Q2 2024 EverQuote Inc Earnings Call

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

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

Speaker Change: At this time, I would like to welcome everyone to the EverQuote 2nd Quarter 2024 Earnings Conference Call.

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

Speaker Change: After the speaker's remarks, there will be a question and answer session.

Speaker Change: If you would like to ask a question, simply press star followed by the number 1 on your telephone keypad. And if you would like to withdraw that question, again press star 1. Thank you. I will now turn the conference over to Brinlea Johnson from the Blue Shirt Group. Please go ahead.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, simply press star followed by the number one on your telephone keypad. And if you would like to withdraw that question, again, press star one. Thank you. I will now turn the conference over to Brinlea Johnson from the Blue Shirt Group. Please go ahead.

Brinlea Johnson: Thank you, good afternoon, and welcome to EverQuote's second 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 is Jayme Mendal, EverQuote's chief executive officer, and Joseph Sanborn, EverQuote's chief financial officer.

Brinlea Johnson: Thank you. Good afternoon and welcome to EverQuote's second quarter 2024 earnings call. We'll be discussing the results announced in our press release issued today after the market closed.

Speaker Change: With me on the call this afternoon is Jayme Mendal, EverQuote's Chief Executive Officer, and Joseph Sanborn, Chief Financial Officer of EverQuote.

Brinlea 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 third quarter of 2024. Forward-looking statements may be identified with words and phrases such as we expect, we believe, we intend, we anticipate, we plan, may, upcoming, and similar words and phrases. These statements reflect our views only as of today and should not be considered views as of any subsequent date. We specifically disclaim any obligation to update or revise these forward-looking statements except as required by law.

Speaker Change: During the call, we will make statements related to our business that may be considered forelooking statements under federal securities laws, including statements concerning our financial guidance for the third quarter of 2024.

Speaker Change: Forelooking statements may be identified with words and phrases, such as we expect, we believe, we intend, we anticipate, we plan, may, upcoming, and similar words and phrases.

Speaker Change: These statements reflect our views only as of today and should not be considered 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 Johnson: Prod lucky statements are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For discussion of those risks and uncertainties, please refer to our SEC filings, including our annual report on Form 10-K and our quarterly reports on Form 10-Q, on file with the Securities and Exchange Commission and available on the Investor Relations section of our website. Finally, during the course of today's call, we referred to certain non-GAAP financial measures, which we believe are helpful to investors.

Speaker Change: Prod lucky statements are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations.

Speaker Change: For discussion of those risks and uncertainties, please refer to our SEC filings, including our annual report on Form 10-K and our quarterly report on Form 10-Q , on file with the Securities and Exchange Commission and available on the Investor Relations section of our website.

Speaker Change: Finally, during the course of today's call, we referred 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.

Brinlea Johnson: 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. And with that, I'll turn it over to Jayme.

Jayme Mendal: Thank you, Brinlea, and thank you all for joining us today. EverQuote continued to build momentum in the second quarter. Operating results once again exceeded the high end of our guidance range for revenue, VMM, and adjusted EBITDA. And we achieved new record levels across all three of these financial metrics, along with record EBITDA and net income. In April, I shared our perspective that after years of volatility in the auto insurance market, we believe that a sustainable auto recovery was, in fact, underway. This view further solidified as we progressed through the second quarter.

Speaker Change: And with that, I'll turn it over to Jayme.

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

Speaker Change: EverQuote continued to build momentum in the second quarter. Operating results once again exceeded the high end of our guidance range for revenue, VMM, and adjusted EBITDA. And we achieved new record levels across all three of these financial metrics along with record EBITDA and net income.

Speaker Change: In April , I shared our perspective that after years-long volatility in the auto insurance market, we believed that a sustainable auto recovery was, in fact, underway.

Jayme Mendal: This view further solidified as we progressed through the second quarter.

Jayme Mendal: Auto carrier underwriting profitability remained healthy, and carriers continue to reactivate campaigns, restore budgets, and reopen their state footprints in our marketplace. As the auto carrier recovery unfolds, our team continues to execute very well. In the second quarter, not only have we worked closely with carriers to help them step back into the marketplace effectively, but we have also grown demand from local agents, who are a core and differentiated component of our distribution.

Speaker Change: Auto carrier underwriting profitability remained healthy and carriers continue to reactivate campaigns, restore budgets, and reopen their state footprints in our marketplace.

Speaker Change: As the auto carrier recovery unfolds, our team continues to execute very well.

Speaker Change: In the second quarter, not only have we worked closely with carriers to help them step back into the marketplace effectively, but we have also grown demand from local agents, who are a core and differentiated component of our distribution.

Jayme Mendal: Our customer acquisition teams continue to optimize effectively in a dynamic demand environment, and our home vertical grew to new record high levels of revenue and VMM. Turning to the back part of the year, we will continue to support carriers and agents as they restore a greater focus on growth. We will do so by providing them with the guidance, data, and tools they need to effectively scale spend in our marketplace and by expanding our customer acquisition and channels, which will benefit from growing provider demand and monetization.

Speaker Change: Our customer acquisition teams continue to optimize effectively into a dynamic demand environment.

Speaker Change: And our home vertical grew to new record high levels of revenue and VMM.

Speaker Change: Turning to the back part of the year, we will continue to support carriers and agents as they restore greater focus on growth.

Speaker Change: We will do so by providing them the guidance, data, and tools they need to effectively scale spend in our marketplace, and by expanding our customer acquisition and channels that will benefit from growing provider demand and monetization.

Jayme Mendal: Also, we have been actively preparing to comply with a regulatory change imposed by a new FCC rule related to Consent Collection under the TCPA, or the Telephonic Consumer Protection Act, which goes into effect in January of 2025. This rule will affect website consent collection requirements and distribution channels that rely on telephonic outreach.

Speaker Change: Also, we have been actively preparing to comply with a regulatory change imposed by a new FCC rule related to Consent Collective under the TCPA, or the Telephonic Consumer Protection Act, which goes into effect in January of 2025.

Speaker Change: This rule will affect website consent collection requirements and distribution channels that rely on telephonic outreach, most notably our agent channel.

Jayme Mendal: Most notably, our agent channel. We are working closely with carriers and others to comply with the new rule while continuing to support our customers' need for growth. We believe the change presents an opportunity for EverQuote to improve traffic quality for our customers, accelerate execution of our strategy, and extend our market leadership position, as our scale enables us to process regulatory change more effectively than others. Lastly, we are maintaining heightened discipline in our expense management and making significant progress in simplifying and streamlining our tech platforms to enable more efficient and effective execution.

Speaker Change: We are working closely with carriers and others to comply with the new rule while continuing to support our customers' need for growth.

Speaker Change: We believe the change presents an opportunity for EverQuote to improve traffic quality for our customers.

Speaker Change: accelerate execution of our strategy and extend our market leadership position as our scale enables us to process regulatory change more effectively than others.

Speaker Change: Lastly, we are maintaining heightened discipline in our expense management and making significant progress in simplifying and streamlining our tech platforms to enable more efficient and effective execution.

Jayme Mendal: As we begin to shift back to a more investment-oriented mindset, we will ensure that top-line progress continues to contribute to growing operating leverage. In closing, I'd like to thank the EverQuote team for another strong performance in Q2. I'll now turn the call over to Joseph to discuss our financial results.

Speaker Change: As we begin to shift back to a more investment-oriented mindset, we will ensure that top-line progress continues to contribute to growing operating leverage.

Speaker Change: In closing, I'd like to thank the EverQuote team for another strong performance in Q2.

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.

Joseph Sanborn: Thank you, Jayme, and thank you all for joining. I will start by discussing our financial results for the second quarter of 2024 before providing an update on what we are currently seeing in the auto insurance sector and our guidance for the third quarter.

Joseph Sanborn: I will start by discussing our financial results for the second quarter of 2024 before providing an update on what we are currently seeing in the auto insurance sector and our guidance for the third quarter. Our strong momentum in Q1 continued into Q2, as we exceeded guidance across all three of our primary financial metrics. Total Revenue, Variable Marketing Margin, or VMM, and Adjusted EBITDA. We produced a record level of net income, as well as a record level of adjusted EBITDA and operating cash.

Joseph Sanborn: Our strong momentum in Q1 continued into Q2 as we exceeded guidance across all three of our primary financial metrics, total revenue, variable marketing margin or VMM, and adjusted EBITDA.

Joseph Sanborn: We've produced a record level of net income, as well as a record level of adjusted EBITDA and operating cash flow.

Joseph Sanborn: These impressive financial results were due to continued strong execution from our operating teams against an improving auto carrier landscape. As a result of the realignment of our cost structure last year and our continued disciplined expense management, we are driving significant operating leverage as we scale. Total revenues in the second quarter were $117.1 million, up 72% from the prior year period.

Joseph Sanborn: These impressive financial results were due to continued strong execution from our operating teams against an improving auto carrier landscape.

Joseph Sanborn: As a result of the realignment of our cost structure last year and our continued disciplined expense management, we are driving significant operating leverage as we scale.

Joseph Sanborn: Total revenues in the second quarter are $117.1 million, up 72% from the prior year period. Revenue growth was driven by stronger enterprise carrier spend, which increased 42% sequentially and over three times from the comparable period last year.

Joseph Sanborn: Revenue growth was driven by stronger enterprise carrier spend, which increased 42% sequentially and over three times from the comparable period last year. Revenue from our auto insurance vertical was $102.6 million in Q2, up approximately 106% year-over-year and sequentially 32%. Revenue from our home and renters insurance vertical was $13.9 million in Q2, up 29% year-over-year and sequentially 9%. Our strong outperformance in the quarter, relative to guidance, was primarily driven by carriers continuing to gain confidence in their underwriting profitability as we progressed through the quarter. This resulted in carriers increasing their marketing spend during the period, often with minimal advance notice.

Joseph Sanborn: Revenue from our auto insurance vertical is $102.6 million in Q2, up approximately 106% year-over-year and sequentially 32%.

