Q2 2020 EverQuote Inc Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the Evercores second quarter 2020, <unk> earnings Conference call.
At this time, all participants are in listen only mode.
After the speakers presentation, there will be a question and answer session.
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I would now like to how the conference over to your speaker today Brinlea Johnson I suppose shirt group. Please go ahead ma'am.
Thank you good afternoon, and welcome to Evercores second quarter 2020 earnings call, we'll be discussing the results announced in our press release issued today after the market close.
On the call. This afternoon, except for inbound Evercores, Chief Executive Officer, and co founder and John Wagner, Chief Financial officer of ever close.
On the call, we will make statements related to our business that maybe considered forward looking statements under federal securities laws, including statements concerning our financial guidance for the third quarter and full year 2020.
Gross strategy and our plans to execute on our growth strategy key initiatives, our investments and the business the growth levers, we expect to driver business, our ability to maintain existing and acquire new customers, our recent acquisition and interest or ability to acquire other companies our goals for integration and other statements regarding our plans and prospects forward looking statements may.
Maybe identified with words and phrases such as we expect me I believe the intent we anticipate we plan me County, and similar words and phrases. These statements reflect our views only as of today should not be considered our views as it any subsequent date.
Specifically disclaim any obligation to update or revise these forward looking statements except as required by law forward looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties I could cause the actual results to differ materially from our expectation.
For discussion of material risks and other important factors that could affect our actual results. Please refer to those contained under the heading risk factors and our most recent quarterly reports on form 10-Q, which is on file with the Securities Exchange Commission and available on the Investor Relations section of our website under Investor day ever poke dotcom, none the fccs website at FTC.
Dot Gov.
Finally during the course of today's call, we refer to certain non-GAAP financial measures, which we believe are helpful to investors a reconciliation of GAAP to non-GAAP measures is included in the press release me. They issued after the close of market today, which is available on the Investor Relations section of our website and investors that evercore dotcom like that I'll turn the call every stuff birnbaum.
Adequate Chief Executive Officer, and Cofounder go ahead, Jeff.
Thank you really good afternoon, and thank you everyone for joining us today.
We continue to be with all the individuals and businesses the impact that around the world by the pandemic as a company. We're meeting the challenges brought about by the unprecedented combination of a global health crisis significant economic disruption and recent social upheaval, while continuing to execute on our growth initiatives and.
Commitments to our customers our strategy continues to yield excellent results are checking data driven marketplace flywheel continues to drive network effect.
More consumers and providers with deeper engagement across multiple insurance vertical in Q2, we reported a strong second quarter across all of our key financial metrics delivering year on year growth of 41% in both revenue and variable marketing margin. We also delivered positive adjusted EBITDA expansion year over year concern.
Digital insurance distribution marketplace for consumers and providers using data and technology to make insurance simpler more affordable and personalized ultimately reducing costs and risks, while we continue to be vigilant and shifting market dynamics brought about by Covid, we are fortunate and deeply grateful.
That given the resilience of our model or growth prospects have never been stronger.
The insurance industry remains profitable and continues to exhibit strong demand to invest in online channels. The moderation in consumer demand that occurred since the start of the pandemic is largely in line with our historical seasonal traffic patterns and its impact has been modest on our business given our diversity of traffic sources our team remain.
Highly productive and collaborative operating in a fully distributed manner and we believe that the dominant dynamic for our business. The secular shift of insurance online is further validated by the emergence of a growing cohort of successful insurance that companies, many of whom our customers or partner.
We're confident we are better position than ever and have set the stage for a strong second half and for 2021 I'm personally energized by our mission to empower insurance shoppers to better protect life's most important assets their family property and future in our team is passionate about our goal to become V destination.
And for insurance customers, both consumers and providers by delivering high value experiences in broad products selection with low friction.
Strong financial performance in the quarter was achieved while continuing to invest in execute across our for growth levers. We've made strong progress with an expanding set of key initiatives products as well as services as we lean into our massive opportunity and the shift of nearly $150 billion of <unk>.
<unk> distribution spend online or for growth levers are attracting more high intent consumers to our marketplace growing and expanding across insurance vertical deepening consumer provider engagement and growing provider coverage and budget, we are expanding our growth levers to incorporate personalized insure.
Lawrence experiences from arrival to policy sale and our digital distribution platform to extend into a direct to consumer agency model for specific vertical segments. Today, we're announcing to new direct to consumer initiatives that extend our marketplace and health and life insurance, we're developing direct to consumer or D. T.
See agency experiences in our health vertical via an acquisition and in our life vertical through and organically grown agency platform each will enhance the consumer shopping experience and coverage options, while enabling providers to connect with incremental underserved consumers these DTC or direct to.
Consumer agency experiences, we'll further deepen our consumer provider engagement and broaden our ability to access the hundred $30 billion Commission Tam component of the overall distribution spend an insurance.
