Q1 2024 EverQuote Inc Earnings Call

Speaker Change: [music].

Yes.

Operator: Thank you for standing by. My name is Mark, and I will be your conference operator today. At this time, I would like to welcome everyone to the EverQuote First Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise.

Mark: Thank you for standing by my name is Mark and I will be your conference operator today.

Operator: 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 one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Brinlea Johnson. Please go ahead.

Mark: At this time I would like to welcome everyone to the Abbvie call. It first quarter 'twenty to 'twenty four earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' 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 one on your telephone keypad.

Mark: I would like to withdraw your question Press Star one again, thank you.

Mark: I would now like to turn the call over to Brinley Johnson. Please go ahead.

Brinlea C. Johnson: Thank you. Good afternoon, and welcome to EverQuote's first quarter 2024 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 are Jayme Mendal, EverQuote's Chief Executive Officer, and Joseph Sanborn, EverQuote's Chief Financial Officer.

Brinlea C. Johnson: Thank you good afternoon, and welcome to Evercore first quarter 2024 earnings call, we'll be discussing the results announced in our press release issued today after the market close with me on the call. This afternoon is Jamie mental Everquest, Chief Executive Officer, and Joseph Sanborn, Chief Financial Officer of Africa.

Brinlea C. Johnson: During the call, we will make statements related to our business that may be considered forward-looking statements under federal securities law, including statements concerning our financial guidance for the second quarter of 2024, our growth strategy and our plans to execute on our growth strategy, key initiatives, our investments in the business, the growth levers we expect to drive our business, our ability to maintain existing and acquire new customers, our expectations regarding the recovery of the auto insurance industry, and other statements regarding our plans Forward-looking statements may be identified with words and phrases such as we expect, we believe, we intend, we anticipate, we plan, we may, upcoming, and similar words and phrases.

Brinlea C. Johnson: 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 second quarter 2020 for our growth strategy and our plans to execute on our growth strategy key initiatives our investments in the business because we expect to drive our business our ability to maintain.

Brinlea C. Johnson: Existing and acquire new customers.

Brinlea C. Johnson: Dictations regarding recovery of the auto insurance industry and other statements regarding our plans and prospects forward looking statements maybe identified by words and phrases such as we expect we believe we NK. We anticipate we plan may upcoming and similar words and phrases.

Brinlea C. Johnson: 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. 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 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 investor.everquote.com and on the SEC's website at sec.gov.

Brinlea C. Johnson: 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.

Brinlea C. Johnson: 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 cause our actual results to differ materially from our expectations. Please refer to those contained under the heading risk factors in our most reached.

Brinlea C. Johnson: <unk> quarterly report on Form 10-Q or 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 <unk> Dot com and on the Sec's website at SEC Gov. Finally during the course of todays call well refer to certain non-GAAP financial measures, which we bill.

Brinlea C. 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. And with that, I'll turn it over to Jamie.

Brinlea C. Johnson: We've 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 Dot dot.

Dot com and with that I'll turn it over to Jamie.

Brinlea C. Johnson: Okay.

Jayme Mendal: Thank you, Brinlea, and thank you all for joining us today. 2024 is off to a strong start. In the first quarter, operating results exceeded the high end of our guidance range for revenue, variable marketing margin, and adjusted EBITDA. We achieved record levels of net income, adjusted EBITDA, and operating cash flow. These results were made possible by the actions we took in 2023 to strategically realign the business and return to our roots as a capital efficient digital insurance marketplace.

Jayme Mendal: Thank you Brendan and thank you all for joining us today.

Jayme Mendal: <unk> 'twenty 'twenty four is off to a strong start in.

Jayme Mendal: In the first quarter operating results exceeded the high end of our guidance range for revenue variable marketing margin and adjusted EBITDA, We achieved record levels of net income adjusted EBITDA and operating cash flow.

Jayme Mendal: These results were made possible by the actions we took in 2023 to strategically realign the business and return to our roots as a capital efficient digital insurance marketplace.

Jayme Mendal: Since the middle of last year, we have observed auto insurance carrier underwriting profitability steadily improving. With this trend persisting into 2024, carriers have continued to reactivate campaigns, restore budgets, and reopen their state footprints in our marketplace. Actions and messaging from carriers indicate that the majority are either starting to, or planning to, restore a greater emphasis on growth. Given the years-long volatility in the auto insurance market, we maintain caution while noting that we believe a sustainable auto recovery is, in fact, underway.

Jayme Mendal: Since the middle of last year, we have observed auto insurance carrier underwriting profitability steadily improving.

Jayme Mendal: With this trend persisting into 2024 carriers have continued to reactivate campaigns restore budgets and reopen their state footprints in our marketplace.

Jayme Mendal: Actions and messaging from carriers indicate that the majority are either starting to or planning to restore greater emphasis on growth.

Jayme Mendal: Given the year's long volatility in the auto insurance market, we maintained caution while noting that we believe is sustainable auto recovery is in fact underway.

Jayme Mendal: Against an improving industry backdrop, our team continues to execute effectively, as evidenced by our bottom line performance. Alongside sequential growth and carrier revenue, we had strong growth in agent revenue compared to the fourth quarter. And as provider budgets increased, our performance marketing engine continued to optimize in real time, driving volume and variable marketing margin growth. The progress extended into our home vertical as well, as we achieved record home revenue in the first quarter.

Jayme Mendal: Against an improving industry backdrop, our team continues to execute effectively as evidenced by our Bottomline performance.

Jayme Mendal: Alongside sequential growth in carrier revenue, we had strong growth in the agent revenue compared to the fourth quarter.

Jayme Mendal: And as provider budget has increased our performance marketing engine continued to optimize in real time, driving volume and variable marketing margin growth.

Jayme Mendal: The progress extended into our home vertical as well as we achieved a record home revenue in the first quarter.

Jayme Mendal: Q1 also marked numerous milestones in rebuilding technology infrastructure for future speed and scale. We moved most of our traffic to a new site infrastructure, began migrating customers to a new agent platform, and now have the majority of our traffic bidding migrated to our new ML-powered bidding platform. These changes will enable faster feature development and greater employee productivity in the future.

Jayme Mendal: Q1 also marks numerous milestones and rebuilding technology infrastructure for future speed and scale.

Jayme Mendal: We moved most of our traffic to new site infrastructure began migrating customers to our new agent platform and now have the majority of our traffic bidding migrated to our new ml powered bidding platform.

These changes will enable faster feature development and greater employee productivity in the future.

Jayme Mendal: More importantly, it sets us up to accelerate progress in areas ranging from site experiences to AI-powered bidding to new agent products and features. I want to thank the EverQuote team for the incredible tenacity they demonstrated and continue to demonstrate through the recent hard market cycle. This period of unprecedented market conditions dating back to 2021 has been an extended challenging stretch for EverQuote, but we are emerging stronger. The team that has led us through this challenging period is battle-hardened and energized by the results we're beginning to see.

Jayme Mendal: More importantly, it sets us up to accelerate progress in areas ranging from site experiences to AI powered bidding to new agent products and features.

Speaker Change: I want to thank you evercore team for the incredible tenacity, they demonstrated and continue to demonstrate through the recent hard market cycle.

Speaker Change: This period of unprecedented market conditions dating back to 2021 has been an extended challenging stretch forever, but we are emerging stronger the team.

Speaker Change: <unk>, which has led us through this challenging period is battle hardened and energized by the results we are beginning to see.

Jayme Mendal: It's this team that gives me confidence in EverQuote's pursuit and eventual achievement of our vision, to become the largest online source of insurance policies by using data, technology, and knowledgeable advisors to make insurance simpler, more affordable, and personalized. I'll now turn the call over to Joseph to discuss our financial results. Thank you, Jayme.

Speaker Change: Is this team, which gives me confidence in everquest pursuit and eventual achievement of our vision.

Speaker Change: To become the largest online source of insurance policies by using data technology, and knowledgeable advisers to make insurance simpler more affordable and personalized.

Speaker Change: I'll now turn the call over to Joseph to discuss our financial results.

Joseph Sanborn: Thank you, Jayme, and thank you all for joining us. I will start by discussing our financial results for the first quarter of 2024 before providing an update on what we are currently seeing in the auto insurance sector and our guidance for the second quarter. We had a strong start to 2024 and exceeded first quarter guidance across all three of our primary financial metrics of total revenue, variable marketing margin, or VMM, and Adjusted EBITDA.

Joseph Sanborn: Thank you Jamie and thank you all for joining.

Joseph Sanborn: I'll start by discussing our financial results for the first quarter of 2024 before providing an update on what we're currently seeing in the auto insurance sector and our guidance for the second quarter.

Joseph Sanborn: We had a strong start to 2024 and exceeded first quarter guidance across all three of our primary financial metrics of total revenue variable marketing margin or <unk>.

Joseph Sanborn: And adjusted EBITDA.

Joseph Sanborn: We produced a record level of net income as well as a record level of adjusted EBITDA. These results were driven by continued strong execution of our operating teams against an improving auto carrier landscape.

