MediaAlpha Inc
For the period ended Dec 31, 2024. Filed Feb 24, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 24, 2025
MAX$14.20-1.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-22.
0001818383-24-000011
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and capital resources-Financing activities”Current report: 10-K
Period ended 2024-12-31; filed 2025-02-24.
0001818383-25-000022
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations“Liquidity and capital resources-Financing activities”The baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 177 previous paragraphs and 174 current paragraphs.
104 unchanged; 57 reworded; 11 added; 15 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 18 previous and 18 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
For the year ended December 31, 2024, we generated $864.7 million of revenue and $1.5 billion of Transaction Value, representing increases of 122.8% and 151.4%, respectively, compared with the year ended December 31, 2023, driven primarily by significant increases in customer acquisition spending by P&C carrier partners as they refocused on growth in response to improving underwriting profitability.
Current report
Net income for the year ended December 31, 2024 was $22.1 million, compared with a net loss of $56.6 million for the year ended December 31, 2023, driven primarily by the increase in gross profit and lower equity-based compensation expense.
Current report
Results of operations
Current report
The increase in P&C insurance revenue for the year ended December 31, 2024, compared with the year ended December 31, 2023, was due primarily to an increase in customer acquisition spending by P&C carriers as insurance industry profitability improved throughout the year due to premium increases beginning to outpace loss cost inflation. The profitability of certain of our largest P&C insurance carriers improved significantly during the year, resulting in higher customer acquisition budgets from those carriers in addition to higher allocation of budgets by certain other Demand Partners.
Current report
The increase in life insurance revenue for the year ended December 31, 2024, compared with the year ended December 31, 2023, was driven by an increase in the supply of Consumer Referrals from our owned and operated sites.
Current report
Other expense, net
Current report
The increase in other expense, net for the year ended December 31, 2024, compared with the year ended December 31, 2023, was driven primarily by a $7.0 million charge to increase the TRA liability as a result of remeasuring the non-current portion of the liability to the amount of payment under the agreement considered to be probable, offset in part by a one-time contract termination fee of $1.7 million received from one of our Supply Partners in the Health and Life insurance verticals that ceased operations during the year ended December 31, 2024, and by an impairment charge of $1.4 million during the year ended December 31, 2023 related to a cost method investment that did not recur in 2024.
Current report
Income tax expense (benefit)
Current report
(2)Contract settlement consists of $1.7 million of income for the year ended December 31, 2024 recorded in connection with a one-time contract termination fee received from one of our Supply Partners in the Health and Life insurance verticals that ceased operations during the year ended December 31, 2024.
Current report
On February 21, 2023, we received a civil investigative demand from the Federal Trade Commission (the “FTC”) regarding compliance with the FTC Act and the TSR, as they relate to the advertising, marketing, promotion, offering for sale, or sale of healthcare-related products, the collection, sale, transfer or provision to third parties of consumer data, telemarketing practices, and/or consumer privacy or data security. We have cooperated fully with the FTC investigation. On October 30, 2024, we received an initial settlement demand from the staff of the FTC (the “FTC Staff”) stating that the FTC Staff is prepared to recommend that the FTC approve the filing of a complaint against the Company for violations of Section 5(a) of the FTC Act, the TSR and the Government and Business Impersonation Rule (the “Impersonation Rule”). The FTC Staff proposes to seek injunctive and monetary relief and civil penalties. If obtained in whole or in part, the monetary relief and penalties proposed by the FTC Staff would have an adverse, and potentially material, effect on the Company’s liquidity, financial condition and results of operations. The total amount of the monetary relief and penalties proposed by the FTC Staff significantly exceeds our existing liquidity and financial resources. Any such costs above the existing liquidity and financial resources would require us to seek additional capital, incur debt or otherwise take significant actions in order to satisfy the claims and there can be no assurances that such financing could be obtained on acceptable terms, or at all. In addition, the proposed injunctive terms, if obtained in whole or in part, could materially and adversely affect our ability to operate our business in the Health insurance vertical, including how we conduct our marketing activities and endeavors to ensure compliance with consumer protection laws by itself and third parties with which we do business. We strongly disagree with the allegations and believe we have substantial and meritorious defenses to the claims. Among other things, we believe that our conduct does not rise to the legal standard required for the FTC to obtain the proposed monetary relief and penalties. We continue to engage in good faith with the FTC and seek to resolve this matter prior to litigation, but we are prepared to defend ourselves vigorously if a complaint is filed.
Current report
2021 Credit Facilities
Removed paragraphs (15)
Previous report
For the year ended December 31, 2023, we generated $388.1 million of revenue and $593.4 million of Transaction Value, representing decreases of 15.4% and 19.5%, respectively, compared with the year ended December 31, 2022, as challenging conditions in the personal auto insurance industry continued to pressure P&C carrier underwriting profitability and in turn customer acquisition investments on our platform. Many of our demand partners in our P&C vertical continued to experience higher-than-expected underwriting losses driven by inflation in automobile replacement and repair costs, leading them to reduce their customer acquisition spend until they obtain approval of premium increases from state regulators. As claims cost inflation has eased and P&C insurance carriers have received regulatory approval of premium increases, their combined ratios (their claims costs and operating expenses as a percentage of total premiums) have begun to improve, We expect a continuation of this improvement in 2024, which should result in significant increases in advertising spend as carriers turn their focus to acquiring new customers. In our health and life insurance verticals, we continue to capitalize on the shift to direct, digital distribution. In our Health vertical, we experienced an overall strong performance in Under 65 health insurance during the Affordable Care Act (ACA) Open Enrollment Period (OEP), offset in part by lower-than-expected performance in Medicare due to the headwinds encountered by our partners during the Medicare Annual Enrollment Period (AEP).
Previous report
Net loss for the year ended December 31, 2023 was $56.6 million, compared with a net loss of $72.4 million for the year ended December 31, 2022, driven primarily by higher income tax expense during the year ended December 31, 2022 due to recognition of valuation allowance against our deferred tax asset and higher interest expense during the year ended December 31, 2023, partially offset by a gain on reduction of liability pursuant to the Tax Receivables Agreement during the year ended December 31, 2022.