Joseph Sanborn: Revenue from our home and renters insurance vertical is $13.9 million in Q2, up 29% year-over-year and sequentially 9%.

Joseph Sanborn: Our strong outperformance in the quarter, relative to guidance, was primarily driven by carriers continuing to gain confidence in their underwriting profitability as we progressed through the quarter.

Joseph Sanborn: This resulted in carriers increasing their marketing spend during the period, often with minimal advance notice.

Joseph Sanborn: VMM was $36.5 million for the second quarter, up approximately 48% from the prior year period. However, as expected, VMM decreased as a percentage of revenues in the quarter to 31%. Looking ahead to the remainder of the year, given the more competitive advertising environment as well as the impact of preparing for the upcoming regulatory changes, we expect downward pressure on VMM percentage, which is reflected in our guidance. Now, turning to operating expenses in the bottom line.

Joseph Sanborn: VMM was $36.5 million for the second quarter, up approximately 48% from the prior year period.

Joseph Sanborn: As expected, VMM decreased as a percentage of revenues in the quarter to 31 percent.

Joseph Sanborn: Looking ahead to the remainder of the year, given the more competitive advertising environment, as well as the impact of preparing for the upcoming regulatory changes, we expect downward pressure on VMM percentage, which is reflected in our guidance.

Joseph Sanborn: We continue to be disciplined in managing expenses and driving incremental efficiency across our operations, which is resulting in expanding operating leverage as we scale and drive top-line growth. Cash operating expenses, which excludes advertising spend and certain non-cash and other one-time charges, were in line with expectations in the second quarter at $23.5 million and decreased 12% from the same period in 2023. Looking to the remainder of this year, we plan to continue to judiciously invest in what we view as compelling, high ROI opportunities, including advancing and streamlining our technology platforms and expanding our product offerings for our insurance provider partners. In the second quarter, we reported record net income of $6.4 million.

Joseph Sanborn: Turning to Operating Expenses in the bottom line.

Joseph Sanborn: We continue to be disciplined in managing expenses and driving incremental efficiency across our operations, which is resulting in expanding operating leverage as we scale and drive top-line growth.

Joseph Sanborn: Cash operating expenses, which excludes advertising spent and certain non-cash and other one-time charges, were in line with expectations in the second quarter at $23.5 million.

Joseph Sanborn: and decreased 12% from the same period in 2023.

Joseph Sanborn: Looking to the remainder of this year, we plan to continue to judiciously invest in what we view as compelling high ROI opportunities, including advancing and streamlining our technology platforms and expanding our product offerings for our insurance provider partners.

Joseph Sanborn: In the second quarter, we reported record net income of $6.4 million. Adjusted EBITDA was $12.9 million in Q2, up 70% sequentially and improvement from a loss of $2.1 million in the prior year period.

Joseph Sanborn: Adjusted EBITDA was $12.9 million in Q2, up 70% sequentially and an improvement from a loss of $2.1 million in the prior year period. Adjusted EBITDA as a percentage of revenues grew to 11% in the quarter as we continue to benefit from the rapid increase in auto carrier recovery and our strong operating leverage. This, coupled with our tight expense discipline, led to VMM overperformance flowing through to adjusted EBITDA.

Joseph Sanborn: Adjusted EBITDA as a percentage of revenues grew to 11% in the quarter as we continue to benefit from the rapid increase in auto carrier recovery and our strong operating leverage.

Joseph Sanborn: This, coupled with our tight expense discipline, led to VMM overperformance flowing through to adjusted EBITDA.

Joseph Sanborn: Looking ahead, we remain steadfast in our commitment to efficient operations while making calculated investments to position the company for long-term growth. As a result, as we progress to the remaining half of the year, we expect the Justity of a Dumb margins to remain at or near the Q2 level. We delivered operating cash flow of $12.4 million for the second quarter, ending the period with cash and cash equivalents of $60.9 million, up from $48.6 million at the end of the first quarter of 2024. To note, going forward, adjusted EBITDA will continue to be a close proxy for operating cash flow, subject to normal working capital adjustments.

Joseph Sanborn: Looking ahead, we remain steadfast in our commitment to efficient operations while making calculated investments to position the company for long-term growth. As a result, as we progress through the remaining half of the year, we expect the just-to-be-done margins to remain at or near Q2 levels.

Joseph Sanborn: We delivered an operating cash flow of $12.4 million for the second quarter, ending the period with cash and cash equivalents of $60.9 million.

Joseph Sanborn: up from $48.6 million at the end of the first quarter of 2024. To note, going forward, Adjusted EBITDA will continue to be a close proxy for operating cash flow, subject to normal working capital adjustments.

Joseph Sanborn: Before turning to guidance, I want to provide an update on our current outlook for the auto insurance industry for the remainder of 2024. During Q1, we shared that several of our carrier partners had recently reiterated their prior comments to us of wanting to return to acquiring new consumers during the course of 2024. Most recently, we are pleased to see this more growth-oriented mindset taking hold with many carriers, which has led to a strong start to the first half of the year and good momentum continuing into Q3.

Joseph Sanborn: Before turning to guidance, I want to provide an update on our current outlook for the auto insurance industry for the remainder of 2024.

Joseph Sanborn: During Q1, we shared that several of our carrier partners had recently reiterated their prior comments to us of wanting to return to acquiring new consumers during the course of 2024.

Joseph Sanborn: Most recently, we are pleased to see this more growth-oriented mindset is taking hold with many carriers, which has led to a strong start to the first half of the year and good momentum continuing into Q3.

Joseph Sanborn: We, however, remain cognizant that there is no single playbook for how each one of our carrier partners will emerge from the multi-year auto insurance downturn. In Q2, for example, we experienced some unexpected changes from CARES, both favorable and unfavorable, as we progressed through the period. We expect this unpredictability to persist in the near term and are prepared to adapt our operations accordingly as carriers work to rebuild their growth muscle and adapt their marketing spend to a dynamic and competitive environment. Turning to God.

Joseph Sanborn: We, however, remain cognizant there is no single playbook for how each one of our carrier partners will emerge from the multi-year auto insurance downturn.

Joseph Sanborn: In Q2, for example, we experienced some unexpected changes from CARES, both favorable and unfavorable, as we progressed through the period.

Joseph Sanborn: We expect this unpredictability to persist in the near term, and are prepared to adapt our operations accordingly as carriers work to rebuild their growth muscle and adapt their marketing spend to a dynamic and competitive environment.

Joseph Sanborn: For the third quarter of 2024, we expect revenue to be between $137 and $143 million. We expect VMM to be between $38.5 and 41.5 million. And we expected justification to be between $14 and $17 million. In summary, we have had a very strong start to 2024 and will continue to execute and capitalize on the improving auto carrier landscape. Our record results in Q2 for revenue, VMM, and adjusted EBITDA are evidence that a strategic focus on driving operational improvements, maintaining disciplined expense management, and emerging from the auto insurance downturn as a stronger company is working. Jayme and I will now take your questions.

Joseph Sanborn: Turning to Guidance.

Joseph Sanborn: For the third quarter of 2024, we expect revenue to be between $137 million and $143 million. We expect VMM to be between $38.5 million and $41.5 million.

Joseph Sanborn: And we expected Justity Badot to be between $14 and $17 million.

Joseph Sanborn: In summary, we have had a very strong start to 2024 and continue to execute and capitalize on the improving auto carrier landscape. Our record results in Q2 for revenue, VMM, and adjusted EBITDA are evidence that a strategic focus on driving operational improvements

Speaker Change: Maintaining disciplined expense management and emerging from the auto insurance downturn as a stronger company is working. Jayme and I will now take your questions.

Operator: Thank you. We will now begin the question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. And if you'd like to withdraw that question, again, press star 1. Your first question comes from the line of Cory Carpenter with JP Morgan. Please go ahead.

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

Speaker Change: If you'd like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. And if you'd like to withdraw that question, again press star 1. Thank you. Your first question comes from the line of Cory Carpenter with JP Morgan. Please go ahead.

Cory Carpenter: Good afternoon. So, last quarter you got into a potential sequential decline in auto revenue in 3Q. Clearly, I am no longer expecting that. I guess my question is, you know, what has changed since then? Has it been more breadth of carriers? Has it been the opening of new states? I know you were cautious around kind of wave 2 and the new state openings. Or was it more of the wave 1 carriers kind of continuing to ramp up above their historic spend? I'll stop there, and then I do have a quick follow-up.

Corey Carpenter: Good afternoon. So, last quarter you got into potential sequential decline in auto revenue and 3Q, clearly no longer expecting that. I guess my question is, you know, what has changed since then? Has it been more breadth of carriers? Has it been opening of new states? I know you were cautious around kind of the wave 2 and the new state openings.

Speaker Change: Or was it more of the Wave 1 carriers kind of continuing to ramp above their historic spin? I'll stop there, and then I do have a quick follow-up.

Jayme Mendal: Thanks Cory. I mean, I think that we guided with the information we had at the time in, you know, this time last quarter, and what we've seen subsequently, as we just continue to see encouraging data out of the carriers, particularly their underwriting profitability, particularly their loss ratios, and the underlying combined ratios are steadily improving. As that happens, the carriers have continued to reactivate campaigns, restore budgets, and reopen their state footprints in the marketplace.

Speaker Change: Sure. Thanks, Cory.

Speaker Change: I mean, I think we guided with the information we had at the time in, you know, this time last quarter. What we've seen subsequently is we just continue to see encouraging data out of the carriers.

Speaker Change: Their underwriting profitability, particularly their loss ratios and the underlying combined ratios, are steadily improving.

Speaker Change: As that happens, the carriers have continued to reactivate campaigns, restore budgets, reopen their state footprints in the marketplace.

Jayme Mendal: And while there is, you know, as you know, heavy concentration in one major carrier, the recovery, you know, is more broad-based than that. And so we've seen some positive developments, not just from that one carrier, but from a number of carriers, since the time we got to the last quarter. And from where we sit today, I think we see the actions taken thus far as being sustainable so long as the underwriting profitability holds.