Joseph Sanborn: We produced a record level of net income as well as a record level of Adjusted EBITDA. These results were driven by continued strong execution by our operating teams against an improving auto carrier landscape. Total revenues in the first quarter were $91.1 million, driven by stronger enterprise carrier spend of more than 150% from Q4 levels. Revenue from our auto insurance vertical was $77.5 million in Q1, representing roughly 85% of revenues in the period and a sequential increase of 72% from the fourth quarter of 2023.

Total revenues in the first quarter were $91 1 million driven by stronger enterprise carrier spend of more than 150% from Q4 levels.

Joseph Sanborn: Revenue from our auto insurance vertical was $77 5 million in Q1, representing roughly 85% of revenues in the period and a sequential increase of 72% from the fourth quarter of 2023.

Joseph Sanborn: Revenue from our home and renters insurance vertical was $12.7 million in Q1, a sequential increase of 29% from the fourth quarter of 2023. VMM was $30.8 million for the first quarter, up nearly 50% from the fourth quarter of 2023. VMM as a percentage of revenues in the quarter was 33.8% and, as expected, declined from the record level of the previous quarter as we experienced a more costly advertising environment, which was partially offset by continued strong execution by our traffic teams and the ongoing benefits of our investments and our bidding technology. Turning to operating expenses and the bottom line.

Joseph Sanborn: Revenue from our home and renters insurance vertical was $12 7 million in Q1, a sequential increase of 29% from the fourth quarter of 2023 <unk>.

Joseph Sanborn: <unk> was $30 8 million for the first quarter up nearly 50% from the fourth quarter of 2023.

<unk> as a percentage of revenues in the quarter was 33, 8% and as expected declined from a record level of the previous quarter as we experienced a more costly advertising environment, which was partially offset by continued strong execution by our traffic teams and the ongoing benefits of our investments and our bidding technology.

Joseph Sanborn: Turning to operating expenses in the bottom line, we continue to be very disciplined in managing expenses and driving incremental efficiency across our operations. Our reference to streamline that business have led to improved execution and greater operating leverage.

Joseph Sanborn: We continue to be very disciplined in managing expenses and driving incremental efficiency across our operation. Our efforts to streamline the business have led to improved execution and greater operating leverage. Cash operating expenses, which exclude certain non-cash and other one-time charges, were in line with expectations of $23.2 million in the first quarter, or a 23% decline from the first quarter of 2023.

Joseph Sanborn: Cash operating expenses, which excludes certain noncash and other onetime charges were in line with expectations of $23 2 million in the first quarter or 23% decline from the first quarter of 2023.

Joseph Sanborn: In the first quarter, we reached a milestone of generating a positive gap in income for the first time since the third quarter of 2019, reporting a record high of $1.9 million. Adjusted EBITDA reached a record $7.6 million in Q1, a 41% improvement year over year on 17% lower revenues, reflecting the strong operating leverage that we have created in our model since our June 2023 strategic realignment. Adjusted EBITDA as a percentage of revenues reached 8.3% in the quarter as the rapid increase in auto carrier recovery in Q1, coupled with our tight expense discipline, led to VMD overperformance flowing through to Adjusted EBITDA.

Joseph Sanborn: In the first quarter, we reached a milestone of generating positive GAAP net income for the first time since the third quarter of 2019 reporting a record high of $1 9 million.

Joseph Sanborn: Adjusted EBITDA reached a record seven 6 million in Q1 of 41% improvement year over year on 17% lower revenues, reflecting the strong operating leverage that we have created in our model since our June 2023 strategic realignment.

Joseph Sanborn: Adjusted EBITDA as a percentage of revenues reached eight 3% in the quarter as the rapid increase in auto care recovery in Q1, coupled with our tight expense discipline led to DMD over performance flowing through to adjusted EBITDA, We remain steadfast in our commitment to efficient operations and as we gain greater confidence in a sustainable.

Joseph Sanborn: We remain steadfast in our commitment to efficient operations, and as we gain greater confidence in the sustainability of the recovery, we expect to modestly increase investments to support our future growth. As a result, as we progress through the second half of this year, adjusted EBITDA margins are likely to moderate but remain above pre-downturn levels. We delivered operating cash flow of $10.4 million for the first quarter, ending the period with cash and cash equivalents of $48.6 million, up from $38 million at the end of the fourth quarter of 2023. Adjusted EBITDA will continue to be a close proxy for operating cash flow going forward, subject to normal working capital adjustments.

Joseph Sanborn: Of the recovery, we expect to modestly increase investment to support our future growth.

Joseph Sanborn: As a result, as we progressed through the second half of this year adjusted EBITDA margins are likely to moderate but remain above pre downturn levels.

Joseph Sanborn: We delivered operating cash flow of $10 4 million for the first quarter ending the period with cash and cash equivalents of $48 6 million up from $38 million at the end of the fourth quarter of 2023.

Joseph Sanborn: Adjusted EBITDA will continue to be a close proxy for operating cash flow going forward subject to normal working capital adjustments before turning to guidance I want to provide an update on what we're seeing in the auto insurance industry. This year.

Joseph Sanborn: Before turning to guidance, I want to provide an update on what we are seeing in the auto insurance industry this year. During our February call, we shared that many of our carrier partners recently reiterated their prior comments to us of wanting to return to acquiring new consumers during the course of 2024. We are pleased to see this more growth-oriented mindset taking hold, which has led to a strong start for the year with more auto insurers beginning to return to our marketplace.

Joseph Sanborn: During our February call, we shared that many of our carrier partners have recently reiterated their prior comments to us of wanting to return to acquiring new consumers. During the course of 2024. We are pleased to see this more growth oriented mindset is taking hold which has led to a strong start for the year with more auto insurers beginning to return to a marker.

Joseph Sanborn: We are increasingly optimistic that the auto recovery will be more sustainable this time around. However, we are cognizant that there is no playbook for how our carrier partners will emerge from what several insurance executives have referred to as a once-in-a-generation downturn. Given these dynamics, we expect unpredictability to persist in the near term, which makes it increasingly challenging to look at historical seasonal patterns to predict our outlook for the remainder of the year.

Joseph Sanborn: Place, we are increasingly optimistic that auto recovery will be more sustainable at this time around however, we are cognizant that there is no playbook for how our carrier partners will emerge from what several insurance executives have referred to as a once in a generation downturn.

Joseph Sanborn: Given these dynamics, we expect unpredictability to persist in the near term, which makes it increasingly challenging to look at historical seasonal patterns to predict our outlook for the remainder of the year.

Joseph Sanborn: We continue to execute on the strategy and accomplish the goals we laid out last year following our June strategic realignment. We committed to restoring consistent quarterly cash flow from operations in the first half of the year, followed by a return to our pre-downturn adjusted EBITDA margins in 2024. I am pleased to share that we achieved both of these goals in the first quarter ahead of our expectations. Furthermore, we expect our operations to continue to generate cash flow, and quarterly adjusted EBITDA margins to remain at or above pre-downturn levels for the remainder of this year.

Joseph Sanborn: We continue to execute on the strategy and accomplish the goals we laid out last year following our June strategic realignment.

We committed to restoring consistent quarterly cash flow from operations in the first half of the year, followed by a return to our pre downturn adjusted EBITDAR margins in 2024.

I am pleased to share that we achieved both of these goals, but in the first quarter ahead of our expectations.

Joseph Sanborn: Furthermore, we expect our operations to continue to generate cash flow and quarterly adjusted EBITDA margins to remain at or above pre downturn levels for the remainder of this year.

Joseph Sanborn: Turning to our guidance for Q2 2024, we expect revenue to be between $100 and $105 million. We expect VMM to be between $31 and $33 million, and we expect adjusted EBITDA to be between $7 and $9 million.

Joseph Sanborn: Turning to our guidance for Q2 2024, we expect revenue to be between 101 hundred $5 million.

Joseph Sanborn: We expect <unk> to be between 31, and $33 million and we expect adjusted EBITDA to be between seven and $9 million.

Joseph Sanborn: In summary, we entered 2024 with deep conviction that EverQuote is extremely well positioned to directly benefit as sustainable auto care recovery takes hold and persists. We delivered strong performance in the first quarter, meeting or exceeding senior guidance for revenue, VMM, and adjusted EBITDA. Our ability to achieve record levels of net income and adjusted EBITDA in the first quarter demonstrates our efficient business model. We will continue to focus on strong execution and remain steadfast in our commitment to efficiency, while strategically investing in positioning EverQuote for future growth and success. Jayme and I will now answer your question.

Joseph Sanborn: In summary, we entered 2024 with deep conviction that evercore is extremely well positioned to directly benefit our sustainable auto care recovery takes hold and persists. We delivered strong performance in the first quarter exceeding our guidance press revenue <unk> and adjusted EBITDA, our ability achieved record levels of net income and adjusted.

Joseph Sanborn: EBITDA in the first quarter demonstrate our efficient business model.

Joseph Sanborn: We will continue to focus on strong execution and remain steadfast in our commitment to efficiency, while strategically investing and positioning evercore for future growth and success, Jamie and I will now answer your questions.

Operator: We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue, and your first question comes from the line of Ralph Schackart with William Blair. Please go ahead.

