Q2 2021 EverQuote Inc Earnings Call
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Good day, and thank you very standing by welcome to the Agriculture second quarter 2 cell phones from any 1 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. So I asked the question during the session you will need the press the star 1 on your telephone keypad. Please be advised that today's conference is being recorded.
And if you require any further assistance just press the sorry zero I will now turn the call over to your first speaker Ben the Johnson of the Blue shirt group you may begin your conference.
Thank you good afternoon, and welcome to Evercore second quarter 2021 earnings call, we'll be discussing the results announced on our press release issued today after the market close with me on the call. This afternoon is Jamie Mendell, Everquest, Chief Executive Officer, and John Wagner, Chief Financial Officer, I've ever close.
During the call you will make statements related to our business that may be considered forward looking statements under federal securities laws, including statements concerning.
Our financial guidance for the third quarter and full year 2021 our growth strategy and our plans to execute on our growth strategy key initiatives, including our direct to consumer agency on investments as of the business to cross that bridge, we expect to drive our business.
To maintain existing and acquire new customers, our recent and planned acquisitions in interest or ability to acquire other companies our goals for integrations 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 of any subsequent date, we specifically disclaim any obligation to update or revise these forward looking statements.
Except as required by law for looking 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 the actual results. Please refer to those contained under the heading risk factors in our most recent quarterly report on form 10.
The Q and our annual report on form 10-K, which is on file with the Securities and Exchange Commission and available on the Investor Relations section of our website at Investor day ever quote Dot com and on the SEC's website at SEC Gov.
Finally during the course of today's call may 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, we issued after the market close day, which is available on the Investor Relations section of our website at investors day ever quotes dot com with that I'll turn it over to Jamie.
Thank you Bradley and thank you everyone for joining us today.
We delivered a strong second quarter with growth across all of our key metrics.
Year over year revenue increased 34% and variable marketing margin or V. M. M grew 40%.
We generated increased adjusted EBITDA and our strongest adjusted EBITDA margin since going public while continuing to make significant strategic investments in our growth levers.
With over 30% revenue growth in the first half of the year. We continued building towards our vision of becoming the largest online source of insurance policies by using data and technology to make insurance simpler more affordable and personalized.
At the beginning of the year I outlined 4 growth levers and our strategy, including.
Number 1 attracting more shoppers number 2.
Rowing insurance provider coverage and budget.
Number 3 on.
Optimizing of deepening consumer provider engagement.
And number 4 expanding non auto verticals.
I'd like to provide an update on progress against our strategy in the context of these growth levers.
Before discussing Q2 I'll share the strategic rationale for our recently announced the acquisition of policy of fuel.
Policy fuel operates in property and casualty or P&C insurance verticals, providing policy sales as the service offerings to enable carriers to complement their own call center operations with access to a dedicated advisor teams that focus exclusively on selling that providers offering to its target customers.
[noise] policy fuel earns revenue based on policies sold and broadens ever quotes ability to access the 135 billion dollar of commission component of our total addressable market.
We are excited to welcome policy of fuels founders and team to ever quote and expect the transaction to close by the end of Q3.
To put this in the context of our strategy last year, we kicked off a series of strategic initiatives that began to evolve our business to capture a larger portion of the economic value chain of each insurance transaction, while at the same time, bringing us closer to our customers.
We launched our DTC Agency initiative in the health vertical with our acquisition of cross point and in the life vertical with the homegrown agency.
With the planned acquisition of policy fuel in P&C, we will complete the foundation for a multi vertical tech and data enabled DTC agency platform.
We believe this platform will enable ever quote to deliver better buying experiences for consumers improve.
The improved performance for providers and higher monetization and margin for our business over time, the us advancing progress against all of our growth levers simultaneously.
In addition to policy of fuel, we continued making operational investments in our existing DPA platform in Q2, as we build the team process and technology to support of steep ramp and health and Medicare agent capacity in advance of this year's open enrollment period or OAP and Q4.
As part of this effort, we recently hired Garrick kitsch, formerly VP of Medicare sales at Ehealth to lead our health and life DTC a sales operations.
Garrett the track record of rapidly scaling teams of health insurance agents to drive significant growth is already proved invaluable as we prepare for this year's OAP and which we expect to have approximately 3 ex the number of agents compared to last year.