Previous report
The decrease in P&C insurance revenue for the year ended December 31, 2023, compared with the year ended December 31, 2022, was due primarily to a decrease in customer acquisition spending by P&C carriers in response to lower than expected underwriting profitability. The auto insurance industry began to experience a cyclical downturn in the second half of 2021, with many P&C insurance carriers experiencing lower than expected underwriting profitability due to higher than expected inflation in automobile claims costs, leading them to reduce their customer acquisition spending on our platform until they obtain regulatory approval to increase their premium rates. Though we continue to expect P&C insurance revenue to increase over the course of 2024 as more carriers reach rate adequacy and resume competing for market share, we are currently unable to accurately predict the duration of this cyclical downturn or its impact on our revenue from the P&C insurance vertical, or our profitability, beyond the first quarter of 2024.
Previous report
The decrease in life insurance revenue for the year ended December 31, 2023, compared with the year ended December 31, 2022, was driven by a continued reduction in consumers shopping for life insurance as concerns related to the COVID-19 pandemic eased, as well as by a shift in focus by a key supply partner from Life insurance to our Health vertical.
Previous report
As we experience changes in revenue, we expect the relationship between our costs and revenue to remain generally in line with our historical results.
Previous report
Other expense (income), net
Previous report
For the year ended December 31, 2023, other expense (income), net consisted primarily of charges related to the impairment of our cost method investment of $1.4 million. For the year ended December 31, 2022, other expense (income), net consisted primarily of a gain on reduction of our liability pursuant to the TRA of $83.3 million resulting from remeasuring of the non-current portion of liability to zero as of December 31, 2022 after we concluded that payments under the agreement are no longer probable, offset in part by charges related to the impairment of our cost method investment of $8.6 million.
Previous report
Income tax (benefit) expense
Previous report
(2)SOX implementation costs consist of $0.1 million of expenses incurred by us for the year ended December 31, 2022 for third-party consultants to assist us with the development, implementation, and documentation of new and enhanced internal controls and processes for compliance with SOX Section 404(b).
Previous report
(3)Fair value adjustment to contingent consideration for the year ended December 31, 2022 consists of $7.0 million of gain in connection with the remeasurement of the contingent consideration for the acquisition of CHT as of December 31, 2022.
Previous report
(5)Changes in Tax Indemnification Receivable consists of $0.6 million of expense and $0.1 million of income incurred by us for the years ended December 31, 2023 and 2022, respectively, related to changes in the tax indemnification receivable recorded in connection with the Reorganization Transactions. The change also resulted in an expense/benefit of the same amount, which has been recorded within income tax (benefit) expense for the same periods.
Previous report
(6)Settlement of federal and state tax refunds consist of immaterial expense and $0.1 million of expenses incurred by us for the years ended December 31, 2023 and 2022, respectively, related to reimbursement to White Mountains for federal and state tax refunds for the period prior to the Reorganization Transactions related to 2020 federal and state tax returns. The settlement also resulted in a benefit of the same amount, which has been recorded within income tax (benefit) expense for the same periods.
Previous report
Segment information
Previous report
We operate primarily in the United States and in a single operating segment. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our chief executive officer, who reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. No expense or operating income is evaluated at a level below our consolidated financial statements. Since we operate in one operating segment and reportable segment, all required financial segment information can be found in the consolidated financial statements.
Previous report
On April 1, 2022, we closed the acquisition of substantially all of the assets of Customer Helper Team, LLC ("CHT") for cash consideration of $49.7 million at closing, plus contingent consideration of up to $20.0 million based on CHT’s achievement of revenue and profitability targets for the two successive twelve-month periods following the closing. We funded the transaction in part by drawing $25.0 million under the 2021 Revolving Credit Facility and the balance from cash on hand as of the closing. CHT was unable to meet its target for the first twelve-month period and is not expected to meet the target for the second twelve-month period as well, and accordingly, we do not expect to pay the contingent consideration for either period. As of December 31, 2023, we have repaid $20.0 million of the amounts drawn under the 2021 Revolving Credit Facility to fund the purchase price for this acquisition.
Reworded paragraphs (57)
Previous wording
Our mission is to help insurance carriers and distributors target and acquire customers more efficiently and at greater scale through technology and data science. Our technology platform brings together leading insurance carriers and high-intent consumers through a real-time, programmatic, transparent, and results-driven ecosystem. We believe we are the largest online customer acquisition platform in our core verticals of P&C insurance, health insurance, and life insurance, supporting $571 million in Transaction Value across our platform from these verticals in the year ended December 31, 2023.
Current wording
Our mission is to help insurance carriers and distributors target and acquire consumers more efficiently and at greater scale through technology and data science. Our technology platform brings together leading insurance carriers and high-intent consumers through a real-time, programmatic, transparent, and results-driven ecosystem. We believe we are the largest online customer acquisition platform in our core verticals of P&C insurance, health insurance, and life insurance, supporting $1.5 billion in Transaction Value across our platform from these verticals in the year ended December 31, 2024.
Previous wording
We have multi-faceted relationships with top-tier insurance carriers and distributors. A buyer or a demand partner within our ecosystem is generally an insurance carrier or distributor seeking to reach high-intent insurance consumers. A seller or a supply partner is typically an insurance carrier looking to maximize the value of non-converting or low expected LTV consumers, or an insurance-focused research destination or other financial website looking to monetize high-intent users on their websites. During the year ended December 31, 2023, an average of 36.9 million consumers shopped for insurance products through the websites of our diversified group of supply partners and our proprietary websites each month, driving an average of 8.2 million Consumer Referrals on our platform each month.
Current wording
We have multi-faceted relationships with top-tier insurance carriers and distributors. A buyer or a Demand Partner within our ecosystem is generally an insurance carrier or distributor seeking to reach high-intent insurance consumers. A seller or a Supply Partner is typically an insurance carrier looking to maximize the value of non-converting or low expected LTV consumers, or an insurance-focused research destination or other financial website looking to monetize high-intent users on their websites. During the year ended December 31, 2024, consumers shopped for insurance products through the websites of our diversified group of Supply Partners and our proprietary websites each month, driving an average of 9.9 million Consumer Referrals on our platform each month.
Previous wording
Transaction Value is an operating metric not presented in accordance with GAAP. Adjusted EBITDA and Contribution Margin are non-GAAP financial measures. See“Management’s discussion and analysis of financial condition and results of operations-Key business and operating metrics.” for additional information regarding the Company’s operating metrics and Non-GAAP metrics.