Speaker Change: We will now begin the question and answer session.

If you have dialed in and would like to ask a question. Please press star one on your telephone keypad to raise their hand and joined the queue. If you would like to withdraw your question seemed up rest star one again.

Speaker Change: I called upon to ask that question and are listening very loud speaker on your device. Please speak up your handset and ensure that your phone is not on mute when asking a question.

Speaker Change: Press Star one to join the queue.

Speaker Change: And your first question comes from the line of Rob Checkered.

Rob Checkered: Blair. Please go ahead.

Ralph Edward Schackart: Good afternoon, thanks for taking the time to answer the question. Jayme, maybe if you could provide some perspective, if you could please, just in terms of, you know, how broad the base of the recovery you're seeing, you know, in terms of the number of carriers, the increasing number of states, just any sort of like operational metrics you might be able to add to the, you know, obviously really strong performance in the quarter that I have a follow-up for Joseph.

Rob Checkered: Hi, good afternoon, thanks for taking the question Jay.

Rob Checkered: Jamie maybe if you could provide some perspective you could please just in terms of how broad base. The recovery, we're seeing in terms of number of carriers.

Rob Checkered: Increasing number of states, just any sort of like operational metrics, you might be able to to add to that obviously really strong outperformance in the quarter, then I'll follow up for Joseph.

Rob Checkered: Yes.

Jayme Mendal: Sure. Thanks, Ralph.

Sure. Thanks Ralph.

Jayme Mendal: So, you know, if you take a step back, I think sort of across the board, you're seeing broad-based improvement in carrier underwriting profitability. So that's been steadily improving. You know, over the last year, I think auto carriers have taken 20-ish points of rate, and you're seeing, you know, across a number of carriers, double-digit percentage point improvements in their combined ratios. So I think the industry itself is certainly getting back to a more broad-based position of health, which is the primary leading indicator for re-entry back into the marketplace.

Rob Checkered: Yes.

Jayme Mendal: So yes, if you take a step back I think sort.

Speaker Change: Sort of across the board you are seeing broad based improvement in carrier underwriting profitability.

Speaker Change: Been steadily improving over the last year I think auto carriers have taken 20 ish points of rate and you are seeing.

Speaker Change: Across a number of carriers double digit percentage point improvements and their combined ratios.

Speaker Change: I think we are the industry itself is certainly getting back to a more broad based position of health, which is the primary leading indicator to re entry back into the marketplace.

Jayme Mendal: Within our marketplace, I guess a data point I could share is that all the top ten carriers from Q4 have stepped up their spend into Q1. And there is a broad base of carriers that are reactivating campaigns, restoring budgets, and reopening state footprints in our marketplace. Now, if you just look at the performance we've seen so far this year and the guidance we're providing for the second quarter, what that demonstrates is a recovery that has happened quite faster than we expected in the first part of this year.

Speaker Change: Within our marketplace.

Speaker Change: I guess, it's a data point I can share is we've seen all of the top 10 carriers from Q4 have stepped up their spend.

Into Q1, and there is a broad base of carriers that are reactivated campaigns, we're storing budgets reopening state footprints in our marketplace.

Now if you just look at the performance we've seen so far this year and the guidance, we're providing for the second quarter.

Speaker Change: What that demonstrates is a recovery that has happened faster than we expected in the first part of this year and so I think a good bit of that recovery is somewhat frontloaded relative to how we expected the year to play out.

Jayme Mendal: And so I think a good bit of that recovery is somewhat front-loaded relative to how we expected the year to play out. And there is certainly, you know, one major carrier that has leaned in very aggressively, but by and large, we're seeing a more broad-based recovery than we were seeing this time last year.

Speaker Change: And there is certainly one major carrier that has leaned in very aggressively but by and large we're seeing a more broad based recovery than we were seeing this time last year.

Joseph Sanborn: Okay, that's really helpful. And then, Joseph, historically, I know it's just unpredictable, like you talked about on the recovery path, but historically, you'd see a strong Q1, seasonally, maybe down Q2, up Q3, maybe, you know, Q4 is down. Can you help us kind of think about the shape of, you know, the revenue recovery as we think about sort of...

Speaker Change: Okay. That's really helpful. And then just a historical analysis unpredictable like you've talked about on the recovery path of historically see a strong Q1 seasonally down Q2 Q3.

Speaker Change: Q4 is down just can you help us kind of think about sort of the shape of the Robert in your recovery as we think about sort of modeling 'twenty 'twenty four.

Joseph Sanborn: Sure, happy to, Ralph. So let me just maybe start this thing about how the year has unfolded to date, as Jayme said, relative expectations. So the normal seasonal patterns you just described, start the year with, that would be a good start to the year, Q2 down, Q3 up, Q4 down. However, given what's actually transpired, it's been a much stronger start to the year, as Jayme mentioned. And it's really been led by a handful of carers who have been aggressively expanding their state footprint more quickly.

Speaker Change: Sure happy to Rob So let me just maybe start this thing about how as the year unfold to date as Jamie said relative to expectations. So the normal the normal seasonal patterns you to subscribe to start the year, we thought would be a good start to the year Q2 down Q3 Q4 down <unk>.

Speaker Change: Given given what actually transpired its been in a much stronger start to the year as Jamie mentioned and.

Speaker Change: And it's really been led by a handful of carriers, who have been aggressively expanding their state footprint more quickly and was also is having a strong Q1, but then when you look at our Q2 Guide Q2 guide implies auto returning to peak or near peak levels. Let me start in Q1 of 2023.

Joseph Sanborn: And resulting in us having, obviously, a strong Q1, but if you look at our Q2 guide, Q2 implies auto-returning to peak or near-peak levels that we saw in Q1 of 2023. So as a result, we see this growth as we expected for 2024 being more front-end loaded. And so we think about how the, we think for the second half of the year, what does that imply? So we think about the carriers are more aggressive and coming into the marketplace more aggressively.

Speaker Change: So as a result, we see this growth as we expected for 2024 being more front end loaded and so we think about how we think for the second half what does that imply so when you think about the carriers are more rather than coming into the marketplace more aggressively.

Joseph Sanborn: There are relatively few additional states and territories to open at this point, in part because some of the opportunities, some of the more challenging states, some of the larger states, but the timing for those is still TBD, and some are saying it won't be till 2025.

Relatively few additional states soon to open at this point.

Speaker Change: In part because some of those opportunities some of the more challenging states some of our larger states, but the timing of those is still TBD and some are saying won't be till 2025, and then as we look at the broader range of carriers out there, we certainly see enthusiasm for getting back to growth mode, but the justice the specificity of their plans for the second half.

Joseph Sanborn: Then, as we look at the broader range of carriers out there, we certainly see enthusiasm for getting back to growth mode, but the specificity of their plans for the second half is still uncertain. So we put this all together. The way we think about it is, we expect to have strong year-on-year growth in the second half of the year, but we are not currently expecting the sort of seasonal pattern of a sequential improvement from Q2 to Q3 to apply this year, just given the front-end loaded nature of the recovery so far. So that's stuff we can give you right now based on what we're seeing. All right. Thanks, Joseph. I appreciate it.

Speaker Change: Is still uncertain.

Speaker Change: So we put this all together the way we think about it is we expect a strong year on year growth in the second half of the year, but we are not currently expecting this sort of a seasonal pattern of a sequential improvement from Q2 to Q3 apply this year just given the front end loaded nature of the recovery so far.

Speaker Change: So we can give you right now based on what we're saying.

Speaker Change: Alright, Thanks, guys I appreciate it thanks, Eric.

Ralph: Ralph Thanks, Ralph.

Ralph: Okay.

Michael Patrick Graham: Your next question comes from the line of Michael Graham with Canaccord. Please go ahead.

Ralph: Your next question comes from the line of Michael Graham with Canaccord. Please go ahead.

Michael Patrick Graham: Thank you and congratulations on the strong results. Maybe just to follow up on Ralph's question, one of the other players in the industry had suggested that volumes were recovering, but pricing was especially strong here in the early phases of this recovery. So I just wonder if you could comment on the role that pricing might be playing and whether that means this recovery is more sustainable or less sustainable. And then I just wanted to ask a quick question on operating leverage. I know you mentioned that in your prepared remarks, but you had such a good flow through here in the quarter. How are you thinking about the ability to keep delivering that flow through the year?

Michael Patrick Graham: Thank you and congrats on the strong results.

Michael Patrick Graham: Just to follow up on Ralph's question.

Michael Patrick Graham: One of the other players in the industry had suggested that.

Michael Patrick Graham: Volumes were recovering, but pricing was especially strong here in the early phases of this recovery. So I just wonder if you could comment on that.

Michael Patrick Graham: Roll that pricing might be playing.

Michael Patrick Graham: Whether that.

Michael Patrick Graham: You mean, this recovery more sustainable less amenable.

Michael Patrick Graham: And then I just wanted to ask a quick question on operating leverage I know you mentioned that in your prepared remarks, but you had such good flow through here in the quarter.

Michael Patrick Graham: How are you thinking about the ability to keep delivering that flow through as we go through the year.

Michael Patrick Graham: Yes.