Speaker Change: And while it is, you know, there is, I think as...

Speaker Change: You know, heavy concentration in one major carrier, the recovery, you know, is more broad-based than that. And so we've seen some positive development, not just from that one carrier, but from a number of carriers since the time we got to the last quarter.

Speaker Change: And from where we sit today, I mean, I think we see the actions taken thus far as being sustainable so long as the underwriting profitability holds.

Jayme Mendal: We also see some, you know, some upside over time because there are certain carriers that have historically been meaningful spenders in the marketplace who are, you know, not yet sort of back to spending the way they used to. There are also certain states that have been, you know, challenged and probably will remain so for a bit but will eventually come back online. These are states like California. So I think, in sum, it's a little bit of everything contributing. And we expect it to continue to develop favorably from here.

Speaker Change: We also see some, you know, some upside over time.

Speaker Change: Because there are certain carriers that have historically been meaningful spenders in the marketplace who are, you know, are not yet sort of back to spending the way they used to. There are also certain states that have been, you know, challenged and probably will remain so for a bit, but will eventually come back online. These are states like California.

Speaker Change: So, you know, I think in sum, it's a little bit of everything contributing, and, you know, we expect it to continue to develop favorably from here.

Joseph Sanborn: I think I'd add, Cory, when we give our guidance, it's based on what we know at the time. We've certainly had favorable developments, as Jayme highlighted. I also would reiterate the comments that were in our prepared remarks around just the fact that it's an unpredictable environment.

Speaker Change: I think I'd add, Cory, when we give our guidance, it's based on what we know at the time.

Corey Carpenter: We've had certainly favorable developments, as Jayme highlighted. I also would reiterate the comments that were in our prepared remarks around just the, it's an unpredictable environment. So we're seeing carriers making adjustments within the quarter. We saw this in this quarter, we saw it in Q1. As carriers are progressing through the quarter,

Joseph Sanborn: So we're seeing carriers making adjustments within the quarter. We saw this in this quarter. We saw it in Q1.

Joseph Sanborn: As carriers are progressing through the quarter, they're actually making decisions to make incremental spend based on their assessment of their underwriting profitability improving. And so that is a dynamic that came in that allowed us to have overperformance in the second half of the quarter, resulting in beating expectations meaningfully. And we're seeing that sort of dynamic. We factored it into our guidance.

Corey Carpenter: They're actually making decisions to make incremental spend based on their assessment of their underwriting profitability improving, and they're often doing it with both members. And so that is a dynamic that came in that allowed us to have overperformance in the second half of the quarter resulted in beating expectations meaningfully, and we're seeing that sort of dynamic. We factored that into our guidance as we look at Q3.

Cory Carpenter: And just for a follow-up, I wanted to go back to the FCC regulatory change Jayme mentioned. Could you talk a bit more about that? And then, Joseph, any way to kind of frame how big of an impact this could have on the business next year? Thank you.

Speaker Change: Thank you. And just for a follow-up, I wanted to go back to the FCC regulatory change, Jayme, you mentioned. Could you talk a bit more about that? And then, Joseph, any way to kind of frame how big of an impact this could have on the business next year? Thank you.

Jayme Mendal: Sure, so let me try and provide a bit of an overview, and then Joseph, I'll kick it back to you for the impact. At a high level, for those who are less familiar with it, in January, the FCC published new rules that amend consent requirements under the TCPA, which is the Telephone and Consumer Protection Act, to require one-to-one consent for outbound telemarketing calls or texts made using certain technologies, regulated technologies, they're referred to as.

Jayme Mendal: Sure, so let me try and provide a bit of an overview and then, you know, Joseph, I'll kick it back to you for the impact.

Jayme Mendal: So that would include automated telephone dialing systems, pre-recorded voice, artificial voice, And these rules will go into effect January of 2025, January 27th of next year. So, you know, since then, we've been working with legal experts, our clients, and others in the industry to understand the requirements, interpret them, and put a plan in place to comply with them. And of course, we're, you know, we are fully committed to compliance and are working with our customers to do so. So what does this all mean?

Jayme Mendal: At a high level, for those who are less familiar with it, in January , the FCC published new rules that amend consent requirements.

Speaker Change: under the TCPA, which is the Telephonic Consumer Protection Act, to require one-to-one consent for outbound telemarketing calls or texts made using certain technologies, regulated technologies they're referred to. So that would include automated telephone dialing systems, pre-recorded voice, artificial voice.

Speaker Change: And these rules will go into effect January of 2025, January 27th of next year.

Speaker Change: So, since then, we've been working with legal experts, our clients, with others in the industry to understand the requirements, interpret them, and put a plan in place to comply with them. And, of course, we are fully committed to compliance and are working with our customers to do so.

Jayme Mendal: Just to sort of contextualize it, the part of our business that it affects is the part that relies on telephonic outreach to consumers. And so that's, you know, call it 25 to 30% of the business. It will be affected by the change. Now, what will that effect be? I think, from our point of view, it's a very healthy development for the industry. This requirement of one-to-one consent really gives the consumer more control over how they get their quotes.

Speaker Change: So what does this all mean? Just to sort of contextualize it, the part of our business that it affects is the part that relies on telephonic outreach to consumers, and so that's, you know, call it 25 to 30 percent of the business is it will be affected by the change.

Speaker Change: Now what will that effect be? I think from our point of view, it's a very healthy development for the industry. This requirement of one-to-one consent really gives the consumer more control over how they get their quotes.

Jayme Mendal: And so, on the one hand, what that will mean is that, you know, some consumers will opt into fewer provider options, resulting in fewer leads being available to be sold to insurance companies. We would expect to see lead volume for the affected part of the business come down a bit. But on the other hand, what it will do is it will, A, you know, alleviate a consumer pain point, specifically the number of phone calls that some consumers receive.

Speaker Change: And so, on the one hand, what that will mean is that some consumers will opt into fewer provider options, resulting in fewer leads being available to be sold to insurance companies. We would expect to see lead volume for the affected part of the business come down a bit.

Speaker Change: But on the other hand, what it will do is it will, A, you know, alleviate a consumer pain point, specifically, you know, the number of phone calls that some consumers receive.

Jayme Mendal: And two, very importantly, is that it will improve the quality of the lead product. So we've now done a lot of testing, and our data shows that one-to-one consent will improve the performance of the leads that go out to agents. So, I think that the expectation is that agents will be willing to pay more for what will ultimately be a better product. And, net-net, we'll end up with slightly fewer leads, but at higher prices.

Speaker Change: And two, very importantly, is it will improve the quality of the lead product. So we've now done a lot of testing, and our data shows that one-to-one consent will improve the performance of the leads that go out to agents.

Speaker Change: So, I mean, because of all this, I think that the expectation is that agents will be willing to pay more for what will ultimately be a better product.

Speaker Change: And in net-net, we'll end up with slightly fewer leads, but at higher prices.

Jayme Mendal: So that's kind of the overview, you know, from our point of view, compliance will require us to adapt. It comes with some uncertainty, but we're working very closely with carriers, agents, and publishers. We've got a plan. It's in flight. We believe we'll be able to manage through it effectively and that we'll come out the other side in an advantaged position. I'll just add on to that a bit

Speaker Change: So that's kind of the overview, you know, from our point of view.

Speaker Change: Complying, it will require us to adapt. It comes with some uncertainty, but we're working very closely with carriers, agents, publishers. We've got a plan. It's in flight. We'll believe we'll be able to manage through it effectively and that we'll come out the other side in an advantaged position.

Joseph Sanborn: I'll just add on to that a bit, Cory, just to emphasize a few points, because there is a lot here to take in. So when you think about this business, Jayme said the portion of the business to impact this is really around our leads business. About 25-30% of the business, that is principally our third-party agent business. That's the first piece.

Speaker Change: I'll just add on to that a bit, Cory, just to emphasize a few points, because there's a lot here to take in. So when you think about this business, Jayme said the portion of the business to impact this is really around our leads business. About 25-30% of the business, that is principally our third-party agent business. That's the first piece.

Joseph Sanborn: We really do not anticipate much of an impact on our clicks business, which is really the direct care enterprise side. So I want to reiterate that point. You know, when you think about the impact of this at a high level, we talked about this in our last public appearance in Q2, which is that you will have lower volumes of consumers ultimately coming through this process. We expect, though, there will be higher quality, higher converting, sorry, lower converting, higher performing, and as a result of that, from the point of view of the provider, you have an opportunity to have a consumer who is a better qualified, higher performing lead for them.

Speaker Change: We really do not anticipate much of an impact to our Qliks business, which is really the direct care enterprise side. So I want to reiterate that point.

Joseph Sanborn: And that, in turn, we think will lead to opportunities for higher monetization. So, lower volume, higher monetization. When you think about that dynamic, how would you think about quantifying that? And I'd say, one of the things I'd emphasize here is that there's not one single thing.

Speaker Change: You know, when you think about the impact of this at a high level, we talked about this in our last public appearance in Q2, which is, we view this as, you will have lower volumes of consumers, lower volumes of consumers ultimately coming through.

Speaker Change: through this process. We expect that there will be higher quality, higher converting.

Speaker Change: Sorry, lower converting, higher performing, and as a result of that from a

Speaker Change: point of view of the provider, you have an opportunity to have.

Speaker Change: a consumer who's a better qualified hire performing opportunity.

Speaker Change: And that in turn, we think, will lead to opportunities for higher monetization. So lower volume, higher monetization. When you think about that dynamic, how would you think about quantifying that?

Joseph Sanborn: When you look at the changes that are going to be done within our marketplace to execute this, there's a number of individual things that are being done in our traffic operations and how this will flow through our workflows to bring consumers to providers. When you look at all those impacts right now, based on the discussion we've been having with carriers, what we're seeing is that carriers are each figuring out exactly how they're going to comply with this.

