Q4 2020 EverQuote Inc Earnings Call
Earnings call at this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need the press the star one on your telephone.
You require any further assistance. Please press star zero and now I will turn it over to Brendan <unk> Johnson of the Blue shirt group.
Thank you operator.
Good afternoon, and welcome to Evercore fourth quarter and full year 2020 earnings call, we'll be discussing results of announcing our press release issued today after the market close.
With me on the call. This afternoon is Jamie mental ever quits Chief Executive Officer, and John Wagner, Chief Financial officer of ever quote during the call. We will make statements related to our business that may be considered.
Forward looking statements under federal Securities law, including statements concerning our financial guidance for the first quarter and full year 2021, our growth strategy and our plans to execute on our growth strategy key initiatives our investments in the business the growth levers, we expect to drive our business our ability to maintain existing and acquire new customers. Our recent acquisition in interest or ability.
<unk> declare of other companies our goals for integration and other statements regarding our plans and prospects forward looking statements maybe identified with words and phrases such as we expect we believe we intend we anticipate we plan may upcoming and similar words and phrases. These statements reflect our views only as of today and should not be considered our views as.
As of any subsequent date, we specifically disclaim any obligation to update or revise these forward looking statements, except as required by law for the.
The statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations for a discussion of material risks and other important factors that could affect our actual results.
Please refer to those contained under the heading risk factors in our most recent quarterly report on form 10-Q, which is on file with the Securities and Exchange Commission and available on the Investor Relations section of our website, an investor not Evercore dot com and on the SEC's website at SEC Gov G O V.
Finally during the course of today's call, we refer to non-GAAP financial.
Measures, which we believe are helpful to investors a reconciliation of GAAP to non-GAAP measures was included in the press release, we issued after the close of market today, which is available on the Investor relations of clarity of our website at investors Dot Evercore dot com with that I'll turn it over to Jamie.
Thank you Brenda and thank you everyone for joining us today.
As most of you know.
We suffered a tragic loss of November with the sudden passing of Seth Birnbaum, our prior CEO of Dear friend.
While we continue to mourn surpassing his legacy lives on and our work of ever quote where we remain laser focused on building in the industry defining company.
I'm humbled and honored to assume the CEO role and speak with you today.
Despite unprecedented challenges that 2020 brought our team executed remarkably well, we grew revenue rapidly while driving greater efficiency in producing substantially more cash flow to reinvest in our future growth.
In Q4 year over year, we reported 32% revenue growth 46%.
The growth and positive adjusted EBITDA expansion.
For the full year, we delivered 39% year on year revenue growth of 48% year on year, <unk> growth and record adjusted EBITDA of $18 $4 million up from $8 3 million in 2019.
Before.
The empting into more detail on Q4, and 2021 I want to affirm our vision and strategy as shared with you previously.
Our company's vision is to become the largest online source of insurance policies by using data and technology to make insurance simpler more affordable and personalized ultimately reducing cost and risk.
<unk>.
Our strategy is based on building of unique ecosystem of insurance distribution assets that connected by our proprietary data and technology will enable us to emerge as the insurance shopping destination for consumers and the distribution platform of choice for providers across all major lines of insurance.
This ecosystem includes the following.
On the consumer acquisition side of the marketplace, we have two platforms.
Our performance marketing platform for managing traffic to our owned and operated websites.
And our verified partner network, which is a fast growing platform through which third parties can leverage and benefit from.
Our insurance distribution.
We also have two platforms on the provider distribution side of the marketplace.
Our third party marketplace network of carriers and local agents and.
Our first party direct to consumer or DTC agency staffed with ever quote agents, which was initiated in 2020.
And is focused solely on life and health.
Our DTC agency is modest in scale, but growing quickly.
Between traffic and distribution since our proprietary data and technology, which connects consumers to providers via the lowest friction and highest performing path from arrival to policy.
This is <unk>.
Everything from traffic bidding to site experience to consumer provider connections.
From AD to policy sale all of our experiences are growing increasingly personalized to each individual shopper.
We make investments in these assets to drive our four growth levers.
The first attracting.
Power suffers.
The expanding non auto verticals.
Third optimizing and deepening consumer provider engagement and.
And fourth growing insurance provider coverage and budget.
Our strong financial performance in Q4 resulted from investments paying off across all four of.
More shares.
For each lever I'll share Q4 highlights and 2021 focus areas.
Let's begin with our first growth lever attracting more shoppers.