I'm excited to share Q2 highlights across our growth levers and key initiatives, including several of these newer developments, which we expect to enhance customer experience provider coverage and budget first attracting more high intent consumers to our marketplace.
Our traffic teams are executing well growing consumer quote request volume by 50% year over year and Q too we continued to be successful focusing on channels that bring high intent consumers, who are marketplace and delivering workflow improvements to enhance conversion across our insurance verticals.
Consistent with our historical seasonal patterns, we saw cue to traffic volume slightly lower than in Q1, and we believe covid compounded with recent social unrest contributed to moderating consumer demand in late Q too. We however have seen traffic volume increase in July with strong ended economics.
Consequently, we saw high overall traffic growth in Q too and we have senior returned to our historically strong Q3 pattern with strong momentum and the current quarter. Overall, we continue to deliver consumer demand and variable marketing margin growth in excess of our long term model and faster than the secular market shift online we.
Believe we are gaining sure an insurance shopping online. Additionally, we're excited it early results from recent performance brand tests, combining engaging content and marketing created to help us develop our brand strategy with positive Roy.
Net growing and expanding across insurance verticals.
Q too we had another strong quarter and are non auto verticals with revenue increasing 133% year over year with solid unit economics as we benefited from the network effects of our marketplace and from disciplined investments and are non auto verticals with increased head count and the vertical teens.
Q too, we launched exciting new customer experiences in our home vertical in addition to scaling integrations and reducing customer friction, we delivered auto and home bundling from the consumer to the provider, enabling end to end cross selling our view is that consumers gain access to a broader panel of the top agents in the market with relevant.
Products and discounts, we see incremental monetization for the bundled referrals, creating wins for our consumer and provider customers as well as our business.
And Q too. We also began to scale inorganically developed direct to consumer agency experience for the life insurance vertical, which we have been building for months through a sophisticated data driven sales technology platform. We seamlessly connect underserved life vertical segment specific consumers from arrival to policy sale with light.
Since the agents directly on our marketplace platform and sell life insurance policies on a commission share basis, or DTC agency initiatives enable more comprehensive consumer coverage address under and Unserved consumer needs help us maximize provider inclusion from the large carriers to individual agents and.
Increased product selection for customers. We are confident that this will ultimately increase bind for user while enabling us to deliver more personalized better consumer experiences for consumers and providers and our marketplace.
In our health insurance vertical we announced today that we are acquiring cross point of data driven health insurance agency headquartered in Evansville, Indiana that connect consumers to high quality health care insurance. This acquisition physicians us to accelerate the growth of our health vertical with a DTC agency capability, enabling improved hell.
Insurance vertical customer experiences deep integration broader carrier distribution and higher monetization with recurring revenue looking ahead to the fourth quarter open enrollment period. We believe we are well positioned to drive significantly higher revenues and our health insurance vertical with our expanded provider coverage and monetization opportunities.
We're building our DTC agency experiences with the vision of bringing together best in class Agency operations like those of cross point in health with cutting edge, enabling technologies of our marketplace platform.
Including machine learning in AI as we've launched in our life vertical to create an enhanced and more personalized and and consumer to provider arrival to policy sale experience with greater monetization opportunities and bind or policy sale performance.
Bundling and home an auto as well as DTC agency for life and health enable us to develop user experiences to enhance consumers insurance shopping journeys deepened engagement and drive incremental long term value and our marketplace. We plan to rollout our first logged in user experience in Q4 of this.
Here.
Our third growth lever deepening consumer provider engagement, we're confident that direct to consumer agency experiences in our health in life verticals will deepen customer engagement and improve the consumer experience and the insurance shopping journey by having ever quote Act as the first party agents to sell a policy directly to insure.
Shoppers and these select verticals, we will complement are provider partners in under an uncertain segments delivering a wider range of choice personalization.
An end to end shopping experiences that further reduce friction integrations also reduce friction as you may recall, we establish the gold completing deep integrations with 100% of our carriers by the end of this year to improve consumer experienced an increase provider bind right or policy purchase rates to drive up marketplace efficiency.
This is one of our key initiatives for 2020 and at the end of the second quarter I'm pleased to say, we are well on our way through our goal of 100% deep integrations with 66% of our carrier partners deeply integrated and we continue to make steady progress.
Four growing provider coverage and budget, we continue to add more providers and expand our relationships with existing carriers an agent this quarter over 94% of revenue from carriers came from those who've been on our platform for more than a year. We added several new customers to our smart campaigns platform, where we use machine learning to.
<unk> bidding for our carrier partners, resulting in more efficient marketing spend at desired Kpa targets. We also began to offer the option for carriers to bid on a referrals on either on RLI or conversion rate metric to better meet their individual targeting preferences.
Our agency business expanded to 37% of revenues this quarter up from 24% last quarter, which further diversified our revenue mix and contributed to increased revenue per quote request sequentially, our investments to expand agent demand via content marketing consultative sales top notch service.