Speaker Change: One of the things I'd emphasize here is that there's not one single thing. When you look about the changes that are going to be done within our marketplace to execute this, there's a number of individual things that are being done in our traffic operations and how this will flow through on our workflows to bring consumers to providers.

Speaker Change: When you look at all those impacts right now, based on the discussion we've been having with carriers...

Joseph Sanborn: So, we're working that through, and we'll continue to form our views on this, but based on how we're seeing it now, we view this as the likely outcome is that financial performance in our business is likely to be more temperate, probably in Q1, than a normal start of the year you would have with carrier budget resets, sort of the net net effect. And as we prepare for one-to-one consent, I should highlight that we're also making some investments in the current period to prepare for this, and that's coming through both on the operating expense side, but it's also coming in on our VMD and revenue side. As you go through some of these tests, that does impact performance on, as you go through these tests, that does impact the traffic side and the VMM margin, which we noted in our preparation And our plan is to continue making these efforts as we get into Q4 as we prepare for one-to-one consents.

Speaker Change: What we're seeing is that carriers each are figuring out exactly how they're going to comply with this. So we're working that through.

Speaker Change: And we'll continue to form our views on this, but based on how we're seeing it now, we view this as the likely outcome is that financial performance in our business is likely to be more temperate probably in Q1 than a normal start of the year you would have with carrier budget resets, sort of the net net of all of this.

Speaker Change: And as we prepare for one-to-one consent...

Speaker Change: I should highlight that we're also making some investments in the current period to prepare for this, and that's coming through both on...

Speaker Change: The operating expense side is also coming in on our VMD and revenue side as you make through some of these tests that does impact performance on, as you go through these tests that does impact the traffic side and the VMM margin, which we noted in our preparative tax.

Speaker Change: And our plan is to continue making these efforts into Q4 as we prepare for one-to-one consent at the start of the year.

Jed Kelly: Your next question comes from the line Jed Kelly with Oppenheimer. Please go ahead. Hey, Greg.

Speaker Change: Thank you all.

Speaker Change: [inaudible]

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

Jayme Mendal: Thanks for taking my question. Just one quick question, Jayme. You mentioned local agents as a source of differentiation. I know a lot of the other marketplaces are seeing pretty good revenue growth. So can you just touch on that? And then Joseph, you know, you generated a very healthy free cash flow this quarter. Can you talk about how you're thinking about, you know, returning capital or capital deployment as you guys sort of move to a much larger free cash flow base? Thank you.

Jed Kelly: Hey, Greg, may I ask you to take my question? Just one quick question, Jayme, you mentioned local agents as a source of differentiation. I know a lot of the other marketplaces are seeing pretty good revenue growth, so can you just touch on that and then just, Joseph,

Speaker Change: You know, you generated a very healthy free cash flow this quarter. Can you talk about how you're thinking about, you know, returning capital or capital deployment as you guys sort of inflect to a much larger free cash flow base? Thank you.

Joseph Sanborn: Yeah, so I mean, with respect to the agent business, we've always viewed the agents as a differentiated part of our distribution. We continue to invest in delivering better performing products and more products to that agent base. We had a great performance this past quarter; business is growing year over year, and it's growing sequentially. And so our focus right now with agents is really helping, you know, enhance the product we have. And beginning to expand that offering to more holistically address their growth needs, particularly in a world where, you know, if lead volume is going to come down a bit, we have ways to offset that and continue to serve their needs.

Judd: Thanks, Jed.

Greg: So, I mean, with respect to the agent business, we've always viewed the agents as a differentiated part of our distribution. We continue to invest in delivering better performing products, more products into that agent base.

Speaker Change: We had great performance this past quarter. That business is growing year over year. It's growing sequentially.

Speaker Change: And so our focus right now with agents is really helping, you know, enhance the product we have.

Speaker Change: and beginning to expand that offering to more holistically address their growth needs, particularly in a world where, you know, if lead volume is going to come down a bit, we have ways to offset that and continue to serve their needs.

Joseph Sanborn: So I think our focus here will be, you know, quite instrumental in our ability to kind of continue to build on the advantage that we have with agents. And I think we've got a pretty compelling roadmap that we'll be kind of executing and rolling out over the next couple of years, which will really continue to build on the strength of these agent relationships and enable us to continue to grow the agent business and leverage it as an advantage in our traffic buying within the marketplace.

Speaker Change: So I think our focus here will be quite instrumental in our ability to kind of continue to

Speaker Change: build on the advantage that we have with agents. And I think we've got a pretty compelling roadmap that we'll be kind of executing and rolling out over the next couple of years, which will really continue to build on the strength of these agent relationships.

Speaker Change: and enable us to continue to grow the agent business and leverage it as an advantage in our traffic buying within the marketplace.

Joseph Sanborn: So maybe I'll touch on the use of cash. So, obviously, we are pleased with how the turnaround in the business is resulting in positive cash flow from the business. Again, we had a record this quarter, and we expect to continue to be cash-generative going forward from operations. You know, as we look at potential, as we look at growing the business over time, we've talked about coming out of this having a stronger leadership position based on the moves we've made, and we think that sets us up to consider potential M&A selectively in areas that we could accelerate our current organic plans.

Speaker Change: Maybe I'll touch on the use of cash.

Speaker Change: So,

Speaker Change: You know, we are pleased, obviously, with how we've...

Speaker Change: The turnaround in the business is resulting in positive cash flow from the business. Again, we have record this quarter. We expect to continue to be cash-generative going forward from operations.

Speaker Change: As we look at growing the business over time, we've talked about coming out of this having a stronger leadership position based on the moves we've made, and we think that sets us up to consider potential M&A selectively in areas that we could accelerate our current organic plans.

Joseph Sanborn: We've talked about that in our prior calls, and we continue to see that opportunity. We think there's also a dynamic in the private markets, given the dislocation of some of the private capital markets. There can be some quality private insurer techs who we may be able to get on more favorable terms than we might have a few years ago. We look at M&A, though, still through the prism through which we've been guiding the business, which is being very disciplined.

Speaker Change: We've talked about that in our prior calls, and we continue to see that opportunity. We think there's also a dynamic in the private markets, given the dislocation of the private capital markets. There can be some quality private insurer techs who we may be able to get in more favorable terms than we might have a few years ago.

Speaker Change: We look at M&A, though, still through the prism through which we've been guiding the business, which is being very disciplined. If we look at acquisitions, they will be in the context of our P&C focus. They also be in the context of maintaining our disciplined approach to generating top-line gross and return on investment as measured by free cash flow.

Joseph Sanborn: If we look at acquisitions, they will be in the context of our P&C focus. They will also be in the context of maintaining our disciplined approach to generating top-line growth and return on investment as measured by frequency. And I think the last thing I would touch on is, you know, we feel very good about our long-term strategy. We just went through a process this summer focusing on that. And we do not see M&A as a requirement to achieve our long-term goals. We do see it as an additional lever we can consider, and we think we're increasingly in a better position to do so when the opportunity arises.

Speaker Change: And I think the last thing I would touch on is, you know, we feel very good about our long-term strategy. We just came through a process this summer focusing on that, and we don't, we do not see M&A as a requirement to achieve our long-term goals. We do see it as an additional lever we can consider, and we think we're increasingly in a better position to do it as the opportunities may arise.

Ralph Schackart: Your next question comes from the line of Ralph Schackart with William Blair. Please go ahead.

Speaker Change: Thank you. Very helpful.

Ted: Thanks, Ted.

Speaker Change: Your next question comes from the line of Ralph Schackart with William Blair. Please go ahead.

Ralph Schackart: Good afternoon, thanks for the question. Just in terms of the VMM margin, I guess being that sort of the lower range contemplated, is that more of a temporary, I guess, issue as you sort of work through some of the regulatory changes, maybe some pricing on search, or is that something that would be contemplated perhaps on a longer-term basis? And then maybe just kind of follow up on the previous question, you talked about seeing strong performance from local agents also in the quarter along with the recovery that's continuing, so just curious what you're seeing perhaps more specifically from local agents in the quarter that's also contributing to the strong performance. Thank you.

Speaker Change: Good afternoon. Thanks for the question. Just in terms of the VMM margin,

Ralph Schackart: I guess being at sort of the lower range, contemplated that more of a temporary I guess issue as you sort of work through some of the regulatory changes, maybe some pricing on search, or is that something that would be contemplated perhaps on a longer term basis?

Speaker Change: and then maybe just kind of follow up on the previous question.

Speaker Change: You talked about, you know, seeing strong performance from local agents also in the quarter along with the recovery that's continuing So just curious what you're seeing perhaps more specifically from local agents in the quarter that's also contributing to the strong performance. Thank you

Joseph Sanborn: Sure. Thanks, Ralph.

Speaker Change: Sure, thanks Ralph. So in terms of the VMM margin, I'd touch on a couple things for you. So

Speaker Change: You know, just to give, remind folks of context, we started the year

Speaker Change: Secondly, the BMM margin will come down from last year's we had auto carrier recovery and it became a more competitive environment. In Q1 we said we were going to come in a little under 30 points exactly where we landed. This quarter we said we'd come in around 31 percent which is where we've landed.

Joseph Sanborn: So, in terms of the VMM margin, I'd touch on a couple of things for you. So, just to remind folks of context, we started the year saying the VMM margin would come down from last year as we had the auto carrier recovery and it became a more competitive environment. In Q1, we said we were going to come in a little under 30%, where we landed. This quarter, we said we'd come in around 31%, which is where we landed.

Speaker Change: You know, we thought we'd come in, that we'd be in that 30 to 31 percent for the year initially. And why we're moderating that is twofold. One is, we do view the advertisement as increasingly more competitive.

Joseph Sanborn: We thought we'd be in that 30 to 31% for the year initially, and why we're moderating that is twofold. One is we do view the advertisement as increasingly more competitive. We do think some of that is, in part, the environment of quickly returning growth, and monetization hasn't quite calibrated accordingly. So, there is one dynamic there, and I think that is a big piece. But the second piece we would touch on is some of the work we're doing around preparations for FCs.

