Q4 2023 EverQuote Inc Earnings Call

Okay.

Operator: Thank you for standing by. My name is Eric, and I'll be your conference operator. This time I would like to welcome everyone to the EverQuote fourth quarter 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone. If you would like to answer any questions, press star 1 again.

Thank you for standing by my name is Eric and I'll be your conference operator today.

At this time I would like to welcome everyone to the other quote fourth quarter 2023 earnings call.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there'll be a question and answer session.

If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

She would like to withdraw your question.

Press Star one again.

Thank you.

Brinlea Johnson: I would now like to turn the call over to Brinlea Johnson, Investor Relations. You go ahead. Thank you. Good afternoon, and welcome to EverQuote's fourth quarter and full year 2023 earnings call. We'll be discussing the results announced in our press release issued today after the market closed. With me on the call this afternoon is Jamie Mendel, EverQuote's Chief Executive Officer, and Joseph Sanborn, EverQuote's Chief Financial Officer. During the call, we 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 first quarter of 2024, our growth strategy and our plans to execute on our growth strategy, the initiative, our investments in the business Forward-looking statements may be 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.

I would now like to turn the call over to Brittany Johnson Investor Relations.

Please go ahead.

Thank you good afternoon, and welcome to Evercore fourth quarter and full year 2023 earnings call well be discussing the results announced in our press release issued today after the market close with me on the call. This afternoon is Jamie Mendel Everglades, Chief Executive Officer, and Joseph standby, Chief Financial Officer of Evercore.

During the call we will make statements related to our business that may be considered forward looking statements under federal security laws, including statements concerning our financial guidance for the first quarter of 2020 for 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 of course.

Your new customers, our expectations regarding recovery of the auto insurance industry 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.

That'd be considered our views as of any subsequent date.

Brinlea Johnson: We 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 that could cause actual results to differ materially from our expectations. For a discussion of material risks and other important factors that could cause our actual results to differ materially from our expectations, please refer to those contained under the heading Risk Factors in our most recent quarterly report on Form 10-Q or 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 www.investor. Everquote.com and on the SEC's website at SEC.gov.

Typically 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 that could cause the actual results differ materially from our expectations for a discussion of material risks and other important factors that could cause the actual results to differ materially from our expectation.

Please refer to those contained under the heading risk factors in our most recent quarterly report on Form 10-Q, our annual report on Form 10-K is on file with the Securities and Exchange Commission and available on the Investor Relations section of our website at Investor got Evercore Dot com and on the Sec's website at SEC Docker finally during the course of today's call.

Brinlea Johnson: Finally, during the course of today's call, we will refer to certain 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 section of our website at Investors. Everquote.com.

We refer to certain non-GAAP financial measures, which we believe are helpful to investors a reconciliation of GAAP to non-GAAP measures when they put in the press release, we issued after the close of market today, which is available on the Investor Relations section of our website at investors don't ever quote dot com and with that I'll turn it over to Jamie. Thank you Bradley and thank you all for joining us.

Jamie Mendel: And with that, I'll turn it over to Jamie. Thank you, Brindley, and thank you all for joining us today. 2023 was a transformative year for EverQuote. Our team continued to demonstrate a strong command of the business, managing effectively through a challenged auto insurance market. We maintain positive adjusted EBITDA for the year, improved our balance sheet, and produced record high VMM as a percentage of revenue against historically low carrier demand. We also return to our roots as a capital-efficient digital insurance marketplace, completing a significant restructuring of the business. We exited our health vertical, including our direct-to-consumer agency.

2023, it was a transformative year for Evercore.

Our team continues to demonstrate a strong command of the business managing effectively through a challenge to auto insurance market.

We maintained positive adjusted EBITDA for the year improved our balance sheet and produced record high the amount as a percentage of revenue I guess historically low carrier demand.

We also returned to our roots as a capital efficient digital insurance marketplace, completing a significant restructuring of the business.

We exited our health vertical, including our direct to consumer agency, we significantly reduced our head count and operating expenses and we refocused on extending the customer acquisition provider networks and technology advantages that are the foundation of our industry, leading P&C insurance marketplace.

Jamie Mendel: We significantly reduced our headcount and operating expenses, and we refocused on extending the customer acquisition, provider network, data, and technology advantages that are the foundation of our industry-leading P&C insurance marketplace. By consolidating operations and teams, we have not only reduced expenses and improved our capital efficiency, but we have accelerated operational execution within our core P&C marketplace. An example of this can be seen in our home and renters insurance vertical, which grew by 28% year over year in 2023. We enter 2024 with a streamlined operation, a focused team, and a healthy balance sheet. Additionally, recent signs point to a less unfavorable auto insurance outlook as profitability appears to be improving for a number of carriers in our marketplace. In the last several months, we have seen carriers reactivate campaigns, expand their geographical footprints, and increase budgets. Nonetheless, we will continue operating with heightened discipline.

Consolidating operations and teams, we have not only reduced expenses and improved our capital efficiency, but we have accelerated operational execution within our core P&C marketplace that.

An example of this can be seen in our home and renters insurance vertical which grew by 28% year over year in 2023.

We enter 2024 with a streamlined operation a focused team and healthy balance sheet.

Additionally, recent signs point to a less unfavorable auto insurance outlook as profitability appears to be improving for a number of carriers in our marketplace.

In the last several months, we have seen carriers reactivate campaigns expand our geographical footprint and increased budgets.

Nonetheless, we will continue operating with heightened discipline.

Jamie Mendel: We have seen previous auto carrier recoveries falter, and while this recovery appears more sustainable in that we see a broader base of improving carrier profitability, we don't discount the possibility that volatility may persist in 2024. We also continue operating with urgency, driven by the magnitude of the opportunity that remains in front of us. P&C Insurance Distribution and Advertising is a $100 billion market, of which digital advertising comprises $6 billion, growing at a rate in excess of 10% per year.

We have seen previous auto carrier recovery falter, and while this recovery appears more sustainable and that we see a broader base of improving carrier profitability, we don't discount the possibility that volatility may persist in 2024.

We also continue operating with urgency driven by the magnitude of the opportunity that remains in front of us piceance.

P&C insurance distribution and advertising is a $100 billion market of which digital advertising comprised of 6 billion growing at a rate in excess of 10% per year.

Jamie Mendel: This shift is supported by the majority of consumers now favoring online shopping over in-person shopping and insurance carriers steadily improving their digital customer acquisition funnels. We also believe this shift may accelerate as new technology, including AI, enables EverQuote and our customers to solve for certain points of friction in online insurance shopping in new ways. Insurance distribution remains ripe for disruption, and as insurance shopping continues to shift online, we believe EverQuote is well positioned to emerge as the company that defines insurance distribution for the digital era. We continue to build on a unique set of advantages which will enable us to do so. EverQuote processes a vast amount of auto, home, and renters insurance quote requests each year, and it expects to process nearly $35 million in 2023.

This shift is supported by the majority of consumers now favoring online to in person shopping and insurance carrier steadily improving their digital customer acquisition funnel as well.

We also believe the shift may accelerate as new technology, including AI enables ever quote and our customers to solve for certain points of friction and online insurance shopping in new ways.

Insurance distribution remains ripe for disruption and as insurance shopping continues to shift online. We believe ever quote is well positioned to emerge as the company, which defines insurance distribution for the digital era.

We continue to build on a unique set of advantages, which will enable us to do so.

Evercore process is a vast amount of auto home and renters insurance quote request each year nearly $35 million in 2023.

Jamie Mendel: We believe that the data generated through these marketplace transactions provides EverQuote with a unique competitive moat in its data assets, which will enable us to deploy increasingly sophisticated and effective AI and machine learning models across aspects of our business, ranging from traffic bidding to experience personalization to consumer provider matching and recommendations. This will make our marketplace more effective for consumers and providers and more operationally efficient for EverQuote. EverQuote's marketplace offers access to a relatively broad set of PNC insurance products. As a reminder, PNC insurance carriers distribute their insurance products through different channels, some directly to consumers, others through captive agents, and others through independent agents.

