HIIQ - Health Insurance Innovations

[ratiman]

Health Insurance Innovations is an online/call center broker of temporary/supplemental health insurance with possibly the dullest name for a company on the stock market. Revenues are expected to grow 30-40% in 2016 and earnings at a rate of 40-55%. It currently trades at about 16x the midpoint of the earnings guidance. Revenues are expected to come in around $142M this year.

 

The  main competitor is ehealth, which is not growing nearly as fast. I'm not quite sure why HII is growing so much faster than eHealth, except that HII is newer and has newer technology? About two years ago it purchased Healthpocket for $30M, a kind of Kayak for health care plans, and then used the tech to create agilehealthinsurance.com, which grew very rapidly in the last year and is now catching up to ehealth's site. Healthpocket isn't growing so fast but Agile is growing very fast.

 

Here is a comparison of the two:

 

Ehealth 2016

Revs $200M

EV $175

Price $13.20

Earns 64c

PE 21

Rev Growth 6%

 

 

HII

Revs $142

EV $42M

Price $6.31

Earns 40c

PE 16

Rev Growth 30-40%

 

So it's pretty obvious that HII is MUCH cheaper than eHealth. I guess there is a risk that the users of these temp/supplementary plans could get hit this year with Obamacare penalties and decide next year to go on Obamacare? That's possible though it could go the other way and we could see reduced penalties. The O-Care penalties have to be a huge political loser, but health insurance is not something I want to know more about. Anyway, the comparison of the two makes plain that HII is a better bet, at least at first sight.

[ratiman]

A good overview of the market HII is serving.

 

https://www.facebook.com/AgileHealthIns/posts/455778501286042

[siddharth18]

How sustainable is their business model? Seems they trick people into believing that their policies are ACA compliant...and once people find out it's not true, the company makes it very hard for them to cancel the policy.

 

 

http://www.yelp.com/biz/health-insurance-innovations-tampa

 

http://www.bbb.org/west-florida/business-reviews/health-insurance/health-insurance-innovations-in-tampa-fl-90072827/complaints

[ratiman]

How sustainable is their business model? Seems they trick people into believing that their policies are ACA compliant...and once people find out it's not true, the company makes it very hard for them to cancel the policy.

 

 

http://www.yelp.com/biz/health-insurance-innovations-tampa

 

http://www.bbb.org/west-florida/business-reviews/health-insurance/health-insurance-innovations-in-tampa-fl-90072827/complaints

 

All transactions like that at a call center are recorded, so if that is the business model, it wouldn't last very long. I worked at a call center and dealt with claims like that all the time, it's hard to rip somebody off when it's being recorded.

[ratiman]

HII was essentially a shell that was sold at the IPO in early 2013 as an opportunity to profit from Obamacare. At the time the company had nothing but a few insurance carrier relationships and a couple of call centers. Without the Obamacare hype, no way would the underwriters have ever considered taking this public. The COO was 70 years old and the CEO was running what was effectively the family business. The shorts were immediately all over it.

 

But what's interesting is that it has turned into quite a well-run business in the last three years. In 2014 (about a year after the IPO) HII bought Healthpocket, which was built by two former eHealth employees. They built a newer, shinier version of eHealth. Then in 2015 HII hired Patrick McNamee, who had spent the last seven years as COO of Express Scripts and is way overqualified to run a $50M company. In other words, they replaced Jim Zorn with Mike Shanahan. OK, Mike Shanahan didn't work out so well, but he did get the Redskins to the playoffs. Right now the market doesn't seem to get that HII is not even close to the same company that came public three years ago.

 

Here is his bio:

 

  Mr. McNamee began his career at the General Electric Corporation, attaining increasing levels of achievement and responsibility over a 14-year period.  His first role at GE was in product management at GE Medical in development of radiology information systems, after which he was promoted successively to Chief Information Officer GE Power Plants, Chief Information Officer and General Manager of e-Business for GE Transportation, Chief Information Officer and Chief Quality Officer for NBC, and lastly as President and CEO of GE Surgery, a division of GE Medical Systems.

 

Mr. McNamee then took on the role of President and CEO of Physician Systems at Misys Healthcare Systems.  Most recently Mr. McNamee served as EVP & Chief Operating Officer of Express Scripts Holding Company, where he helped grow the company from $10 billion to more than $100 billion in revenues over a nine- year tenure. Mr. McNamee joined HII in June 2015 as President.

 

[ratiman]

 

Looks like Obama administration is going after HIIQ:

 

http://www.cnbc.com/2016/06/08/government-moves-to-curb-short-term-health-insurance-to-boost-obamacare-risk-pool.html

 

 

Federal officials Wednesday moved to improve the financial outlook of Obamacare insurance plans by calling for limits on increasingly popular short-term health plans that are siphoning off healthier customers from coverage sold both on government marketplaces and outside those exchanges.

 

The government's move would limit short-term health coverage for an individual to less than three months each year and bar renewal, as opposed to the almost 12-month term that some of those non-Obamacare-compliant plans are offering, along with a chance to renew.

 

The proposed rule, one of several moves announced Wednesday, is designed to nudge those healthier customers now in short-term plans into Obamacare plans sold on and outside of government-run exchanges, and improve their so-called risk pool, by balancing out less-healthy customers.

[walkie518]

this is an old thread but the company might deserve a little attn?

 

addressable market only set to spike?

 

the Simple Health relationship seems to be a problem, but not a material enough % of business?

