MAX, MediaAlpha Inc.

Will it survive?

• Can it pay its interest? 2.0×
  Thin
  Operating income $22M ÷ interest expense $11M
  What this means

  Operating profit covers interest, but with little room. A bad year, a refinancing at higher rates, or a revenue wobble closes the gap fast.

• How heavy is the debt, net of cash? $107M · 4.8× operating profit
  Heavy net debt
  Cash $47M − debt $153M
  What this means

  Netting $47M of cash and short-term investments against $153M of debt leaves $107M owed, about 4.8× a year's operating profit (6.9× on the gross debt, before the cash). Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.

• How long is cash tied up? 5d
  Tight
  DSO 40 + DIO 0 − DPO 35 days
  What this means

  Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash. (Little or no inventory, a services / asset-light model, so the inventory leg is ~0.)

Is it a good business?

• Return on invested capital -12%
  Below average through the cycle
  3-yr median, range -21%–44%; the latest year is left out — large non-operating charges put its operating line well above pretax profit
  Industry peers: median 6%
  What this means

  The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 3 years, so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.

• Owner-earnings margin 5%
  Solid through the cycle
  8-yr median margin, range 4%–9%; latest $65M = operating cash $66M − maintenance capex $340K
  Industry peers: median 7%
  What this means

  What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 6% of revenue this year, a 5% median across 8 years. Treating stock comp as the real expense it is (less $30M of SBC) leaves $35M.

• Are earnings backed by cash? 2.56×
  Cash-backed
  Cash from ops $66M ÷ net income $26M
  What this means

  How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.

How is the cash used?

• Where do the earnings go? —
  Not enough data
  What this means

  The filing data didn't include the inputs for this check.

• Investing or harvesting? 1.25×
  Expanding
  Capex $340K ÷ depreciation $273K
  What this means

  Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Graham’s defensive tests · 0 of 6 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

• Adequate size Near
  Revenue ≥ $2B · $1.1B
  What this means

  Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.

• Strong liquidity Miss
  Current ratio ≥ 2× · 1.18×
  What this means

  Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.

• Conservative debt Miss
  Debt ≤ working capital · $153M vs $27M WC
  What this means

  Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.

• Earnings stability Miss
  A profit every year (8-yr record) · 4 loss years
  What this means

  Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.

• Dividend record Miss
  Uninterrupted dividends · none paid
  What this means

  An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.

• Earnings growth Miss
  Earnings +33% over the record · −94%
  What this means

  At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.

• Moderate price —
  P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
  What this means

  Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $0.01/share (latest year $0.46), the averaged base the calculator's gate runs on, and book value is $0.07/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2018–2025

Whether the record’s returns held, and what the capital reinvested earned.

• Profitable years 4 of 8
  What this means

  Lost money in 4 year(s), look at what happened there before trusting the average.

• Return on capital ≥ 15% 2 of 6 yrs
  What this means

  A moat shows up as a high return on invested capital that holds year after year, not one good vintage.

• Operating margin 5% → −1% (3-yr avg ends)
  What this means

  Through the cycle the operating margin slipped — about 5% early to −1% lately, median 2% — competition or costs are biting in.

• Reinvestment, incremental ROIC returns capital
  What this means

  The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.

• Owner earnings growth +14%/yr
  What this means

  Owner earnings grew about 14% a year over the record.

• Worst year 2023 · −10.3% op. margin
  What this means

  Operations went underwater in 2023, understand why before trusting the good years.

• How management talks about it Promotional
  What this means

  The record is compounding, but the filing leans on a promoter’s vocabulary rather than the per-share, return-on-capital terms an owner uses. The results back the talk here; the register is still worth noting.