Speaker Change: You know, we do think some of that is in part the environment of quickly returning growth and the monetization hasn't quite calibrated accordingly. So there is one dynamic there, and I think that is a big piece, but the second piece we would touch on is some of the work we're doing around preparations for FCC.

Joseph Sanborn: You know, we do believe that, longer term, there is an opportunity to continue to build upon our BMM margin percentage that we've, you know, in the low 30s and continue building from there, part reflecting the progress we're making on our bidding technology and things of that nature. We'll continue to be able to build our data advantage, which I think will be important in the long term. In the near term, we're cognizant of these two dynamics, the competitive advertising environment becoming even more so in the next near term. And second, overlaid with the impact of the SEC's preparations for

Speaker Change: You know, we do believe that longer term, there is an opportunity to continue to build upon our VMM margin percentage that we've, you know, the low 30s and continue in building from there, part of reflecting the progress we're making on our bidding technology and things of those nature. We'll continue to be able to build our data advantage, which I think will be important in the long term. In the near term, we're cognizant of these two dynamics, the competitive advertising environment becoming even more so in the next, in the near term.

Speaker Change: and second, overlaid with the impact of the SEC preparations for doing the Q1.

Jayme Mendal: And then on the second question, Ralph, there are a handful of factors that are contributing to the strong performance of the agent business. I think the first is, you know, you're seeing the kind of beginnings of what amounts to a recovery from some of the agent-based carriers. So with that, we've seen changes made by the carriers with respect to their financial support for agents, like, you know, subsidy programs and things like that, and kind of the incentive structure, the bonus plans they've got in place with the agents. So the carriers are, at least in a targeted way, beginning to sort of restore more emphasis on growth with their agents, and the agents are responding accordingly.

Speaker Change: Yep.

Speaker Change: And then on the second question, Ralph, there's a handful of factors that are contributing to the strong performance of the agent business. I think the first is, you know, you're seeing the kind of beginnings of

Ralph: what amounts to a recovery from some of the agent-based carriers.

Ralph: changes made by the carriers with respect to their financial support for agents like subsidy programs and things like that.

Ralph: and kind of the incentive structure, the bonus plans they've got in place with the agents. So the carriers are, at least in a targeted way, beginning to sort of restore more emphasis on growth with their agents, and the agents are responding accordingly.

Jayme Mendal: Number two, you know, like I said, we continue to work to enhance our product that's going out to the agents. So we've been making investments and continuing to be, you know, best in class from a quality standpoint. And I think that's being well received by the agent base, and into that, we've been able to execute very well. So the teams have been, you know, selling into the agent population and servicing them well and driving growth as a result.

Ralph: Number two, you know, we've, like I said, we continue to work to enhance our product that's going out to the agents. So we've been making investments and continuing to be, you know, best in class.

Ralph: From a quality standpoint, and I think that's being well received by the agent base, and into that we've been able to execute very well, so that the teams have been, you know, selling into the agent population and servicing them well and driving growth as a result.

Jayme Mendal: Great. Thanks, Jayme. Thanks, Joseph.

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

Speaker Change: Great. Thanks, Jayme. Thanks, Joseph. Thanks, Ralph.

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

Michael Graham: Hi, thanks a lot and congrats on the momentum. I just wanted to ask about... The visibility that you have into the second half as a whole, you mentioned that some carriers were back in action, and you were still waiting on others. So I just would love to hear some context around how you feel about the visibility regarding your Q3 guidance and just how you feel the year might finish. And then I just wanted to ask, sort of related to Jed's earlier question, I just wanted to ask about how you think about EBITDA margins.

Michael Graham: Hi, thanks a lot and congrats on the momentum. I just wanted to ask about

Michael Graham: you know, the visibility that you have into the second half as a whole. You mentioned that some carriers were back in action and you were still waiting on others. So I just would love to hear some context around.

Michael Graham: how you feel about the visibility regarding your Q3 guidance and just, you know, how you feel the year might might finish.

Michael Graham: And then I just wanted to ask, you know, sort of related to Jed's earlier question, I just wanted to ask about

Michael Graham: As revenue starts to accelerate, you have really good incremental profitability with an 11% margin in the quarter, and you're guiding lower than that for the third quarter. So I just want to kind of understand how you're thinking about what the business might produce on the EBITDA side.

Speaker Change: how you're thinking about, you know, EBITDA margins.

Speaker Change: as, you know, revenue, you know, starts to, um...

Speaker Change: starts to accelerate, you have like really good incremental profitability with an 11% margin in the quarter and you're guiding lower than that for the third quarter. So I just want to kind of understand how you're thinking about what the business might produce on the EBITDA side.

Joseph Sanborn: Thanks. Thanks, Mike.

Speaker Change: Thanks. Thanks, Mike. So I'll start with the visibility into the back part of the year. I think we are, as I mentioned earlier,

Jayme Mendal: So I'll start with the visibility into the back part of the year. I think we are, as I mentioned earlier. Underwriting profitability looks healthy and improving in auto, and thus far, I think the gains that we've made appear to be sustainable. We do see additional upside in the future. And that upside, just to reiterate, comes specifically from a handful of carriers that have been sort of slow to recover but who we do expect to join the recovery soon, and from states that are kind of lagging from a rate approval standpoint. We don't, you know; it's hard to say exactly when those things will come to pass.

Speaker Change: Underwriting profitability looks healthy and improving in auto and you know thus far I think the gains that we've made appear to be sustainable.

Speaker Change: We do see additional upside out in the future.

Speaker Change: And that upside, just to reiterate, comes specifically from a handful of carriers that, you know, have been sort of slow to recover, but who we do expect to join the recovery soon, and from states that are, you know, that are kind of lagging from a rate approval standpoint.

Jayme Mendal: I think we're confident that as we turn the corner into 2025, we will certainly begin to see some of that happen. But between now and the end of the year, I think what we can say is we're comfortable with the sort of level of recovery we've seen thus far, and that's, you know, factored into guidance. But we don't contemplate significant additional upside beyond that.

Speaker Change: We don't, you know, it's hard to say exactly when those things will come to pass. I think we're confident that as we turn the corner into 2025, we will certainly begin to see some of that happen.

Speaker Change: But between now and the end of the year, I think what we can say is we're comfortable with this sort of, like, level of recovery we've seen thus far, and that's, you know, factored into guidance, but we don't contemplate significant additional upside beyond that.

Jayme Mendal: Now, all that being said, right, we continue to operate with discipline. Like, we've seen, you know, we've seen some unpredictability of these recoveries in the past. There's the unknown of cat losses. We are in hurricane season after all, right? So there are things that, you know, that cause us to continue to operate with discipline. But in terms of the recovery, we're pretty solid on where we are right now and do expect some upside in the future.

Speaker Change: Now all that being said, right, we continue to operate with discipline, like we've seen, you know, we've seen some unpredictability of these recoveries in the past.

Speaker Change: There's the unknown of of cat losses. We are in hurricane season after all, right? We're so there are things that you know that caused us to continue to operate with discipline But in terms of the recovery, we're pretty solid on where we are right now and and do expect some upside out in the future

Joseph Sanborn: Maybe I'll add on to it as well to give you a little sense of the second half of the year, more specifically in the numbers. So, I guess, first, we see this dynamic where positive dynamics across auto cat recovery. We see that continuing into 2025, as Jayme said, some larger states coming online and also carriers who have not meaningfully returned, seeing that opportunity with those as well. I think the real question is the exact timing and how this plays out.

Speaker Change: Maybe I'll maybe I'll add on to it as well to give you a little sense of the back of the year more specifically in the numbers So I guess first we see this dynamic where positive positive dynamics across AutoCAD recovery

Speaker Change: We see that continuing into 2025. As Jayme said, some larger states coming online and also carriers who have not had meaningfully returned, seeing that opportunity with those as well. I think the real question is on the exact timing and how this plays out.

Joseph Sanborn: We talked about in our prepared remarks a dynamic where we continue to have near-term uncertainty, and I think it reflects what we're dealing with with the carriers, which is they're coming back after a multi-year period of downturn. They're going back and trying to figure out how they rebuild that growth muscle, and how do they go about adapting to an environment where they enter states; they may feel it's an opportunity, and all of a sudden, other carriers come on very quickly, and it changes the dynamic, and they have to look at other things.

Speaker Change: We talked about our prepared remarks. There's a dynamic where we continue to have near-term uncertainty.

Speaker Change: And I think it reflects what we're dealing with with the carers, which is they're going back.

Speaker Change: After a multi-year period of downturn, they're going back and trying to figure out how they rebuild that growth muscle and how do they go about adapting to an environment where as they enter states they may feel it's an opportunity and all of a sudden other carriers come on very quickly and it changes the dynamic and they have to look at other states.

Joseph Sanborn: So that's all part of the mix for us. And we think that near-term predictability will persist as we get to the remainder of this year. And so that certainly factors into our thinking. And again, we saw this in Q1. We saw it again in Q2. And they went both ways.

Speaker Change: So that's all part of the mix for us.

Speaker Change: And we think that near-term predictability will persist as we get to the remainder of this year, and so that certainly factors into our thinking.

Joseph Sanborn: There were a lot of favorable things for that, particularly in the latter part of both Q1 and Q2, that allowed us to exceed our guidance. At the same time, there were some unfavorable things, which we had to adapt to and work through. We noted those as well. As I look to Q4, I think the question a lot of folks are asking is, what is our Q4 going to look like relative to Q3? So, here is what we know. And again, we base our guidance on what we know at the time. We're not going to speculate about that.

Speaker Change: And again, we saw this in Q1, we saw it again in Q2, and they went both ways. There was a lot of favorable things that happened, particularly in the latter part of both Q1 and Q2, that allowed us to exceed our guidance.

Speaker Change: At the same time, there were some unfavorable things which we, you know, had to adapt to and work through. We noted those as well. As I look to Q4, I think the question a lot of folks are asking is, what is our Q4 going to look like relative to Q3?