Our consumer acquisition teams executed well in Q4 growing volume into enhanced monetization as reflected in our Vms expand.
Growth of 11% to 33% revenue per quote request, increasing 18% and quote request volume growing 12% year over year.
In December we welcomed a new chief marketing Officer, Craig Lister.
Greg joins us from Norton Lifelock with extensive experience scaling data and tech powered LTE.
<unk> based consumer acquisition programs and in building a brand and performance marketing context.
Looking ahead investments in both of our consumer acquisition platforms will continue growing the volume of insurance shoppers to our marketplace.
In our performance marketing platform, we plan to drive efficiency.
And scale by more tightly aligning consumer intent and lifetime value to our traffic bidding and provider pricing.
We plan to further personalize and aligned end to end user experiences and to expand investment in new channels, including TV.
We are also continuing to invest and our verified partner network.
Work by Rolling out new products that enable verified partners to access our distribution network in different ways.
Over time, we plan to build this offering into an industry standard platform for any company seeking to monetize insurance intent among its audience, making ever quote of ubiquitous distribution platform for the industry.
The second growth lever is expanding non auto verticals.
In Q4, our non auto verticals continued their rapid growth trajectory with revenues, increasing 55% year over year with improving unit economics in.
In our health vertical we were pleased with the team's performance during the open enrollment period or OSP.
We closed on the acquisition of cross point of DTC Agency platform and health in late September we.
We developed the plan with aggressive policy sales targets for OSP and exceeded our initial plan by nearly 15%.
In addition, three health insurance providers turn to ever quotes DTC agency to support there.
<unk> sales efforts illustrating the potential for partners to leverage our tech enabled agency platform through policy sales as a service offerings.
Our move into DTC agency in life and health has substantially increased the size of our immediately addressable market as we know access not only digital advertising.
Budgets, but also the much larger opportunity of commission dollars directly from carriers.
Looking ahead, we remain excited by the potential in non auto verticals and believe that over time, we can grow non auto verticals to 50% of total revenue.
We plan to invest aggressively in health and life.
And marketing teams will leverage our DTC agency platform to drive transformational change and the ever quote shopping experience, including by developing enduring and multi line relationships with consumers, which will enable us to capture greater LTV.
The third growth lever is optimizing and deepening consumer provider.
<unk> engagement.
These initiatives reduced friction from the shopping experience and improved performance for providers.
We are pleased to share that we achieved deep integrations with all but one of our carriers leading to lower friction shopping experiences for our consumers and better buying performance for providers the remaining carriers.
Carrier is also well along in the process of completing their deep integration with Evercore.
In 2021, we will make a number of investments to further remove friction from arrival to policy sales.
For example, we are creating a more unified shopping experience by facilitating more online to offline connections on.
On behalf of local agents.
We are also enabling online quoting and purchasing of policies in our home health and life verticals.
Finally, I'll touch on our fourth growth lever growing provider coverage and budget.
We continued to add third party marketplace providers and expand relationships.
Ships with existing carriers and local agents.
In Q4, we grew the number of marketplace carriers on the platform as we expanded coverage and non auto verticals and we delivered high growth in our third Party agency business.
We also saw digital carriers emerge as a growing customer segment.
Our share DNA.
Leveraging technology and data to make insurance shopping more efficient it makes them a natural fit for leveraging evercore, it's well established consumer targeting and deep integration capabilities.
And for supporting innovation and testing of new more advanced performance enhancing features.
We are often asked if these companies are competitors, we do not.
From that way they are first and foremost partners and customers within our inclusive provider ecosystem.
Looking ahead on the back of strong growth and improving efficiency in our third Party agency business. We are increasing investment in go to market and product development teams to further improve agent performance.
In summary, we delivered a strong Q4 to close out of record year, we drove progress across all four growth levers and made key investments to drive future growth, including and our verified partner network on the consumer acquisition side of the marketplace and in our DTC agency platform on the distribution side.
We entered.
Entered 2021, with the clarity and strategy and focus on execution.
We will continue to invest in new platforms experiences and the capabilities that will enhance the consumer shopping experience improved provider performance and ultimately get more people the coverage they need of less cost and friction.
With.
The ongoing shift online of the two trillion dollar of insurance industry, we anticipate big enduring game changing companies to be born.
I believe ever quote is well positioned to be one of those companies. We have the team the execution muscle and the strategy to become the online destination for insurance and we're just getting started.
Now I will turn the call over to John to provide more details on our financial results.