Current wording
Transaction Value is an operating metric not presented in accordance with GAAP. Adjusted EBITDA, Contribution, and Contribution Margin are non-GAAP financial measures. See“Management’s discussion and analysis of financial condition and results of operations-Key business and operating metrics.” for additional information regarding the Company’s operating metrics and Non-GAAP metrics.
Previous wording
Contribution, which generally represents revenue less revenue share payments and online advertising costs, was $78.1 million for the year ended December 31, 2023, a year-over-year decline of 3.3%. Contribution Margin was 20.1%, compared with 17.6% in 2022. The increases in contribution margin was due primarily to mix driven increases in our P&C vertical as well as increases in Health Transaction Value.
Current wording
Contribution, which generally represents revenue less revenue share payments and online advertising costs, was $154.4 million for the year ended December 31, 2024, a year-over-year increase of 97.7%, driven primarily by the higher revenue. Contribution Margin was 17.9% for the year ended December 31, 2024, compared with 20.1% for the year ended December 31, 2023.
Previous wording
Adjusted EBITDA for the year ended December 31, 2023 was $27.1 million, a year-over-year increase of 18.6%, due primarily to lower personnel costs resulting from employee terminations and lower directors and officers insurance premiums.
Current wording
Adjusted EBITDA for the year ended December 31, 2024 was $96.1 million, a year-over-year increase of 254.4%, due primarily to higher gross profit.
Previous wording
Transaction Value from Open Marketplace transactions is a direct driver of our revenue, while Transaction Value from Private Marketplace transactions is an indirect driver of our revenue (see“Key business and operating metrics” below). Transaction Value on our platform declined to $593.4 million for the year ended December 31, 2023 from $737.5 million for the year ended December 31, 2022, due primarily to a decrease in customer acquisition spending by P&C insurance carriers in response to significant reductions in their underwriting profitability. We have developed multi-faceted, deeply integrated partnerships with insurance carriers and distributors, who may be both buyers and sellers on our platform. We believe the versatility and breadth of our offerings, coupled with our focus on high-quality products, provide significant value to insurance carriers and distributors, leading many of them to use our platform as their central hub for broadly managing digital customer acquisition and monetization, resulting in strong retention rates. For the year ended December 31, 2023, 93% of total insurance Transaction Value executed on our platform came from demand partner relationships in existence during 2022.
Current wording
We define “Transaction Value” as the total gross dollars transacted by our partners on our platform. Transaction Value is an operating metric not presented in accordance with GAAP, and is a driver of revenue based on the economic relationships we have with our partners. Transaction Value from Open Marketplace transactions is a direct driver of our revenue, while Transaction Value from Private Marketplace transactions is an indirect driver of our revenue (see“Key business and operating metrics” below). Transaction Value on our platform increased to $1.5 billion for the year ended December 31, 2024 from $593.4 million for the year ended December 31, 2023, due primarily to an increase in customer acquisition spending by P&C insurance carriers in response to improvements in their underwriting profitability. We have developed multi-faceted, deeply integrated partnerships with insurance carriers and distributors, who may be both Demand Partners and Supply Partners on our platform. We believe the versatility and breadth of our offerings, coupled with our focus on high-quality products, provide significant value to insurance carriers and distributors, leading many of them to use our platform as their central hub for broadly managing digital customer acquisition and monetization, resulting in strong retention rates. For the year ended December 31, 2024, 96% of total insurance Transaction Value executed on our platform came from Demand Partner relationships in existence during 2023.
Previous wording
Our success depends on our ability to retain and grow the number of demand and supply partners on our platform. The aggregate number of demand and supply partners active on our platform, excluding our agent buyers, was approximately 1,230 for the years ended December 31, 2023 and 2022, driven by increased engagement in our Health vertical. We retain and attract demand partners by finding high-quality sources of Consumer Referrals to make available to our demand partners. We obtain these Consumer Referrals from our diverse network of supply partners as well as from our proprietary properties. We seek to develop, acquire and retain relationships with high-quality supply partners by developing flexible platforms to enable our supply partners to maximize their revenue, manage their demand side relationships in scalable and flexible ways and focus on long-term sustainable economics with respect to revenue share. Our relationships with our partners are deep and long standing and involve most of the top-tier insurance carriers in the industry. In terms of buyers, during the year ended December 31, 2023, 15 of the top 20 largest auto insurance carriers by customer acquisition spend were on our platform.
Current wording
Our success depends on our ability to retain and grow the number of high-quality Demand and Supply Partners on our platform. The aggregate number of Demand and Supply Partners active on our platform, excluding our agent partners, was approximately 1,230 for the years ended December 31, 2024 and 2023. We retain and attract Demand Partners by finding high-quality sources of Consumer Referrals to make available to our Demand Partners. We obtain these Consumer Referrals from our diverse network of Supply Partners as well as from our proprietary properties. We seek to develop, acquire and retain relationships with high-quality Supply Partners by developing flexible platforms to enable our Supply Partners to maximize their revenue, manage their demand side relationships in scalable and flexible ways and focus on long-term sustainable economics with respect to revenue share. Our relationships with our partners are deep and long standing and involve most of the top-tier insurance carriers in the industry. In terms of Demand Partners, during the year ended December 31, 2024, 15 of the top 20 largest auto insurance carriers by customer acquisition spend were on our platform.
Previous wording
Our results depend in large part on the number of Consumer Referrals purchased on our platform. The aggregate number of consumer clicks, calls and leads purchased by insurance buyers on our platform increased to 98.8 million for the year ended December 31, 2023 from 90.4 million for the year ended December 31, 2022. We seek to increase the number and scale of our supply relationships and drive consumers to our proprietary properties through a variety of paid traffic acquisition sources. We continuously look to diversify our paid media sources to extend beyond search engine marketing, which has historically represented the bulk of our paid media spend, into other online media sources, such as native, social, and display advertising.
Current wording
Our results depend in large part on the number of Consumer Referrals purchased on our platform and the pricing of such Consumer Referrals. The aggregate number of consumer clicks, calls, and leads purchased by insurance buyers on our platform increased to 118.8 million for the year ended December 31, 2024 from 98.8 million for the year ended December 31, 2023. We seek to increase the number and scale of our supply relationships and drive consumers to our proprietary properties through a variety of paid traffic acquisition sources. We continuously look to diversify our paid media sources to extend beyond search engine marketing, which has historically represented the bulk of our paid media spend, into other online media sources, including native, social, and display advertising.
