Tampa, Florida based Health Insurance Innovations, Inc. (NasdaqGM: HIIQ) is one of the best performing stocks that we have covered over the last year at Vista Partners. Shares of HIIQ closed trading Wednesday, May 3rd at $17.10 up .29% on trading volume of 334,801 shares, which is below the daily average of 356,980 shares. The 52-week range is $3.72-$21/share. HIIQ’s stock took a sharp turn to the positive and proceeded to shoot up to $21 post last fall’s presidential election & in concert with management’s upward guidance in the same time frame.
HIIQ is a market leader in developing innovative health insurance products that are affordable and meet the needs of millions of health insurance plan shoppers. HIIQ develops insurance products through partnerships with best-in-class insurance companies and markets them via its broad distribution network of licensed insurance agents across the nation. HIIQ’s data-centric paperless business model is facilitated by its Consumer Division that provides real-time data used to identify opportunities and underserved needs in the health insurance market. HIIQ’s Consumer Division includes AgileHealthInsurance.com, a website for researching, comparing and purchasing Term Health insurance products, and HealthPocket.com, an independently managed 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.
HIIQ announced financial results for the first quarter ended March 31, 2017 today post the close. The First Quarter 2017 Consolidated Financial Highlights are as follows:
- Record revenue was $55.9 million, an increase of 31.5% over $42.5 million in the first quarter of 2016.
- Record total collections from customers (premium equivalents) of $90.9 million, an increase of 28.6% over $70.7 million in the first quarter of 2016.
- Net Income attributable to Health Insurance Innovations, Inc was $5.8 million, an increase of 545.2% over $0.9 million in the first quarter of 2016.
- Record adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $9.7 million, compared to $4.2 million in the first quarter of 2016, an increase of 127.1%.
- GAAP diluted earnings per share was $0.58, compared to $0.12 in first quarter 2016, an increase of 385.2%.
- Record adjusted earnings per share also referred to as Adjusted Net Income per Share, was $0.36 compared to $0.17 in the first quarter of 2016, an increase of 111.8%.
- Record policies in force as of March 31, 2017, totaled approximately 345,000, a 33.8% increase from 257,900 as of March 31, 2016.
- 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.
HIIQ also revised their guidance upwards for the full year 2017 and they are as follows:
- They expect Revenue to grow 15% to 20% year-over-year ($212 million to $222 million), Adjusted EBITDA to grow 30% to 40% year-over-year ($36 million to $39 million) and Adjusted EPS to grow 25% to 35% ($1.40 to $1.50).
- Previously they guided to Revenue of $210 million to $220 million, Adjusted EBITDA of $33 million to $36 million and Adjusted EPS of $1.35 to $1.45.
Gavin Southwell, HIIQ’s Chief Executive Officer and President stated, “Our record first quarter performance demonstrated continued strong demand for our products and solid execution as we continue to meet the affordable health care needs of our consumers. We will continue to focus on earnings growth and product innovation.”
HIIQ offered the following explanation of the results in their release:
- First quarter revenues of $55.9 million increased 31.5%, compared to the first quarter of 2016, driven primarily by an increase in policies in force and accelerating IFP sales in the fourth quarter of 2016 and first quarter of 2017 through the ACA open enrollment period.
- Total SG&A expenses were $15.3 million (27.3% of revenues) in the first quarter of 2017, compared to $12.0 million (28.2% of revenues) in the same period in 2016.
- Their core SG&A for the quarter – total SG&A less marketing leads and advertising, stock compensation, transaction, severance, restructuring and other costs – was $9.8 million (17.6% of revenues) in the first quarter of 2017, compared to $8.5 million (20.1% of revenues) in the same period of 2016.
- EBITDA was $8.0 million in the first quarter of 2017, compared to $3.5 million in the same period in 2016, an increase of 131.0%.
- Adjusted EBITDA was $9.7 million in the first quarter of 2017, an increase of 127.1% over $4.2 million in the same period in 2016.
- Adjusted EBITDA as a percentage of revenue was 17.3% in the first quarter of 2017, compared to 10.0% in the same period in 2016.
- Adjusted EBITDA is calculated as EBITDA, adjusted for items that are not part of regular operating activities, including restructuring costs, tax receivable adjustments and other non-cash items such as stock-based compensation.
- GAAP diluted earnings per share for the first quarter was $0.58, compared to $0.12 in the first quarter of 2016. Included in our GAAP earnings per diluted share is a $0.14 benefit that resulted from the early adoption of an accounting policy related to share-based payment transactions.
- Adjusted EPS for the first quarter of 2017 was $0.36, compared to $0.17 in the prior year. A reconciliation of net income to adjusted net income per share is included within this press release.
- HIIQ makes short-term loans to their distributors, based on actual sales, that we refer to as advanced commissions. These advanced commissions assist their distributors with cost-of-lead acquisition and provide working capital. They recover the loans from future commissions earned on premiums collected over the period in which policies renew. The first quarter advanced commission balance of $35.7 million is a decrease of $1.3 million from the fourth quarter of 2016.
- Cash and cash equivalents totaled $15.8 million at March 31, 2017, an increase of $3.6 million from December 31st 2016.
- During the quarter, the Company announced a secondary underwritten public offering of 3,000,000 shares of its Class A common stock. All such shares were offered and sold by certain stockholders of the Company, which stockholders are entities owned and controlled by Michael Kosloske, the founder, Chief of Product Innovation, and a director of the Company. The selling stockholders received all of the net proceeds from the offering. The Company did not sell any shares in the offering. The offering closed on March 13, 2017. This transaction resulted in an $18.6 million increase in our deferred tax assets which was fully offset by a corresponding liability for future payments required under the tax receivable agreement as the Company recognizes sufficient income to utilize the deferred tax asset.
The Company will host an earnings conference call on May 4, 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 13660546. A webcast of the call may be accessed in the Investor Relations section of Health Insurance Innovations’ website at http://investor.hiiquote.com/events.cfm. An archive of the call will be available for 30 days through the same website.
Shares of HIIQ in the aftermarket is showing that Shares are up 4.09% currently at $17.80.
It will be interesting to see if this fundamental advance and upward guidance will drive shares significantly higher as we have seen in the recent past and as we have been highlighting in our newsletter over the last year.
Please visit the Vista Partners Coverage page for HIIQ in order to track further progress and to increase your understanding of this emerging growth company in the healthcare sector.
Also, please take a few seconds to register at the Vista Partner website to receive via email and to freely review all content that includes: Vista’s Monthly Macroeconomic & Investment Newsletter, Vista’s Weekly Market Update, Vista’s Proprietary Research and Update Notes on the Coverage Universe that includes the Dow30 and Emerging Growth companies across all sectors and ongoing commentary on World & Market News!
Happy Wednesday to all and thanks again for your consideration.
John F. Heerdink, Jr., Managing Director, Vista Partners LLC