Thank you Jamie and good afternoon, everyone I will start by discussing our financial results for the fourth quarter and full year 2020, and then provide guidance for the first quarter and full year 2021.
We're pleased to report very strong fourth quarter.
Quarter and full year 2020 results across all of our key financial metrics exceeding our revenue variable marketing margin and adjusted EBITDA guidance provided last quarter.
We delivered fourth quarter revenue of $97 $3 million.
Up 32% year over year in full.
The year 2020 revenue of $346 $9 million.
Up 39% from the previous year.
Fourth quarter revenue in our auto insurance vertical increased to $76 2 million.
Our growth rate of 27% year over year, reflecting the continued healthy auto insurance.
Industry and strong appetite for new customer acquisition from our carrier and agent insurance providers.
Looking at the full year revenue from our auto insurance vertical increased to $283 2 million.
Up 33% over the previous year.
Fourth quarter revenue.
From our other insurance verticals, which includes home and renters life health and commercial insurance increased to $21 1 million.
Our growth rate of 55% year over year and represented a record 22% of total revenue.
For the full year revenue from our other insurance verticals.
<unk> increased 74% year over year to $63 7 million and represented 18% of total revenue.
In Q4 of our other insurance verticals benefited from the health and Medicare open enrollment period.
This included a more than doubling of the historic growth rate.
<unk> of recently acquired Cross point DTC Health Insurance agency.
This acceleration was driven by integrating our performance marketing and verified partner platforms with cross points direct to consumer sales operations.
The early results of our cross point acquisition provide of proof.
Rate of of the acquisition strategy of leveraging our expertise in consumer acquisition to accelerate the growth of an acquired business.
Q4 was representative of what we expect to be a new pattern of sequential Q4 revenue growth relative to Q3, driven by the contribution of open enrollment season.
Proof point within our health insurance vertical.
Turning to our metrics quote requests in the fourth quarter increased 12% year over year to $6 $6 million with contributions to growth coming from both our performance marketing and verified partner platforms Rhem.
The revenue per quote request increased 18%.
Selecting our continued focus on attracting high performing consumers most valued by our providers revs.
Revenue per quote request also benefited from unusually favorable end of year provider budget capacity in our auto insurance vertical and higher monetization associated with our health TTC agency.
Our fleet and the yearend open enrollment period.
These improvements in traffic volumes and monetization led to record variable marketing margin or <unk> for Q4, which exceeded our guidance provided last quarter.
Defined as revenue less advertising expense <unk> as our primary metric.
<unk> from managing the profitable growth of the marketplace.
This quarter of <unk> was $31 9 million, an increase of 46% year over year.
As a percentage of revenue fourth quarter of <unk> expanded to 33% up from 30% in Q4 of last year.
This record VM was a reflection of the aforementioned monetization improvements from strong provider demand in Q4 budget capacity in autos as well as the open enrollment period for health and Medicare policies.
Given that these drivers were specific to Q4, we would not expect to maintain this level.
<unk> of <unk> percentage in Q1, but do believe we will continue to see VM percentage expansion over time, while we target and manage for incremental variable marketing margin dollars in absolute terms.
For the full year <unk> grew 48% year over year to $108 six.
Million.
As a percentage of revenue full year of VM expanded to 31% up from 30% in the previous year.
Turning to profitability fourth quarter GAAP net loss was $3 8 million or a loss of <unk> 13 per share of based on approximately $28 million.
Diluted weighted average shares outstanding fourth quarter's GAAP net loss reflected of one $8 million noncash charge to account for the change in the fair value of the cross point acquisition earn out based on the improved performance and outlook of that business.
Full year GAAP net loss was $11 two.
Diet or a loss of 41 per share.
We delivered record adjusted EBITDA of $5 4 million of five 5% of revenue for the fourth quarter, driven by our better than expected revenue in Vms performance.
Due to our improving performance during the quarter.
We accelerated spending on operational resources to lay the foundation for growth in 2021, while still delivering favorable performance against our guidance range.
For the full year, we delivered adjusted EBITDA of $18 4 million of five 3% of revenue up nearly two percentage.
<unk> from the previous year.
On the balance sheet, we ended the quarter with $42 9 million in cash and cash equivalents.
Afflicting of $3 $2 million use of cash in operating cash flow during the quarter driven by the timing of payables and receivables at year end.
For the full year.
2020, operating cash flow was a positive $10 $7 million.
Turning to our outlook for 2021, we expect revenue growth to continue to exceed our long term model of 20% with continued higher growth from our other insurance verticals.