Speaker Change: So, here is what we know, and again, we base our guidance on what we know at the time. We're not going to speculate, but we'll give you what we know.

Joseph Sanborn: But we'll give you what we know and some of the factors you might consider. So first, when you look at Jayme, she talked about the momentum going into the second half of the year and next year. You feel good about that momentum.

Speaker Change: and some of the factors you might consider.

Speaker Change: First, when you look at, you know, Jayme talked about the momentum going into the, you know, the second half of the year into next year, you feel good about that momentum. I think the real question is, how does it play out specifically within the time periods?

Joseph Sanborn: I think the real question is, how does it play out specifically within the time period? So first, I would highlight that, you know, the normal. When we think about what we look at to guide Q4, we'd say, what specific events do we know of, significant states, or things that will happen that will have materially moved the marketplace positively or negatively? We don't have any specific insight into anything we've not talked about.

Speaker Change: So first I would highlight that

Speaker Change: When we think about what do we look at to guide to the Q4, we'd say, what specific events do we know of significant states or things that will happen that will have materially moved

Speaker Change: marketplace positively and negatively. We don't have specific insight into anything we've not talked about. You know, so what we know is reflecting our guide and beyond that we you'll be speculating if more states would happen sooner or carriers may change their views. So we don't we don't have a view there.

Joseph Sanborn: You know, so what we know is reflective of our guide. And beyond that, we would be speculating if more states would happen sooner or carriers may change their views. So we don't, we don't have a view there.

Joseph Sanborn: If you look at seasonal patterns, we've talked about the challenges of using seasonality given this auto recovery cycle, but that being said, it is something we do look at here internally as we try to analyze carriers in our business more broadly and the aging side as well. Generally, seasonality, Q3 to Q4 is down, you know, high single digits, close to 10%. Since 2020, the average is right around there.

Speaker Change: If you look at seasonal patterns, we've talked about the challenges of using seasonality given this auto recovery cycle, but that being said, it is something we do look at here internally as we try to analyze carriers and our business more broadly on the aging side as well.

Speaker Change: Generally, seasonality, Q3 to Q4 is down, you know, high single digits close to 10% since 2020, the average is right around there and so we do look at that. The other thing we would acknowledge is that when we think about the dynamics of this, we also would say

Joseph Sanborn: And so we do look at that. But the other thing we would acknowledge is that when we think about the dynamics of this, we also would say... The second half of the year has some impact on FCC preparations, which I've mentioned in my prepared remarks. And that, certainly, those investments will continue into Q4. And lastly, this dynamic around cat losses. And I want to sort of put some balance on this, which is that carriers have run their business for years thinking about how to factor in cat losses into their business, and they are doing that, and will continue to do that well.

Speaker Change: The second half of the year has some impact on FCC preparations, which I mentioned in my prepared remarks, and that will certainly, those investments will continue into Q4.

Speaker Change: And the last is this dynamic around cat loss. And I want to sort of put some balance on this, which is carers have run their business for years, thinking about how to factor in cat losses into their business, and carers are doing that, will continue to do that well. I think the dynamic I would focus on is really...

Joseph Sanborn: I think the dynamic I would focus on is really, if you look at the season we had in 2023, the storm season, which tends to run from mid-August to mid-November, was relatively mild, very favorable from a carrier viewpoint. That gave confidence to a lot of carriers in late 2023, as they started thinking about their plans for 24. It gave them some confidence. Fast forward to now, some carriers are still sort of getting comfortable with the levels of underwriting profitability or cognizant that if a catastrophe loss has become more meaningful than a norm, it could make their confidence shaken a bit as they're thinking about their. So those are the dynamics we would think about sort of the puts and takes, you know, looking from Q3 to Q4, acknowledging it's an environment where there's a lot of reasons for And then second, in terms of EBITDA margins, I'd maybe give some context on this point.

Speaker Change: If you, you know, if you look at the season we had in 2023, the storm season, which tends to run like mid-August to, you know, mid-November, was a very, relatively mild, very favorable from a carrier viewpoint. That gave confidence to a lot of carriers in late 2023 as they started to think about their plan 24. It gave them some confidence.

Speaker Change: Fast that forward to now, you know, some carriers are still sort of getting their comfort with the levels of underwriting profitability. We're cognizant that if the cat loss has become more meaningful than a norm, it, you know, could make their confidence, you know, shaken a bit as they're thinking about their spend.

Speaker Change: So those are the dynamics we would think about, sort of the puts and takes, you know, looking from Q3 to Q4, acknowledging it's an environment where there's a lot of reasons for options, but also continue to near-term uncertainty.

Speaker Change: And then second in terms of EBITDA margins, you know, maybe give some context in this point. We started the year saying we were going to get back to pre-downturn margins. We thought we'd do that in the first half of the year. We did that in Q1. We actually went beyond. We said we'd stay in that 6% to 8% for the rest of the year.

Joseph Sanborn: We started the year saying we were going to get back to pre-downturn margins. We thought we'd do that in the first half of the year. But we actually went beyond that.

Joseph Sanborn: We said we'd stay in that 6% to 8% for the rest of the year. As we progressed into Q2, we made some public comments saying we were at that 8% level. And what we saw is that in the second half of Q2, we had favorable performance that, because of our tight operating leverage, flowed through the bottom line, and we ended up at 11%. If you look at our guide for Q3, the midpoint of our guide is the same as Q2.

Speaker Change: As we progressed into Q2, we made some public comments saying we were at that 8% level. And what we saw is in the second half...

Speaker Change: of Q2.

Speaker Change: We had favorable performance that, because of our tight operating leverage, flowed through the bottom line, and we ended up at 11%. If you look at our guide for Q3, the midpoint of our guide is the same as Q2, it's 11%, so we're expecting sort of flat margins going into Q2, some modest incremental investment, but also some tightening on the VMM margin, which is reflected.

Joseph Sanborn: It's 11%, so we're expecting sort of flat margins going into Q2, some modest incremental investment, but also some tightening on the BMM margin, which is reflected. And as we look to Q4, we're still expecting sort of at or near that 11%, give or take. You know, the way I look at Q4 is if it's sequentially down from Q3, we'll manage expenses carefully to sort of still land within that, you know, at or near that level.

Speaker Change: And as we look to Q4, we're still expecting sort of at or near that 11% give or take.

Speaker Change: Now, the way I look at Q4 is if it's sequentially down from Q3, it will manage expenses carefully to sort of still land within that, you know, at or near that level. If we should have a strong, you know, such as AR, everything I just discussed doesn't work out to sequentially down, it becomes favorable as Q3 was.

Joseph Sanborn: If we should have a strong, you know, since you say everything I just discussed doesn't work out to be sequentially down, it becomes favorable as Q3 was, you know, that would be a dynamic where you might have a chance for overperformance, particularly if it happens late in the quarter, just like we had in Q1.

Speaker Change: You know, that would be a dynamic where you might have a chance for overperformance, particularly if it happens late in the quarter, just like we've had in Q1 and Q2.

Joseph Sanborn: As we look to next year, 2025, what I would just remind you of what we've said previously, which is that we want to continue to have, and the other is the improvements in EBITDA margins. Our long-term goal is 20 plus percent. Our thought in Q2 when we last commented on this was that we'd be in that 80%, give or take, for the rest of the year. We'd get to double digits, low double digits, in 2025.

Speaker Change: As we look to next year, 2025, what I would just remind you is what we've said previously, which is we want to continue to have

Speaker Change: Improvements in EBITDA margins. Our long-term goal is 20 plus percent. Our thought in Q2, when we last commented on this, is that

Speaker Change: We'd be in that 80-ish percent, give or take, for the rest of the year. We'd get to double digits, low double digits in 2025. We're obviously there early now, and we're pleased by that, and I think it reflects

Joseph Sanborn: We're obviously there early now, and we're pleased by that. I think it reflects the strong performance, but also the operating leverage we've embedded in the model that we're now benefiting as it flows to the bottom line. And so that, I guess, is the color I can give you for the rest of this year. Again, the long-term goal is still 20.

Speaker Change: I see strong performance, but also the operating leverage we've embedded in the model that we're now benefiting as it flows through the bottom line. And so that, I guess, is the color I can give you for the rest of this year.

Michael Graham: That's really helpful. Thanks a lot, Joseph and Jayme.

Speaker Change: Again, long-term goal still being 20-plus percent.

Speaker Change: That's really helpful. Thanks a lot, Joseph and Jayme. Thank you. Thank you, Mike.

Zach Cummins: Your next question comes from the line of Zach Cummins with B. Reilly Security. Please go ahead.

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

Zach Cummins: Hi, good afternoon. Congratulations on the quarter and thanks for taking my questions. So, the first question for me is just, in terms of carriers that haven't ramped up spend yet, I mean, do you get any sort of feedback as to why they haven't at least started to dip their toe in terms of renewing some of these budgets and kind of their expectation of a timeline as to when they'll start to be more meaningfully involved in trying to acquire new customers?

Zach Cummins: Hi, good afternoon. Congrats on the quarter and thanks for taking my questions. So, first question for me is just in terms of carriers that haven't ramped up spend yet, I mean, do you get any sort of feedback as to why they haven't at least started to dip their toe in, in terms of...

Speaker Change: renewing some of these budgets and

Speaker Change: kind of their expectation of a timeline to when they'll start to be more meaningfully involved in trying to acquire new customers. And then my follow-up question is, away from the automotive side, just curious what's driving the pretty strong performance we're seeing in the home and renters insurance business and expectations we should be modeling in for that moving forward?

Zach Cummins: And then my follow-up question is away from the automotive side; just curious what's driving the pretty strong performance we're seeing in the home and renters insurance business and what we should be modeling in for that moving forward.

Jayme Mendal: Sure. Thanks, Zach.

Speaker Change: Sure, thanks Zach.

Speaker Change: So, with respect to the carriers that have yet...