We believe that the data generated through these marketplace transactions provides ever quote with a unique competitive moat and its data assets, which will enable us to deploy increasingly sophisticated and effective AI and machine learning models across aspects of our business ranging from traffic bidding to experience personalization to consumer provider match.

King and recommendations.

This will make our marketplace more effective for consumers and providers and more operationally efficient forever quote.

Evercore its marketplace offers access to a relatively broad set of P&C insurance products. As a reminder, P&C insurance carriers distribute their insurance products through different channels, some directly to consumers others through captive agents and others through independent agents.

Evercore has built a marketplace, which supports all carriers and their pursuit of profitable growth most notably through the inclusion of the largest local agent network in the industry.

Jamie Mendel: EverQuote has built a marketplace that supports all carriers in their pursuit of profitable growth, most notably through the inclusion of the largest local agent network in the industry. We continue to invest in our advantage with local agents, who we believe represent the best point of purchase for many consumers who go online to shop for insurance. Our vision remains unchanged, to become the largest online source of insurance policies by using data, technology, and knowledgeable advisors to make insurance simpler, more affordable, and personalized. While market conditions made progress toward this goal challenging in 2022 and 2023 as carrier underwriting appetite contracted, in 2024, we expect a return of conditions for progress as the carrier market begins to normalize, and carriers once again seek to acquire new policyholders.

We continue to invest behind our advantage with local agents. We believe represent the best point of purchase for many consumers who go online to shop for insurance.

Our vision remains unchanged to become the largest online source of insurance policies by using data technology and knowledgeable advisers to make insurance simpler more affordable and personalized.

While market conditions made progress towards this goal challenging in 2022, and 2023 as carrier underwriting appetite contracted.

In 2024, we expect a return of conditions for progress as the carrier market begins to normalize and carriers once again seek to acquire new policyholders.

Additionally, we entered the year leaner and more focused than any time in recent memory we.

Jamie Mendel: Additionally, we entered the year leaner and more focused than at any time in recent memory. We believe the stage is set for a year in which we rebuild momentum in our operations, financial performance, and progress towards our longer-term vision. Our team's strength, discipline, and resilience, and our financial health will serve us well as we continue our relentless pursuit to build an enduring, industry-defining company. Thank you. I'll now turn the call over to Joseph.

We believe the stage is set for a year in which we rebuild momentum in our operations financial performance and progress towards our longer term vision.

Our team's strength and discipline and resilience in our financial health will serve us well as we continue our relentless pursuit to build an enduring industry defining company.

Thank you I'll now turn the call over to Joseph.

Thank you Jamie and thank you all for joining.

I will start by discussing our financial results for the fourth quarter and full year 2023, before providing an update on what we're currently seeing in the auto insurance sector and our guidance for the first quarter of 2024.

Joseph Sanborn: Thank you, Jamie, and thank you all for joining us. I will start by discussing our financial results for the fourth quarter and full year 2023 before providing an update on what we are currently seeing in the auto insurance sector and our guidance for the first quarter of 2024. We exceeded guidance for the fourth quarter across all three of our primary financial metrics of Total Revenue, Variable Marketing Margin, or VMM, and Adjusted EBITDA. In addition, Q4, which is typically seasonally down from Q3, showed quarter-over-quarter improvement across all three metrics, most notably at the adjusted EBITDA level. These results were driven by continued strong execution by our operating teams in what was a prolonged and deeply challenging environment. Total revenues in the fourth quarter were $55.7 million, driven by stronger enterprise carrier spend, up more than 50% from Q3 levels. For the full year, revenue was $287.9 million.

We exceeded guidance for the fourth quarter across all three of our primary financial metrics of total revenue variable marketing margin or <unk> and adjusted EBITDA. In addition, Q4, which is typically seasonally down from Q3 showed a quarter over quarter improvement across all three metrics most notably.

<unk> at the adjusted EBITDA level.

These results were driven by continued strong execution by our operating teams in what was a prolonged and deeply challenging environment.

Total revenues in the fourth quarter were $55 $7 million driven by stronger enterprise carrier spend up more than 50% from Q3 levels.

For the full year revenue was $287 9 million as a reminder, evercore announced the exit of our health insurance vertical in late June which represent approximately $15 million up 2023 full year revenue.

Revenue from our auto insurance vertical was $45 million in Q4, representing 81% of revenues in the period.

Joseph Sanborn: As a reminder, EverQuote announced the exit of our health insurance vertical in late June, which represented approximately $15 million of 2023 full-year revenue. Revenue from our auto insurance vertical was $45 million in Q4, representing 81% of revenues in the period. We saw a modest increase in auto revenues in Q4 relative to the third quarter, which was a new low point since the auto industry downturn began in late summer 2021. Revenue from our auto insurance vertical is $227.5 million for the full year of 2023, or 83% of total revenues, excluding revenues from our former health insurance vertical. Beginning in Q3, as a result of our exit from health in June 2023, we are reporting revenue on two primary verticals, auto insurance and home insurance, which includes renters. Revenues from our principal non-auto vertical, Home and Renters Insurance, were $9.8 million in Q4, a year-over-year increase of 48%. And for the full year, VMM was $40.9 million, a year-over-year increase of 28%, highlighting the benefit of dedicated leadership focused on this vertical during 2023. VMM was $20.7 million for the fourth quarter and $100.3 million for the full year.

We saw a modest increase in auto revenues in Q4 relative to the third quarter, which was a new low point since the auto industry downturn began in late summer 2021.

Revenue from our auto insurance vertical was $227 5 million for full year of 2023 or 83% of total revenues excluding revenues from our former health insurance vertical.

Beginning in Q3 as a result of our exit from health in June 2023, we're reporting revenue on two primary verticals auto insurance and home insurance, which includes renters.

Revenues from our principal non auto vertical home and renters insurance was $9 8 million in Q4, a year over year increase of 48% and for the <unk>.

Full year was $40 9 million a year over year increase of 28% highlighting the benefit of dedicated leadership focus on this vertical during 2023.

<unk> was $20 7 million for the fourth quarter and $100 3 million for full year.

<unk> as a percentage of revenue was a record quarterly and annual high of 37, 1% for the fourth quarter and 34, 8% for the full year driven by three primary factors first our traffic teams continued to execute well and adapting our operations to a volatile environment.

Second our significant investment in developing proprietary technology and processes to better leverage our data to acquire high intent consumers is continuing to yield results and finally, we benefited from a relatively more favorable advertising environment.

As further evidence that our strategic decision to focus and take actions to realign our operations is generating results.

Joseph Sanborn: VMM as a percentage of revenue is a record quarterly and annual high of 37.1% for the fourth quarter and 34.8% for the full year, driven by three primary factors. First, our traffic teams continue to execute well in adapting our operations to a volatile environment. Second, our significant investment in developing proprietary technology and processes to better leverage our data to acquire high-intent consumers is continuing to yield results. And finally, we have benefited from a relatively more favorable advertising environment. This is further evidence that a strategic decision to focus on and take actions to realign our operations is generating results. Turning to operating expenses and the bottom line, We continue to be very disciplined in managing expenses and driving incremental operating leverage. We ended 2023 with a significantly more efficient operating model than we had when we began last year, given the substantial actions we took to streamline our operations during the period.

Turning to operating expenses and the bottom line.

We continue to be very disciplined in managing expenses and driving incremental operating leverage.

We ended 2023 with a significantly more efficient operating model than we had when we began last year given the substantial actions we took to streamline our operations during the period for context cash operating expenses, which excludes certain noncash and other one time charges were $21 6 million in the fourth quarter our Neely.

30% below the first quarter of 2023, our current workforce consists of approximately 380 employees down by nearly 40% from this time last year.

In the fourth quarter.

GAAP net loss was $6 3 million and for the year GAAP net loss was $51 3 million.

Which include a restructuring charge of $23 6 million related to actions. We took last summer, which included the exit and sale of our former health insurance vertical and a significant reduction in our workforce. In addition, full year net loss includes $22 8 million in ongoing stock comp expense, which is the lowest annual level we have seen.