Jayme Mendal: Sure. Thanks, Mike. I'll take the first question, then I'll turn it over to Joseph on the operating leverage question.

Speaker Change: Sure. Thanks, Mike.

Speaker Change: I'll take the first question and then I'll turn it over to Josef on the operating leverage question.

Josef: So we.

Jayme Mendal: We, we have, As it relates to volume, we continue to see elevated levels of shopping persisting into Q1, and we would expect that to really persist over the course of this year as the rate cycle unfolds, people get renewal notices, those renewal notices are coming in, you know, with rates that are meaningfully higher than what people are paying. And that triggers shopping behavior. So for as long as the rate cycle is unfolding, and you got to remember, there's a six to 12 month lag from when a rate increase goes into effect to when the renewal notice may flow out to the customer.

Josef: We.

Josef: We have we.

Josef: We continue to see as it relates to the volume we continue to see elevated levels of shopping persisting into Q1, and we would expect that to really persist over the course of this year.

Josef: Yeah.

Josef: Rate cycle unfolds people get renewal notices does renewal notices are coming in with rates that are meaningfully higher than what people are paying in that trigger shopping behavior. So for as long as the rate cycle is unfolding and you've got to remember there is that 6% to 12 month lag from when a rate increase goes into effect to when the renewal notice.

Josef: Notice may close to the customer.

Jayme Mendal: For as long as that remains in effect, we expect to see these elevated levels of shopping behavior, and so... We're kind of planning for heightened levels of shopping in 2024. And then in 2025, a gradual return to more normalized levels of shopping activity. As it relates to pricing, pricing is, you know, it's stepped up meaningfully from Q4 to Q1. It is operating at healthy levels, you know, by historical standards. And, you know, we'd expect some stability in higher pricing levels, assuming the auto recovery continues to maintain its foothold. So, we're benefiting from a combination, certainly sequentially, of higher volume and higher pricing.

Josef: As long as that remains in effect, we expect to see these elevated levels of shopping behavior and so.

Josef: We're kind of planning for <unk>.

Josef: And levels of shopping in 2024, and then in 2025 gradual return to more normalized levels of shopping activity.

Josef: As it relates to pricing.

Josef: Pricing is has stepped up meaningfully from Q4 to Q1.

Josef: Is operating at healthy levels.

Josef: Historical standards.

Speaker Change: Yes, we'd expect some some.

Stability.

Speaker Change: Alrighty and higher pricing levels, assuming the auto recovery continues to maintain its foothold. So we're benefiting from a combination, yes, certainly sequentially as higher volume and higher pricing.

Speaker Change: Okay.

Joseph Sanborn: So with regard to operating leverage, I'll just give you a little color. So following our strategic realignment last summer in June, we really focused on driving operating leverage in the business. I think what you saw in Q1 was representative of what we have done.

Speaker Change: So with regards to operating leverage I'll, just give you a little color.

Speaker Change: So we are following our strategic realignment last last summer in June we have we really focus on driving operating leverage in the business I think what you saw in Q1 was representative of what we have done we got a record level of adjusted EBITDA and actually also a record level of net income the adjusted EBITDA margin in the business was $8 three.

Joseph Sanborn: You know, we got a record level of adjusted EBITDA and, actually, a record level of net income. The adjusted EBITDA margin in the business was 8.3% in Q1. As we think about... how we're going to expand the expense-based review and the implication for EBITDA margin, I have to point out a couple of things. We think operating expenses, cash operating expenses, as we refer to them, will have modest increases as we progress through the year, but we'll be very disciplined as we do that.

Speaker Change: 3% in Q1, as we think about the.

Speaker Change: How we're going to expand the expense base will be on the implications for EBITDA margin I'd point, a couple of things. We think operating expenses cash operating expenses, we refer to them, we'll have modest increase as we progress through the year and we will but we'll be very disciplined as we do that there'll be tied to sort of this idea of maintaining adjusted EBITDA margin that is above the brita pre downturn levels, we've talked to.

Joseph Sanborn: They'll be tied to sort of this idea of maintaining an adjusted EBITDA margin that is above the pre-downturn levels that we've talked about as a goal, and pre-downturn levels were like 5.5 to 6 percent, where they were in Q1, which was around 8.25 percent in Q1, and we'll manage them in a disciplined way. We're adding modest incremental investment as we progress through the year on the op-ex side of positions for future growth, but at the same time, we'll be continuing to make sure we're maintaining that EBITDA margin and improving it as we get a sense of performance in the second half.

Speaker Change: It is a goal and pre downturn levels were like 556% and where they were in Q1, which is around eight eight in a quarter percent in Q1, and we will manage them in a disciplined way, we're adding modest incremental investments as we progress through the year on the opex side position us for future growth, but at the same time, we'll be continuing to make sure we're maintaining that EBITDA margin improving it is.

Speaker Change: We get and the <unk> performance in the second half of the year.

Michael Patrick Graham: Okay, great. Thanks a lot, guys. Thank you, Michael.

Speaker Change: Okay, great. Thanks, a lot guys.

Speaker Change: Thank you Michael.

Cory Alan Carpenter: Your next question comes from the line of Cory Carpenter with J.B. Morgan. Please go ahead. Okay, thanks for the questions.

Cory Alan Carpenter: Your next question comes from the line of Cory Carpenter with J.B. Morgan. Please go ahead. Okay, thanks for the questions. I have two. First, I'm just hoping you could talk more about the increment.

Your next question comes from the line of Cory Carpenter with Jpmorgan. Please go ahead.

Cory Alan Carpenter: Great. Thank you for your questions.

Cory Alan Carpenter: First just hoping you could talk more about the incremental investments that you are planning on making.

Cory Alan Carpenter: What may be a little more specificity.

Cory Alan Carpenter: And we plan on investing in and then secondly.

Cory Alan Carpenter: Vertical drilling 35% if you could just talk about what youre seeing there and how you think about the sustainability of that growth going forward. Thank you.

Speaker Change: Sure. Thanks, Brian.

Jayme Mendal: So, as Joseph mentioned, you know, we, the discipline and expense management will persist, but as we get comfortable with our adjusted EBITDA levels, we will begin ramping some targeted investments back in as we progress through the course of the year. Probably two areas I'd highlight for you, Cory; it's probably not exhaustive, but there'll be some concentrated investment in the areas of data science, ML, and AI, where we have applications across the business, from traffic to improving carrier performance and agent performance.

Speaker Change: So as Joseph mentioned.

Speaker Change: The disciplined.

Speaker Change: Disciplined expense management will persist, but as we get comfortable.

Speaker Change: With our adjusted EBITDA levels, we will begin ramping some targeted investments back in.

Speaker Change: Through the course of the year, but it's.

Jayme Mendal: So that'll be one area of investment. Another is going to be continuing to extend our advantage with local agents. Over the last year, we've spent a lot of time with the local agent customer base. I think we've got a pretty good sense of their needs and, you know, have begun making investments in improving our existing products and developing new products to better meet their needs, to both sort of deepen and expand our relationships with that agent base. So that would be another area where we'll direct some resources.

Two areas I'd highlight for you Corey.

Speaker Change: It's probably not exhaustive, but there'll be some concentrated investment in the areas of sort of data science ml and AI, where we have applications across the business from traffic to prevent carrier performance Asia performance.

Speaker Change: So that would be one area of investment and now theres going to be and continuing to extend our advantage with local agents.

Speaker Change: Over the last year, we spent a lot of time with the local Asian customer.

Speaker Change: Customer base.

Speaker Change: We've got a pretty good sense.

Speaker Change: Their needs and have begun making investments.

Speaker Change: Proving our existing products and developing new products to better meet their needs to both deepen.

Speaker Change: Deepen and expand our relationships with that agent base.

Speaker Change: That'd be another area, where we will direct resources.

Jayme Mendal: To your second question about homeowners, you know, we had record revenue and profits in the first quarter. We're starting to see some improvement in the homeowner's market from an underwriting profitability standpoint. You know, it was similarly challenged to auto. I think it's gone through a period of a lot of cat losses. But in the first quarter of this year, carriers produced better underwriting results, and that was helped by a period of relatively light cat losses. So, you know, the growth has been healthy.

Speaker Change: To your second question about homeowners.

Speaker Change: Record revenue and home in the first quarter.

Speaker Change: We're starting to see.

Speaker Change: Some improvement in the homeowners market from an underwriting profitability standpoint, it was similarly challenged to auto.

I think it's gone through a period of.

Speaker Change: Lot of Cat losses.

Speaker Change: But in the first quarter of this year carriers produce better underwriting results and that was helped by periods of relatively light cat losses.

So yes.

The growth has been healthy we've continued to.

Jayme Mendal: We've continued to maintain focus on it as we've stepped back from some of our previous vertical markets and shifted some of that focus to home. And we expect home to continue to grow over the course of the year. You know, I'll note that the comps will become a bit higher as we progress through the year, but we do expect to continue to grow that vertical as we progress through 2024.

Speaker Change: To maintain focus on it as we step back from some of our previous vertical markets and shifted some of that focus to home and we expect him to continue to grow over the course of the year.

Speaker Change: I will note that the comps will become a bit high.