Jayme Mendal: So with respect to the carriers that have yet to reactivate or yet to sort of ramp up, it's typically one of two reasons. Reason number one is just underwriting health. They haven't quite gotten to a place where they're comfortable sort of throttling spend yet. And number two is actually staffing and resourcing. So there's at least one major carrier that really kind of took down their staffing levels in their marketing department and are sort of left in a position where they need to actually hire back in before they're able to manage the amount of spend that moves through our channel.

Speaker Change: to reactivate or yet to sort of ramp. It's typically one of two reasons. Reason number one is just underwriting health. They haven't quite gotten to a place where they're comfortable sort of throttling spend up yet.

Speaker Change: And number two is actually staffing and resourcing. So there's at least one major carrier that really kind of.

Speaker Change: took down their staffing levels in their marketing department and are sort of left in a position where they need to actually hire back in before they're able to manage the amount of spend that moves through our channel.

Jayme Mendal: So, I would say the former is the more common reason that we've heard, but, you know, interestingly enough, it's not the only reason. And the expectation, just given the trend line of underwriting, and obviously the staffing piece can be solved for, is that these issues get resolved probably between now and the end of the year. But again, we don't know exactly when, and so it's hard for us to factor that into any guidance we provide.

Speaker Change: So, I would say the former is the more common reason that we've heard, but, you know, interestingly enough, it's not the only reason.

Speaker Change: And, you know, the expectation, just given the trend line of underwriting, and, you know, obviously the staffing piece can be solved for, is that these issues get resolved, probably between now and the end of the year. But again, we don't know exactly when, and so therefore it's hard for us to factor that into any guidance we provide.

Joseph Sanborn: Maybe the one piece I'd add before on home is if you think about the CARES as they went into the downturn, some CARES went into the downturn much faster than others. They pulled back quickly on spend, and tried to readjust prices. What you've seen with some of our CARES is that they delayed going in to pulling back spend, and as a result, it's taking them longer to work through repricing their books, and that's reflected in our agency.

Speaker Change: Maybe the one piece I'd add before I go home is, if you think about the CARES as they went into the downturn, some CARES went into the downturn much

Speaker Change: They pulled back quickly on spend, tried to readjust pricing. What you've seen with some of our CARES is that they delayed going in to pulling back spend, and as a result, it's taking them longer to work through repricing their book, and that's reflected in our agency side.

Jayme Mendal: And then on the home vertical, you know, I mean, we had another record quarter for revenue for VMD in the home. And that's with a backdrop of a homeowner's market that's still struggling pretty mightily. So, you know, if you just look at, like, the cat losses in Q2, they were elevated quite a bit. And so, you know, home, the lack of underwriting health in home was on full display in the carriers' Q2 results.

Speaker Change: Yeah.

Speaker Change: And then on the home vertical, you know, I mean, we had another record quarter for revenue for VMD in home.

Speaker Change: And that's with the backdrop of a homeowner's market that's still struggling pretty mightily. So, you know, if you just look at, like, the cat losses in Q2,

Speaker Change: They were elevated quite a bit, and so, you know, home, the lack of health, underwriting health and home was on full display in the Carrier's Q2 results.

Jayme Mendal: And yet, you know, we've been able to just continue to grow it through solid execution. So I think the expectation going forward on HOME is that we feel like we're sort of well-positioned. We've got a good handle on that marketplace at this point, and you know, as the market recovers, we should be in a good position to ride that recovery. But we need to see the carriers kind of sort out their HOME underwriting before we would expect meaningful, you know, upside from here, and we expect they will.

Speaker Change: And yet, we've been able to just continue to grow it through solid execution. So, I think the expectation going forward on home is we feel like we're sort of well-positioned. We've got a good handle on that marketplace at this point.

Speaker Change: And, you know, as the market recovers, we should be in a good position to ride that recovery, but we need to see the carriers kind of sort out their home underwriting before we would expect meaningful, you know, upside.

Jayme Mendal: It was just kind of the second priority relative to auto, and so we're starting to see the carriers get around to kind of putting more focus on home, but that will likely take some time to work itself through.

Speaker Change: from here, and we expect they will. It was just kind of the second priority relative to auto, and so we're starting to see the carriers get around to kind of putting more focus on home, but that will likely take some time to work itself through.

Zach Cummins: Got it. Well, thanks for taking my questions and best of luck with the rest of the quarter.

Speaker Change: Got it. Well, thanks for taking my questions and best of luck with the rest of the quarter.

Greg Peters: Your next question comes from the line of Greg Peters with Raymond James. Please go ahead. Hey, good afternoon. This is Sid on.

Operator: Thank you, Zach. Your next question comes from the line of Greg Peters with Raymond James. Please go ahead. Hey, good afternoon. This is Sid on behalf of Greg.

Speaker Change: Thank you, Zach.

Speaker Change: Your next question comes from the line of Gregg Peters with Raymond James. Please go ahead.

Sid: Hey, good afternoon. This is Sid on for Greg. Just based on your results here to date and your guidance, curious if you can comment if it's correct to believe you're gaining wallet share of the carriers who have increased their growth appetite, or are you seeing an increase in willingness to spend on your platform when compared to pre-downturn?

Jayme Mendal: Yeah, I mean, we're certainly seeing a willingness to increase spend. I think, look, we're, you know, we are the leading digital PNC insurance marketplace. Right now, we're in a period where there's a lot of change, and it's happening quickly. I think many of us are riding that wave of growth, and we believe we're executing really well in it. We made a decision last year to go deep in P&C, to really focus there, to go deeper with carriers, and deeper with agents.

Speaker Change: Yeah, I mean, we're certainly seeing a willingness to increase spend. I think, look, we're, you know, we are a leading digital PNC insurance marketplace.

Speaker Change: Right now, we're in a period where there's a lot of change. It's happening quickly.

Speaker Change: Many of us are riding that wave of growth, and we believe we're executing really well in it. We made a decision last year to go deep in P&C, to really focus there, to go deeper with carriers, deeper with agents.

Jayme Mendal: We're focused on quality and sustainability of that growth. And so, we feel really good about our market position long-term. I think one month to the next, one quarter to the next, it's a little hard to measure. But some of the data we do get back from carriers, though, from some of our biggest carrier partners would suggest that we have gained share in the recent past.

Speaker Change: We're focused on quality, sustainability of that growth.

Speaker Change: And so, you know, we feel really good about our market position long-term. I think, you know, one month to the next, one quarter to the next, it's a little hard to measure. Some of the data we do get back from carriers, though, from some of our biggest carrier partners would suggest that we have gained share in the recent past.

Jason Kreyer: Your next question comes from the line of Jason Kreyer with Craig Hallam. Please go ahead.

Speaker Change: Okay, thank you. Thanks, Ed.

Speaker Change: Your next question comes from the line of Jason Kreyer with Craig Hallam. Please go ahead.

Jason Kreyer: Great, thank you. You mentioned a few times just the variability in the recovery in some states. Curious if you can give an updated perspective on some of those larger states where rate adequacy has been challenged and if you have any perspective on when that starts to straighten out.

Jason Cryer: Great, thank you. You mentioned a few times on just the variability on the recovery in some states. Curious if you can give an updated perspective on some of those larger states where rate adequacy has been challenged, and if you have any perspective on when that starts to straighten out.

Jayme Mendal: Yeah, the biggest state, I mean, the states that tend to be challenged, California, New York, New Jersey, Michigan, to an extent, the biggest one of those is California. And all the intel we get from carriers would suggest that they're expecting to get back to sort of adequate rates in 2025. So we have yet to hear from any of the major carriers that they expect a significant kind of breakthrough in rate approvals between now and the end of the year.

Speaker Change: Yeah, the biggest state, I mean, you know, the states that tend to be challenged, just California, New York, New Jersey, Michigan to an extent, the biggest one of those is California, and all the, you know,

Speaker Change: All the intel we get from carriers would suggest that they're expecting...

Speaker Change: getting back to sort of adequate rates in 2025. So we have yet to hear from any of the major carriers that they expect a significant kind of breakthrough in rate approvals between now and the end of the year.

Jayme Mendal: New York, you know, would be the other one that's maybe noteworthy. We're starting to see some movement in New York, at least in parts of the state. So, you know, that one could happen sooner, or it's beginning to happen maybe a little bit sooner. I think California would probably be the last shoe to drop, and that one is likely to be in 2025.

Speaker Change: New York, you know, would be the other one that's maybe noteworthy. We're starting to see some movement in New York, at least in parts of the state. So, you know, that one...

Speaker Change: could happen sooner or it's beginning to happen maybe a little bit sooner. I think California would probably be the last shoe to drop and that one is likely to be in 2025.

Jayme Mendal: And then you kind of gave an indication that as you move from Q1 to Q2, the recovery became a little bit more broad-based across carriers. Just curious, any more details on that, like looking across your carrier partners? What is the mix of those that are in the midst of a pretty robust recovery versus those that are still kind of waiting in the early stages of recovery? Yeah, it's an interesting question.

Speaker Change: Thank you and then you kind of gave an indication that as you move from Q1 to Q2 the recovery became a little bit more broad-based across carriers. Just curious any more details on that like looking across your carrier partners what is the mix of those that that are in the midst of a pretty robust recovery versus those are that are still kind of waiting in early stages of recovery?

Jayme Mendal: Yeah, it's an interesting question. I mean, if you kind of benchmark against historical levels of spend, I would say the majority of carriers are still in the early to mid stages of a recovery. You know, there is obviously one major carrier that we would characterize as being in later stages of recovery, but most I would characterize as being in earlier to mid-stages.

Speaker Change: Yeah, it's an interesting question. I mean if you kind of benchmark against historical levels of spend, I would say the majority of carriers are still in the early to mid stages of a recovery.

Speaker Change: You know, there is obviously one major carrier that we would characterize as being in later stages of recovery, but most I would characterize as being earlier to mid stages.

Mayank Tandon: Your next question comes from the line of Mayank Tandon with Needham & Company. Please go ahead. Thank you.

Speaker Change: Got it. Thank you.