As Jamie outlined we're making.
The significant investments in our business driven by the massive market opportunity that we see these operational investments support our growth initiatives and DTC agency verified partner network and in technology and data platforms to accelerate our long term growth of our marketplace and continued to build our competitive mode.
Should we expect to be able to make these investments while still growing adjusted EBITDA on a full year basis consistent with the low end of our long term model.
For Q1, our guidance is as follows.
We expect revenue to be between 101 hundred $2 million a year.
The increase of 24% at the midpoint.
We expect variable marketing margin to be between 35, and $31 5 million a year over year increase of 30% at the midpoint.
And we expect adjusted EBITDA to be between 4% and $5 million.
Our year over year improvement of 18.
The percent at the midpoint.
For the full year 2021, our guidance is as follows we.
We expect revenue to be between $430 and 440 million of.
The year over year increase of 25% at the midpoint.
We expect variable marketing margin to be between $135.
Over year $140 million, a year over year increase of 27% at the midpoint and.
And we expect adjusted EBITDA of between 25% and $30 million a year over year increase of 49% at the midpoint.
In summary, fourth quarter financial results capped off a year of.
Increasing momentum and strong performance at Evercore.
Our team has stayed focused on execution is evident in our results and has positioned us well for continued growth in 2021.
And with that Jamie and I look forward to answering your questions.
As a reminder to ask the question Amit from Star.
The one on your telephone to withdraw your question press the Packer.
Please standby, we compile the Q&A roster.
Your first question comes from the line of Michael Graham from Canaccord. Your line. Your line is open.
Thanks, a lot I appreciate the question and congrats on the results I wanted.
Wanted to ask a big picture, one and then one about the guidance on the Big picture could you just comment on the.
The state of the sort of typical auto insurance shopper.
I think several years ago like before your IPO in the U S. There werent there wasn't a lot of switching and I think the average time that of consumer state within the auto carrier.
It was long and I think that's been compressing, but do you have a feel for like how much that's compressed and how much more of it can go because it seems like a real good tailwind for your business and then.
You touched on this a little bit, but I just wanted to ask on the guidance you know the relative growth.
You're expecting between auto versus the other verticals and just.
The other.
Other verticals grew twice as fast in Q4, just any any more quantification or color you care to put around that would be helpful. Thanks.
Thanks, Mike This is Jamie I'll take the first question.
No we don't have any data on switching patterns or.
Our behaviors, but certainly we have seen.
<unk>.
The the increasing shift of shopping into digital channels in general and so we've got the $150 billion of of distributions.
Distribution spend.
The only about 4%.
Out of that moves through digital channels. Meanwhile, we've got about 70% of shoppers, who go online to buy insurance and we think that as as that.
That that the process of buying insurance online becomes more accessible and becomes easier for consumers, which is a big big part.
What we are focused on.
That the the ability for them to re shop.
We will increase and it will reduce a lot of the friction for for continuing to shop over time. So our expectation is that yes shopping behavior will increase but I don't have any specific data points.
Yes.
Michael on the on the guidance question. We expect first we continue to see a very healthy auto insurance market.
And so we expect that auto insurance vertical will continue to grow.
We continue to say that the other verticals.
First of all at a pace.
Last year than auto insurers simply due to the the relative.
Tenure of those verticals for us.
I think thats, probably emerging as a bit of a growing.
Both pattern as we move through the year, So I would expect that that others.
The gross the.
Other vertical will probably have a more modest growth rate in Q1.
But build as we move towards the towards the end of the year.
And certainly we're building off of <unk>.
The enrollment now within the health insurance vertical we had good results this year and we're starting to recognize that that.
Others, the part of our seasonal pattern as we go into Q4, we now expect that.
Q4 will be a a.
Sequentially up quarter against Q3, and Thats due to the influence of health.
So we think other continues to grow fast in auto, but we also think that auto is going to have a strong year in.
As can the only one we don't see any major difference any any major changes on the auto.
<unk> landscape, we think it continues to be healthy and growing into 2021.
Okay. Thank you John and thank you, Jamie and Thats helpful.
Your next question comes from the line.
Line of Ron Josey from JMP Securities. Your line is open.
Great. Thanks for taking the question and glad to see things going so well internally.
Wanted to ask about carrier and integration I think Jamie you mentioned, all but one carriers of integrated here and as we look forward with RP Q revenue per quote request art, the QR growing call it mid to high teens.