And carrier partnerships to named just a few are paying off of note R. Accelerated growth program, which focuses on larger agencies is ramped up for agents, who are increasing their acquisition and marketing spend with us online.
Rounding out key initiatives data Sciences machine learning.
And team building I'm happy to share some insights into progress we continue to build our engineering and data sciences capabilities as we speak to better leverage are large and rapidly growing data set of consumer and carrier preferences to drive consumer satisfaction and operating leverage. An example of are working cue to includes deploying an internal <unk>.
Normally detection platform, allowing for faster and more automated issue identification and resolution to improve many aspects of our consumers journey, including integrations. We believe that given are successful team building. We are winning the war for talent and we're thrilled to be a magnet for top talent <unk> been successful hiring.
While developing current talent to support growth scale and innovation ever cult leaders are raising their performance bar with every higher and promotion.
Q2, we hired a significant number a full time employees, including 20 engineering Tech and data folks, notably we've also added three senior leaders to our team since our last earnings call. Mike Connelly is SVP of agency sales and customer success, who joined from car Gurus, Tom Mcdermott is SVP of health and Medicare who joined from <unk>.
Sure and Michael All this is VP insurance data and products services from Liberty mutual we believe that continuing to add top talent to the team is another key indicator of our future growth and ability to capitalize on our massive market opportunity. I also wanted to take a moment to talk about everquest actions related to the <unk>.
Topic of diversity, and inclusion which has been an integral part of our culture. Since our founding we believe that supporting diversity and inclusion is critical to both our success and winning the war for talent and creating an inclusive marketplace for the broadest possible range of insurance consumers like all decisions and our business our efforts and diversity Echo.
Inclusion or D. I R data driven and extends at protecting the integrity of our analytic from potential but as we continue to grow as a company. We want to ensure that are long standing commitment to dei remains integral to our strategic decision, making and governance yesterday, we announced that Darryl August who is foundational in our growth.
And leaves our strategy group and our dei initiatives was named to our board. We're confident that are boards decisionmaking will be enhanced by his presence in council <unk>.
<unk> in the context of our broader commitment to environmental social and governance or ESG considerations and managing our company since our founding we have recognize the importance of incorporating broader social considerations into building a great company, which we believe ultimately drives higher longterm shareholder.
<unk>, we look forward to sharing more with you about our efforts around ESG.
Finally, I wanted to touch on our strategic plan, which we referred to internally as our path to 1 billion and includes bowl bet on initiatives such as direct to consumer agency experiences. This plan as our internal roadmap for how we plan to build a large and impactful company that can lead and accelerate the digital <unk>.
<unk> of the two trillion insurance industry online, we're confident that we have the elements and a deterministic path to grow our business to $1 billion of revenue consistent with our long term model.
In summary, we delivered a solid second quarter was strong execution across our verticals and see continued strengthen the business is John will reflect in our guidance are marketplace flywheel is demonstrating progress and resilience with increasing diversity across our team traffic verticals distribution and customer experiences including.
Direct to consumer agency initiatives and life and health insurance, we are confident that we are better position now than at any point in our history to capitalize on the shift of insurance online I would like to think our customers are partners and our shareholders for believing in our vision and for their ongoing support as well as our terrific.
Plays who each sure my passion about ever quotes incredible future now I'll turn the call over to John to provide more details on our financial results.
Thank you set and good afternoon, everyone I'll start by discussing our financial results for the second quarter of 2020 highlight our current financial performance and then provide guidance.
We're pleased to report a solid second quarter of 2020 with the results consistent with our guidance across all our key financial metrics.
Second quarter revenue was 78 $3 million up 41% year over year, a growth rate that is notable considering the level of economic and social disruption during the quarter.
Second quarter revenue in our auto insurance vertical increased to 64 $6 million a growth rate, 30% year over year.
Second quarter revenue from our other insurance vertical which includes home and renters life health and commercial insurance increased to 13 $7 million a growth rate of 133% year over year.
Non auto revenue now represents 17.5% of total revenue.
And the second quarter variable marketing margin for VM M, which redefine as revenue less advertising expense was 23 $5 million, an increase 41% year over year.
As a percentage of revenue V. M M expanded nearly a point over first quarter V M M to 30%.
While staying consistent with the prior years quarter.
And the second quarter consumer quote requests increased 50% year over year to six $8 million <unk>.
We believe traffic this quarter was negatively impacted by a combination of factors, including the softer seasonal trend of Q too as well as a modest impact from consumer shopping distraction as a result of Covid 19, and social unrest.
During the quarter, we put a greater focus on growing consumer volumes and a challenging consumer environment, while not losing sight of our primary goal of growing variable marketing margin.
Although online advertising costs have decreased broadly insurance specific advertising has remained more competitive reflecting the resilience of the general insurance industry. During this time.
Our traffic teams have been disciplined and selective across the advertising an acquisition landscape and were successful growing consumer quote request Williams through the quarter and importantly exited the quarter with momentum is extended into Q3.