Speaker Change: As we progress through the year, but we do expect to continue to grow that vertical as we progressed through 2024.

Speaker Change: Great. Thank you.

Speaker Change: Alright.

Zach Cannon: Your next question comes from the line of Zach Cannon with B Riley Securities. Please go ahead.

Speaker Change: Your next question comes from the line of Zach Cummins with B Riley Securities. Please go ahead.

Zach Cannon: Hi, good afternoon. Thanks for taking my questions and congratulations on the strong results here in Q1. I really just had a question around the ramp-up in advertising expenses as you start to see improvements in demand. Can you talk about some of the pricing that you're seeing in the ad environment and maybe which channels you could be prioritizing versus others as you start to see carrier demand really ramp up?

Zach Cummins: Yes, hi, good afternoon, thanks for taking my questions and congrats on a strong results here in Q1.

Zach Cummins: Are you really just had a question around the ramp up in advertising expenses as you start to see improvements in demand can you talk about some of the pricing that youre seeing in the AD environment.

Zach Cummins: Maybe which channels you could be prioritizing versus others as you start to see carrier demand really ramp up.

Zach Cummins: Yeah.

Jayme Mendal: So, we... As carrier demand has come back, so too has some competition in the sort of advertising environment, particularly in the more vertical, specific channels, you know, like paid search as an example. And so Zach, I mean, the way we're always managing the business to maximize our variable marketing margin dollars, and so where we think we can get incremental volume or incremental dollars, we will bid on that, which may cause some BMM margin percentage compression but results in more variable marketing margin dollars for us.

So we.

Zach Cummins: Yeah as carrier demand has come back so so too has.

Zach Cummins: Competition in the <unk>.

Zach Cummins: Advertising environment, particularly in the more vertical specific channels.

Zach Cummins: Like paid search as an example.

Speaker Change: And so Jack I mean, the way, we're always managing the business to maximize our variable marketing margin dollars, that's where we think we can get incremental volume or incremental dollars.

Speaker Change: <unk> will fit into that which may cause some BNS margin percentage compression, but our results in more variable marketing margin dollars for us so as we have as we've seen.

Jayme Mendal: So as we've seen the advertising environment become more competitive, we see a little bit of compression in BMM, but it's more than made up for in the cost; increases are more than made up for by volume and pricing. With the higher pricing, what that has changed from a channel standpoint is that it now makes insurance as a category more competitive in some of the more broad-based channels. So channels that aren't industry-specific, you know, display or social or things like that, have really come back to life in the first part of the year.

Speaker Change: The advertising environment become more competitive and we've seen a little bit of compression of the <unk>, but its more than made up for in.

Speaker Change: The cost increases are more than made up for by volume and pricing.

Speaker Change: With the higher pricing that has changed from a channel standpoint is it now makes insurance as a category more competitive in some of the more broad based channels. So channels that are industry specific display or social or things like that have really come back to life in the first part of the year. They may run at slightly lower Mark.

Jayme Mendal: They may run at slightly lower margins, but there's a lot of incremental volume and dollars to go get. And so we've been able to reactivate a number of those channels as monetization has come back over the first four months of this year.

Speaker Change: But there's a lot of incremental sort of volume and dollars to go yet and so we've been able to reactivate a number of those channels as monetization has come back over the first four months of this year.

Speaker Change: And maybe I could add just to give you a quick.

Joseph Sanborn: And maybe I could add or just give you a little comment. In context of the sort of VMM margins, do you think about what it means as we progress through the year? So we had Q1 was just under 34%. As expected, it was down from the levels we saw in Q4, which was an environment that was very depressed. As we think about Q, as we progress into Q2, you see our guide implies about 31% for VMM margin. We think it'll be sort of in the low 30s for the year on balance.

Speaker Change: Hello, Joe and.

Speaker Change: In context on sort of BMS margins do you think about what it means that as we progress through the year. So we had Q Q1 was just under 34%. We are sort of as expected was down from the levels. We saw in Q4, we closed with an environment. It was very depressed as we think about Q as we progress into Q2, you see our guide implies about 31% for VM and margin.

Speaker Change: And we think it'll be sort of in the low <unk> for the year on balance and I guess sort of three factors that give you the sort of help understand whats driving it one is first and foremost advertising cost as the auto as we get on a recovery of the costs around acquiring advertising is rising there is more demand and that's putting up cost.

Zach Cannon: And I guess sort of three factors I'd give you to sort of help understand what's driving it. One is, first and foremost, advertising costs. As we get auto recovery, the costs around acquiring advertising are rising. There's more demand, and that's driving up costs for advertising. The second, which is driving it from our point of view, is that as we're, especially in Q2, as we're ramping up our traffic, you're effectively testing back into certain channels, and in doing that, it's less efficient until you scale them.

Zach Cannon: So that's a part that's impacting Q2. And the third is just at a high level from the business; as we get more, we have a relatively higher VMM margin in agency than in enterprise, generally speaking. As we've seen the ramp in enterprise care, Q1 driving, being driven by enterprise care, ramping at a much higher rate, that is resulting in the next shift to carry, which is bringing down the VMM margin as a whole in the business.

Speaker Change: So the advertising the second which is driving it from our point of view is that we have as which especially in Q2 as we are lean as we're ramping our traffic youre effectively testing back in to certain channels and in doing that it's less efficiently scale them.

Part of this impact in Q2 and the third is just at a high level from the business as we get more we have a relatively higher <unk> margin in agencies and enterprise and generally speaking as we've seen the ramp in enterprise carrier Q1, driving being driven by enterprise care ramping at a much higher rate that is helping in the mixed shift to carrier.

Speaker Change: Which is bringing down to be in mid March in a hole in the business.

Zach Cannon: You understand. That's extremely helpful. Well, thanks for taking my question and best of luck here in Q2.

Speaker Change: Understood Thats extremely helpful. Thanks for taking my question and best of luck here in TTS.

Speaker Change: Thanks Mac.

Greg Peters: Your next question comes from the line of Greg Peters with Graham and James. Please go ahead.

break theatres: Your next question comes from the line of break theatres with Raymond James. Please go ahead.

Greg Peters: Yeah. Hey, good afternoon. This is Greg sitting in for you. With the recovery in the auto carriers, it doesn't feel like they fully restored their budgets, but your second quarter guidance seems to imply revenue near the quarterly run rate you were achieving in 2021. So just curious if you could discuss how you view your market share and if it's fair for us to assume that it's increased in the last couple of years.

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

Sid: Just with the recovery in the auto carriers, just doesn't feel like the fully restored their budgets, but your second quarter guidance seems to imply revenue near the quarterly run rate you were achieving in 2021 so.

Sid: Just curious if you could discuss how you view your market share and if it's fair for us to assume that it's increased the last couple of years.

Jayme Mendal: Yeah, so, you know... We are today the largest digital PNC insurance marketplace. You just look at that by revenue. Now, over the last couple of years, we've been in a very constrained budget environment. In that environment, we've been mostly focused on maximizing profitability and improving the value we're delivering to our customers, whether that's through better targeting and higher-intent traffic. In some cases, that means actually pulling back on volume

Speaker Change: Yes so.

Speaker Change: We are today, the largest digital P&C insurance marketplace. If you just look at that by revenue.

Now over the last couple of years, we've been in a very constrained budget environment and that environment, we've been mostly focused on maximizing profitability and improving and improving the value we're delivering to our customers, whether that's through better targeting higher intent traffic and in some cases that means actually pulling back on.

Speaker Change: Volume, but even still we remain the largest digital insurance marketplace in P&C.

Jayme Mendal: But even still, you know, we remain the largest digital insurance marketplace in PNC. And so, as we do that, we expect, as we continue to make these investments, we expect our position to continue to strengthen. Do you want to talk about the relative, like, benchmarking? in terms of revenue versus historical periods. Yeah, sure. So I make when you think about auto and think about auto rev.

Speaker Change: And so.

As we do that we expect as we continue to make these investments we expect our position to to continue to strengthen.

Speaker Change: Do you want to talk about the relative like benchmarking.

Speaker Change: In terms of revenue versus historical periods, yes.

Joseph Sanborn: And if you look at that, our Q2 guide, and what's implied by that Q2 guide, we're sort of at or near the peak levels implied in Q2 that we saw in Q1. As we look to the second half of the year, we believe that the auto recovery, we're still very bullish on the outlook for the auto recovery. I think what we're highlighting, though, is that what exactly will happen in the second half of 24 depends on factors we don't yet know. So, one is, you know, other carriers coming to the market. Some carriers are; a handful of carriers have been more aggressive in getting rate increases.

Joseph Sanborn: Yeah, sure. When you think about auto revenues, our peak was Q1 of 2023 for auto, not for total revenues, but for auto. Remember, we had the health business prior to June 23, 23. So, if you look at just auto, it was just under $90 million in Q1.

Speaker Change: Yes, sure. So I think when you think about auto think about auto revenues are peak was Q1 of 2023 are for auto not for total revenue of the audits I remember we had the health business. Prior to June 23. So we look at it as auto was just under 90 million in Q1 of 'twenty three and if you look at that but where our Q2 guide and what's implied by that Q2 guide where sort of added.