Previous wording
Our results are subject to fluctuations as a result of seasonality. In particular, our P&C insurance vertical is typically characterized by seasonal strength in our quarters ending March 31 due to a greater supply of Consumer Referrals and higher customer acquisition budgets during the start of the year, and to seasonal weakness in our quarters ending December 31 due to a lower supply of Consumer Referrals available on a cost-effective basis and lower customer acquisition budgets from some buyers during those quarters. Our health insurance vertical is typically characterized by seasonal strength in our quarters ending December 31 due to open enrollment periods for health insurance and annual enrollment for Medicare during those quarters, with a material increase in consumer search volume for health products and a related increase in buyer customer acquisition budgets.
Current wording
Our results are subject to fluctuations as a result of seasonality. In particular, our P&C insurance vertical is typically characterized by seasonal strength in our quarters ending March 31 due to a greater supply of Consumer Referrals and higher customer acquisition budgets during the start of the year, and by seasonal weakness in our quarters ending December 31 due to a lower supply of Consumer Referrals available on a cost-effective basis and lower customer acquisition budgets from some buyers during those quarters. Our health insurance vertical is typically characterized by seasonal strength in our quarters ending December 31 due to open enrollment periods for health insurance and annual enrollment for Medicare during those quarters, with a material increase in consumer search volume for health products and a related increase in buyer customer acquisition budgets.
Previous wording
Our results are also subject to fluctuations as a result of business cycles experienced by companies in the insurance industry. These cycles in the auto insurance industry are characterized by periods of “soft” market conditions, when carriers are profitable and are focused on increasing capacity and building market share, and “hard” market conditions, when carriers are experiencing lower or even negative underwriting profits and are seeking to increase their premium rates to improve their profitability. As our demand partners in these industries go through these market cycles, they often increase their customer acquisition spending during soft markets and reduce it during hard markets, causing their relative demand for Consumer Referrals from our platform to increase and decrease accordingly. We believe that the auto insurance industry has been in a "hard” market since the second half of 2021, with many P&C insurance carriers experiencing lower than expected underwriting profitability due to higher than expected inflation in automobile claims costs, causing them to significantly reduce their customer acquisition spending on our platform. In late 2023, P&C insurance industry profitability began to improve as premium increases began to outpace loss cost inflation. While we expect this improvement to continue, driving increases in P&C insurance revenue over the course of 2024 as more carriers reach rate adequacy and return their focus to acquiring new customers, we are currently unable to accurately predict the timing or slope of a recovery from this cyclical downturn, or its impact on our revenue from the P&C insurance vertical or our profitability, beyond the first quarter of 2024.
Current wording
Our results are also subject to fluctuations as a result of business cycles experienced by companies in the P&C insurance industry. These cycles in the P&C insurance industry are characterized by periods of “soft” market conditions, when carriers are profitable and are focused on increasing capacity and building market share, and “hard” market conditions, when carriers are experiencing lower or even negative underwriting profits and are seeking to increase their premium rates to improve their profitability. As our Demand Partners in the P&C insurance industry go through these market cycles, they often increase their customer acquisition spending during soft markets and reduce it during hard markets, causing their relative demand for Consumer Referrals from our platform to increase and decrease accordingly. Beginning in the second half of 2021, the P&C insurance industry entered a "hard” market, with many carriers experiencing lower than expected underwriting profitability due to higher than expected inflation in automobile claims costs, causing them to significantly reduce their customer acquisition spending on our platform. In late 2023, P&C insurance industry profitability began to improve as premium increases began to outpace loss cost inflation, causing them to begin to resume their marketing investments. This recovery gained significant momentum during 2024 as multiple carriers meaningfully increased their spending in our marketplaces.
Previous wording
Our revenue and earnings may fluctuate from time to time as a result of federal, state, international and industry-based laws, directives and regulations and developing standards with respect to the enforcement of those regulations. Our business is affected directly because we operate websites, conduct telemarketing and email marketing and collect, process, store, share, disclose, transfer and use consumer information and other data. Our business is affected indirectly as our clients adjust their operations as a result of regulatory changes and enforcement activity within their industries. For example, the FTC has recently started taking a new position (in recent public statements and enforcement actions) regarding the consent rules under the Telemarketing Sales Rule ("TSR"), and the Federal Communications Commission has recently adopted changes to the consent rules under the Telephone Consumer Protection Act of 1991 (“TCPA”). These changes have required, and may in the future require, both us and our Partners to adjust their telemarketing activities. While it is unclear how these changes may ultimately be implemented and/or interpreted, they may have a significant impact on the market for leads, and may require us and our Partners to modify our telemarketing practices and policies. In addition, the California Consumer Privacy Act ("CCPA"), became effective on January 1, 2020 and has been amended by the California Privacy Rights Act ("CPRA"), which became effective January 1, 2023, and a number of other states, including Colorado, Connecticut, Delaware, Florida, Indiana, Iowa, Montana, New Jersey, Oregon, Tennessee, Texas, Utah, Virginia, and Washington, have enacted or are considering similar laws, all of which may affect our business. While it is unclear how this new legislation may be modified or how certain provisions will be interpreted, the effects of this legislation are potentially significant, and may require us to modify our data processing practices and policies and incur substantial compliance-related costs and expenses. In addition, we are licensed as a health insurance broker in all 50 states and the District of Columbia, making us subject to certain insurance laws and regulations. Our Medicare business is also subject to Federal rules governing the marketing of such policies. For a description of laws and regulations to which we are generally subject, see Item 1 “Business” and Item 1A “Risk Factors.”