Over the past four years.

Adjusted EBITDA for the fourth quarter was negative <unk> 9 million and positive <unk> 5 million for the full year.

We had operating cash flow of negative <unk> 8 million for the fourth quarter with the exit from the health insurance vertical and the scale down of our remaining DTC a operations, which again requires significant upfront cash investment to drive growth. We expect that adjusted EBITDA will be a close proxy for operating cash flow going forward.

Subject to normal working capital adjustments the.

Joseph Sanborn: For context, cash operating expenses, which excludes certain non-cash and other one-time charges, were $21.6 million in the fourth quarter, or nearly 30% below the first quarter of 2023. Our current workforce consists of approximately 380 employees, down by nearly 40% from this time last year. In the fourth quarter, the gap net loss was $6.3 million, and for the year, the gap net loss was $51.3 million, which included a restructuring charge of $23.6 million related to actions we took last summer, which included the exit and sale of our former health insurance vertical and a significant reduction in our workforce. In addition, the full-year net loss includes $22.8 million in ongoing stock comp expense, which is the lowest annual level we have seen over the past four years.

The company ended Q4 with $38 million in cash and cash equivalents up from $38 million at the end of 2022. In addition, we have a 25 million Undrawn working capital line of credit we have no plans to draw on the facility and we have no other outstanding debt before turning to guidance I want to provide an update on what we're seeing in the <unk>.

The insurance industry as we start this year.

Based on our recent discussions many of our carrier partners have indicated that they have made meaningful progress towards achieving the desired levels of underwriting profitability. Many insurers also reiterated their comments towards some last fall of wanting to return to acquiring new consumers in 2020 for this more growth oriented mindset has led to a strong start.

For our company this year with more auto insurers beginning to return to our marketplace.

We are encouraged by the positive outlook, starting this year and are cautiously optimistic that auto recovery will be different and more sustainable this time around.

We recognize however that conditions could change rapidly as many carriers are balancing the desire to return to new customer acquisition, we are being careful to not do too much too quickly, which could jeopardize their considerable work over the past several quarters to restore their underwriting profitability for example.

Joseph Sanborn: Adjusted EBITDA for the fourth quarter was negative $0.9 million and positive $0.5 million for the full year. We had operating cash flow of negative $0.8 million for the fourth quarter. With the exit from the health insurance vertical and the scale-down of our remaining DTCA operations, which again require significant upfront cash investment to drive growth, we expect that adjusted EBITDA will be a close proxy for operating cash flow going forward, subject to normal working capital adjustments. The company ended Q4 with $38 million in cash and cash equivalents, up from $30.8 million at the end of 2022. In addition, we have a $25 million undrawn working capital line of credit. We have no plans to draw on the facility, and we have no other outstanding debt.

Our largest carrier partner is taking a more measured approach to customer acquisition. So far this year relative to the more aggressive posture. They had in Q1 of 2023. Additionally, one of our captive carrier partners has to date significantly limited the states in which they are interested in writing new business as they continue to me.

Their profitability goals.

Also have seen a carrier pullback meaningfully in their February spend in our marketplace from their January levels as they test the attractiveness of different markets and customer segments.

While these carrier dynamics create some uncertainty over the exact timing and slope of auto recovery, we believe that insurers, taking a more balanced approach to restoring their marketing spend will ultimately create a more sustainable long term recovery, which will benefit our company.

Joseph Sanborn: Before turning to guidance, I want to provide an update on what we are seeing in the auto insurance industry as we start this year. Based on our recent discussions, many of our carrier partners have indicated that they have made meaningful progress towards achieving their desired levels of underwriting profitability. Additionally, many insurers also reiterated their comments to us from last fall of wanting to return to acquiring new consumers in 2024.

In regards to our progress following our June 2023 restructuring, we committed to restoring consistent positive quarterly cash flow from operations in the first half of this year followed by a return to our pre downturn adjusted EBITDA margins in 2024, we believe we remain on track to achieve both.

These goals after a step up in first quarter operating expenses relative to Q4, largely driven by customary annual increases we plan to continue to maintain tight expense discipline, which will drive incremental operating leverage and adjusted EBITDA margin expansion as we benefit from what we expect.

Joseph Sanborn: This more growth-oriented mindset has led to a strong start for our company this year, with more auto insurers beginning to return to our marketplace. We are encouraged by the positive outlook for this year and are cautiously optimistic that the auto recovery will be different and more sustainable this time around. We recognize, however, that conditions could change rapidly as many carriers are balancing a desire to return to new customer acquisition with being careful to not do too much too quickly, which could jeopardize their considerable work over the past several quarters to restore their underwriting profitability. For example, our largest carrier partner is taking a more measured approach to customer acquisitions so far this year, relative to the more aggressive posture they had in Q1 of 2023. Additionally, one of our captive carrier partners has, to date, significantly limited the states in which they are interested in writing new business as they continue to manage their profitability goals.

B and expanding auto recovery as we progress through 2024.

Based on our strong start to this year the midpoint of our Q1 guidance implies a near returned to pre downturn adjusted EBITDA margins.

While we are encouraged by our early performance. This year, we recognized a considerable uncertainty remains around the exact timing and slope of auto or carrier recovery and as such we will not be providing full year guidance.

Turning to our outlook for Q1, 2024, we expect revenue to be between 78 and $82 million.

We expect <unk> to be between 26 and $28 million.

And we expect adjusted EBITDA to be between three and $5 million.

In summary, we delivered solid performance in the fourth quarter, given the environment exceeding the high end of our guidance across revenue <unk> and adjusted EBITDA.

Joseph Sanborn: We also have seen a carrier pullback meaningfully in their February spend in our marketplace from their January levels, as they tested the attractiveness of different markets and customer segments. While these carrier dynamics create some uncertainty over the exact timing and slope of the auto recovery, we believe that insurers taking a more balanced approach to restoring their marketing spend will ultimately create a more sustainable long-term recovery, which will benefit our company. Regarding our progress following our June 2023 restructuring, we committed to restoring consistent, positive quarterly cash flow from operations in the first half of this year, followed by a return to our pre-downturn adjusted EBITDA margins in 2024. We believe we remain on track to achieve both of these goals.

We enter 2024 with strong conviction that evercore is extremely well positioned to directly benefit as sustainable auto carrier recovery eventually takes hold.

From an operating perspective, we will continue to focus on strong execution and controlling what we can control.

We believe that the decisive strategic actions, we took in 2023 to successfully refocused our operations on our core P&C markets streamline our operations and strengthen our balance sheet set the stage for future growth and long term profitability.

Jamie and I will now answer your questions.

At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

Your first question comes from the line of Cory Carpenter with Jpmorgan.

Joseph Sanborn: After a step-up in first-quarter operating expenses relative to Q4, largely driven by customary annual increases, we plan to continue to maintain tight expense discipline, which will drive incremental operating leverage and adjusted EBITDA margin expansion as we benefit from what we expect to be an expanding auto recovery as we progress through 2024. Based on our strong starts this year, the midpoint of our Q1 guidance implies a near return to pre-downturn adjusted EBITDA margins. While we are encouraged by our early performance this year, we recognize that considerable uncertainty remains around the exact timing and slope of the auto carrier recovery, and as such, we will not be providing full-year guidance. Turning to our outlook for Q1 2024, we expect revenue to be between $78 and $82 million. We expect the VMM to be between 26 and 28 million. And we expect it just to be between 3 and 5 million.

Please go ahead.

Hey, good afternoon, I wanted to ask I think you mentioned in the prepared remarks that enterprise carrier stated was up more than 50% sequentially. Just curious how broad based that was.

Versus the one carrier that we've heard from others has been ramping and then maybe secondly.

Sorry, secondly, just kind of what are you seeing this time around that's giving you the confidence that gives you confidence that theres more sustainability and versus the false start that retail this time last year. Thank you.

Thanks Corey.

So I'll start with this second well.

I'll, let first questions maybe in reverse order.

The first is I think we see a <unk>.