 

I suppose if the carriers underwrite poorly, HIIQ will suffer, but that doesn't mean when combined ratios turn bad for cash flow HIIQ will be impacted other than possible loss of clients?

 

healthcare in general has taken a hit, this one might be leveraged to a return to historical valuations as well as an asset light model? 

[walkie518]

 

 

TAMPA, Fla., May 06, 2019 (GLOBE NEWSWIRE) -- Health Insurance Innovations, Inc. (NASDAQ:HIIQ), a leading cloud-based technology platform and distributor of affordable health insurance, life insurance and supplemental plans, today announced financial results for the first quarter ended March 31, 2019. The Company will host a live conference call on Monday, May 6, 2019, at 5:00 P.M. ET.

 

"We met our internal expectations for the quarter and continued to execute on several key initiatives, including enhancements to our industry leading regulatory compliance protocols, setting the foundation for diversification of our insurance product portfolio and improved revenue contribution from our ecommerce channels, all while focusing on maintaining an outstanding consumer experience,” said Gavin Southwell, HIIQ's Chief Executive Officer and President.

 

First Quarter 2019 Consolidated Financial Highlights

All comparisons are to the three months ended March 31, 2018

 

Revenue was $87.3 million, compared to revenue of $75.9 million, an increase of 15.0%.

Net income of $2.2 million, compared to net income of $6.7 million, a decrease of 67.2% partly due to a higher effective tax rate.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $9.3 million, compared to adjusted EBITDA of $15.8 million, a decrease of 41.1%.

GAAP diluted net income per share was $0.11, compared to GAAP diluted net income per share of $0.36, a decrease of 69.4%.

Adjusted net income per share was $0.43 compared to adjusted net income per share of $0.70, a decrease of 38.6%.

Expected duration units of submitted IFPs (excluding fulfillment) of 680,000 compared to 567,900, an increase of 19.7%.

Adjusted EBITDA and adjusted net income per share are non-GAAP financial measures. See the reconciliations of these measures to their respective most directly comparable GAAP measure below in this press release.

 

2019 Full Year Guidance

 

The Company raises 2019 adjusted net income per share guidance to a range of $3.50 to $3.75 and reaffirms 2019 annual revenue guidance in the range of $430 million to $440 million and adjusted EBITDA guidance in the range of $72.0 million to $77.0 million. The increase in projected 2019 net income per share is due to a lower diluted average share count resulting from additional repurchases of the company’s common stock in the first quarter.

 

2019 First Quarter Financial Discussion

 

First quarter revenues of $87.3 million increased 15.0%, compared to revenue of $75.9 million in 2018. The increase was primarily due to a sales mix shift to longer duration products with greater lifetime value per submitted application.

 

Third-party commission expense was $60.7 million in the first quarter of 2019, compared to $45.5 million in the same period in 2018. The increase in third-party commissions was primarily due to a sales mix shift to products sold with longer expected policy durations and a shift to higher cost distributors with greater potential to drive market share gains across multiple product lines within our portfolio.

 

Total selling, general & administrative expense (“SG&A”) was $18.7 million in the first quarter, compared to $16.2 million in the same period in 2018. Adjusted SG&A, defined as total SG&A adjusted for stock-based compensation, transaction costs, indemnity and other related legal costs, severance and restructuring and other charges, for the first quarter of 2019 was $15.8 million, compared to $13.2 million in the same period in 2018. The increase is primarily attributable to increased advertising and marketing investment in our ecommerce channels. Adjusted SG&A is a non-GAAP financial measure, and a reconciliation of total SG&A to adjusted SG&A is included below in this press release.

 

Net income was $2.2 million in the first quarter of 2019, compared to net income of $6.7 million in the same period in 2018. EBITDA was $6.5 million in the first quarter of 2019, compared to $12.8 million in the same period in 2018. The effective tax rate (ETR) of 56.2% was due to the adoption of ASC 606 creating an opening balance sheet tax liability adjustment. The impact of this opening balance sheet tax liability adjustment in the first quarter of 2019 increased the provision from income taxes by an additional $1.4 million resulting in a total tax expense of $2.8 million, thus increasing our ETR from 28% to 56.2%.  This adjustment will continue to inflate the ETR for the remainder of 2019.

 

Adjusted EBITDA was $9.3 million in the first quarter of 2019, compared to $15.8 million in the same period in 2018. Adjusted EBITDA is calculated by taking EBITDA and adjusting for items that are not part of regular operating activities including stock-based compensation and related costs, and items that are not part of regular operating activities, including tax receivable adjustments, indemnity and other related legal costs, and severance, restructuring, and acquisition costs. A reconciliation of net income to EBITDA and adjusted EBITDA for the first quarter of 2019 and 2018 is included within this press release.

 

GAAP diluted net income per share for the first quarter in 2019 was $0.11, compared to GAAP diluted net income per share of $0.36 in the same period in 2018.

 

Adjusted net income per share for the first quarter in 2019 was $0.43, compared to adjusted net income per share of $0.70 in the same period in 2018. A reconciliation of net income to adjusted net income per share is included within this press release.

 

Cash and cash equivalents totaled $6.5 million as of March 31, 2019, a decrease of $2.8 million from December 31, 2018. The decrease in cash included the $3.4 million payment for closing the market conduct examination and $3.1 million increase in advance commissions. The Company repurchased 1,351,241 shares of our common stock during the first quarter of 2019, for $45.3 million, as part of its previously announced share repurchase program. The Company has $94.0 million remaining under its $200 million share repurchase authorization. The Company borrowed $50.0 million on its bank line of credit in the first quarter.