As anticipated are increased volume of quote requests as compared to the prior year period was accompanied by 6% year over year decline in revenue per quote request to $11 and 55 for the quarter.
However, note that this was a 5% sequential improvement over Q1.
Similar to quote request volumes, we're seeing higher revenue per quote request continue into Q3, largely as a result of strong referral pricing.
Although it's an output of our marketplace model, we do see higher revenue per referral as at least partially indicative of improving carrier sales performance from our referrals and a reflection of carriers willingness to reflect that improved performance in their referral bids.
Increases in revenue per quote request also provide us with the ability to bid more aggressively for advertising and consumer traffic, while still delivering higher variable marketing margin as a percentage of revenue.
The second quarter cap net loss was two $8 million or loss of 10 per share based on approximately 27 1 million weighted average shares outstanding.
This compares to a gap net loss of $2 million in the prior year period.
Our gap net loss was impacted by six $3 million in stock compensation expense largely the direct result of our higher stock price.
We expect stock compensation for the balance of the year to be between 15 and $16 million.
We delivered adjusted EBITDA, a $4 million or five 1% of revenue for the second quarter.
Above the midpoint of our guidance range are adjusted EBITDA benefited directly from favorable expense management and the variable nature of a portion of our non advertising operating expenses.
We generated $4 million in positive cash flow from operating activities in the quarter with 54 $4 million in cash in cash equivalents on the balance sheet at the end of the quarter.
We're also finalize a renewal of are working capital a line of credit increasing it to $25 million further improving our liquidity position.
Assess mentioned earlier, we're excited today to announced the acquisition of cross point to help cure growth and the health protocol.
Cross point joins our recent direct to consumer agency initiative in the life vertical and will allow us to provide end to end insurance shopping experiences within the health vertical.
Combined TTC Agency initiative expands are Tam to include agency commissions and offers us the opportunity to improve the consumer shopping experience.
Consideration to be paid at the closing of the acquisition is $15 million in cash which will be funded from our balance sheet <unk>.
Additional consideration payable whenever quote stock maybe earned based on three years, a post closing operational performance.
And 2019 Cross point reported cash based revenue approximately $4 million and positive EBITDA.
Cross point management has demonstrated a consistent growth trajectory and we're excited to add approximately 30, new team members too our company, including the too passionate founders and leaders.
We expect to close the acquisition and wait Q3.
Before discussing guidance I'd like to provide a brief update of the impact of code with 19 on our business.
And a modestly perceptible impact to consumer shopping intent volume, we believe Kobe 19 had a relatively minor impact on cue to results.
We remain confident that the long term impact of the pandemic will be to accelerate the transition of insurance industry advertising dollars to online channels and to emphasize the importance of products and workflow that support online consumer insurance shopping and purchasing.
We continue to closely monitor the near term effective Cove at 19 on advertising and consumer traffic and acquisition.
Previously noted we've seen early trends consistent with our seasonal pattern, a sequential growth and Q3.
Now turning to the specifics of Q3 guidance, we've reflected these operational trends observations and our confidence as follows.
We expect revenue to be between 80 $486 million a year over year increase of 27% at the midpoint.
We expect variable marketing margin to be between 26, five and $28 million a year over year increase of 30% at the midpoint.
And we expect adjusted EBITDA to be between four and $5 million a year over year improvement of 15% at the midpoint.
For the full year 2020, we're pleased to be increasing your guidance, reflecting the early Q3 momentum through the balance of the year the impact of the cross point acquisition and incorporating the anticipated organic growth of our health vertical.
We expect revenue to be between 331 and $336 million, an increase from our prior guidance of $318 million to $327 million.
We expect variable marketing margin to be between 101, and 104 $5 million and increased from our prior guidance of 96, two $102 million.
And we expect adjusted EBITDA between 15, and 17 $5 million.
And increased from our Pryor guidance of 12 $517.5 million.
In summary, we delivered solid second quarter financial results in line with our guidance are experiencing continued momentum that we are pleased to reflect in are improved outlook <unk>.
Seth and I look forward to answering your questions.
And as a reminder to ask a question you need Crestar one on your telephone keypad to make sure. All your question at anytime Cresta pound key.
Please send that while we compiled Q&A roster.
And your first question comes from the line of Ralph Schuchardt from William Blair.
Please go ahead.
Good evening. Thank you for taking the question of a couple of I could first steps on the DTC new initiatives, both by the crust for an acquisition of life insurance programs.
Perhaps you give us some more color on the strategic rationale for these obviously a large town, but just curious how this is going to interact with the marketplace model and then any more of these opportunities that you may have going forward that you could perhaps give some perspective on.
Sure.
Alright, let's start with that one yeah.
I'll go ahead.
Maybe just on the quarter kind of what to revisit some of the comments there. Thank you had called out some seasonality, obviously and cute too on the traffic side, but also some maybe paramount pronounced impact from Covid as well as the social unrest in late cute too.