Number of encouraging data points starting to build up.

If you look out broadly across the industry, what we're seeing as more carriers feeling confident in their underwriting profitability and more states and.

And if you just look at some of the carriers that have released publicly their Q4 results are there January results Youre seeing double digit improvements in combined ratios and it is not unique to a single carrier it's across now a growing set of carriers.

Joseph Sanborn: In summary, we delivered solid performance in the fourth quarter given the environment, exceeding the high end of our guidance across revenue, VMM, and adjusted EBITDA. We enter 2024 with strong conviction that EverQuote is extremely well positioned to directly benefit as sustainable auto carrier recovery eventually takes hold. From an operating perspective, we will continue to focus on strong execution and controlling what we can control. We believe that the decisive strategic actions we took in 2023 to successfully refocus our operations on our core PNC markets, streamline our operations, and strengthen our balance sheet will set the stage for future growth and long-term profitability. Jamie and I will now answer your questions. At this time, I would like to remind everyone that, in order to ask a question, press star and then the number 1 on your telephone keypad. Our first question comes from the line of Corey Carpenter with JPMorgan. Hey, good afternoon.

So I.

I think that that gives us some confidence that the.

Addressed.

The industry is addressing the underlying issue more broadly.

And then specific to ever quote in the last several months, we've seen a number of carriers reactivation campaigns re entering states increasing budgets.

I think we've had a similar experience and that Theres been one carrier that has done so in a way that's been.

The most impactful, but we are seeing the improvements and the expanding margin in some of these actions across a growing number of carriers.

Thank you and one more if I could just.

If you could update us Jamie and what you're seeing on the on the agency side of the business as well that would be helpful. Thank you.

Jamie Mendel: I wanted to ask, I think you mentioned in the prepared remarks that enterprise carrier spin was up, percent sequentially. Just curious how broad-based that was versus, you know, the one carrier that I think we've heard from others has been Rampage. And then maybe secondly, kind of what are you seeing this time around that's giving you the confidence or giving you confidence that there's more sustainability versus the false start that we saw this time last year? Thank you. Thanks, Corey.

Yes for sure.

Last year, we experienced modest declines in the agency business that were largely driven by the reduction in captive carrier subsidy support.

As we turned the corner into this year I think we are.

Getting back to a position, where we expect growth out of that business. This year.

And thats going to come from a number of areas I think the captive carriers themselves will be probably still a little bit slow to bring back some of the marketing support dollars that existed in 2022 or early 2023.

Jamie Mendel: So I'll start with this second question, and I'll hit both questions maybe in reverse order. The first is, I think we see a number of encouraging data points starting to build up. If you look out broadly across the industry, what we're seeing is more carriers feeling confident in their underwriting profitability in more states. And if you just look at some of the carriers that have released publicly, their Q4 results or their January results, you're seeing double-digit improvements in combined ratios, and that's not unique to a single carrier. It's across now on a growing set of carriers. So...

But in the meantime, we have been investing in enhancing and extending our product offering with our local captive agents. We've also been working on.

Increasing our penetration of the independent agents segment, which is less dependent on carrier subsidy support for its growth and so we've worked through some pricing and packaging that seems to be getting traction with that market.

So overall I'd say the direct segment to the direct carrier business is likely to kind of lead the recovery, but we do see the agency business returning to growth this year as well.

Jamie Mendel: I think that gives us some confidence that the..., industry is addressing the underlying issue more broadly. And then specific to EverQuote, you know, in the last several months, we've seen a number of carriers reactivating campaigns, reentering states, increasing budgets. I think we've had a similar experience in that, you know, there's been one carrier that has done so in a way that's been the most impactful, but we are seeing improvements and an expanding budget and some of these actions across a growing number of carriers. Thank you. And one more, if I could, just if you could update us, Jamie, on what you're seeing at the agency, as well. That'd be helpful.

Great. Thank you I appreciate it.

From.

Thanks, Brian.

The next question comes from the line of Michael Graham with Canaccord.

Please go ahead.

Hey, Thanks, and it's great to see the momentum here. So congrats on that I wanted to ask.

Just if you could give a little bit of color around.

How are you thinking about how long it could take the business too.

Get back to sort of like those 2021 peak ish levels.

Jamie Mendel: Yeah, for sure. So, you know, last year, we experienced modest declines in the agency business that were largely driven by the reduction in captive carrier subsidy support. As we turn the corner into this year, I think we are getting back to a position where we expect growth out of that business this year, and that's going to come from a number of areas. I think the captive carriers themselves will probably be still a little bit slow to bring back some of the marketing support dollars that existed in 2022 or early 2023.

Auto.

If you think thats possible and sort of related to that you did a great job.

Managing costs throughout this downturn and it feels like structurally profitability could.

Could be approved at higher revenue levels, and I, just wonder how youre thinking about sort of like the medium term.

Possibility for four.

Or better EBITDA margin structure.

Sure. So thanks, Mike Let me give you I'll take both of your questions.

Jamie Mendel: But in the meantime, we've been investing in enhancing and extending our product offering with our local captive agents. We've also been working on increasing our penetration of the independent agent segment, which is less dependent on carrier subsidy support for its growth. And so we've worked through some pricing and packaging that seems to be getting traction with that market. So overall, I'd say the direct segment, the direct carrier business, is likely to kind of lead the recovery. But we do see the agency business returning to growth this year as well. Great, thank you, I appreciate it.

So I think in Jamie can add on I think first with regards to auto.

And the ability to get back to what we saw in <unk>.

Q3 of 2002 and 2020 in Q3 of 'twenty. One that's our peak was around 90 million model. So we certainly see a path to getting back to $90 million auto and then some in revenue. So I think I'll just touch on that piece in terms of the timing I won't get into specifics on it we are giving a guide for the quarter.

We're not guiding for the year, we feel good.

Joseph Sanborn: Thanks, Troy. Our next question comes from the line of Michael Graham with Kencore. Hey, thanks, and it's great to see the momentum here. So congratulations on that. What do you want me to ask?

Starting the year, we're feeling very good about how carriers are coming back with messaging receiving at the same time, we are still dealing with some variability or how they are engaging and giving specificity and our plans for the year. So feel good about getting there over time, but the exact timing I am not going to call for this year at this point.

Joseph Sanborn: Just if you could give a little bit of color around how you're thinking about how long it could take the business to get back to, sort of, those, you know, 2021 peak-ish levels in the auto industry. Do you think that's possible? And sort of related to that, you did a great job managing costs here throughout this downturn, and it feels like structurally profitability could be improved at higher revenue levels. I wonder, you know, how you're thinking about the possibility for, for a better EBITDA margin structure in the medium term. Sure. So, thanks, Mike. Let me give you. I'll take both of your questions.

Second with regarding to sort of managing profit managing costs and properly. So give you a little bit of insight there into <unk>.

Building on the comments I gave in my script is when you look at Q1, which Youre seeing is operating expenses sort of taking up the guidance from Q4. The guide implies about $23 million in cash operating expenses in Q1.

And what we've said is that we're going to manage those continue to be very disciplined in managing those costs as we progress through this year and what we.

Joseph Sanborn: So, I think Jamie can add on. First, with regard to auto and the ability to get back to what we saw in Q3 of 22 and Q3 of 21, our peak was around $90 million in auto. So, we certainly see a path to getting back to $90 million in auto and then some in revenue. So, I think I just touched on that piece.

We will see that leading to us two things first obviously returning to cash flow positive on a consistent basis. So we think we are feeling good about that in Q1 and that continuing in the second is returned to the pre downturn adjusted EBITDA margins, we had it.

Just to put that in context, our pre downturn margins. If you say the downturn really begin in earnest in Q3, we took in the 12 months prior to Q3 of 'twenty one given the 312 months prior to that through Q2 of 'twenty. One the average adjusted EBITDA margin around five 5% Q2 of 'twenty. One is a little over six years, so even with those if you look at.

Joseph Sanborn: In terms of the timing, I won't get into specifics on that. No, we're giving a guide for the quarter. We're not guiding for the year.