<unk> 2002, and the back half of 2020 can you just talk about how carriers are viewing ever from an ROI perspective, how thats increase now that you call it or almost a year more than a year into having some of your major carriers integrated and then I didn't hear much about it on the call I'm sure it'll come up but if you could talk about just the bundling opportunity right I think in <unk>.
<unk>, we talked about auto it's been home and health and life I think launched this quarter and any progress on the bundling opportunity would be helpful. Thanks again, great quarter.
Thank you.
So.
So Ron.
On the first question of integrations.
An audacious goal for us at the beginning of last year.
And I'm incredibly proud of the team's efforts and the results that we delivered so we have now completed all but one of our deep carrier integrations, we expect to have that last one completed shortly.
The impact of that is felt as you noted with the provider in the form of improved performance, but it's also about.
By the consumer in the form of lower friction in their shopping experience.
As we look ahead in terms of what's next and how we can continue to integrate more deeply and improved performance for the providers I would say there is.
There's a bit of a bifurcation of the way that I think about it.
<unk> got that subset of shop.
Or is that wants to do there.
The insurance shopping in general online.
And then you've got another subset of shoppers that wants to get on the phone and talk to someone because at the end of the day. This is a relatively complex financial instrument for most people.
And so we have initiatives lined up against both.
The online and offline buying paths of.
Online, we're planning to move further downstream and so youll see us push too to get consumers closer to the quote or even to be able to purchase online for certain products and I would expect a lot of the online quoting and and purchasing two.
A care first and non auto verticals.
And then down the offline Pat what we focusing some investment on began last year will continue this year is taking over that connection specifically on behalf of of the local agent and in doing so I think we can apply some most of the best practices as well.
All of some technology to improve performance in connection rate for the local provider, but also create a much more unified ever quote experience for the consumer and so I think both of those things as they materialize in scale over the course of the year ought to improve provider performance and provide some tailwind.
For revenue per quote request.
Now you asked the question about bundling last year, we did rollout.
Bundled products.
About.
What drives our PQ our revenue per quote request up its both the.
The number of connections per consumer and its the.
Value of each of those connections and that value can be driven by the downstream performance of the referrals right. So that was integrations improves the outperformance. It can also be driven by us sending higher LTV shoppers out to providers and a bundled shopper would be an example of a higher LTV.
The product or referral type. So we've made some progress in home and auto.
Continuing to rollout more bundled products in P&C and.
We'll do the same in health and life.
And the last thing I'll say on that is specifically in health and life, where we have our DTC agency.
The platform I think we really have an opportunity to cross train our agents across the health and life and have some opportunities too.
Cross sell those customers both as they come in and over the course of their of their life as a customer with us.
Got it thank you.
Yeah.
Your next question comes from the line of Jed Kelly from Oppenheimer. Your line is open.
Great for taking.
My question.
Just a couple one.
You mentioned, TV, which I think is pretty interesting.
What's the what's the strategy around leaning more into the T V.
Have you gotten the customer experience to where you want it and then you mentioned earlier that cross.
Cross point grew double its revenue in <unk> I mean can you just dive into that more and does this make you want to acquire more agencies that are a little more tech enabled.
Sure. Thanks, Jeff.
So with respect to TV. If you think about our first growth lever is attracting more shoppers and we have a number of ways that we do that one of which is by expanding into new channels.
So we've done some testing in television.
You are right to sort of think about TV relative.
Hip to the experience that we're sending the consumer into and I would say we have pockets of television is the channel into specific experiences, which are and which we are finding performance. So specifically that's in our DTC agency distribution.
And in life, specifically and so that is a.
Proof point for us and something that we're that we're driving through right now where.
Excited by the addition of Craigslist or as I mentioned, who has an extensive performance marketing background not only in the channels in which sort of Evercore grew up but also the channels, which we plan to expand to in the future.
Relative, including TV, OTT radio and others and so I think Craig will certainly take up the banner and help us expand profitably and at scale in those channels.
With respect to cross point.
We are pleased with the results in Q4 and in the opening.
Open enrollment period, we closed on the acquisition in late September and so it was pretty tight to integrate and get ready for open enrollment and the team just did a tremendous job in that effort. We set an aggressive plan for ourselves we exceeded that plan.
And the.
The culture.
<unk> profit has been fantastic and so as I reflect on Q4, OAP and cross point I'd takeaway two things the first is.
Increased confidence in health as a growth platform moving forward and I think having not only the operational platform of cross point.
The culture, the knowledge transfer that occurred.