Speaker Change: Near the peak levels implied in Q2 that we saw in Q1 of 'twenty three so we look to the second half of the year, we believe that auto recovery, we're still very bullish on the outlook for auto recovery I think what we're highlighting knows how what exactly will happen in the second half of 'twenty four depends on factors, we don't yet know so one is other carriers.

Joseph Sanborn: They've been aggressively leaning into our market in Q1, and we expect that to continue in Q2. As you get to the end of Q2, for those large, some of these handful of very large carriers that leaned in aggressively, there are relatively few states they can open at this point in our marketplace, they've opened so many. The states that remain are some of these very large states with relatively more challenging regulatory environments.

Coming to the market. Some carriers are a handful of carriers have been more aggressive in getting rate getting rate increases they've been aggressively leaning into our marketing Q1, and we expect that to continue in Q2 as you get to the end of Q2 for those large some of these handful of very large carriers with Lincoln aggressively there's relatively few states. They can open at this point in our marketplace.

Speaker Change: They've opened so many of the states that remain at some of these very large states was more toward relatively more challenging regulatory environment and.

Joseph Sanborn: And, you know, when those will open is an open question. Some are saying it won't be in a meaningful way until 2025. So, I think that's something to think about.

How when those will open as an open question. Some are saying we won't be in a meaningful way till 2025.

Speaker Change: A piece to think about it the second piece I would say if you look at the.

Joseph Sanborn: The second piece I'd say, if you look at the second half of the year, we're expecting strong year-on-year growth in the second half of 23 to the second half of 24. I think the thing we highlighted in response to Ralph's question is, how will seasonality play out? And I think, as we look at it right now, we've had a very front-end loaded recovery, relatively expected. So, it's hard to know whether the normal sequential increase you'd see from Q2 to Q3 will apply, based on what we are seeing today, just given the environment.

Second half of the year, we're expecting.

This year, a strong year on year growth in second half of 'twenty three the second half of 'twenty four.

Speaker Change: Thing we highlighted in response to <unk> question is how will the seasonality play out and I think as we look at it right now we've got a very front end loaded recovery relatively we expected. So it is hard to know the normal sequential increase you see from Q2 to Q3 will apply based on what we are seeing today, just given the environment, but we were very bullish on the long term view on as Jamie said trying to measure that we are the largest.

Joseph Sanborn: But we're very bullish on the long-term view. And as Jamie said, trying to measure it, you know, we are the largest PNC marketplace today. But if you look at measuring market trends, we'll be talking about more of that over time, I think, as we get to a more sustainable market where there's more predictability in the market and you're seeing a more broad base of tariffs.

Speaker Change: P&C marketplace today, but as you look at measuring market share I think we'll be talking about more of that over time I think as we as we get to a more.

Speaker Change: <unk>.

Speaker Change: A market, where there is more predictability in the market and you're seeing more broad based of tariffs coming out.

Speaker Change: Okay. Thank you.

Jason Michael Kreyer: Your next question comes from the line of Jason Kreyer with Craig Halem Capital Group. Please go ahead.

Speaker Change: Your next question comes from the line of Jason <unk> with Craig Hallum Capital Group. Please go ahead.

Cal Bartizan: Thank you. This is Cal Bartizan for Jason. So, just to start, you know, following up on some of the commentary that you had on agents, I'm just kind of curious what you're seeing there, what maybe the pockets of strength are, and if there's any green shoots that you're seeing from captive carriers that would indicate an upswing in the agent chain.

Speaker Change: Thank you this is <unk> on for Jason.

So just to start.

Speaker Change: Following up on some of the commentary that you had.

Speaker Change: <unk>.

Speaker Change: Just kind of curious what youre seeing there what maybe the pockets of strength and.

Speaker Change: If there is any green shoots that you're seeing from captive carriers that would indicate the upswing in the agent channel.

Jayme Mendal: Sure. So, our agent business performed well in the first quarter; we did see the return of some carrier subsidies. Now, it's been happening in a fairly targeted way, right, similar to how we've seen direct carriers kind of reenter the market state by state, we're seeing subsidy dollars reenter the market state by state. But overall, you know, it's been a favorable trend. Going forward, as I mentioned earlier, we've spent a lot of time with agents over the last year.

Speaker Change: Sure. So our agent business performed well in the first quarter, we did see the return of some carrier subsidies.

No it's been happening in a fairly targeted way similar to how we've seen direct carriers kind of re enter the market state by state, we're seeing subsidy dollars reenter the market state by state, but overall, yes, it's been a favorable trend.

Speaker Change: Going forward as I mentioned earlier, we've spent a lot of time with agents over the last year I think we're going to it's an area. We'll continue to invest to extend our advantage I think we have an opportunity to grow the agent based specifically in that independent agent channel.

Jayme Mendal: I think it's an area where we'll continue to invest to extend our advantage. I think we have an opportunity to grow the agent base specifically in that independent agent channel and deepen our relationships with agents, so more spend per agent, more sticky relationships by improving the existing products and services we're offering them, as well as extending into sort of adjacent products and services to help them solve for their growth needs.

Speaker Change: And deepen our relationships with agents, so more spend per agent more sticky relationships.

Speaker Change: Moving the existing products and services, we're offering them as well as extending into.

Speaker Change: Adjacent products and services to help them solve for their growth needs.

Cal Bartizan: Perfect, thanks. And then just a second one from me quick, just wanted to follow up on kind of some of the comments earlier about some of this new bidding technology, some of the things you guys are doing on the tech side. You know, as we've seen VMM, and as the Q2 guide implies, kind of getting back towards where it kind of has been historically. I mean, do you think that there's any upside to historic levels, particularly as you continue to roll out these tech improvements?

Speaker Change: Perfect. Thanks, and then just second one from me quick.

Speaker Change: Just wanted to follow up on kind of some of the comments earlier about some of the.

This new bidding technology some of the things you guys are doing on the tech side.

Speaker Change: As we've seen BMS as the Q2 guide implies kind of getting back towards where it kind of has been historically I mean do you think that there is any upside to historic levels, particularly as you continue to rollout these tech improvements.

Jayme Mendal: Yeah, I wouldn't, you know, I wouldn't over index any one quarter on the VMM front. Joseph explained some of the factors that have contributed to the VMM compression on a percentage basis, from one quarter to the next. I think over the, you know, over a longer period of time, certainly some of the investments we are making, particularly in our bidding platform, have structurally improved the VMM of the business.

Speaker Change: Yeah, I wouldn't I wouldn't over index to any one quarter on the <unk> front.

Speaker Change: Joseph explained some of the factors that have contributed to the compression on a percentage basis.

Over the from one quarter to the next I think over the.

Speaker Change: Over a longer period of time, certainly some of the investments we are making particularly in our bidding platform have structurally improved the <unk> of the business. We're now able to take data more data at more granular level in real time about a consumer about our distribution about.

Jayme Mendal: We're now able to take data, you know, more data at a more granular level in real time about a consumer, about our distribution, about, you know, the auctions in which we are competing, and apply machine learning more effectively to generate profit-maximizing bids.

Speaker Change: Our auctions in which we are competing and apply ml more effectively to generate profit maximizing bids and that has been responsible for just a structural expansion of the Vietnam as a percentage right now we're in a period of time, where the advertising landscape is in transition we're testing back into <unk>.

Jayme Mendal: And that has been responsible for just a structural expansion of the VMM as a percentage. Right now, we're in a period of time where the, you know, the advertising landscape is in transition. We're testing back into new channels. Our distribution mix is shifting. And so there's, you know, there's a bit of fluctuation. But we do continue to expect our VMM levels to settle out probably somewhere between where they were, you know, at their peak and somewhere where they've been historically. And the structural increase there largely can be, you know, attributed to some of the bidding technology that we've rolled out.

Speaker Change: New channels, our distribution mix is shifting and so theres a bit of fluctuation, but we do we continue to expect our <unk> levels to settle out probably somewhere between where they were at their peak and somewhere where they've been historically and the structural increase there largely can be attributed to some of the bidding technology that we've rolled.

Joseph Sanborn: And maybe I can just expand on the numbers more specifically. So we talked about this on our prior call on some of our public comments last quarter. But when you look at 2023, you had VMM margins that had lots of things going on. You had puts and takes of DTCA, not DTCA.

Speaker Change: Okay.

Speaker Change: Maybe I can just expand on the numbers more specifically so you talked about this on our prior call in some of our public comments last quarter, but when you look at 2023 <unk> margins that had lots of things going on your puts and takes of DTA knocked ATCA. You had also the very depressed environment for and we were able to get advertising relatively cheap.

Joseph Sanborn: You had a very depressed environment, so we were able to get advertising relatively cheaply. What we did say, if you look back on those comments, we said normalize VMM margin just for the marketplace, including DTCA, was sort of high 20s, low 30s starting last year. We had some improvement as we progressed through the year in the normalized marketplace. And what we said going into this year is that we expected it would settle up between that 30 to 35 range.