Joseph Sanborn: We feel we're... Starting the year, we're feeling very good about how carers are coming back and the messaging we're receiving. At the same time, we are still dealing with some variability in how they're engaging and giving specificity in their plans for the year. So I feel good about getting there over time. But the exact timing, I'm not going to call for this year.

Our guide relative to that our guidance the midpoint of our guidance around 5%. So we see a path, where we committed to getting cash flow pause in the first half getting back to pre just EBITDA margins second goal for this year Ron track to do that I think will continue to build from that given the expense discipline, we outline which is 2003.

Joseph Sanborn: Second, with regard to sort of managing costs and profitability, so to give you a little bit of insight there into building on the comments I gave in my script, when you look at Q1, what you're seeing is operating expenses sort of ticking up. The guide from Q4, the guide implies about $23 million in cash operating expenses in Q1. And what we've said is that we're going to manage those, continue to be very disciplined in managing those costs as we progress through this year. And what we will see that leading to is two things. First, obviously, returning to cash flow positive on a consistent basis.

And in Q1, continuing to be disciplined adding any incremental expenses. We think we will have an opportunity to.

As we get out a recovery see significant increase in operating leverage and expansion adjusted EBITDA margins.

Alright, that's great. Thank you Joseph.

Thank you.

Yes.

The next question comes from the line of Jason <unk> with Craig Hallum.

Please go ahead.

Great. Thank you guys, Jamie just maybe wanted to ask as this recovery takes shape.

Joseph Sanborn: So we think we're feeling good about that in Q1 and that it will continue. And the second thing is returning to the pre-downturn adjusted EBITDA margins we had. If you, just to put that in context, our pre-downturn margins, if you say the downturn really began in earnest in Q3, look in the 12 months prior, Q3 of 21, look in the three, the 12 months prior to that through Q2 of 21, the average adjusted EBITDA margin is around 5.5%. For Q2, 21, it was a little over 6%.

Curious what you think your opportunities are for gaining market share relative to where we were at different points in the cycle in the past.

Yes, thanks, Jason.

I think the story of the last year.

<unk> has been largely focused on optimizing for margin and profitability in a highly budget constrained environment.

And as those budget constraints begin to go away I think well will restore greater focus on growth and share.

One of the things that has always enabled us to do well from a share point of view is the local agent network that we have it's relatively proprietary distribution. The health of this network is strong and we expected to continue to build and grow and that allows us to be more competitive.

Joseph Sanborn: So if you think about those, if you look at our guide relative to that, our guide, the midpoint of our guide is around 5%. So we see a path where we committed to getting cash flow positive in the first half, and getting back to pre-adjusted EBITDA margins as the second goal for this year. We're on track to do that, and I think we'll continue to build from that. Given the expense discipline we outlined, which is $23 million in Q1, continuing to be disciplined in adding any income expenses, I think we'll have an opportunity to, as we get out of recovery, see a significant increase in operating leverage and expense adjusted EBITDA margin. All right, that's great. Thank you, Joseph. Our next question comes from the line of Jason Crayer with Craig Hallam. Please go ahead.

So the traffic acquisition landscape. So we're confident in our ability to continue to build share as as the sort of budget restrictions.

Fade away.

And I think one of the keys to doing that is going to be continuing to invest in this and this.

Agency network, and then flowing through that monetization as we do into our traffic landscape and our traffic bidding.

So we feel confident in that.

Okay, and then maybe a follow up for Joseph.

The VM and guide for Q1, it's a little bit of a pullback from Q4, obviously not surprising just curious with the strengthening market, where do you expect <unk> settled in or what is a more stable VM look like as we as we look forward.

Joseph Sanborn: Great. Thank you, guys. Jamie, just maybe wanted to ask, you know, as this recovery takes shape, I'm curious what you think your opportunities are for, you know, gaining market share relative to where we were at different points in the cycle in the past. Yeah, thanks, Jason. You know, I think the story of the last year or two has been largely focused on optimizing for margin and profitability in a highly budget-constrained environment. And as those budget constraints begin to go away, I think we'll restore a greater focus on growth and share. One of the things that has always enabled us to do well from a share point of view is the local agent network that we have. It's relatively proprietary distribution.

Sure.

Yes.

Houston context.

In terms of our <unk>.

The guide the BMA margins implied by our Q1 guide is little under 34% 33, 8% to put that in context with last year. We were pleased with our performance throughout last year getting about just under 35% on average gain on margin and 37% in Q in Q4 last year.

Jamie Mendel: The health of this network is strong, and we expect it to continue to build and grow. And that allows us to be more competitive in the traffic acquisition landscape. So we're confident in our ability to continue to build share as the sort of budget restrictions continue to stay away. And I think one of the keys to doing that is going to be continuing to invest in this agency network and then flowing through that monetization as we do into our traffic landscape and our traffic bidding. So we feel confident in that. Okay, and then maybe a follow-up for Joseph. The VMM guide for Q1...

If you put that 35, 35% and context for the year that is the old debt is six two pieces I just wanted to have a bit of DTC in the first half of the year for exited health, which has a higher margin and the second is the second half of the year has depressed volumes were advertising costs are relatively low if you look at sort of normalized <unk>.

Joseph Sanborn: It's a little bit of a pullback from Q4, obviously not surprising. Just curious, with a strengthening market, where do you expect VMM to settle in? Or what does a more stable VMM look like as we look forward?

Margins in marketplace still around 30 ish percent as we've said before and then we believe that we will see DMM margins settle out between that 30 ish percent in that 35% over over the course of the year now you see it starting out just under 34 and we'd expect to see some downward pressure on that as we progress through the year yes.

Joseph Sanborn: So in terms of our BMM, the guide, the VMM margin that's implied by our Q1 guide is a little under 34%, 33.8%. To put that in context with last year, I would say we were pleased with our performance throughout last year of getting about just under 35% on average VMM margin and 37% in Q4 last year. You know, if you put that 35% in context for the year, that takes two pieces.

As advertising costs becomes relatively more less favorable to us as a rise, but I would emphasize that one piece of that we continue to be very strong on the overtime continue to build a BMS margins in future periods is what we've done with our data and technology investments around bidding. So we can more effectively acquire high intent consumers.

Joseph Sanborn: One is if there was a bit of DTCA in the first half of the year for Exit of Health, which has a higher VMM margin, and the second is that the second half of the year had depressed volumes where advertising costs were relatively low. If you look at sort of normalized VMM margins in Marketplace, they're around 30-ish percent, as we've said before, and then we believe that we'll see VMM margins settle up between that 30-ish percent and that, you know, 35% over the course of the year. Now, you see it starting out just under 34, and we'd expect to see some downward pressure as we progress through the year, as advertising costs become relatively less favorable to us as they rise. But I would emphasize that one piece that we continue to build very strongly on, though over time, we will continue to build the BMM margins in future periods, is what we've done with our data and technology investments around bidding, so we can more effectively acquire high-intent consumers who perform well and monetize well with carriers. That'll continue to give enduring benefits, but again, the advertising environment will offset them. So that's what we see that it's implied by the guidance, but it's probably some incremental downward pressure, at least in the course of. I got it.

We performed well and monetize well with carriers that will continue to give enduring benefits, but again the advertising environment will offset it. So that's why we see that it's implied by the guidance sort of probably some incremental downward pressure at least in the course of this year.

Got it thanks gentlemen.

Your next question congrats.

Okay.

The next question comes from the line of Ralph <unk> with William Blair.

Go ahead.

Hi, good afternoon, Jamie.

Sort of give you a perspective on market share shifts that you've seen them over the last couple of years, obviously, the market's been fairly dynamic.

And then kind of going forward, perhaps more importantly, the trends that you see there to protect essentially capture share I mean, you talked about better bidding technology using AI with your data scale et cetera is sort of if you could kind of reframe your competitive position going forward it would be helpful.

Yes sure so.

I think that.

Joseph Sanborn: Thanks, Shannon. The next question comes from... Thank you.

Two things that we'd really like point to in terms of the competitive position, which will enable us to.