Their experience into our traffic teams our product teams I think that probably accelerated our progress in house by a good 18 to 24 months. So that was that was the key takeaway the second though which may have been more core to your question is that its success.
For us has validated M&A as a tool in the toolkit. So as we look ahead.
We will count M&A as an offer as a as a an.
An opportunity to accelerate execution of our strategy.
Yeah.
Thank you.
Your next question comes from the line of Ravi Shankar from William Blair. Your line is open.
Good evening, Thanks for taking the question first one per day.
I know you've been enrollment for a couple of months out of the CEO, which is you've had a chance to sort of reevaluate the strategy and I know you were instrumental in previously and setting it.
How.
The sort of thinking about the existing strategy.
In terms of the areas of refocus do you want of shifting anything around maybe on the marketing side any major changes there tweaks.
The the first question that I have the follow up.
Okay.
Thanks Ralph.
So the short answer is no Ralph.
Yes.
Somewhat fortuitous.
We had just come through a long term planning cycle and so we solidified our strategy towards the end of last year. This was the strategy that Seth and I co developed with the team.
Author of the document.
We ends out.
Through 2023, and so we made of many of our sort of big strategic decisions as part of that process.
And as a result, this year was always meant to be of a year of very much sort of focus and execution and that remains the case I have high confidence in our strategy.
And then extend the right strategy to build of long term competitive advantage in this market and at this point, we're heads down on execution.
Great. Thanks, Jamie.
Follow up on the BMS guide it looks like the the growth rate in dollars will be.
The quite a bit slower than what we've seen historically I'm just curious is that just sort.
I believe it I guess law of larger numbers coming into play maybe exceptional outperformance of 2020, I know you talked about some investments in health and life and then TV investments I'm just curious if theres any changes.
Anticipate up to the marketing strategy next year. Thanks.
Yes sure.
I'll take that Ralph.
With.
<unk> to kind of the.
And as we look back a couple of things the recognized in Q4, we had an exceptional quarter in Q4, and we had favorable dynamics from a couple of different areas. One is from open enrollment within our health vertical and the second is with year end.
And provider budgets. So open enrollment obviously as we go into Q1.
We will see open enrollment is ended and then also we saw a little bit of a bump this year from.
From provider budgets as we got to the end of the year, sometimes that can actually turn unfavorably against you.
This year, we saw provider budgets actually run favorably for us.
I think we've reflected within the Vms guide a normalization of both of those factors, we're exiting out of open enrollment and also we're seeing.
The providers budgets.
<unk> laws and so I think what you've seen reflected there is still.
Solid growth over Q1 of of.
2020, so were expecting the <unk> as a percentage of revenue up about a point in the half.
And then on DMM dollars, we're still reflect.
It's normally about a 30% growth rate over Q1 of 2020.
So of solid guide, but but certainly there are some aspects of Q4 that was exceptional and that won't repeat in Q1.
That makes sense. Thanks, John Thanks, Jim.
Thanks, Ron.
Your next question comes from the line of my.
Net tandon from Needham Your line is open.
Thank you of good evening, Jimmy first just wanted to get a sense from you in terms of the wallet share that you have today of your existing clients.
Just talk about what share in your mind do you currently have what is sort of the growth opportunity within the core.
Call it the.
The reflect auto customer base since the audit of the one that's a little bit more mature than the other verticals for you I just wanted to get a sense of again the penetration level and then I have a follow up after that.
Sure. Thanks Mac.
So I'll take it sort of it.
Two levels. There is the there is the carriers and then there.
The local agents.
And.
I am guessing because I don't have complete data on what share of wallet, we have for all of the local agents, but but the sort of subjective view that I have is the.
It is.
It would not be surprising for us to have about 50.
The share of wallet of.
Of expense among of the agent base.
And one of our one of our growth levers as to expand provider coverage and budget and so we have a number of programs in place specifically with our local agent base that is meant to through the use of higher service level.
The percent of some tools expand our share of wallet with them and we've been very successful growing. This program is called our accelerated growth program over the last couple of years. So whatever the number is I do believe it has been growing over the last couple of years.
Within the the carriers.
The harder question to answer because many of our large carriers.
And operate in a sort of budget unconstrained environment, meaning that as long as we are hitting their target kpis.
There's no fixed allocated budget to us I presume such is the case for other providers of traffic to them, so that one's a little bit harder to answer.
Got it that's helpful and then maybe.
For John John just wanted to get a sense in terms of the growth in 'twenty. One so how should we think about the growth between the quote request volume and the revenue per quarter is that going to be a little bit more balanced would you say relative to what you saw in 2020, because there were obviously some factors, including the tougher comp that you had on the volume.