We decided to step up investments in <unk> readiness compared to our original operating plan, which we believe will help us more rapidly build the long term profitable growth engine and our health DTC agency.
In addition, based on feedback from carrier partners, we continue enabling more granular and targeted bidding for providers as we shift focus away from volume of referrals, and we deliver and towards volume of consumer and provider outcomes.
Furthermore, we continue investing in machine learning applications to improve the alignment and matching of the right consumer to the right provider with whom they are most likely to bind.
These actions have led to improvement in monetization as carrier pricing now aligns more closely to bind performance and along with investments in DTC, a mark progress in our evolution from being paid per referral to per policy.
In the second half of this year, our growth will be more balance between continued monetization of expansion and consumer volume growth.
However, as we continue to focus on capturing more of the economic value on each transaction metrics based on the volume of quote requests or referrals will increasingly be less relevant to analyzing and understanding the performance of our business.
As we build ever quote we are guided by serving customers on both sides of our marketplace consumers seeking a more streamline shopping experience with personalized coverage options.
And insurance providers seeking more profitable policies.
Q2 marked another quarter of consistent forward progress in service of these customer needs.
We are pleased with our Q2 performance and we are excited by important steps, we're taking to accelerate that progress through critical strategic initiatives, most notably our DTC agency platform.
As we advance through this year of investment in additional foundations for growth I firmly believe that we have the right strategy and team to emerge as an industry defining company as the 2 trillion dollar of insurance industry moves into the digital age.
You all again for your time and now I'll turn the call over to John to provide more details on our financial results.
Thank you Jamie and good afternoon, everyone I'll start by discussing our financial results for the second quarter provide a brief overview of our recent agreement to acquire policy fuel and conclude with guidance for the third quarter and our updated guidance for the full year.
We're very pleased to report strong second quarter 2021 results with performance above our guidance range for revenue <unk> and adjusted EBITDA.
Our revenue for the quarter was $105.1 million, an increase of 34% year over year and building on last year's strong growth in the comparable period.
Revenue in our auto insurance vertical increased to $86.4 million.
Our growth rate of 34% year over year, which reflected a healthy demand in our core vertical from both carriers and agents through the period of Covid reopening in Q2.
Revenue from our other insurance verticals, which include home renters life health and commercial insurance increased $18.7 million.
Growth rate of 36% year over year, and representing 18% of revenue.
We continue to attract high intent more valuable consumers.
Which fueled a 34% increase in revenue per quote request year over year.
Quote requests remained flat at $6.8 million.
Looking ahead to Q3, we anticipate some moderation in carrier demand for acquisition of new insurance consumers, but we believe we will maintain much of the improvement we've made in monetization.
We expect revenue per quote request to moderate slightly in Q3 from Q2's record levels, while continuing to grow modestly on a year over year basis.
We also expect the volume of consumers coming to our marketplace to emerge as a significant driver of revenue with an expected mid teens year over year growth rate in quote request in Q3.
This is consistent with our expectations expressed in prior remarks that we believe consumer volume and monetization will both contribute to our year over year growth in the second half of 'twenty 1.
We delivered second quarter variable marketing margin or <unk>, which we define as revenue less advertising expense of $32.8 million, an increase of 40% year over year, which exceeded the high end of our guidance range provided last quarter.
As a percentage of revenue second quarter of <unk> expanded to 31% up from 30% in Q2 of last year.
Notably consumer acquisition costs captured in cost per quote request were significantly higher this quarter, reflecting a more competitive online advertising landscape, but were outpaced by growth in revenue per quote request, resulting in our margin improvement this quarter.
As we look forward, we expect consumer acquisition costs to be stable at current levels, which are elevated from comparable Q through 2020 levels. We expect that slight reductions of monetization coupled with current elevated consumer acquisition costs will put pressure on <unk> growth and <unk>.
<unk> as a percentage of revenue in Q3.
Looking further ahead into Q4, we expect our Vms operating point to improve and to be largely consistent with Q4 of 2020.
Given our expected strong growth within our health direct to consumer agency during the annual health open enrollment period, and the higher <unk> margin profile associated with that revenue stream.