Jamie Mendel: Your next question comes from the line of Ralph Schackart. William Blair, Good afternoon, Jimmy. Maybe you sort of give your perspective on, you know, market share ships, have you seen them over the last couple of years? and then, kind of going forward, perhaps more importantly, the trends that you see there. This has been a press conference.

Drive share gains as the market recovers the first of what I, just alluded to which is the <unk>.

Agency network in the amount of monetization that comes from that so as we continue to strengthen that agent network.

We are in an advantage position in terms of our ability to compete for and acquire traffic in our paid traffic acquisition landscape. So that would be number one but then the second thing that you.

Jamie Mendel: Yeah, sure. So, there are two things that we'd really like to point to in terms of our competitive position, which will enable us to, I think, drive share gains as the market recovers. The first of which I just alluded to, which is the agency network and the amount of monetization that comes from that. So as we continue to strengthen that agent network, we are in an advantaged position in terms of our ability to compete for and acquire traffic in a paid traffic acquisition landscape. So that'd be number one.

You alluded to was the.

We have a bin.

Developing our bidding technology since the early days of Evercore really and we've got a second generation of that bidding technology and rolling out over the last couple of years. So we as a company we probably see.

Nearly as much internet insurance shopping traffic as anybody out there.

And you referenced the number of quote requests that we processed last year was about $35 million or so quote request.

Jamie Mendel: But then the second thing that you alluded to, Mike, was the, um... You know, we've been developing our bidding technology since the early days of EverQuote, really. And we've got a second generation of that bidding technology that's been rolling out over the last couple of years. So we, as a company, probably see nearly as much internet insurance shopping traffic as anybody out there.

The data that we generate through these transactions gives us a real unique competitive moat and we use the data from these transactions and that traffic bidding engine, which effectively allows us to kind of apply machine learning and AI to imprint attributes our values about a consumer at various stages and therefore.

Jamie Mendel: And you referenced the number of quote requests that we processed last year, about 35 million or so quote requests. The data that we generate through these transactions gives us a real unique competitive moat. And we use the data from these transactions in that traffic bidding engine, which effectively allows us to kind of apply machine learning and AI to imprint attributes or values about a consumer at various stages in their funnel and use that to make better decisions about which consumers to bid for, how much to pay for them, and how much to route them to improve the overall efficiency of our traffic acquisition engine and of the marketplace.

Final and use that to make better decisions about which consumers to bid for how much to pay for them how much to route them to improve the overall efficiency of our traffic acquisition engine of the marketplace and so it's the combination of better monetization engine and a better traffic acquisition engine that over time really will enable us to.

Continue to build our share.

That's helpful. Thanks, Jim.

The next question comes from the line of Ben <unk> with B Riley Securities.

Please go ahead.

Yes, thanks, guys for taking the questions.

Jamie Mendel: And so it's the combination of, you know, a better monetization engine and a better traffic acquisition engine that, over time, really will enable us to continue to build our share. Great. It's helpful. Thanks. Your next question comes from the line of Dan Day with B. Riley Securities. Thank you.

Maybe a little on quote request volume.

Trended the last couple of months.

I know you don't give the number anymore just generally speaking.

Have we seen.

Have we seen a spike year since.

Jamie Mendel: Yeah, thanks guys for taking the questions. Just maybe a little on quote request volume for the last couple of months. I know you don't give the number anymore, just generally speaking. Have we seen a spike here since the calendars have turned and some carriers have raised prices? So, hi, Dan.

The calendar is turned in some carriers have raised prices.

Okay.

Hi, Dan.

Since since the rate cycle began in 'twenty, two we've been running with relatively elevated levels of <unk>.

Consumer shopping for insurance.

And so that was no different last year I think we stepped up a bit from already elevated levels. In 2022, I think the expectation is this year as.

Jamie Mendel: Thanks. Since, you know, since the rate cycle began in 22, we've been running with relatively elevated levels of consumer shopping for insurance. And so that was no different last year; I think we stepped up a bit from already elevated levels in 2022. I think the expectation is this year, as rates continue to flow through and as carriers continue to take rates, we will continue to see elevated levels of shopping.

Rates continue to flow through and as carriers continue to take rate. We will continue to see elevated levels of shopping that combined with a favorable.

More favorable monetization backdrop, some more carrier demand out there and more carriers sort of advertising and inducing shopping behavior, I think would lend itself to sort of incremental step up in quote request volume.

Jamie Mendel: That combined with a favorable, more favorable monetization backdrop, so more carrier demand out there and more carriers sort of advertising and inducing shopping behavior, I think would lend itself to sort of an incremental step up in quote request volume. But, generally speaking, I would say things have been elevated since 2022. They will remain that way in 2023, and I expect it to remain that way in 2024 as well. Okay, thanks, another one just on like your general strategy, track.

But generally speaking I would say things have been elevated since 2022.

That way in 2023, and I expect it to remain that way in 2024 as well.

Okay. Thanks.

Another one just unlike your general strategy for attracting consumers in the marketplace and a lot of them.

The question you talked a lot about bidding strategy.

Yeah, absolutely paid search in performance marketing have you guys thought about.

Jamie Mendel: The marketplace, you know, and a lot of the questions we talked about a lot about bidding strategy, paid search, and performance marketing. Have you guys thought about, given there might be a lot of consumers potentially looking to switch to more traditional methods like brand advertising, radio, those sorts of things, to maybe increase the number of people coming directly to EverQuote.com rather than... Yeah, it's a good question. The answer is yes, you know, we will we will compete in any channel that we can, you know, drive sufficient performance from. And there are some of the channels that you referenced that lend themselves to more of a performance brand approach. Channels like OTT or something like that, which allow you to start to build a brand but do so in a highly performance-oriented context.

Just given there might be a lot of consumers potentially looking to switch more traditional like brand advertising on television radio those sorts of things to do.

<unk> increased the number of people coming directly to Evercore dot com rather than through search or ads.

Yes, it's a good question.

The answer is yes.

We will compete in any channel that we can drive sufficient perf.

Performance from.

And there are some of the channels that you referenced which lend itself.

Two more of our perform milk out more of a performance brand approach right channels like OTT or something like that.

Which allow you to start to build brand, but do so in a highly performance oriented context, I think that's probably where you'd see us go and our progression before we get to a full on brand advertising.

Jamie Mendel: I think that's probably where you'd see us go in our progression before we get to full-on brand advertising. But I do think there continues to be an opportunity for us to expand the channels in which we participate, build more brand awareness over time, and drive more of that direct traffic, as you suggested. Okay, great. Thanks, guys. Thanks, Dan. Your next question comes from the line of Greg Peters with Raymond James. Yeah, hey, good afternoon. This is sitting on for Greg.

But I do think there are there continues to be opportunity for us to expand the channels in which we participate build more brand awareness over time and drive some more of that direct traffic as you suggest.

Okay, great. Thanks, guys.

Thanks, Patrick.

Your next question comes from the line of Greg Peters with Raymond James.

Please go ahead.

Yes, Hey, good afternoon. This is sid on for Greg.

Joseph Sanborn: Maybe just a cleanup question. In your prepared remarks, you mentioned the fourth quarter is typically more seasonally weak. I'm curious if the exit of the health vertical changes the seasonality any in the business? We had one of the comments in terms of Q4 being seasonal because of the context of the auto and home vertical. When we had the health business, that countered, kind of way to that typical, So Q4 is typically a seasonally lower fraud at home, but was unusual in Q4. Continue to spend, and actually, in the second half of the quarter, continue But they didn't do it.

Maybe just a cleanup question in your prepared remarks, you mentioned the fourth quarter is typically.

More seasonally weak curious of the exit of the health vertical changed the seasonality any in the business.

So yes, one of the comments in terms of Q4 being seasonally because in the context of the auto and home vertical.

When we had the health business that counters.

Kind of a way to that typical seasonality dip for auto and home.

So the so.

So Q4 was is typically a seasonally lower for auto homes. What was unusual in Q4 of 2023 as we had some carriers who were looking to spend.