<unk>.
Sense of how that should maybe track over the course of the year as we build our models and also the tightening but that would be any change in seasonal spending patterns outside of the healthcare comment that you mentioned.
How has that been affected during the pandemic.
Sure. Thanks Mani.
So with regard to the kind of of the mix.
So I'll start in Q Q1.
Coming into Q1, we expect revenue per quote request to fuel the better portion of our revenue growth in Q1. So.
So we expect revenue per quote request to continue to be strong probably not at Q4 levels, but certainly at levels above.
The full year average of revenue per quote request so monetization.
It continues to fuel growth in Q1, but we also see contribution from quote requests in Q1, even though we are up against pretty tough comps in Q1, we had 80% quote request growth.
Mixed Q1 of last year.
So it is a mixed story in Q1 and as we move through the year quote requests and volume of the consumer consumers plays a larger role as we grow through the year.
In terms of the seasonal pattern.
We have seen a larger.
<unk> kind of a sequential increase in quarters than we did historically and I think that certainly has been reinforced but with the Q4 of this year P&C is seasonally a down quarter in Q4.
But we've seen Q Q4 actually.
As an up quarter this year.
Mostly due to the contribution of the health vertical so we think that as we move through the year, we'll see a little more sequential growth as well as a strong Q4 really buoyed by the.
<unk> of the health insurance vertical.
Great, Thanks, Jamie and John Congrats on the quarter.
Sure.
Your next question comes from the line of Doug Anmuth from Jpmorgan. Your line is open.
But the theory on for the thanks for taking the question Firstly I'm sorry for your law firm.
Okay.
Thanks for taking my first question is on the.
You talked about improving.
Thanks, <unk> and non ore out of verticals. So just wanted to.
Sir your views on the.
Could you provide more color on how youre non auto unit economic compared to the auto vertical and then how you think about the long term monetization potential between those two vertical in the secondly.
Given all the changes that are happening in the online traffic.
And that our customer channels focus more on privacy.
Anticipating on the changes to your ability to the target and acquire customers.
Sure why don't I take the first part of that day.
In terms of improving unit economics, certainly we see the influence of the direct to consumer agency business in Q4.
The <unk> acquisition improved revenue per quote request.
So that business.
In general has better monetization as we as we go direct to consumers and we monetize on the agency Commission. So that's part of the reason why we saw.
Kind of record levels of nearly record levels.
<unk> revenue per quote request and expansion of <unk> in Q4, and Thats. The only that generally we expect to continue in Q4.
Thanks, John.
And with respect to privacy of we're not we don't see any any imminent.
Risks of our concerns on that front, we have a number.
Of different.
Levers to continue to grow our traffic volume and this year, we're focused on things like more personalized site experience that we expect to improve conversion rate I mentioned already of the expansion into new channels.
The verified partner network has been a good growth growth.
Levels number for us over the last year or two and we're investing incrementally in product to make our third party distribution network more available to more types of of publishers and media partners in the future and so we see promising prospects for growth and expect that the build over the course of the year. So we're not.
Driver of concerned about that right now.
Alright.
Your next question comes from the line of Ben Rose from Battle Road Research. Your line is open.
Yes, good good evening.
Jamie and John.
All of question.
<unk>.
Jamie maybe you could speak to the strategy kind.
The longer term of.
Monetization of.
Commissions.
Yes.
Whether that will be.
The growing portion of the revenue base in the future.
Yes, absolutely.
Particularly so.
We.
We launched our direct to consumer agency efforts in 2020, and we now have the platform live in life insurance and in health insurance from those two verticals.
As we have moved into the direct.
From our agency space.
Almost overnight unlocked a larger immediately addressable tam in the form of the Commission's directly from carriers. In addition to the marketing budgets, which we access through the third party marketplace.
And so in those verticals, specifically I would expect commission.
To continue to comprise the majority of our of our revenue.
And of relatively short order.
Now as we look across to two P&C the.
The value of the DTA platform is less immediately obvious because we have such.
Revenue.
The distribution and the third party marketplace in P&C now that's not to say there arent segments of our pockets of consumers, where we might benefit from adding that layer of coverage through a direct to consumer agency, but I think that decision has not been made and that would dictate the sort of long term answer to your question.
<unk> percent of our overall revenue.
Okay. That's very helpful. Thank you and.
My other question.
As with respect to the sales and marketing budget overall, if you were to look at that.
