What happened
Health Insurance Innovations (BFYT) is battling back against short-sellers who've been questioning the viability of its business model. Today, the company issued encouraging preliminary third-quarter financials and announced a new share-repurchase program, sending shares 11.6% higher.
So what
Health Insurance Innovations markets short-term health insurance and hospital indemnity plans online and through third-party distributors. There's been significant demand growth for these plans over the past few years. However, short-sellers have recently been questioning the company's marketing approach and worrying over its future.
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Last month, short-sellers suggested the company may need to be licensed in its home state of Florida, something that hasn't happened yet. They also highlighted a 42-state investigation into whether the company's adequately disclosing information about its plans to consumers, including that they're not compliant with Obamacare requirements.
Management's attempts to assuage these concerns haven't stopped shares from falling; however, the company appears to have won back at least some investors with its third-quarter financials and new buyback program.
The company expects to report between $62.3 million and $63.3 million in third-quarter revenue, up 35% to 37% year over year. Consensus estimates were for $54.8 million. Health Innovations also anticipates adjusted net income of between $7.3 million to $7.6 million, or $0.44 to $0.46 per share. Final results will be reported on Nov. 1.
In addition, the company's board of directors authorized a $50 million buyback program that will run until October 2019.
Now what
The financial results are encouraging, but there are still a lot of question marks plaguing this company.
There's no telling when the multistate investigation will wrap up or what the outcome of it might mean for the company. It's also unclear how the Florida license issue will be resolved. Investors should also know that while the buyback news is good, there's no requirement for the company to buy any stock under this program, and the program could be modified in the future.
Overall, there may be an important market for short-term plans that fill gaps in insurance coverage, however, Health Insurance Innovations still has work to do to prove short-sellers wrong.