Turning to profitability.
GAAP net loss improved to $1.9 million or a loss of <unk> <unk> per share based on $28.9 million weighted average shares outstanding.
This included $6.1 million on stock based compensation for the balance of the year, we expect stock based compensation to be between 18 and $19 million, including the impact of new grants in Q4 related to our announced acquisition.
We delivered.
The adjusted EBITDA of $6.6 million or 6.3% of revenue for the second quarter, which was above the high end of our guidance range provided last quarter.
This fueled record operating cash flow of $7.7 million and resulted in $54.5 million of cash and cash equivalents on the balance sheet at the end of the quarter.
As we look to the second half of the year, we've refined our operating plan to better support our health TTC agency in the second annual enrollment period since our acquisition of Cross point last September.
As Jamie mentioned, we have accelerated our recruitment of new Evercore health agents increase the training and development time of our agents and strengthened our agent incentives.
We are ensuring that our agents are fully on board and ready to advise consumers on policy choices when open enrollment begins in Q4.
The addition of DTC a resources earlier than planned increases our confidence and our aggressive growth plans in Q4 for our health vertical but it also increases our forecasted operating expenses in the second half of the year and consequently reduces our anticipated adjusted EBITDA.
Given that our plans are to Triple Health TTC agency revenue in Q4 over the same period in 2020.
We believe the additional expense is justified and establishing a strong foundation for this rapidly growing new distribution channel.
As Jamie mentioned on July 20th after the quarter ended we were pleased to announce the expected acquisition of policy fuel.
<unk> agreed to pay approximately $16 million in cash at closing with additional potential consideration to be paid in ever quote stock contingent on the company achieving growth targets for policy sales as the service revenue.
We expect the acquisition to close by the end of Q3 and plan to fund the acquisition using cash from our balance sheet.
Looking ahead, we are excited about policy fueled strong business model and anticipated future contributions.
The policy fuel reported trailing 12 months revenue through March 31, 2021 of approximately $10 million and is modestly profitable we have reflected the impact of policy fuel in our guidance, including approximately $3 million of revenue in 2021.
Turning to our outlook.
As a result of our strong execution in Q2, and our confidence in the upcoming open enrollment period, we maintain our conviction and our full year revenue in the <unk> guidance. However, we are lowering our guidance for full year adjusted EBITDA to reflect incremental investment in our health DTC agency.
<unk> and temporarily muted <unk> growth in Q3.
For Q3, we expect revenue to be between 109, and 111 million of year over year increase of 22% at the midpoint.
We expect variable marketing margin to be between 33 and $34 million a year over year increase of 14% at the midpoint and.
And we expect adjusted EBITDA to be between 4 and a half and $5.5 million a year over year decrease of 4% at the midpoint.
For the full year of 2021, we expect revenue to be between 440 and $446 million a year over year increase of 28% at the midpoint and an increase from our prior guidance of between 434 and $442 million.
We expect variable marketing margin to be between 138 and $141 million a year over year increase of 28% at the midpoint and an increase from our prior guidance of between 136 and $140 million.
And we expect adjusted EBITDA of between 23 of $26 million.
The year over year increase of 33% at the midpoint and a decrease from our prior guidance of between 26% of $30 million.
In summary, we delivered strong second quarter financial results and executed well against our plan for the first half of 2021.
We remain confident in our ability to execute against the market opportunity as insurance shifts online.
Jamie and I look forward to answering your questions.
And at this time, if you would like to ask any questions. Just press star 1 on your telephone keypad. The withdraw your question just press the pound key.
We'll pause for just a moment to compile the Q&A roster.
Yes.
And your first question will come from the line of Ron Josey from JMP Securities. Your line is open great.
Great. Thanks for taking the question Jamie I wanted to follow up on your comments around the volume of quote requests being less relevant here and then and then Jon we heard the guidance for mid teens growth in <unk>, but specifically on being less relevant can you talk about how ever quoted succeeded and just focusing on high end 10 customers I think was the.
The commentary, which may lead to just call. It consistent QR growth going forward and then following up from that earlier in the year, we talked quite a bit about the verified partner network and so Jamie can you just talk a little bit more how that's coming along and how thats impacting QR growth. Thank you.