Current wording
Our revenue and earnings may fluctuate from time to time as a result of federal, state, international and industry-based laws, directives and regulations and developing standards with respect to the enforcement of those regulations. Our business is affected directly because we operate websites, conduct telemarketing and email marketing and collect, process, store, share, disclose, transfer and use consumer information and other data. Our business is affected indirectly as our clients adjust their operations as a result of regulatory changes and enforcement activity within their industries. For example, the FTC has recently started taking a new position (in recent public statements and enforcement actions) regarding the consent rules under the Telemarketing Sales Rule ("TSR"). These changes have required, and may in the future require, both us and our Partners to adjust their telemarketing activities. While it is unclear how some of these changes may ultimately be interpreted, they may have a significant impact on the market for leads, and may require us and our Partners to modify our telemarketing practices and policies. In addition, the California Consumer Privacy Act ("CCPA") became effective on January 1, 2020 and has been amended by the California Privacy Rights Act ("CPRA"), which became effective January 1, 2023, and more than 20 other states have enacted or are considering similar laws, all of which may affect our business. While it is unclear how this new legislation may be modified or how certain provisions will be interpreted, the effects of this legislation are potentially significant, and may require us to modify our data processing practices and policies and incur substantial compliance-related costs and expenses. In addition, we are licensed as a health insurance broker in all 50 states and the District of Columbia, making us subject to certain insurance laws and regulations. Our Medicare business is also subject to federal rules governing the marketing of such policies. For a description of laws and regulations to which we are generally subject, see Item 1 “Business” and Item 1A “Risk Factors.”
Previous wording
The price and amount of Consumer Referrals purchased and sold on our platform vary based on a number of market conditions and consumer attributes, including (i) geographic location of consumers, (ii) demographic attributes of consumers, (iii) the source of Consumer Referrals and quality of conversion by source, (iv) buyer bid levels and (v) buyer demand and budgets.
Current wording
The price and amount of Consumer Referrals purchased and sold on our platform vary based on a number of market conditions and consumer attributes, including (i) geographic location of consumers, (ii) demographic attributes of consumers, (iii) the source of Consumer Referrals and quality of conversion by source, (iv) the volume of Consumer Referrals provided by our Supply Partners, (v) Demand Partner bid levels and (vi) Demand Partner demand and budgets.
Previous wording
In our Open Marketplace transactions, we have control over the Consumer Referrals that are sold to our demand partners. In these arrangements, we have separate agreements with suppliers and demand partners. Suppliers are not a party to the contractual arrangements with our demand partners, nor are the suppliers the beneficiaries of our demand partner agreements. We generate revenue from the sale of consumer referrals from our demand partners and separately pay (i) a revenue share to suppliers or (ii) a fee to internet search companies to drive consumers to our proprietary websites. We are the principal in Open Marketplace transactions. As a result, the fees paid by demand partners for Consumer Referrals are recognized as revenue and the fees paid to suppliers are included in cost of revenue.
Current wording
In our Open Marketplace transactions, we generate revenue by delivering qualified clicks, calls, and leads and have control over these Consumer Referrals that are sold to our customers (Demand Partners) on our technology platform. In these arrangements, we have separate agreements with our suppliers (Supply Partners) and Demand Partners. Supply Partners are not a party to the contractual arrangements with our Demand Partners, nor are the Supply Partners the beneficiaries of our Demand Partner agreements. We separately pay (i) a revenue share to Supply Partners or (ii) a fee to internet search companies to drive consumers to our proprietary websites. We are the principal in Open Marketplace transactions. As a result, the price paid by the Demand Partners for Consumer Referrals sold is recognized as revenue and the price paid to the Supply Partner is included in cost of revenue.
Previous wording
With respect to our Private Marketplace transactions, buyers and suppliers contract with one another directly and leverage our platform to facilitate transparent, real-time transactions utilizing the reporting and analytical tools available to them from use of our platform. We charge the supplier a platform fee on the Consumer Referrals transacted. We act as an agent in Private Marketplace transactions and recognize revenue for the platform fee received, which is a negotiated percentage of the Transaction Value of such transactions. There are no payments made by us to suppliers in our Private Marketplace.
Current wording
In our Private Marketplace transactions, Supply Partners and Demand Partners contract with one another directly. In these transactions, we act as an agent, facilitating the sale of Consumer Referrals between these Supply and Demand Partners, by providing access to our platform to the Supply Partner for their use as a tracking, reporting, optimization, and analytics tool in transacting with the Demand Partner, and we generate revenue by charging the Supply Partner a platform fee on the Consumer Referrals transacted, which is a negotiated percentage of the Transaction Value of such transactions. We do not make any payments to Supply Partners in our Private Marketplace transactions.
Previous wording
We recognize revenue derived from Consumer Referrals when we transfer these Consumer Referrals to our buyers in an amount that reflects the consideration to which we are entitled. We recognize revenue pursuant to the framework contained in Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606"), as issued by the Financial Accounting Standards Board (“FASB”): (i) identify the contract with a client; (ii) identify the performance obligations in the contract, including whether they are distinct in the context of the contract; (iii) determine the transaction price, including the constraint on variable consideration; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when we satisfy the performance obligations.
Current wording
We recognize revenue derived from Consumer Referrals when we transfer these Consumer Referrals to our Demand Partners in an amount that reflects the consideration to which we are entitled. We recognize revenue pursuant to the framework contained in Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606"), as issued by the Financial Accounting Standards Board (“FASB”): (i) identify the contract with a client; (ii) identify the performance obligations in the contract, including whether they are distinct in the context of the contract; (iii) determine the transaction price, including the constraint on variable consideration; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when we satisfy the performance obligations.
Previous wording
Generally, our contracts with buyers specify a period of time covered and a budget governing spend limits. While contracts can specify a term, most of our contracts can be terminated at any time without penalty upon 30- or 60-days’ notice. As a result, the transaction price for the delivery of each Consumer Referral is determined and recorded in real time and no estimation of variable consideration or future consideration is required. We satisfy our performance obligations as services are provided. We do not promise to provide any other significant goods or services to our partners after delivery and generally do not offer a right of return.
Current wording
Generally, our contracts with Demand Partners and Supply Partners specify a period of time covered and a budget governing spend limits. While contracts can specify a term, most of our contracts can be terminated at any time without penalty upon 30- or 60-days’ notice. As a result, the transaction price for the delivery of each Consumer Referral is determined and recorded in real time and no estimation of variable consideration or future consideration is required. We satisfy our performance obligations as services are provided. We do not promise to provide any other significant goods or services to our partners after delivery and generally do not offer a right of return.
Previous wording
Our cost of revenue is comprised primarily of revenue share payments to suppliers and traffic acquisition costs paid to search engines and social media platforms, as well as telephony infrastructure costs, internet and hosting costs, and merchant fees, and includes salaries, wages, equity-based compensation, the cost of health and other employee benefits for employees engaged in media buying, and other expenses including allocated portion of rent and facilities expenses.