Exclusive of advertising, so stripping out the DMM portion.
<unk>.
Could you talk about.
What some of the larger.
The programs are within that.
Line item, if you will and whether there may be some opportunities for.
Leverage over the coming year or coming 18 months.
So so thanks, Pat I guess I'll start off by saying.
The DTC agency initiatives certainly plays a larger role in our sales and marketing expense.
So youll see.
Some investment coming through on that line item as we add the.
<unk> of <unk> talked to consumers.
Directly.
And sell policies directly.
Youll see that that line item already starting to scale.
Relative to sales and marketing.
Yes.
I think you'd expect to see leverage not not only there but.
Abilities, but across the third party marketing sales and marketing teams as well.
So we're innovating on products, specifically, we're rolling out an enhanced carrier.
Campaign management platform, which I think will remove some of the operational load on our enterprise.
Account management teams and likewise really scaling up <unk> marketing and some of an enhanced product initiatives within our agency network that should also reduce the operation of load from the third party sales and marketing agent sales and marketing teams.
Okay. Thank you that's.
<unk>.
Your next question comes from the line of Nat Schindler from Bank of America. Your line is open.
Yes, hi, guys I'm, just trying to figure out it looks like the <unk> acquisition of fully closed in September but there was the change in the fair value.
The contingent consideration that.
It's very helpful equals zero acquisition related cost of it looks like a change in earn out I'm guessing.
Is that tell me the cross point did significantly better in Q4 than you expected.
If I'm right.
Also can you talk a little bit about the variable marketing margin of the various verticals.
The exact terms, but generalities autos versus health home and others.
If those are long term trends or if those occur.
So I'll take the first part of that net.
So yes, you've got it right the.
The adjustment that you see coming through is the result of.
Maybe.
The marketing more or less marking to market the value of the earn out for cross point, so that that the.
The initial evaluation of that is based on.
The cross point as a standalone entity the.
The Mark to market really represents the addition of <unk>.
Kind of what we have seen in terms of our expertise around traffic and the early results of cross point. So that is effectively of mark to market adjustment based on the performance of cross point within the quarter and our forecast for cross point and our health.
Our health.
The us vertical as we go forward so that that generally is a.
Is it change that Youll see in Q4, and then we'll continue the mark to market that that component of the milestone.
Simply because it's paid out of out of.
On the stock based basis, so as are.
The insurer in our stock fluctuates, we could see additional charges, but for the most part of that that adjustment is related to.
The performance of cross point, and our improved performance of the <unk>.
Outlook for that for that business.
And with respect to the <unk> profile of the various verticals again, we haven't.
Or is the five vertical but what I, what I can share is.
P&C is sort of.
Of moving together now so auto and home has matured a bit as a vertical and is exhibiting higher <unk>.
Relative to some of the the other two more nascent verticals.
Free life.
Health and commercial lines and so those three were comfortable running operating at a lower of Vms operating point, while we build scale.
Our mass data to inform the efficiency of our traffic acquisition and we would expect them to come up over time.
Break it out just to follow up on the cross point point can you just roughly how much of the quarter's growth was attributed to.
That vertical or even specifically of that acquisition.
So so I guess on cross point, where certainly we're very pleased with the results.
In Q4, but.
Really building off of a relatively small revenue platform in terms of what we acquired with cross point. So as a reminder, cross point in all of 2019 was about $4 million worth of revenue.
The majority of the revenue that we saw in Q4.
<unk> was the result of really growth off of that platform.
So really what we're excited about with cross point is not what we acquired in terms of the revenue base.
We think we can add in terms of adding our distribution to that.
And Thats, what we saw we.
We talked of a little bit.
Of the fact that we more than doubled nearly triple the growth of that initiative.
And so some of the vast majority of that growth was really organic.
Makes sense. Thank you.
Thanks, Matt.
There are no further questions at this time I will turn the call back over.
The violence bundle for closing remarks.
Thank you.
So I appreciate everyone joining today.
We're in the early innings here of a shift of $150 billion of insurance distribution spend online and it's in seismic shifts like this that the big enduring companies are born.
To take ever quote is a leading marketplace in the industry and we continue our track record of execution with strong Q4 performance and another record year. Our strategy is clear and we are making targeted investments and growth platforms across traffic experience and distribution that will allow us to continue building our competitive moat for the long.
I am confident that we have the team the strategy of the execution muscle to really emerge as the defining company for the for insurance distribution and the digital age. Thank you all for your time today.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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