Sure. Thanks.
Thanks, Ron.
No.
The the way that were.
Evolving our thinking on on <unk>.
Traffic in quote request in general is really.
Optimizing increasingly for the outcome for the thing that we get paid for which is the placement of the policy with carriers.
And to the extent that we.
We can drive higher quality and more favorable outcomes with less arrivals and in fewer quote request those are trade offs that we're willing to make and so examples of actions that we've taken that might result in this war.
The increasing the granularity with which carriers can bid on traffic to target for certain current new characteristics and in debt levels that they werent able to target for previously the.
The net result of this has been for them to increase their bids of our pricing on certain subsets of our traffic and decreased pricing on other subsets and as that flows through our bidding into the traffic landscape. The net result is meaningfully higher monetization.
But on on on lower growth in quote request volume and those are trades, we're comfortable making because it improves the IRR the ROI for the carriers that improves our performance.
And improves and it drives our overall growth and wins as more of a more budget as a result.
So that's 1 example, another example is with increasing attention on on an.
Net investment in the <unk>.
Data and the technology of that matches each individual consumer to the right set of of options for them and through the the tightening of that routing again, we're able to drive up performance and downstream bind rate.
Which improves the provider performance and so that's our ability to improve monetization on.
On a on a given quote request level.
But the general of the general thrust is towards focusing on the policy sale of the outcome, which is what the customer cares about on both sides of the marketplace and as a result, focusing less on on the raw volume of quote request or referrals.
To the second part of your question Ron.
The verified partner network.
Continues to grow.
We launched some new products into that program and the first part of the year and so the first part of the year was was focused very much on on building and launching of product.
Those are the end market now we've had some good reception from both sides of the marketplace and as we begin to now operationalized and scale, we expect that to account for some of the increased growth rate in volume in the second half of the year.
Yes.
Got it thank you.
And your next question will come from the line of Cory Carpenter from Jpmorgan. Your line is open.
Great.
Thanks for the question on it too I wanted to circle back to a comment you made I believe on anticipating some moderation in carrier demand for customer acquisition spend just I think that was more of a general industry comment, hoping you could talk a bit more about some of the drivers on what youre seeing there and then.
Secondly, last quarter, you talked a bit about unifying the health and life D. The CA.
Of under 1 leadership team just curious any any lessons learned there.
How youre thinking about integrating policy fuel with those 2 existing businesses. Thanks.
Sure Cory I'll kick that off with regard to what we're seeing around.
Around pricing and monetization.
We're certainly coming off of sort of a very very strong quarter for monetization in Q2, we saw record levels of revenue per quote request.
Strong demand coming from carriers and agents, even as we went through reopening.
That said, we're coming off of a year of increased increases in monetization, we do anticipate some moderation in monetization and in revenue per quote request.
And we think that as we return to kind of of more of a more of a normal.
Scenario in terms of autos are on those vertical.
We've certainly been the beneficiary of some surplus profit in the past year.
Through Covid, we expect it will start to see some normalization of some moderation and monetization.
But certainly we're going to maintain much of the monetization that we've gained over the past year. So what we've really reflected.
Some slight moderation and.
And against a still a fairly competitive traffic.
Backdrop or landscape within the traffic side of the business.
And I can address your second question. So yes, we made the decision to unify the health and life direct to consumer agency platforms and operations earlier this year.
As we integrate policy fuel I think the view right now is that there are certain sort of platform elements that will accrue efficiency to any agency operation within ever quote that will migrate tier 2 shared infrastructure. So the debate include things like data systems.
Acknowledged.
The recruiting and other sort of elements of the operation and so we're there we don't see a benefit of having the vertical or market specific expertise I think you'll see us move in a direction of building a more scalable platform that can be leveraged across any type of insurance product.
But where the where we do perceive benefit and specialization.
Whether that's in carrier relations or in the sort of Asia and sales operations themselves will continue to maintain separate management for for those parts of the business and so the the going in view of.
Through the integration certainly.
Policy of fuel will continue to operate largely uninterrupted and then we will begin looking at the different platform elements that we would pull in to the more unified structure.
Thank you both very helpful.
And your next question will come from the line of Jed Kelly from Oppenheimer. Your line is open.