Current wording
Our cost of revenue is comprised primarily of revenue share payments to Supply Partners and traffic acquisition costs paid to search engines and social media platforms, as well as telephony infrastructure costs, internet and hosting costs, and merchant fees, and includes salaries, wages, equity-based compensation, the cost of health and other employee benefits for employees engaged in media buying, and other expenses including an allocated portion of rent and facilities expenses.
Previous wording
General and administrative expenses consist primarily of an allocation of personnel expenses for executive, finance, legal, people operations, and business analytics employees, and include salaries, wages, equity-based compensation, and the cost of health and other employee benefits. General and administrative expenses also include professional services, an allocated portion of rent and facilities expenses and depreciation and amortization expense, and any change in fair value of contingent consideration.
Current wording
General and administrative expenses consist primarily of an allocation of personnel expenses for executive, finance, legal, people operations, and business analytics employees, and include salaries, wages, equity-based compensation, and the cost of health and other employee benefits. General and administrative expenses also include professional services, an allocated portion of rent and facilities expenses and depreciation and amortization expense.
Previous wording
Other expense (income), net consists primarily of income and expenses not incurred by us in our ordinary course of business and that are not included in any of the captions above. Other expense, net for the year ended December 31, 2023 consisted primarily of an impairment charge related to our cost method investment. Other (income), net for the year ended December 31, 2022 consisted primarily of a gain on reduction of liability pursuant to the Tax Receivables Agreement (“TRA”) offset in part by an impairment charge related to our cost method investment.
Current wording
Other expense (income), net consists primarily of expenses and income not incurred by us in our ordinary course of business and that are not included in any of the categories listed above.
Previous wording
MediaAlpha, Inc. is taxed as a corporation and pays corporate federal, state and local taxes on income allocated to it from QLH based upon MediaAlpha, Inc.’s economic interest held in QLH. QLH is treated as a pass-through partnership for income tax reporting purposes and is not subject to federal income tax. Instead, QLH’s taxable income or loss is passed through to its members, including MediaAlpha, Inc., pro-rata to their ownership interest in QLH. Accordingly, as our ownership interest in QLH increases, our share of the taxable income (loss) of QLH also increases. As of December 31, 2023, our ownership interest in QLH was 72.3%.
Current wording
MediaAlpha, Inc. is taxed as a corporation and pays corporate federal, state and local taxes on income allocated to it from QLH based upon MediaAlpha, Inc.’s economic interest held in QLH. QLH is treated as a pass-through partnership for income tax reporting purposes and is not subject to federal income tax. Instead, QLH’s taxable income or loss is passed through to its members, including MediaAlpha, Inc., pro-rata to their ownership interest in QLH. Accordingly, as our ownership interest in QLH increases, our share of the taxable income (loss) of QLH also increases. As of December 31, 2024, our ownership interest in QLH was 82.7%.
Previous wording
The decrease in health insurance revenue for the year ended December 31, 2023, compared with the year ended December 31, 2022, was driven primarily by a decrease in the supply of Consumer Referrals from our Medicare supply partners due to challenges in complying with recent changes in marketing regulations, offset in part by increased advertising spend from our under 65 health insurance partners.
Current wording
The decrease in health insurance revenue for the year ended December 31, 2024, compared with the year ended December 31, 2023, was driven primarily by a decrease in the supply of Consumer Referrals from our Medicare Supply Partners due to one of our partners ceasing operations during the first half of the year, as well as reduced advertising spend from our under-65 health insurance partners.
Previous wording
The decrease in other revenue for the year ended December 31, 2023, compared with the year ended December 31, 2022, was driven primarily by lower revenue from our travel vertical, as a significant increase in cost of acquisition for publishers reduced the supply of Consumer Referrals to our marketplaces.
Current wording
The decrease in other revenue for the year ended December 31, 2024, compared with the year ended December 31, 2023, was driven primarily by lower revenue from our travel vertical, as a significant increase in traffic acquisition costs for our Supply Partners reduced the supply of Consumer Referrals to our marketplaces.
Previous wording
The decrease in cost of revenue for the year ended December 31, 2023, compared with the year ended December 31, 2022, was driven primarily by lower revenue share payments to suppliers due to the overall decrease in revenue as well as lower media costs during the year ended December 31, 2023.
Current wording
The increase in cost of revenue for the year ended December 31, 2024, compared with the year ended December 31, 2023, was driven primarily by higher revenue share payments to suppliers due to the overall increase in revenue and lower take rates, offset in part by a higher mix of transactions in our Private Marketplaces, which have a minimal impact on cost of revenue.
Previous wording
The decrease in sales and marketing expenses for the year ended December 31, 2023, compared with the year ended December 31, 2022, was driven primarily by a decrease in equity-based compensation expense of $1.8 million and a decrease in other personnel-related costs of $2.1 million, which were related to lower employee headcount resulting primarily from the reduction in force plan implemented by us in May 2023 (RIF Plan), offset in part by an increase in amortization expense of $0.9 million related to the amortization of intangible assets arising from our acquisition of CHT.
Current wording
The decrease in sales and marketing expenses for the year ended December 31, 2024, compared with the year ended December 31, 2023, was driven primarily by a decrease in equity-based compensation expense of $1.4 million and a decrease in amortization expense of $0.6 million, offset in part by an increase in personnel-related costs of $1.1 million due primarily to accruals for higher bonus payouts during the year ended December 31, 2024.
Previous wording
The decrease in product development expenses for the year ended December 31, 2023, compared with the year ended December 31, 2022, was driven primarily by a decrease in equity-based compensation expense of $1.8 million and a decrease in other personnel-related costs of $0.4 million, which were related to lower employee headcount resulting primarily from the RIF Plan.
Current wording
The increase in product development expenses for the year ended December 31, 2024, compared with the year ended December 31, 2023, was driven primarily by an increase in personnel-related costs of $2.1 million as we hired additional employees and due to accrual for higher bonuses, offset in part by a decrease in equity-based compensation expense of $1.3 million.