What we did say and if you look back on those comments you said normalized <unk> margin for the just for the marketplace, excluding HCA with sort of high <unk> low <unk>, starting last year, we had some improvement as we progress through the year and then with normalized marketplace and what we said going into this year as we expect it would settle out between that 30 to 35 range and use that.

Joseph Sanborn: And we said Q1 would be just under 34. It landed just under 34. We continue to believe this year will land, will have incremental improvement relative to the 30 last year. Maybe this year is in the 31, 32 range.

Speaker Change: We said Q1 would be just under 34 Atlanta just under 34, we continue to believe this year will land, we will have incremental improvement relative to the 30 last year. Maybe this year is in the $31 32 range. So we see a dynamic where you'll continue to build every year incremental DMM margin percentage very much like we articulate I appreciate it's not the perfect.

Joseph Sanborn: We see a dynamic where you continue to build every year an incremental VMM margin percentage, very much like we articulated. I appreciate it's not the perfect story to watch, but if you look over time, I think you'll see our investments in the bidding technology are what's really driving that, you sort of normalize behaviors quarter to quarter on, especially with advertising and recovery with an auto. It's hard to look at them right now, but the bidding technology will be more sustainable. We'll talk about it as we progress through the year.

Speaker Change: <unk> started to watch where if you look over time, I think youll see youll see our investments in the bidding technology or what's really driving that as you sort of normalize behaviors quarter quarter on especially with advertising and recovery with an auto it's hard to look at those right now, but the bidding technology will be more sustainable I'll talk about as we progress through the year.

Speaker Change: Yes.

Cal Bartizan: All right, very helpful. Thank you, guys.

Speaker Change: Alright very helpful. Thank you guys.

Speaker Change: Yes.

Jed Kelly: Our next question comes from the line Jed Kelly said to Oppenheimer: Please go ahead. Peace. Be great.

Speaker Change: Our next question comes from the line of Jed Kelly with Oppenheimer. Please go ahead.

Jed Kelly: Hey, great. Thanks for taking my question. Looking at the industry as a whole, it seems like, you know, everyone's doing pretty well. So we're assessing how you're performing relative to your carriers or relative to the other competitors. How should we assess it? What key metrics should we look at? And then I think you entered the corner with 48 million in cash. Um, you talk about, you know, is that the right balance going forward and how you kind of do your balance sheet thing.

Jed Kelly: Hey, great. Thanks for taking my questions.

Jed Kelly: Looking at the industry and haul it seems like.

Jed Kelly: Everyone is doing pretty well.

Jed Kelly: So we're assessing like how you're performing relative to your carriers are up relative to other competitors.

Jed Kelly: How should we assess what key metrics should we look at and then.

Jed Kelly: Thank you ended the quarter with 48 million in cash.

Jed Kelly: You talk about is that the right balance going forward and how you kind of view your balance sheet.

Jed Kelly: Okay.

Jed Kelly: Sure.

Jayme Mendal: Thanks, Jed. Yeah, so as you say, I think... We're focused on us, right, and we've gotten off to a very strong start this year. We have results that exceeded the high end of the range on all metrics that we managed to achieve. You know, we've got record levels of adjusted EBITDA, operating cash flow, and net income. And all that, you know, is really made possible by the actions we took last year to refocus the business into a capital-efficient, P&C-focused digital insurance marketplace.

Speaker Change: Thanks, Ed.

Speaker Change: Yes, so as you say I mean I think.

We're focused on Australia, and we've gotten off to a very strong start this year.

Speaker Change: We have results that exceeded the high end of the range on all metrics that we manage to.

Got record levels of adjusted EBITDA or operating cash flow of net income and all of that is really made possible by the actions. We took last year to refocus the business.

Speaker Change: <unk> capital efficient P&C focused digital insurance marketplace.

Jayme Mendal: Jed, as we look out across the market, I think we view ourselves increasingly like, there's an element of it, which is our model is digressing a bit from that of some of our peers, simply in that we are more focused, like we are a pure play focus on PNC. We are of the mind that going deeper in this market with carriers, with agents, with consumers in a world where, you know, we are the leading player in the space, we have access to a tremendous amount of proprietary data in the space, and we think that using that data and going deeper in this market will pay off over time and allow us to extend that advantage.

Speaker Change: Hi, Jeff.

Speaker Change: <unk>.

Jeff: As we look out across the market.

Jeff: I think we view ourselves increasingly like there's an element of it which is our model is digressing a bit from that of some of our peers simply and that we are.

Jeff: More focused like we are a pure play focus on P&C.

Jeff: We are of the mind that going deeper in this market with carriers with agents with consumers in a world where we are the leading player in the space. We have access to a tremendous amount of proprietary data in this space and we think that using that data and going deeper in this market.

Jeff: Will pay off over time and allow us to extend that advantage.

Jayme Mendal: So I don't know exactly what metrics to point you to. We're really focused on delivering more value to our customers in the P&C insurance market. And I think that it's hard for us to find a comp that is similarly focused. So I would just measure us on, you know, what we say we're going to do and how we do against that. Maybe I'll take the second question.

Jeff: So I don't know exactly what metrics to point you to we are really focused on delivering more value to our customers in the P&C insurance market and I think that it's hard for us to find a comp that is similarly focused.

Jeff: So I would just measure us on what we say, we're going to do and how we do against that.

Joseph Sanborn: Maybe I'll take your second question, Jed, which is around capital allocations. First, I just want to put a couple things in context. See, we ended Q1 with close to $50 million in cash, just under $50 million in cash, and obviously, a significant improvement from where we were a year ago and where we were in the summer of 2023. I think it reflects, as Jayme said, we have a management team that is saying what we're going to do, and we're doing that, and we're executing upon it, and the operating leverage is driving more cash to We do not need it, and we expect to be cash flow positive going forward as a company.

Speaker Change: Maybe I'll take the second question Jay with strong capital allocation. So let me just put a couple of things in context.

Speaker Change: We ended we ended Q1 with close to $50 million in cash just under $50 million in cash and obviously a significant improvement from where we were a year ago and where we were in the summer of 2023 I think it reflects as Jamie said, we are we're managing that as saying, what we're going to do and we're doing that and we're executing upon it and the operating leverage.

Speaker Change: Driven more cash balance sheet, we do not need and as we expect to be cash flow positive going forward as a company.

Joseph Sanborn: So we, and as we think about the cash position, we are, you know, we're pleased to see where it's at, also compared to last year. What we'd say is, in our, we are, we are confident in our ability to drive long-term growth organically, and as Jayme mentioned, we believe we are, by going deeper to help clients' needs within P&C, we're actually going to add value that will make us increasingly differentiated from the broader market participants.

As we think about the cash position. We are we're pleased to see where it's at relative to last year. What we'd say is we are confident of our ability to drive long term growth organically and as Jamie mentioned, we believe was by going deeper.

Speaker Change: Clients' needs within TNT were actually unit value that will make us increasingly differentiated from the broader market participants.

Joseph Sanborn: We'll put it, and so that's why we feel confident about driving long-term growth organically, but we'll continue to selectively evaluate acquisition opportunities to drive inorganic growth, and what we will do, we'll be very disciplined about this and apply the same disciplined approach we've used to manage our operating expenses. We use the same approach when looking at acquisitions. But that's certainly sort of something we'll consider with our cash over time. As we've said in our prior call with regard to M&A, we believe that M&A will make sense over time as this sector consolidates with every more M&A. And we believe that we are well positioned to be a leader in this space for the long term. And we have the team and the approach that we think will win long term.

Speaker Change: And so that's why we feel comfortable driving long term growth organically, but we'll continue to selectively evaluate acquisition opportunities to drive inorganic growth.

Speaker Change: And while we will have to be very disciplined about this one requires the same disciplined approach we've used to.

Speaker Change: Manage our operating expenses, we use the same approach looking at acquisitions, but that's certainly something we'll consider with our cash over time as we've said in our in our prior call with regards to M&A, We believe that M&A will make sense over time for the sector consolidates. So there'll be more M&A and we believe that we are well positioned to be a leader in this space long term.

Speaker Change: We have the team and the approach that we think will win long term.

Speaker Change: Thank you.

Ed: Thanks, Ed.

Mayank Tandon: Our last question comes from the line of Mayank Tandon with Knee Dam. Please go ahead.

Ed: Our last question comes from the line of Miami <unk> Tandon with Needham. Please go ahead.

Mayank Tandon: Thank you. Good evening.

Mayank Tandon: Thank you good evening, congrats Jamie and Joseph on a strong quarter.

Mayank Tandon: Congratulations, Jayme and Joseph, on a strong quarter. A couple of clarifying questions. Joseph, sorry, I missed this.

Mayank Tandon: A couple of clarifying questions Joseph sorry, I missed this but I think you walked through some of the assumptions for the back half, even though you're not giving formal guidance, but just to be clear if the recovery hold that youre seeing right. Now would you still expect to see sequential growth maybe not the same seasonality that you've seen historically as you said, but.

Joseph Sanborn: But I think you walked through some of the assumptions for the back half, even though you're not giving formal guidance. But just to be clear, if the recovery holds that you're seeing right now, would you still expect to see sequential growth? Maybe not the same seasonality that you've seen historically, as you said, but some sequential growth in the back half, 3 and 4Q, just based on what we're seeing in the market right now.