Any way you could help us think about how about traffic rebound, perhaps quantified in July and then <unk>.
Respect perspective, which one may have impacted more on the quarter between Coca Dendroid, the social unrest. Thanks.
Sure Ralph Thanks, and a good afternoon, so I'm going to take the first question and John is going to answer the second question.
Our traffic team is doing extraordinary work driving great growth in there a specific segments, where we obviously have more consumer demand then provider supply and you can see that.
The <unk> revenue prefer request dynamic the direct to consumer agency initiatives both of them will actually help US cover these underserved consumers. They certainly can help us lower friction drive higher revenue for cure revenue per call request in these specific segments until ultimately it will enable us to continue.
To ramp traffic spin are flywheel more increasing actual overall consumer demand in the marketplace to benefit everybody. So that includes our partners in the marketplace. So we we do expect that the vast majority of consumers to continue to match and connect with partners and again this will enable us to drive incremental growth, especially bye.
Increasing the coverage for underserved consumers and these specific segments.
Far as sort of incremental VTC segments right now we're focused on obviously health in life and that's what we're working on right now.
Sure and then Hey, Ralph I'll take the second part within Q too we saw more challenging consumer environment.
Our traffic teams reacted to that and ultimately returned in quote request volumes that we're in line with our expectations, albeit at at slightly higher cost per quote request I think more importantly, we saw very good momentum going into Q3 <unk> reflected that in our guide I think when we look.
Q3, we see a balanced quarter developing.
Certainly a quarter, that's led by growth and consumer volumes, but I think you will continue to see.
Good sequential increases in unit economics, as well so I think we saw some turbulence and Q3 and you can connect to the normal excuse me Q2, you can connect to the normal seasonal pattern of Q too.
But we also ascribed some.
Some connection too.
Consumer distraction from shopping, which is Culver 19 or social unrest.
I think we've seen a Q3 developing that is like you to largely consistent with the seasonal pattern, which for Q3 means sequential growth over Q too.
Great that's really helpful. Thank.
Sure.
And your next question comes from the lineup, Brian Jason J M. P Securities. Please go ahead.
Great. Thanks for taking the question and I sat taejon. So I wanted to understand maybe following up on on Ralph's question <unk> Agency models, that's a little bit more maybe just from the consumer approach can you just talk about how the consumer experienced might evolve here and really the two different channels on the D C agency versus the marketplace.
And then I wanted to ask a little bit an auto revenues. It looked like they declined sequentially around four 5% and just wondering if if there's anything to do with what you talked about within civil unrest et cetera, or is this more of a seasonal thing, which sort of ebbs and flows. Thank you.
Sure Hieron good afternoon, Seth I'm going to take the first question on DTC Agency and then Wagged will follow up with your question with regard to autos growth.
Hi, I'm DTC agency is a consolidated marketplace experience, so consumer arrive and if that consumer happens to be in one of the segments that we're covering with a direct to consumer agency experience.
Let's see if we can do it we can sort of match them by age or coverage.
Need basically they can go through.
Through our workflow.
They can get either a curator quote so so 'single-quote exit matched with a product that serve their needs or multiple quote exit and then they can actually connect with an agent directly in our platform either online or offline to purchase insurance and so these are experiences that were already building out we already have these.
Personalized experiences running in production in life in it literally takes a consumer who is matched and a specific segment with an under met need with a very streamline product that they can purchase online or offline through one of the agents in our platform and so that precisely how it works again, we're confident it will reduce friction increase coverage.
And plug it sort of broaden our exposure to the commission Tan.
So run on your second question there, we did connect our expectations around Q2 with the normal seasonal pattern, though we were quick to say in the past that we've seen disruption to that seasonal pattern, which is usually a softer Q too in recent years and that was really connected to the growth.
The other verticals, so that seasonal pattern of a down Q too is one that we do associate more with the with the autos vertical then with these new other verticals, which are growing kind of through any seasonal trend and that's what you saw within the quarter with the other vertical growing 133% year over year.
Here. So so we do see kind of the seasonal trend is being most connected to the autos vertical.
And kind of our historic business I think Ron. It's also important to note right. We came in right on our traffic model right, 50% year on year growth for quote request volume in the quarter and sort of right on the button in terms of maybe at the high end of the model for costs, which again, we believe is that compounding effect of covered in social unrest.
And then simply an error pocket came right out with strong momentum strong unit of economics into Q3.
Very helpful. Thanks, guys.
And your next question comes from the line of Chad Kelly from Oppenheimer.
Please go ahead.
Hey, great. Thanks for taking my question.
Just first on the third quarter guidance that predominantly organic and then on the cross point acquisition I mean, just the majority of that revenue show up in the fourth quarter, just I should review the guidance.
Yeah, you got it yet so so third quarter as we look at the crust point acquisition, we anticipate that closing late and Q3.
So we really don't anticipate much contribution within Q3, so what you're seeing there is is a strong organic quarter.
