the company repurchased 2.2 million shares for $20 million, with $41 million in year-to-date repurchases and $88 million over the past four quarters, representing ~13% of outstanding shares. - The company repurchased $69 million of its tax receivable agreement (TRA) liability for $31 million (a 55% discount), generating a $38 million Q2 gain and delivering an expected mid-teens unlevered IRR, an attractive alternative use of capital to share repurchases.

Guidance

- For Q3 2026, Media Alpha guides revenue of $330 million to $355 million, representing ~12% year-over-year growth at the midpoint. - Q3 2026 contribution is guided to $51.5 million to $54.5 million, ~16% year-over-year growth at the midpoint. Adjusted EBITDA is guided to $32 million to $35 million, ~15% year-over-year growth at the midpoint. - Excluding the under 65 health segment, Q3 2026 contribution is expected to grow 20% year-over-year and adjusted EBITDA is expected to grow 21% year-over-year at the midpoint, with the health segment remaining ~1% of total revenue. - The company maintains its full-year 2026 free cash flow guidance of $90 million to $100 million. - The company expects to complete the vast majority of the remaining $45 million under its $100 million share repurchase authorization by the end of 2026.

Segment performance

Core Insurance Marketplace Segment: Q2 2026 revenue and adjusted EBITDA both grew over 30% year-over-year, contributing the vast majority of total company revenue. Under 65 Health Segment: The segment saw a year-over-year revenue decline, contributing approximately 1% of total company revenue in Q2 2026, with an expected ~$1 million year-over-year contribution decline for Q3 2026. Within the insurance marketplace, two transaction models operate with different revenue recognition: 1) Open Marketplace: The majority of transactions for carriers outside the top 2, uses gross revenue recognition and carries markedly higher take rates, with typical contribution margins in the teens. 2) Private Marketplace: Primarily used by the top 2 carrier partners, uses net revenue recognition with low single-digit revenue per $100 of spend. Total consolidated Q2 2026 results: Revenue was $317 million, up 26% year-over-year; Contribution was $47.2 million, up 18% year-over-year; Adjusted EBITDA was $29.3 million, up 19% year-over-year.

Risks & headwinds

All forward-looking statements made on the call are subject to inherent risks and uncertainties that could cause actual results to differ materially from projections, as detailed in the company's SEC filings (including Form 10-K and Form 10-Q). No specific new material operational or financial risks beyond these general forward-looking statement disclosures were discussed in the call.

Analyst Q&A

• Q: What is the current state of the auto insurance market cycle, and what are the main gating factors holding back slower-growing carriers from increasing spend on the platform? /

  A: Management states the industry remains in a robust growth-oriented soft market, with above-historical profitability driving carriers to cut rates and increase ad spend to grow policy count. This is driving continued broadening of demand, even among traditional agent-based carriers that are building out direct-to-consumer distribution. The main gating factor for slower adopters is internal capability: most are new to direct-to-consumer performance advertising, so Media Alpha is expanding beyond the core marketplace to offer end-to-end platform support and technology integration to help these carriers scale. Management expects this demand broadening to continue through 2026 and well into 2027.

• Q: How has LLM-driven insurance referral traffic evolved since last quarter, and how do its conversion characteristics compare to established channels? /

  A: Management notes LLM-driven organic traffic continues to scale, with volume now on par with Google Organic Search for some publisher partners. The traffic is higher quality than traditional search because LLM searches are more granular: consumers share more specific personal details and requirements during their search, resulting in higher-intent shoppers that deliver better conversion. While LLM traffic still makes up a relatively small portion of total marketplace traffic, management expects it to grow significantly as major LLM platforms roll out full advertising ecosystems.

• Q: How will expanding spend from smaller carriers outside the top 2 impact contribution margins, and what are the differences in economics between these partners and the top carriers? /

  A: Management explains that top two carriers mostly transact via the private marketplace on a net revenue basis, with low single-digit revenue per 100 dollars of spend. All other carriers overwhelmingly transact via the open marketplace on a gross revenue basis, with markedly higher take rates and typical contribution margins in the teens. As smaller carriers grow their spend, this mix shift will be supportive of overall margins.

• Q: Why did Q2 take rates dip mid-quarter, and how was the recovery achieved so quickly? /

  A: Management states the dip was the result of short-term, partner-specific investments with long-standing core partners, made to secure long-term growth benefits. The dip was temporary, and take rates fully recovered by the end of Q2, with Q3 off to a strong start aligned with guidance. The company is already beginning to capture the long-term benefits of these investments in Q3. The investments were not AI-related, but focused on deepening existing partner relationships.