Mayank Tandon: Some sequential growth in the back half.

Speaker Change: <unk> just based on what Youre seeing in the market right now.

Joseph Sanborn: Yeah, I guess here's the comments I said earlier, Mike, and I'll just repeat them for the group, which is: Going into the year, we expected to have a gradual auto recovery. Good Q1, and the seasonal pattern would be Q2 would go down, Q3 would go up, and Q4 would go down.

Speaker Change: I guess is the comments I said earlier.

Speaker Change: Mike and I'll, just repeat them for the group which is.

Going into the year, we expected to have a gradual auto had a good Q1 and the seasonal pattern would be Q2 will go down Q3 Q4, we go down.

Joseph Sanborn: What we've actually seen play out is something quite different, which is we've seen a much stronger start to Q1, and that is progressing into Q2. And as we progress into Q2, you're seeing in our guide, implied by our guide, that the car is at or near the peak levels we saw in Q1 of 2023. So we look at that backdrop.

Speaker Change: What we've actually seen play out is something quite different which is we've had we've seen a much stronger start for Q1 and that is progressing into Q2 and as we progress into Q2 Youre seeing in our guide implied by our Guy that auto is added near the peak levels. We saw in Q1 of 2023. So we look at that backdrop, we say what's going to happen in <unk>.

Joseph Sanborn: We say, "What's going to happen as we progress into the second half of the year?" So first, we know what's been driving a lot of the growth in the first half of the year and making it more front-end loaded is that a handful of the very large carriers have leaned in aggressively. And they've been opening more and more states as they've progressed through Q1, and certainly as they're progressing into Q2, and we expect that to continue.

Speaker Change: Regress into the second half of the year. So first we know what's been driving a lot of the growth in the first half of the year and making it more front end loaded is that a handful of the very large carriers are linked and aggressively and they've been opening more and more states progressed through Q1, and certainly they are progressing into Q2, and we expect that to continue.

Joseph Sanborn: As we think to the end of Q2 in the second half of the year, we think there's going to be limited opportunity for these handful of large carriers that have leaned in aggressively to open more states this year, because it'll be contingent upon some of the larger states with a more challenging regulatory environment, and they may or may not open this year. They may not open until 2025, based on how rate increases are going in those states. So we will look at that piece.

Speaker Change: As we think to the end of Q2 in the second half of the year. We think there is going to be limited opportunity for these for these and these.

Speaker Change: Handful of large carriers of Lincoln aggressively to open more states. This year, because it'll be contingent upon some of the largest states was a more challenging regulatory environment and they may or may not open. This year. They may not open until 2025 based on how rate increases are going in those states. So we look at that piece, we overlay what do we know about the broader carrier landscape, we see the broader care.

Joseph Sanborn: We overlay what we know about the broader carrier landscape. We see the larger carriers. We see carriers who are not as advanced in getting rate sufficiency as a couple of the large carriers who come in.

Speaker Change: Ours, we see carriers, who are not as advanced in getting rates efficiency as a couple of the large carriers, who come in certainly bullish about wanted to get back to growth mode. The specificity of their plans for the second half or.

Joseph Sanborn: Certainly bullish about wanting to get back to growth mode, but the specificity of their plans for the second half is, As a result, we are seeing it's an unpredictable environment. So in that context, based on what we know right now, we're not expecting that sequential increase from Q2 to Q3. And the same reason we didn't have the seasonal pattern effectively didn't hold from Q1 to Q2, so it's hard to think it would continue into Q3 and then Q4.

Speaker Change: Okay.

Speaker Change: As a result, we are not we are seeing is an unpredictable environment. So in that in that context based on what we know right now we're not expecting a sequential.

Joseph Sanborn: So we're not expecting sequential growth right now based on what we know. But, as I said, as it progresses, we will see. I think the wild card will be the other carriers coming back in faster, so they gain confidence in rate adequacy. But it still remains to be seen how fast they'll move. But we remain bullish about auto recoveries here. And it's just a question of how many... Is it how fast it progresses through the year? But really, we view it as a multi-year recovery, and it'll drive growth in 2025 and beyond as well as this year. And the second half of this year will have strong year-on-year comps relative to 2023.

Speaker Change: The increase from Q2 to Q3 and the same reason we didn't have the sequential pattern of sequential seasonal pattern effectively didn't hold from Q1 to Q2, it's hard to think it was closed.

Speaker Change: Continue into Q3 and Q4, so we're not expecting sequential growth right now based on what we know, but as I said as it progresses, we will we will see I think the what.

Speaker Change: The wildcard will be two other carriers come back in faster so they get confidence in rate adequacy and still remains to be seen how fast number but.

We remain bullish about auto recoveries here, it's just a question of how how many.

Speaker Change: Is it how fast it progresses through the year, but really we view it as a multi year recovery and will drive growth in 'twenty, five and beyond as well as this year in the second half of this year, we'll have strong year on year comps relative to the 2023.

Mayank Tandon: Right, no, that's very clear. Thank you so much for clarifying. And then as a quick follow-up, Jayme, I think you were asked about pricing, and I just wanted to go back to some of the key underlying drivers. So, could you just walk through what is driving RPQ? I know you don't provide the details, like maybe in the past, but just, you know, Is it more bundled offerings? Is it better integration with the carriers? What are some of the underlying factors that are driving our Qtrends for you?

Speaker Change: Right no that's very clear. Thank you so much for clarifying and then as a quick follow up Jimmy I think you were asked about pricing and I just wanted to go back to some of the key underlying drivers. So could you just walk through what is driving our PQ I know you don't provide the details like maybe in the past, but just.

Speaker Change: Sure.

Speaker Change: Is it more bundled offerings that better integration with the carriers. There what are some of the underlying factors that are driving our Q trends for you.

Jayme Mendal: Yes, so I think it's actually a bit more straightforward than that. The recent upticks in revenue per quote request are largely driven by what we call auto recovery. So we have had carriers stepping back into the marketplace, really since the beginning of this year. And that means, you know, more carriers participating, expanding their state footprints and increasing their budgets and their bids, their willingness to pay. So you've got, you know, a competitive dynamic beginning to form, which is resulting in pricing going up and more carriers, you know, willing to pay for the traffic that we're generating.

Jimmy: Yes, so I think it's actually a bit more straightforward than that.

Jimmy: The recent upticks in rather than revenue per quote request are largely driven by the book off the auto recovery.

Jimmy: So we have had carriers stepping back into the marketplace.

Jimmy: Since the beginning of this year and that means more carriers participating.

Jimmy: Spanning their state footprints and increasing their budgets and their bids or willingness to pay so you've got a competitive dynamic beginning to form which is resulting in pricing going up and more carriers.

Jimmy: Willing to pay for the traffic that we're generating and then you have a similar dynamic on the agent side. So we've seen a meaningful.

Jayme Mendal: And then you have a similar dynamic on the agent side. So we've seen a meaningful step-up in demand sequentially from Q4 into Q1. And on, you know, although we are seeing an increase in volume in quote request volume, we're seeing an even larger increase in revenue per quote request sequentially as we come into this year.

Jimmy: A meaningful step up in demand from sequentially from Q4 into Q1.

Jimmy: So on although.

Jimmy: We are seeing an increase in volume in quote request volume, we're seeing an even larger increase in revenue per quote request sequentially.

Jimmy: Sequentially as weak as we come into this year.

Mayank Tandon: Okay, that sounds simple enough. Thank you so much for taking my questions. I appreciate it. Thanks, Mayank.

Speaker Change: Okay that sounds simple enough. Thank you so much for taking my questions I appreciate it thanks, Mike Thanks, Mike.

Mayank Tandon: Thanks, Mike. Thanks, Mike.

Operator: That concludes our Q&A session. I will now turn the conference back over to the management for closing remarks. Thank you.

Speaker Change: That concludes our Q&A session I will now turn the conference back over to the management for closing remarks.

Jayme Mendal: Thank you. I just want to thank everyone once again for joining us on the call today. The team and I are energized by how strong a start to the year we've had here. You know, over the last couple of years, we've made a number of difficult decisions to realign the business towards a brighter future, and the benefits of those decisions are now very clear as we produce record levels of net income, adjusted EBITDA, and operating cash flow in Q1. And now with a solid foundation, a battle-hardened team, and more focused than ever before, we're excited to continue building a great business into this incredible market opportunity of bringing insurance distribution into the digital age.

Speaker Change: Thank you I just want to thank everyone. Once again for joining us on the call today.

Speaker Change: The team and I are energized by how strong a start to the year with out here.

Speaker Change: Over the last couple of years, we've made a number of difficult decisions to realign the business towards a brighter future.

Speaker Change: And the benefits of those decisions are now very clear as we produced record levels of net income adjusted EBITDA and operating cash flow in Q1.

Speaker Change: And now with a solid foundation of Battle hardened team and more focused than ever before we're excited to continue building a great business and to this incredible market opportunity of bringing insurance distribution into the digital age.

Speaker Change: Thanks Al.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now disconnect.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Speaker Change: Sure.