As you look at the full year guidance we've considered.
The cross point acquisition as well as the momentum neck, we're carrying into Q3 as well as the contribution from our own health vertical as well.
Okay.
Raise.
With regard to the full year guidance there.
Okay. Okay. Thank you that's helpful.
And then just a couple of things on.
Are you seeing any benefit from the increase and used car sales that we saw in June July and then.
How are you thinking of carry of the large carriers budgets.
Brand television start.
Might've events.
Start to lean more into branded channels, just how is that dynamic shaping up for the second half of the year.
So typically Jed, we see no connective tissue little to no connective tissue between car shopping and even auto insurance shopping a vast majority of the businesses renewal price shopping.
Triggered by our claims experienced good or bad and so again, we don't see much connective tissue, we grew traffic and cue to.
Really.
At the high end of our growth model for traffic modestly increased cost per quote request. So we're pretty confident that the consumer demand dynamic and the opportunity to grow consumer demand.
Is evident in right in front of us and we will keep executing on it with regards to incremental advertising on T V and turning on some of these channels.
We see it more dimmer switch it'll turn on slowly over time as opposed to a light switch and there are certain conditions under which incremental offline advertising actually can drive up online consumer demand as well. So so again, we sort of considered all this and our model and our guidance and we're really <unk>.
Confident that we set the stage not just for a strong Q3, but a strong back half of the year.
Okay, and then just one more question you talked about some other social unrest maybe cause impacting your traffic acquisition.
Elections coming up so I mean, how are you going to manage that because I guess that would.
Seem to be it could be potentially as volatile as social and restaurants online. So I'll just keep talking about that too.
Sure again it it it is important to empathize with the traffic teams delivered a significant 50% year on year growth.
In addition is you know we keep diversifying the marketplace, adding traffic sources, expanding our major sort of traffic elements are the sort of different marketing campaigns and in fact in Q too we saw an increase.
Cross the board and all of our traffic operations.
Certainly with some highlights in search or industry specific channels and again, we didn't so much see traffic moderation, because we were able to keep executing against our model and I believe that's also related to just our team's increasing an extraordinary ability to execute and demonstrate resilience and the traffic model that we have.
And then finally coming out of that.
That will be able to consider you continue to execute as we did an cue to.
Even with the election in view and that is a function of increasing diversity, great execution and resilient in the business model or traffic model.
Thank you.
And your next question comes from nine of Michael Graham from God.
Please go ahead.
Thank you.
Everyone does the DTC initiative changer regulatory footprint at all.
Do you have to go like street by state and get licensed or anything like that it does it impact your growth trajectory.
And then.
You talked you've talked in the past about sort of tapping more into the agent Commission T M an auto.
Sort of moving beyond advertising budgets.
Do you plan on taking this model to auto as well and can you just touch on like what are some of the other strategies you haven't place to to capitalize on the agent commissions, Tim an auto.
Sure Let me let me take your first question Hi, Michael Good afternoon.
Alright.
In order to share quote information.
Basically both get insurance.
Have been licensed to produce insurance for some time, so so <unk> maintain I believe we maintain licensing.
In all or most of the states that we operate and so we don't expect any kind of sort of.
Followed <unk> or.
Growth any of our growth to be prevented by having to go into the licensing because we've done that in the health sector and the health segment. The acquisition of cross point. So it gives us incremental not just incremental and market experience.
But also some incremental licensing around health and appointments.
With some of the carriers and the specific segments that we're going to serve together with cross point as far as plans for DTC, an auto right now again.
So much opportunity and these two specific segments that we're announcing today and health in life that that's where we're really focused and there's always an opportunity with agency partners to evolve the business on more of a commission share basis. So that's always open to US we will continue to explore the opportunities as we expand the marketplace for both consumer.
And providers and we're going to be focused laser focused on growing out the health in life verticals using these new initiatives.
Okay, that's great and it just slipped and one more stuff maybe you could just comment on the macro an auto I think we saw a little bit of.
Carriers with.
Maybe a little more money to spend.
How much how do you guys factored into your thank you for the balance of the year the possibility that miles driven starts to go up and claims activity starts to go up and does that impact carrier spending.
So maybe we will go backwards through that again, we're confident that by increasing diversity outside of auto.
Bye, even within auto having a diversity between the carrier business.
The agency business and the DTC distribution businesses.
Further increased monetization diversity in that we believe over the long term really strengthens the business as far as the dynamics, we're seeing and again, what we expect through Q3 in the back half of the year is.
We saw even in cue to it and now leading into Q3, increasing monetization. So cute too revenue for clothes places up sequentially from Q1.
Saw that momentum continuing again into Q3 or monetization continues to strengthen and we believe that reflects really two things one is our performance for referrals and.
The performance of a referral for our provider partners, but also are provider partners appetite to grow their business with us right to increase their marketing spend as far as what do we expect the impact to be on the provider provider side of the business. We expect continued strength and demand from the Provider's now on the consumer side.