Previous wording
The increase in general and administrative expenses for the year ended December 31, 2023, compared with the year ended December 31, 2022, was driven primarily by a gain of $7.0 million recorded during the year ended December 31, 2022 on remeasurement of the contingent consideration related to CHT , as well as to a $5.2 million increase in legal costs associated primarily with the civil investigative demand from the Federal Trade Commission and a legal settlement unrelated to our core operations, offset in part by a $2.4 million decrease in directors and officers insurance premiums, a $2.7 million decrease in accounting and professional fees, and a $1.8 million decrease in equity-based compensation.
Current wording
The decrease in general and administrative expenses for the year ended December 31, 2024, compared with the year ended December 31, 2023, was driven primarily by a decrease in equity-based compensation of $15.7 million and a $1.0 million decrease in directors and officers insurance premiums, offset in part by a $7.5 million increase driven primarily by higher legal fees and a charge of $7.0 million to establish a reserve relating to the FTC Matter, a $1.1 million increase in accounting and professional fees, and a $0.6 million increase in personnel-related costs.
Previous wording
The decrease in equity-based compensation expense for the year ended December 31, 2023, compared with the year ended December 31, 2022, was driven primarily by lower employee headcount, resulting primarily from the RIF Plan and as the majority of the RSUs granted at IPO became fully vested during the fourth quarter of 2023, offset in part by higher expenses related to annual awards of RSUs granted to employees,
Current wording
The decrease in equity-based compensation expense for the year ended December 31, 2024, compared with the year ended December 31, 2023, was driven primarily by certain RSUs granted to key employees at IPO being fully vested as of December 31, 2023, offset in part by higher expenses related to annual awards of RSUs granted to employees.
Previous wording
The increase in amortization expense for the year ended December 31, 2023, compared with the year ended December 31, 2022, was related to intangible assets arising from our acquisition of CHT, which was completed in April 2022.
Current wording
The decrease in amortization expense for the year ended December 31, 2024, compared with the year ended December 31, 2023, was immaterial.
Previous wording
The following table presents our other expense (income) for the years ended December 31, 2023 and 2022, and the dollar and percentage changes between the periods:
Current wording
The following table presents our other expense, net for the years ended December 31, 2024 and 2023, and the dollar and percentage changes between the periods:
Previous wording
The increase in interest expense for the year ended December 31, 2023, compared with the year ended December 31, 2022, was driven by an increase in the interest rate payable on amounts borrowed under the 2021 Credit Facilities, offset in part by the impact of lower outstanding balances in the current year period.
Current wording
The decrease in interest expense for the year ended December 31, 2024, compared with the year ended December 31, 2023, was driven primarily by the impact of lower outstanding balances in the current year period.
Previous wording
The following table presents our income tax (benefit) expense for the years ended December 31, 2023 and 2022, and the dollar and percentage changes between the periods:
Current wording
The following table presents our income tax expense (benefit) for the years ended December 31, 2024 and 2023, and the dollar and percentage changes between the periods:
Previous wording
For the year ended December 31, 2023, our income tax benefit of $0.5 million consisted primarily of the tax impacts of changes in our uncertain tax positions, as we recorded a valuation allowance against our current year losses. During the year ended December 31, 2022, our income tax expense consisted primarily of the tax impacts of an additional valuation allowance of $84.5 million that we recorded on our deferred tax assets, as based on our recent history of pre-tax losses we determined that the negative evidence outweighs the positive evidence and so it is more likely than not that our deferred tax assets will not be utilized.
Current wording
For the year ended December 31, 2024, our income tax expense of $1.4 million consisted primarily of the tax impacts of changes in our valuation allowance and uncertain tax positions. During the year ended December 31, 2023, our income tax benefit consisted primarily of the tax impacts of changes in our uncertain tax positions, as we recorded a valuation allowance against losses incurred during that year.
Previous wording
We define “Adjusted EBITDA” as net income excluding interest expense, income tax benefit (expense), depreciation expense on property and equipment, amortization of intangible assets, as well as equity-based compensation expense and certain other adjustments as listed in the table below. Adjusted EBITDA is a non-GAAP financial measure that we present to supplement the financial information we present on a GAAP basis. We monitor and present Adjusted EBITDA because it is a key measure used by our management to understand and evaluate our operating performance, to establish budgets and to develop operational goals for managing our business. We believe that Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in the calculations of Adjusted EBITDA. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects. In addition, presenting Adjusted EBITDA provides investors with a metric to evaluate the capital efficiency of our business.
Current wording
We define “Adjusted EBITDA” as net income (loss) excluding interest expense, income tax expense (benefit), depreciation expense on property and equipment, amortization of intangible assets, as well as equity-based compensation expense and certain other adjustments as listed in the table below. Adjusted EBITDA is a non-GAAP financial measure that we present to supplement the financial information we present on a GAAP basis. We monitor and present Adjusted EBITDA because it is a key measure used by our management to understand and evaluate our operating performance, to establish budgets and to develop operational goals for managing our business. We believe that Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in the calculations of Adjusted EBITDA. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects. In addition, presenting Adjusted EBITDA provides investors with a metric to evaluate the capital efficiency of our business.
Previous wording
Adjusted EBITDA is not presented in accordance with GAAP and should not be considered in isolation of, or as an alternative to, measures presented in accordance with GAAP. There are a number of limitations related to the use of Adjusted EBITDA rather than net income, which is the most directly comparable financial measure calculated and presented in accordance with GAAP. These limitations include the fact that Adjusted EBITDA excludes interest expense on debt, income tax benefit (expense), equity-based compensation expense, depreciation and amortization, and certain other adjustments that we consider to be useful to investors and others in understanding and evaluating our operating results. In addition, other companies may use other measures to evaluate their performance, including different definitions of “Adjusted EBITDA,” which could reduce the usefulness of our Adjusted EBITDA as a tool for comparison.
Current wording
Adjusted EBITDA is not presented in accordance with GAAP and should not be considered in isolation of, or as an alternative to, measures presented in accordance with GAAP. There are a number of limitations related to the use of Adjusted EBITDA rather than net income, which is the most directly comparable financial measure calculated and presented in accordance with GAAP. These limitations include the fact that Adjusted EBITDA excludes interest expense on debt, income tax expense (benefit), equity-based compensation expense, depreciation and amortization, and certain other adjustments that we consider to be useful to investors and others in understanding and evaluating our operating results. In addition, other companies may use other measures to evaluate their performance, including different definitions of “Adjusted EBITDA,” which could reduce the usefulness of our Adjusted EBITDA as a tool for comparison.