Hey, great. Thanks for taking my question.
Just a couple of just just 1 on on the competition that Youre seeing for traffic can you talk what's driving that is that more on companies.
Receiving more investments and then just on the policy fuel.
Can you provide like an example of from checks youre of some context on how that will benefit some of your larger agencies the carrier of larger carrier partners.
Sure Hi, Jed. Thanks, Thanks for the question I guess I'll take the first part and talk about what we're seeing on the on the traffic landscape.
We're continuing to see the.
The competitive landscape for insurance.
For the insurance related traffic and advertising.
We're also seeing probably some influence on some of the general sources of traffic that are less insurance specific from other industries.
As they pivot back into.
Yes into digital advertising, so even something like travel I think has some effect on the overall kind of cash landscape.
For us so so we're seeing a bit of a combination.
<unk> stayed strong through the pandemic insurance related advertising and I think we're seeing some uplift from just the general.
Online digital advertising now that we're more fully into reopening.
And Jed I can take the second question so.
Policy fuel operates.
We're referring to as a policy sales as a service model where they have.
The dedicated pods of advisers the agents that complement our marketplace and provide the value added service of taking the referral and actually binding the policy on behalf of of the carrier.
And so for existing carriers the benefit would be twofold.
The first is 1 of the performance so in many cases ever quote through and with policy. If you will be able to apply our technology our process our data to sell more effectively and drive improved performance on the referrals that we're sending them.
And then secondly capacity so when carriers are running into capacity constraints. This can be.
Relief valve for them to enable them to scale beyond whatever their capacity will allow internally. The net result is going to be more profitable policies coming from ever quote going to the carrier the.
The other the other.
Net of category of of cash.
Carrier that will benefit though.
Even in addition to our existing carriers, you've got a whole bunch of carriers in the market today that have not yet really crack the nut on acquiring.
Customers through digital channels right Theyre carriers, they may be regional carriers that distribute through local independent agents and thats what their business model of setup to do from a distribution standpoint. However, they have great insurance products for a ton of people, but historically, we have had less success with those carriers because they are not.
Set up operationally and with the technology to get performance out of the referrals, we send them.
And so by extending the service to carriers like that we feel we're going to be able to unlock as sort of an incremental segment of the market that has historically not participated in the meaningful way in the digital marketplaces.
Got it and then as a follow up I think John you mentioned or Jamie you mentioned.
During open enrollment for health care you wanted the up 3 ex is that on revenue and how much revenue was from open enrollment last year and then is there as you get as you build out your DTC capabilities with more agents.
Is there any do you plan to provide total total bookings of total policies written in the total commissions are generating.
Sure. So so what we've said with regard to our expectations around open enrollment in Q4, we expect our healthy TCA revenue to be up at least 3 ex that's our plan as well as as well as our agents.
Servicing that as well so so it's significant and that speaks to a little bit what we've talked about in the past, which is a bit of of new seasonal pattern that we see emerging which is a strong Q4, where Q4 is traditionally weaker on the auto side of the business, we think that that.
Our investment in health makes Q4, a seasonally strong quarter for the business on the whole and we are considering kind of.
What metrics, we provide in order to give some insight into this open enrollment so I would say.
Stay tuned on that and that we expect to update you.
Thank you.
Thanks, Jeff.
And your next question will come from the line of Michael Graham from Canaccord. Your line is open.
Thank you could you just maybe talk about the the.
The sort of growth rates that you expect to see between auto and your other verticals.
We've seen those growth rates sort of the key.
<unk> here over the last few quarters I'm, just wondering if you expect that to persist or just maybe any comment on the on the general health of the of the auto vertical and then kind of building on what Jed was asking.
Can you just talk a little bit of at the investments, we're making in DTC into open enrollment.
Most of the agents.
And sort of hiring ahead of some of that volume can you talk about how you think about the payback or the the return on investment for an agent and how how good are you at.
At sort of bringing those folks on in game and productive.
So there are a few questions from there Mike I'll try to.
Do my best.
To cover everything.
Let me know if we missed anything.
In terms of the auto non auto split.
Historically non auto has has outpaced auto.
You sort of.
You.