Continue to spend and actually in the second half of the quarter continued to spend which is unusual for carriers historically.

Indeed in the P&C space typically pull back.

In that period, just given the sort of broader retail advertising and the holidays, but they did this year.

Alright. Thanks.

Jamie Mendel: All right, thanks. Your next question comes from the line Jed Kelly with Oppenheimer. Hey, great. Thanks for taking my questions. Just, um, two, if I may.

The next question comes from the line of Jed Kelly with Oppenheimer.

Please go ahead.

Hey, great. Thanks for taking my questions just two if I may one.

Joseph Sanborn: One, I get the reasoning behind not giving guidance, but can you just give us a sense from where you guide the one Q, just how we should think about the seasonality of the business and balance that with the recovery? And then can you just talk about terms of performance marketing with your competitors, maybe some that aren't as aggressive, some that are being more aggressive in the recovery. Thanks. Thanks, Chad, for the questions. Why don't I take the first one, and then Jamie will follow up on the second?

The reason behind not giving guidance, but can you just give us a sense from where you're guiding to one <unk> and then <unk>.

How we should think about the seasonality of the business.

And balance that with the recovery and then can you just talk about some of the competition youre seeing in terms of performance marketing.

With their comp competitors, maybe some that aren't as aggressive versus some that are being more aggressive in the recovery. Thanks.

Sure. Thanks.

Thanks, Jeff for the question so when I take the first one and then Jamie will follow up on the second.

Joseph Sanborn: So in terms of our guidance and our thought process for the year, as you pointed out, we are guiding for Q1. It reflects our high-confidence view of what we expect to happen in Q1 based on what we know now and what we expect to happen in the course of the remainder of the quarter in March. When we look to the year, we did not give a guide because we didn't have high confidence in what would happen with the auto recovery cycle, just given the variability and what the carriers are doing. That being said, when we think about the factors that would drive it, I think there's a couple we would highlight. So one, obviously, if you look at where our guide was in Q1, you would look at seasonality in the business of auto and home, again, excluding the health operations. That's no longer part of it.

So in terms of our guide and our thought process for the year. So as you as you pointed out we are guiding for Q1 and reflects our high competency will we expect to happen in Q1 based on what we know now and we expect to happen in the course of the remainder of the quarter in March when.

When we look to the year. We did we did not give a guidance we didn't have high confidence in what would happen with the auto recovery cycle, just given the variability in the display the carriers are doing.

That being said when we think about.

How are the factors that would drive it as a couple we would highlight so one obviously the if you look at where our guide was in Q1, you would look at seasonality in the business of auto and home again, excluding health operations and settle on a part of it if you look over since we've been public Odyssey typically Q2 was down from Q1 sequentially Q3 is up from Q2.

Joseph Sanborn: If you look at the past five years since we've been public, typically, Q2 is down from Q1 sequentially, Q3 is up from Q2, and Q4 is down from Q3. That's sort of the typical seasonal pattern over the past five years since we were public. Admittedly, there's volatility in all of that, but that would be the pattern if you look at the numbers. With regard to VMM margin, which we talked about in the earlier question, which implied just under 34% for Q1. We'd expect to see some downward pressure on that as we progress through the year based on, you know, advertising in the current environment can be relatively more costly. So you'd see that, and we said it would peddle out between the 30% VMM margin of the marketplace historically and the 35% we had last year.

In Q4 is down from Q3, Thats sort of a typical seasonal pattern over the past five years of us being public admittedly there is volatility and all of that but that's sort of the typical that'd be the pattern. If you look at the <unk>.

<unk>.

With regards to <unk> margin, we talked about.

On the earlier question, which was our guide implies just under 34% for Q1, we would expect to see some pressure on that is downward pressure on that as we progressed through the year based on.

Advertising environment relatively more possible CFC, and we said it would settle out between.

30 markets 30 page, 30% <unk> margin of marketplace historically in the 35% last year.

Joseph Sanborn: Then on the operating expense side, by the last piece of it, you think of that $23 million in Q1, we expect to. And we said there'd be a step up in Q1 from Q4, so 22 going about 23, about a 6% step up in Q1 of this year relative to last year. Then we're going to be very disciplined in adding in the incremental costs, you know. And as you look at that, the impact throughout the year, what we think that means that you're going to get, or that implies that you're going to get a significant increase in operating leverage, and the amount of expansion you get in adjusted EBITDA is going to be a function of where auto recovery is, how auto recovery is shaped. Those are some of the factors I look at. Seasonality, you know; VMM margin percentages are progressing through the year and then the opposite.

On the operating expense side, if I the last piece of it do you think of that $23 million in Q1, we expect to.

And we said it would be a step up in Q1 from Q4. So 22 has gone about 23 about a 6% step up in Q Q1 of this year relative to last year and then we're going to be very disciplined and then adding an incremental cost.

<unk> as you look at that the impact throughout the year, while we think that means that you're going to get with it implies that you're going to get significant increase in operating leverage and the amount of expansion you get an adjusted Ebitdas in the country, where auto recovery our auto recover shakes out those are some of the factors I look at seasonality.

Mmm margin percentages of progressive through the year and then the opposite side.

Jamie Mendel: And then, Jed, I'll try and address your second question. I mean, with respect to competition in the performance marketing landscape, it's been very dynamic to start the year. And so we have, you know, technology and people who are literally reacting in real time as things change.

And then Jen I'll try to address your second question I mean with respect to competition in the performance marketing landscape.

It's been very dynamic to start the year and so we have we have technology and people who are literally like reacting in real time as things change.

Jamie Mendel: But generally speaking, you know, we've seen meaningful growth from Q4, both in volume and in revenue. We've seen a significant step up in revenue for quote requests, driven by carrier budgets and carrier expansion. And so we expect to see this quarter our carrier revenue step up by over 100%. So there's a lot happening on the sort of monetization side of the marketplace. Now that, of course, will come with a more competitive ad

But generally speaking we've seen.

Meaningful growth from Q4, both in volume and in revenue.

Revenue, we've seen significant step up in revenue per quote request.

Driven by carrier budgets and carrier expansion.

And so we expect to see this quarter, our carrier revenue step up by over 100%.

So there's a lot happening on the sort of monetization side of the marketplace now that of course will come with more competitive ad.

Landscape and so we are seeing commensurate improvement.

Jamie Mendel: And so we are seeing commensurate improvement or increases, I should say, in cost per quote requests, which is why, as Joseph mentioned, we do expect to see a bit of VMM compression as we progress through the year and through the recovery. But net-net, it's all very positive, and we feel really good about our position as monetization comes back, and we're seeing a lot of volume flowing into our marketplace. So I guess I know it's hard, but. One cube would be the lowest quarter.

Increases I should say and cost per quote request.

Which is why we will Joseph mentioned, we do expect to see a bit of DMM compression as we.

As we progress through the year and through the recovery, but net net it's all very positive and we feel really good about our position as a monetization comes back and we're seeing a lot of volume flowing into our marketplace.

So I guess I know, it's hard but.

When <unk> be the lowest quarter for revenue just given the Ark in recovery or is it too early to say.

Joseph Sanborn: The Art of Recovery is a two-year-old... It's too early to say, Jed. I mean, I think for us, we got into Q1 because we have high confidence in Q1. But we can't give insight for the rest of the year with any specificity on what the exact slope of revenue would be just given the environment. Again, very encouraging to start the year, but we're not going to claim victory. Not that it's an exact swap.

Yes, it's too early to say Jed I mean, I think for us as we guided to Q1 due to high costs in Q1, we can't give insight on the rest of the year with any specificity on what the exact slope of revenue just given the environment. We're seeing again, a very encouraging start to the year, but we're not going to claim victory at this point.

Confidence in the exact slope of recovery for the year.

Joseph Sanborn: All right, get it. Thank you. Thanks, Chet. The final question comes from the line of Mayank Tandon with Needham for Thank you. Good evening, Jamie and Joseph.

Alright got it thank you.

Okay. Thanks, Jeff.