Speaker Change: Your next question comes from the line of Mayank Tandon with Needham and Company. Please go ahead.

Mayank Tandon: Thank you. Good evening, Jayme and Joseph.

Jayme Mendal: Jayme, can you share any insights into the buying rates or conversion rates or the ROI on the marketing spend by carriers? How has that changed over time? Has that gone up, enticing them to come back to you for even more spend? I'm just trying to get a sense of sort of the share of the market versus your competition.

Mayank Tandon: Thank you. Good evening, Jayme and Joseph.

Mayank Tandon: Jayme, can you share any insights into the buying rates or conversion rates or the ROI on the marketing spend by carriers?

Mayank Tandon: which, you know, how has that changed over time? Has that gone up, enticing them to come back to you for even more spend? I'm just trying to get a sense of sort of the shareship in the market versus your competition.

Jayme Mendal: So the connection rate of our traffic is obviously something we invest a lot of time and attention into and into improving. We believe we have a real data advantage when it comes to this as one of the largest marketplaces out there. We process just a vast amount of data through the funnel, and we get a lot of feedback from our carriers with respect to the performance of every click or lead that we're sending them. And that is really the foundation for a lot of the data science and AI work that we focus on.

Speaker Change #100: Yeah, I mean...

Speaker Change #101: So, you know, the bind rate of our traffic is obviously something we invest a lot of time and attention into and into improving.

Speaker Change #101: We believe we have a real data advantage when it comes to this as one of the largest marketplaces out there.

Speaker Change #101: We process just a vast amount of data through the funnel, and we get a lot of feedback from our carriers with respect to the performance of every click or lead that we're sending them.

Speaker Change #101: And that is really like the foundation for a lot of the data science and AI work that we focus on.

Jayme Mendal: So, you know, where we are, we are sort of actively managing; we see meaningful improvements in conversion rate. And as I said earlier, you know, we have placed an outsized emphasis of late on quality and performance. We think there's really an opportunity to continue to differentiate through the quality of our traffic. So, you know, we're continuing to focus there, and I think that the investments we're making in our data, in our analytics, and some of the technology that we've been rolling out for traffic bidding and for sort of provider bidding services will all contribute to continuing to improve our relative bind rate.

Speaker Change #101: you know where we are we are sort of actively managing

Speaker Change #101: We see meaningful improvements in conversion rate.

Speaker Change #101: We placed an outsized emphasis of late on quality and performance. We think there's really an opportunity to continue to differentiate through the quality of our traffic.

Speaker Change #101: So, you know, we're continuing to focus there, and I think that the investments we're making

Speaker Change #101: in our data, in our analytics, and some of the technology that we've been rolling out for traffic bidding and for sort of provider bidding services will all contribute to continuing to improve our relative bind rate.

Mayank Tandon: Got it, that's helpful. And then also, just maybe, a longer-term question. You know, when you think about the spend overall, do you think over time it's gonna be more driven by new carriers coming onto your platform? Or do you think it'll really be a function of the current carriers? And I know you have many of the big ones already on your platform, increasing their marketing spend over time because, as you said earlier, you have that advantage in the market with your data analytics. We're just trying to get a sense of growth from existing clients, increasing their spend versus new logos coming onto the platform.

Speaker Change #102: Got it. That's helpful. And then, also, just maybe a longer-term question.

Speaker Change #103: You know when you think about

Speaker Change #103: The

Speaker Change #104: spend overall. Do you think overtime is going to be more driven by new carriers coming onto your platform, or do you think it'll really be a function of...

Speaker Change #105: the current carriers. And I know you have many of the big ones already on your platform, increasing their marketing spend over time, because as you said earlier, you have that advantage in the market with your data analytics.

Speaker Change #106: We're just trying to get a sense of growth from existing clients, increasing their span versus new logos coming onto the platform.

Jayme Mendal: Yeah, it's a great question. I mean, I think the answer is it's likely going to be a bit of both. You know, we believe very strongly in this secular tailwind of marketing budgets and spend flowing from more upper funnel harder to measure channels into more lower funnel easier to measure channels because you can get more performance out of a channel like ours than you can out of just about any other channel.

Speaker Change #107: You know, we believe, like, very strongly in this secular tailwind of...

Speaker Change #107: marketing budgets and spend flowing from

Speaker Change #108: More upper funnel, harder-to-measure channels, into more lower funnel, easier-to-measure channels. Because you can get more performance out of a channel like ours than you can out of...

Jayme Mendal: The reason for that is we collect all the consumer attributes that are relevant for insurance underwriting, and so the sophisticated advertiser can target with much more precision in our channel than they can anywhere else. That drives outsized ROI, and I think that's why you see dollars moving from other channels into ours at a steady rate over time. And so for the existing customer base, we expect that trend to continue. And we expect to get a disproportionate share of that by continuing to help our providers optimize through the data, throughout the technology, through everything that we've been talking about.

Speaker Change #108: just about any other channel.

Speaker Change #108: The reason for that is we collect all the consumer attributes that are relevant for insurance underwriting.

Speaker Change #108: And so the sophisticated advertiser can target with much more precision in our channel than they can anywhere else. That drives outsized ROI, and I think that's why you see dollars moving from other channels into ours at a steady rate over time.

Speaker Change #108: And so for the, you know, we'll call it the existing customer base, we expect that trend to continue.

Speaker Change #108: And we expect to get a disproportionate share of that by continuing to help our providers optimize through the data, throughout the technology, through everything that we've been talking about.

Mayank Tandon: At the same time, over the last five to ten years, we continue to see sort of a new breed of digital native insurance companies, we'll call them that, coming into the fray. Typically, the way this starts is it'll be a carrier or somebody that leaves an established insurance carrier because they've identified some gap in the market, and they spin up an insurance product, and they, you know, they sort of start. Digital First because, again, digital allows them to target the very precise type of risk they're looking for, and then they're able to grow from there.

Speaker Change #108: At the same time, you know, over the last...

Speaker Change #108: five to ten years.

Speaker Change #108: We continue to see sort of a new breed of digital native, we'll call it, insurance companies coming into the fray. And typically the way this starts is it'll be a carrier or somebody that leaves an established insurance carrier because they've identified some gap in the market.

Speaker Change #108: and they spin up an insurance product and they, you know, they sort of start digital first.

Mayank Tandon: And some of our, actually, some of our largest spenders in the marketplace are not the legacy insurance carriers but some of these, you know, companies that have probably been around for less than 10 years. And so we would expect that trend to continue to proliferate. And I do think that, you know, over the next 10 years, we'll probably see a vast increase in the amount of spend coming from these digital native carriers, some of whom probably, you know, haven't even, you know, haven't even seen the light of day yet. The target for insurance risk in this channel is superior than it is anywhere else. And I think there's just a tremendous opportunity to create efficiency in the insurance market for people who understand that and know how to build an insurance company around it.

Speaker Change #108: Because, again, digital allows them to target for the very precise type of risk they're looking for, and then they're able to grow from there.

Speaker Change #108: Actually some of our largest spenders in the marketplace are not the legacy insurance carriers but some of these you know companies that have probably been around for less than 10 years and so we would expect that

Speaker Change #108: trend to continue to proliferate. And I do think that, you know, over the next 10 years, we'll probably see a vast increase in the amount of spend coming from these digital native carriers, some of whom probably, you know, haven't even, you know, haven't even seen the light of day yet because

Speaker Change #108: target for insurance risk in this channel is is superior than it is anywhere else and I think there's just a tremendous opportunity to create efficiency in the insurance market for people who understand that and know how to build an insurance company into it.

Jayme Mendal: That's a great color. Thank you so much. Congratulations on the quarter.

Speaker Change #109: That's a great color. Thank you so much. Congrats on the quarter.

Operator: And that concludes our question and answer session. I will now turn the conference back over to management for closing remarks.

Speaker Change #110: And that concludes our question and answer session. I will now turn the conference back over to management for closing remarks.

Jayme Mendal: All right, well, thank you all for joining us today. To close, you know, I'd just like to take a moment to really zoom out and reemphasize how well our team's been executing our plan since since last summer's realignment. You know, over the last year, we've achieved a remarkable turnaround in financial performance. This began with streamlining and refocusing around the core of our business, that is, our digital P&C marketplace. It's an area where EverQuote has built a significant competitive moat.

Speaker Change #111: All right, well, thank you all for joining us today.

Speaker Change #112: To close, I'd just like to take a moment to really zoom out and reemphasize how well our team's been executing our plans since last summer's realignment. Over the last year, we've achieved a remarkable turnaround in financial performance.

Speaker Change #112: This began with streamlining, with refocusing around the core of our business, that's our digital P&C marketplace. It's an area where EverQuote has built a significant competitive moat. It's fueled by our data, by our technology, and through the strength of our distribution and our customer acquisition platforms.

Jayme Mendal: It's fueled by our data, by our technology, and through the strength of our distribution and our customer acquisition platform. And so now, you know, as a direct result of these efforts, we find ourselves just really well positioned to reap the benefits of the ongoing market recovery, which is resulting in financial performance that is, you know, exceeding expectations across all metrics and, notably, in record levels of profitability and record levels of cash flow. So, you know, we look forward to continuing to lean into this renewed focus against the backdrop of an improving insurance market as we enter the back half of the year and begin looking ahead to 2025.

Speaker Change #112: And so now, you know, as a direct result of these efforts, we find ourselves...

Speaker Change #112: Just really well positioned to reap the benefits of the ongoing market recovery, which is resulting in financial performance that is exceeding expectations across all metrics and notably in record levels of profitability, record levels of cash flow.

Speaker Change #112: So, you know, we look forward to continuing to lean into this and to this renewed focus against the backdrop of an improving insurance market as we enter the back half of the year and begin looking ahead to 2025.

Operator: And this concludes today's conference call. Thank you for your participation, and you may now disconnect.

Speaker Change #112: Thanks again.

Speaker Change #113: And this concludes today's conference call. Thank you for your participation and you may now disconnect.

Operator: Thanks for watching. Bye.