We did see some modest moderation towards the end of Q too and that also has just was just an error pocket come out and both July was very strong volume and unit economic wise for consumer demand in auto and we expect that to continue into the quarter and it's reflected in our guidance as far as how do we expect all these.
Put can take to play out.
I think the effects in terms of turning back on T V folks driving Moore.
Because of the way the pandemic was managed in the U S are likely to be more of the lights are more of a dimmer switch turning up then a light switch and we expect continued strength, both and growing consumer demand and and provider monetization and provider budget demand in the marketplace in Q3 enter the end of the year, because it's going to be.
B a.
Slow shift.
Back to normal if you will.
Okay sounds good thanks, so much.
And your next question comes from the line of my Yank Tamkin from medium.
Please go ahead I thought that.
Thank you have good evening, Hi, Southern John just a few questions here I wanted to ask you broadly about competition.
Larger peer R. I guess you are about the same size now in terms of your revenue.
Talked about some relative softness versus you. It is what you're showing your business. Despite some of the challenges and the second quarter could you talk about what are some of the differences that have helped you maybe come out relatively unscathed. So far during the pandemic and then also just I would love to hear any thoughts if you could comment on some of the emerging.
So called emerging players in this market I think there's a lot of.
<unk> around platforms like zebra, Gabby et cetera, while they making a dent in the market or is it sort of so large that it's not really having an impact on your opportunity.
Sure My let me take it maybe backwards with your second question burst in good afternoon. So.
The the dominant trend in the business is the secular shift literally billions of dollars from offline spend by the insurance industry to online a lot of the online agencies, which you just mentioned.
And a lot of the insured <unk> some of them with just when public many of them are either partners our customers have hours because again, we can we can help provide them consumers for the specific books, a business or the segments that they're each addressing so we're really well positioned to not just inherit.
Increased marketing spend from the carriers, but also partner with these insured text in online agencies. So they can grow their business profitably and we do they are in essence, especially the names you just mentioned.
Potential or already incremental budget in our marketplace.
As far as our comp I think you're referring to tree I understand.
Revenues exceed there is at this point, but all that having been said I have no commentary on their operations.
For insurance by the way.
Total, but for insurance I have no commentary on their operations I will say, what's different about us as we've taken a tech data driven approach that's really focused on addressing the broadest possible swath of consumers with broad products selection maximize provider inclusion so basically also maximize.
<unk> right to a policy and we think it's a winning formula for an insurance marketplace and and I think our incremental growth over our peers should demonstrate that.
That's a good helpful background also just one question for John John as we think about the second half model how shall be think about the request versus revenue for a quote request tracking and then also do you still expect to see some.
Benefit on the costs.
For code or is that going to start the trend higher as I think you've mentioned that it is still competitive on that side of the market as well.
Sure. So so I think what we think about for Q3 and beyond has really balanced growth alright, we think of that.
As in recent quarters being driven by quote request volume, but we also expect incremental increases are sequential increases in the unit economics, and I think that would be led by revenue per quote request. So I think you would expect increases.
Q3, and revenue for quote request I would almost looked two Q3 of last year as a more meaningful benchmark and say this past quarter in terms of where revenue.
Per quote request could go.
But it's still going to be a story, that's led by volume increases.
It's a balanced story.
With revenue per quote request as well I think as part of that whenever we see revenue per quote request increases that allows us to get a little more aggressive on traffic acquisition and that usually is accompanied by an increase in cost per quote request, but often not quite level of revenue request. So that usually is.
Reflected in increases and variable marketing margin, which is what <unk> reflected in our guidance for two three.
All right clarifies at grid Y'all guys. Thank you so much.
Thanks, Thanks right.
And your next question comes from the line of.
Animals from J P. Morgan.
Please go ahead.
Hi, This is right around for dogs. Thanks for taking my questions I'm wondering what kinds of increases you're seeing in bind rates from carriers with deep integrations versus carriers without keep integrations and how that translates into revenue per Congress.
Sure I mean, what we discussed publicly and published is that we see an increase depending upon the depth of the integration an increase in bind rater conversion rate to a policy sale of anywhere between 10% at the low and and 41% at the high end and we expect that essentially to linearly be reflected in revenue prefer request.
Two ways Ah one is just a bit up because now providers actually can recycle higher performance into higher volume and then we also feel or believe confident you can leverage integration, specifically deep integrations to increase the number of referrals, we make bricker request. So there's two ways that that can drive increasing <unk>.
You are as we execute on that.
Great. Thank you.
And your next question comes from the line of.
Kessler from Raymond James.
Great. Thanks, guys, maybe just some curious of your thoughts on what you're seeing in the market for add fries can I assume it did improve from Q2 are just turn in terms of you're buying traffic and then or from Q1, sorry, and then how much room do you. Thank you for their have improving maybe your efficiency of buying that was obviously a big benefit over the last year.