Your final question comes from the line of.

<unk> Tandon with Needham.

Please go ahead.

Thank you good evening, Jamie and Joseph I wanted to piggyback off your comments Joseph to the last question.

Joseph Sanborn: I want to piggyback on your comments, Joseph, on the last question. You know, looking back and having covered you for a while, it almost seems reminiscent of EverQuote going from 2018 into 2019. I know the dynamics might be very different, but we do look at 2019 as maybe the last sort of normal year before COVID. Is that, I don't want to put you on the spot, but is that a good proxy for, you know, what the trajectory could look like if the recovery does hold on the auto side? So I would say this, right? When you think about the recovery. What's different in this period?

Looking back and having covered you for a while it almost seems reminiscent of evercore going from 2018 into 2019, I know the dynamic might be very different.

We do look at 2019 as maybe the last sort of a normal year before COVID-19 is that I don't want to put you on the spot but is that a good proxy for what the trajectory could look like if the recovery does hold on the auto side.

So I would say this right when you think about.

The recovery.

What's different in this period versus the last one yes, there was a downturn.

Joseph Sanborn: versus the last one. Yes, there was a downturn, a hard market in 2017-2018, and we recovered nicely coming out of that.

Hard market.

2017, 2018, we recovered nicely coming out of that and did very well in the business I think that the challenge in drawing comparisons as.

Joseph Sanborn: It did very well as a business. I think that the challenge in drawing comparisons is... This has been a much deeper and more prolonged downturn. So in that environment, I think, although there's insight you can see from looking back and what happened during the downturns and how we recovered nicely as a business, I think it'd be hard to draw that as the same thing would happen here, because it's much more prolonged. It's been a much more prolonged downturn. And as we've said before, we think different carriers We continue to believe that. You know, we've seen signs from our carriers at the start of Q1, all showing positive signs, but specificity is still lacking in any of them. And so, in that sense, I can't really draw a specific conclusion beyond the trend of, we saw the recovery was quite nice in that comparison. The fans represented this year, I think it's heart and product got it.

This has been a much deeper and more prolonged downturn so in that environment.

<unk> and I think although there is inside you can see from looking back on Whatsapp and other downturns and how we recovered nicely as a business I think it would be hard to draw that that'll be the same thing would happen here because it's a much more prolonged it's been a much more prolonged downturn.

And as we've said before we think different carriers will come back at different times. We continue to believe that we have seen science Mark carriers will start in Q1, all showing positive signs that specificity is still lacking any of them and so in that sense I can't really address specific conclusion beyond the trend you saw the recovery was quite nice and that compares.

<unk> <unk>.

<unk> represented this year I think it's hard to product just given the difference in the downturn characterized.

Got it well, let's hope it plays out like that so we'll wait and see.

Jamie Mendel: Well, let's hope it plays out like that. We'll wait and see. The second question I have is about the customer. So I think Jamie, you talked about growing within the installed base. And I just wanted to get clarity, like what are the gating factors to drive the increased penetration of marketing spend, the ad spend at your existing clients, and what are some of the sort of nuances around that, if you could just maybe walk us through that? How do you grow yours?

The second question I have is on the customer. So I think Jamie you talked about growing within the installed base and I just wanted to get clarity like what are the gating factors to drive increased penetration of the marketing spend the AD spend at your existing clients and what are some of the sort of nuances around that if you could just maybe walk us through that.

Sure.

Sure. So I think theres, a number of dimensions of growth there.

Jamie Mendel: Sure, so I think there's a number of dimensions of growth there. The first is just expanding into a market segment which, historically, you know, we have not penetrated very deeply, and that's the independent agent segment. So the independent agents are roughly equal in size with the captive agent market from an agent count standpoint, and we've historically focused on the captive agents. When I say captive, I mean they're captive to one of the big carriers, like all state agents or farmers agents, the state farm agents. The benefit of being a captive is they tend to get support in the form of marketing dollars and or technology and other infrastructure that helps them get performance out of a channel like ours. Independent agents lack that security.

The first is just expanding into a market segment, which historically we have not.

Penetrated very deeply and thats the independent agent segment.

So the independent agents are roughly equal in size with the captive agent market from an agent count standpoint, and we've historically focused on the captive agents and when I say captive I mean, they are captive to one of the big carriers like Allstate agents or farmers agents with state farm agents.

The benefit of being a captive is they tend to get support in the form of marketing dollars and our technology and other infrastructure that helps them get performance.

As a channel like ours.

Independent agents lack that harness.

Jamie Mendel: And so we have to kind of build the harness for them and do some things differently with that market segment to help them be successful before we can expect to really scale with that segment of agents. And so one dimension of growth is, you know, expanding the market into this new segment of independent agents and growing with them. And the other dimension is, you know, taking more wallet share within the installed base.

And so we have to kind of build the harness for them and do some things differently with that market segment to help them be successful before we can expect to really scale with that segment of agents and so one dimension of growth is expanding the market into this new segment of independent agents and.

And growing with them.

Then the other dimension is taking more wallet share.

Within the installed base.

Jamie Mendel: And if you think about it from the agent's point of view, you know, I own an insurance agency. I'm trying to get new customers on the door, and I spend... my money on a number of different sort of Lee Jen channels, one of which is with EverQuote. But I'm doing other things. I may be buying things like live calls or ancillary services that are also oriented towards helping me grow my business.

And if you think about it from the agent's point of view I own an insurance agency I'm trying to get new customers in the door and I spend.

My money on a number of different sort of.

Lead Gen <unk>.

Channel one of which is with Evercore.

But I'm doing other things may be buying like live calls or ancillary services.

<unk> also oriented towards helping me grow my business I think there is an opportunity for us to kind of extend.

Jamie Mendel: I think there's an opportunity for us to kind of extend the offering that we provide to these local agents to help them consolidate that spend into one place and which plays well into our strengths in terms of traffic acquisition and digital marketing. And so it's both more agents by expanding into new channels. It's also going deeper with the existing agents; we have to help them consolidate their spend and better solve their needs as it relates to growing their agency. A very helpful caller. Thank you so much. All right, thanks, Byak. I will now turn the call back over to Jamie Mendel, CEO, for closing remarks. Please go ahead.

The offering that we provide to these local agents to capture them consolidate that spend into one place and which play well into our strengths in terms of traffic acquisition and digital marketing and so it's both.

Our agents by expanding into us into new channels. It's also going deeper with the existing agents, we have to help them consolidate their spend and better solve their their needs as it relates to growing the agency.

Got it very helpful color. Thank you so much.

Alright, Thanks Mac.

I will now turn the call back over to Jamie Mendel CEO for closing remarks. Please go ahead.

Alright, well, thank you all for joining us today.

Jamie Mendel: All right. Well, thank you all for joining us today. I'll just conclude with an emphasis on our renewed sense of confidence, not only in a measured return to normalcy of the auto insurance market in the months to come, but also in EverQuote and our team's ability to execute effectively towards our vision. As I said earlier, we entered this year leaner and more focused than at any time in recent memory, and we are a more streamlined organization, we have a team that has grown stronger All these factors are going to position us well to build an enduring and transformative business as insurance shopping continues to move online.

I'll just conclude with an emphasis on our renewed sense of confidence not only in a measured return to normalcy of the auto insurance market in the months to come but also in ever quote and our team's ability to execute effectively towards our vision.

As I said earlier, we entered this year leaner and more focused than any time in recent memory.

And we are a more streamlined our organization we have a team that has grown stronger and more resilient, we have a debt free balance sheet and we are returning to our roots of being a capital efficient digital marketplace focused on driving consistent cash generation.

All of these factors are going to position us well to build an enduring and transformative business as insurance shopping continues to move online.

Operator: Thanks for your time today. Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect your lines. How are you? Hi! Where did you get that?

Thank you for your time today.

Yes.

Ladies and gentlemen that concludes today's call. Thank you all for joining and you may now disconnect your lines.

Okay.

Unnamed Individual: I'm on my way to my mom's place now. I can't wait. I can't. I'm on my way to my mom's place now.