I mentioned the call essence in this most recent quarter our expectation is that over the long term non auto will continue to outpace auto.
Our right now our focus alright.
Of near term highest confidence path to drive non auto growth backup.
Back up to levels.
That we've seen historically is through the health and Medicare market and debt.
So therefore, we are really focused on investing and preparing for and then executing through the Q4 open enrollment period, and we do expect that that will have a meaningful impact in restoring the growth rates debt that we're accustomed to seeing.
With respect to that investment I'll skip to what I think was kind of your third question there.
The.
The.
We obviously have data on the performance of the agents that we've hired to date.
And so if we go back and just kind of.
<unk> walked through the the arc of our health and Medicare of direct to consumer agency, we launched the health and Medicare marketplace in 2019.
We acquired cross point in September of 2020.
And we had about.
Months to integrate and kind of ramp for <unk> last year, and we did so successfully and profitably.
And then that felt some confidence that the market opportunity could could support much more aggressive growth. This year. It also build confidence in the leadership team.
To execute into that opportunity and we've since complemented that leadership team with some experience from.
From places where the.
They are accustomed to the level of scale to which we aspire, which is thousands of agents overtime and so we hired Garrett catch from Ehealth.
Who managed epic part of their sales operation.
As he is on boarded we've pulled forward some of the investment and growth there and I think we have high confidence that the.
The scale will come and the profitability will come base.
Based on both the experience we had last year as well as the experience of of the team the cross point team and Garrett and the rest of the leadership team.
Okay.
Okay that makes sense.
Yes go ahead on a little tail.
On the first part of that as well just to add with Jamie's comments. So we expect we expect non others to continue to grow.
Faster than autos certainly in the second half of the year.
But obviously in Q3, the the growth rates will be closer between all of the non autos and then.
Going into Q4, where we put the investment and where we believe that the.
The growth engine for non autos. This year is around health, we will see growth rates significantly outpace auto in the fourth quarter versus the third.
Okay that makes the amount of sense. Thanks for the extra color there John Thanks Kimi.
Thanks, Mike.
Our next question will be coming from the line of Ravi Shankar with William Blair. Your line is now.
Open.
Good evening and thanks for taking the question 2 questions if I could firsthand the open enrollment reinvestment do you have any associated incremental revenue associated with that contemplated in the revised 2021 outlook. It doesn't really look like it on the ground, but just wanted to to.
To ask that and then secondly, how should we think about these reinvestments are they 1 is at 1 time in nature. We're just really trying to staff up more agents here in 2021 or could it be something that you would contemplate on a yearly basis given the performance of how you assess the current reinvestment. Thank you.
So.
I'll take that Ralph so with regard to maybe the second part first I would say if you think about the expense that we've added it really in 2 buckets..1 is the pulling forward of resources into Q3 to make sure that we are ready for Q4 and that we are ready for open enrollment I would say the other component of expenses of foundational.
Expenses.
The associated with the healthy TCA I'd say, neither 1 of them.
The ones that.
Net scale as revenue scales. So there are more foundational access seat of pulling the expenses forward of foundational expenses.
And then I would say the first part of that is.
What has happened as we move through the year and as we've refined our plan around health as we've we've really added to our conviction around what we believe is possible with the healthy TCA. So so I'd say, what we've ratcheted it up as is a our confidence around healthy TCA.
<unk> in Q3 and as we've outlined we have said now that is a that is a tripling of revenue.
Over Q4 of 2020.
Okay. That's helpful. Thank you.
Our next question will be coming from the line of from Lance.
And then with Needham Your line is open.
Thank you good evening.
Jamie maybe just to start with the policy of the service is there a way to parse solid how big that opportunity is versus say your core the.
Lead Gen model, if theres, a way to do that and the.
And what are sort of the growth dynamic within that segment of the market are relative to again Europe sort of core of lead Gen Rep.
The revenue model.
So Mike Thanks for the question.
1 way to think about it is.
The policy sales as the service while it is the value added service. It does enable us for the really for the first time in P&C to tap directly into the the 135 billion of.
Of commission in the total addressable market.
And so.
I think to the extent that policy sales as a service as we expect it will delivers high performance at or above what the carriers can do themselves. We expect it will unlock quite a bit more budget, it's really hard to quantify but but the vast majority of the dollars on the value chain lives in it.