Previous wording
The following table reconciles Adjusted EBITDA with net (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, for the years ended December 31, 2023 and 2022.
Current wording
The following table reconciles Adjusted EBITDA with net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, for the years ended December 31, 2024 and 2023.
Previous wording
(1)Transaction expenses for the year ended December 31, 2023 consist of $0.6 million of legal and accounting fees incurred by us in connection with the amendment to the 2021 Credit Facilities, the tender offer filed by the Company's largest shareholder in May 2023, and a resale registration statement filed with the SEC. Transaction expenses for the year ended December 31, 2022 consist of $0.6 million of legal, accounting and other consulting fees incurred by us in connection with our acquisition of CHT.
Current wording
(1)Transaction expenses for the year ended December 31, 2024 consist of $1.2 million of legal and accounting fees incurred by us in connection with resale registration statements filed with the SEC. Transaction expenses for the year ended December 31, 2023 consist of $0.6 million of legal and accounting fees incurred by us in connection with the amendment to the 2021 Credit Facilities, the tender offer filed by the Company's largest shareholder in May 2023, and a resale registration statement filed with the SEC.
Previous wording
(4)Changes in TRA related liability for the year ended December 31, 2023 consist of immaterial expense. Changes in TRA related liability for the year ended December 31, 2022 consist of $83.3 million of gain on reduction of liability pursuant to the TRA resulting from remeasuring of the non-current portion of liability to zero as we no longer consider the payments under the agreement to be probable.
Current wording
(3)Changes in TRA related liability for the year ended December 31, 2024 consist of a $7.0 million charge to increase the TRA liability as a result of remeasuring the non-current portion of the liability to the amount of payment under the agreement considered to be probable. Changes in TRA related liability for the year ended December 31, 2023 consist of immaterial expense.
Previous wording
(7)Legal expenses of $4.3 million for the year ended December 31, 2023 consist of legal fees incurred in connection with the civil investigative demand received from the Federal Trade Commission (FTC) in February 2023 and costs associated with a legal settlement unrelated to our core operations.
Current wording
(4)Legal expenses of $11.1 million for the year ended December 31, 2024, consist of a $7.0 million loss reserve established in connection with the FTC Matter and legal fees incurred in connection with such matter. Legal expenses of $4.3 million for the year ended December 31, 2023 consist of legal fees incurred in connection with the FTC Matter and costs associated with a legal settlement unrelated to our core operations.
Previous wording
(8)Reduction in force costs for the year ended December 31, 2023 consist of $1.2 million of severance benefits provided to the terminated employees in connection with the RIF Plan. Additionally, equity-based compensation expense includes $0.3 million of charges related to the RIF Plan for the year ended December 31, 2023.
Current wording
(5)Reduction in force costs for the year ended December 31, 2023 consist of $1.2 million of severance benefits provided to the terminated employees in connection with the RIF Plan. Additionally, equity-based compensation expense includes $0.3 million of charges related to the RIF Plan for the year ended December 31, 2023.
Previous wording
amortization; depreciation; other services; and merchant-related fees. We define “Contribution Margin” as Contribution expressed as a percentage of revenue for the same period. Contribution and Contribution Margin are non-GAAP financial measures that we present to supplement the financial information we present on a GAAP basis. We use Contribution and Contribution Margin to measure the return on our relationships with our supply partners (excluding certain fixed costs), the financial return on and efficacy of our online advertising costs to drive consumers to our proprietary websites, and our operating leverage. We do not use Contribution and Contribution Margin as measures of overall profitability. We present Contribution and Contribution Margin because they are used by our management and board of directors to manage our operating performance, including evaluating our operational performance against budget and assessing our overall operating efficiency and operating leverage. For example, if Contribution increases and our headcount costs and other operating expenses remain steady, our Adjusted EBITDA and operating leverage increase. If Contribution Margin decreases, we may choose to re-evaluate and re-negotiate our revenue share agreements with our supply partners, to make optimization and pricing changes with respect to our bids for keywords from primary traffic acquisition sources, or to change our overall cost structure with respect to headcount, fixed costs and other costs. Other companies may calculate Contribution and Contribution Margin differently than we do. Contribution and Contribution Margin have their limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results presented in accordance with GAAP.
Current wording
We define “Contribution” as revenue less revenue share payments and online advertising costs, or, as reported in our consolidated statements of operations, revenue less cost of revenue (i.e., gross profit), as adjusted to exclude the following items from cost of revenue: equity-based compensation; salaries, wages, and related costs; internet and hosting costs; amortization; depreciation; other services; and merchant-related fees. We define “Contribution Margin” as Contribution expressed as a percentage of revenue for the same period. Contribution and Contribution Margin are non-GAAP financial measures that we present to supplement the financial information we present on a GAAP basis. We use Contribution and Contribution Margin to measure the return on our relationships with our Supply Partners (excluding certain fixed costs), the financial return on and efficacy of our online advertising costs to drive consumers to our proprietary websites, and our operating leverage. We do not use Contribution and Contribution Margin as measures of overall profitability. We present Contribution and Contribution Margin because they are used by our management and board of directors to manage our operating performance, including evaluating our operational performance against budget and assessing our overall operating efficiency and operating leverage. For example, if Contribution increases and our headcount costs and other operating expenses remain steady, our Adjusted EBITDA and operating leverage increase. If Contribution Margin decreases, we may choose to re-evaluate and re-negotiate our revenue share agreements with our Supply Partners, to make optimization and pricing changes with respect to our bids for keywords from primary traffic acquisition sources, or to change our overall cost structure with respect to headcount, fixed costs and other costs. Other companies may calculate Contribution and Contribution Margin differently than we do. Contribution and Contribution Margin have their limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results presented in accordance with GAAP.
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Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Current report — wording carried from elsewhere
In connection with the IPO, we entered into the Tax Receivables Agreement (“TRA”), as amended, with Insignia, the Senior Executives, and White Mountains related to the tax basis step-up of the assets of QLH and certain net operating losses of
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
We define “Contribution” as revenue less revenue share payments and online advertising costs, or, as reported in our consolidated statements of operations, revenue less cost of revenue (i.e., gross profit), as adjusted to exclude the following items from cost of revenue: equity-based compensation; salaries, wages, and related costs; internet and hosting costs;