How should we think about that going forward. Maybe finally, just if you can tell how are consumers changing their policies with coke 119, I assume obviously, they're driving glass are they ratcheting down kind of their insurance levels I assume to offset that insurance companies are more profitable as well. Thank you.
Sure can we just can you clarify our and did you say efficiency of mines.
Yes that was the second question yet.
How much room needs. Thank you for their house to improve your kind of buying efficiencies.
So what we saw and was consistent and Q2 in the non insurance industry specific channel.
Pricing soften and then we saw certainly towards the end throughout the quarter. We saw the specific and we had talked about this before.
Saw industry specific channels again, because of the resilience of the industry. We had expected that we saw industry specific marketing channels to a relatively the costs were stable to up.
There was some some tighter competition and a unit economics, we're strong throughout in terms of overall traffic execution, we stay focused on continuing to drive higher converting traffic and our channels and saw a modest increase in price towards the end of the quarter, which then sort of cleared out as we entered July we had a very strong July clothing.
Volume, but also in terms of cost dynamics on a per converted basis as far as the efficiency of binds in the platform what I can say publicly as year on year, we dramatically increase the radio which we go from on arrival to a quote and we do expect that with deep integrations, we will continue to drive up.
Our binder policy sales right and that will be reflected back to us as monetization. That's what we believe and we have seen monetization not just increased sequentially from Q1 to cute too, but also show strong momentum and strengthening from Q too into Q3, which is sort of giving us confident that dynamic is underway as far.
R. As major policy changes I think what we can say as we do expect people to continue to shop, especially given the economic pressure on them and they have to tighten their belts policies. They are seeing incremental discounts from a lot of the big carriers to both shop and save as well as renew so we expect policy shopping and renewal volumes.
To remain healthy and consumers are going to put some incremental money both from the industry as well as from shopping in their pocket, that's what we believe.
Alright, thank you for it.
And just ask you a reminder, if you would like to ask a question. Please crestar one on your telephone keypad.
Right.
And your next question comes from the line Michael.
Covering from Bank of America. Please go ahead.
Hey, Thanks for taking my question.
I just wanted to ask a quick one about the brand strategy and how does the long term strategy changed now with the DDC with the DDC agency offering.
And also would you consider expanding the DDC agency business two more verticals longer term. Thanks.
Sure, maybe I'll take them a bit out of order good afternoon, Michael So as far as long term strategy. The TTC agency initiatives really extend our marketplace.
Bye deepening provider and consumer engagement and serving underserved consumer segments. So again, we think ultimately it provides better coverage, which will enable us to drive more traffic and all of our partners will benefit. It also gives us an opportunity to broaden our exposure to the commission Tam the 130 billion.
Commission Tan and the shift of insurance online as far as brand strategy. What <unk> said is there a long term model and we expect to continue to execute with our data driven and tech marketplace model and we will extend our growth levers and keep building on our path to 1 billion, but we have an opportunity to introduce what we call a performance brand stratus.
Michael which is gives us the ability to to basically leverage increasingly.
Upper funnel advertisement to build out audiences across a specific vertical and actually further increased conversion rate not just of our traffic, but downstream to policies. So we conducted some of probably really the largest tests that we have in our history on building and market insurance audiences across several different consume.
Segments. It was successful and we're going to keep involving evolving our brand strategy, we do see it as incremental potentially to our long term model and we do expect that any quote unquote brand spend we have to drive positive Roy and our existing marketing channels, which is an important distinction from Los leading brand marketing.
Alright, thanks, so much.
And currently I'm showing no questions at this time in the Q.
So.
I do want to thank everybody for joining us.
Teams shareholders investors analysts.
It was a great quarter, we put in place basis for we're confident as a strong Q3 and back half of 2020 and into next year, where more bullish and excited about our business than ever and we appreciate everybody support and participation in our journey, we look forward to taking your questions offline.
And meeting you at upcoming events. Thank you so much.
Ladies and gentlemen. This concludes today's conference call. You May know disconnect. Thank you for participating.
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Thank you good afternoon and welcome to Everglades.
Second quicker 2020 earnings call will be discussing the results announcing our press release issue today after the market clinic.
<unk> afternoon is that Birnbaum Everquest chief executive.
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Years post closing operational performance.
In 2019 Cross point reported cash based revenue.
Thank you good afternoon, and Latin adequate second.
Liner 2020 earnings call, we'll be discussing results announcing our press release issued today after.
Two years of post closing operational performance.
In 2019 Cross point reported cash based revenue of products.
Thank you good afternoon, and welcome to Everglades second call.
Later 2020 earnings call, we'll be discussing the results announcing our press release issued today after market close.
Hey, Matt Mccall. This afternoon is that fair imbalance.
Okay.
We continue to closely monitor the near term effective kobin 19 on advertising and consumer traffic and acquisition.
As previously noted we've seen early trends consistent with our seasonal pattern.
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