Of that slice of the pie of lives in the commissions, which we're now tapping directly into <unk>.
Got it that's helpful maybe the.
The only other thing I'll add my ex us.
And the.
What I mentioned earlier that we believe policy sales of service will make participation in the marketplace possible and perform it for many carriers that really can't drive performance today. So they have great insurance products that we want to connect with our consumers.
Because they can't get performance out of on.
The internet originated referral.
They don't participate so in addition to getting more wallet share and deepening partnerships with our existing carriers, we have an expectation that we'll be able to unlock.
New segments of the market and begin building relationships, where they don't exist today.
Okay got it. Thank you for that and then just out of the follow up I wanted to ask about just M&A in general and maybe more broadly capital allocation. John you did cross point that seems to have been the successful deal and then I know you're going to focus on digesting policy of fuel for now, but how are you thinking about M&A in general.
All of you see more attractive opportunities in the market or is it just way too expensive right now kind of buy something and insure tech maybe broader comments around M&A approach and then capital allocation of general Thank you.
So I think <unk> been pretty consistent in terms of how we've talked about M&A and how we've executed on M&A and that is we've seen.
M&A as really the opportunity for us to grow along our stated growth levers and potentially to do the faster than we would organically I think you definitely saw that with cross point, you're again seeing net with policy fuel as well. So it really is an opportunity to look at things.
We are planning on doing any way anyway, and see whether or not we can accelerate.
Our growth or our entry into a new area through M&A.
I think you would expect for us to continue to look for opportunities along that line I think you've got 2 good representative acquisitions and cost point of the policy issue.
Great. Thank you.
Thanks Pat.
And your next question will come from the line of banner Rose from Battle Road Research. Your line is open.
Thank you and good evening.
Jamie Jon.
Part of the open enrollment initiative going on in the third quarter of me how many agents do you plan to bring on board.
In the quarter.
In order to execute on that.
So what we've said is we are.
We're more than tripling agents in Q4 as compared to last open enrollment season.
That puts us.
Over 100 agents okay.
And in general.
And looking at the.
The margin structure of the policy of fuel business, how does it differ if at all with.
Ever quote.
On a per quote in general.
Yes, the 1 of the reasons, we're excited about DTC Ptca in general is that it's not just the growth lever, we think of it as of margin lever as well. It is it is we expect higher <unk> margin as we go deeper with the consumer in terms of the value of the transaction and then over time as well we expect it to.
The higher EBITDA business as well so.
So we think it's both unlocking growth as well as margin potential.
Okay, Great and if I may just going back to the comment earlier fully fully understand why you would want to be.
Optimizing for revenue per quote request.
Based on the outcome.
Are there, but but in.
Speaking about the third quarter.
Does look like you are looking to increase the number of quote requests is that.
From the execution.
<unk> standpoint is that simply a matter of optimizing in your model to increase the number of quote requests that are that are being given out to the.
Different agencies or.
Is there something more.
It's a function of a couple of things.
The the I'd say the primary 1 is English Ron's question about the verified partner network, we have launched new products into that market. We've enrolled some new partners into the program and we're I think we're moving from piloting in 2 operationalized and scaling with the number of these.
Partners and we think as we have confidence that as a result that will start to drive up the the volume 3 of those partnerships.
Okay. Thanks, that's very helpful.
And that concludes our Q&A I would like I would now like to turn it back to the management for closing remarks.
Yes.
Thank you.
Well, thank you all for joining us today.
We're pleased with our strong Q2 performance and we're excited by the steps, we're taking to accelerate progress against the strategy, most notably building the foundation for a multi vertical tech and data enabled direct to consumer agency platform.
We're confident in the outlook for the remainder of 2021, and we're laser focused on our vision to become the largest online source of insurance policies by using data and technology to make insurance simpler more affordable and personalized.
With continued execution the strength of our team and increasing clarity of focus on our strategy. We are energized to continue building ever quote into an industry defining company as the 2 trillion dollar of insurance industry moves into the digital age. Thank you all so much and have a great evening.
And this concludes today's conference call. Thank you for participating you may now disconnect.
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