Q1 2025 EverQuote Inc Earnings Call
Collin: Good afternoon, ladies and gentlemen, and thank you for standing by my name is Collin and I will be your conference operator today.
Collin: At this time I would like to welcome everyone to the Evercore first quarter 2025 earnings call.
Collin: Lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Collin: He would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
Collin: Would like to withdraw your question. Please press star one again, thank you I would now like to turn the call over to Brent Johnson. Please go ahead.
Brent Johnson: Thank you good afternoon, and welcome to Evercore first quarter 2025 earnings call, we'll be discussing the results announced in our press release issued today after the market close with me on the call. This afternoon are JV Mendel Evercore, Chief Executive Officer, and Joseph Sanborn Evercore Chief.
Brent Johnson: Officer.
Brent Johnson: During the call we will make statements that refer to our business that may be considered forward looking statements under federal securities laws, including statements concerning our financial guidance for the second quarter of 2025.
Brent Johnson: These statements may be identified with words and phrases such as expect believe intend anticipate plan may upcoming and similar words and phrases. These statements reflect our views only as of today and should not be considered abuse of any subsequent date.
Brent Johnson: We specifically disclaim any obligation to update or revise these forward looking statements except as required by law.
Brent Johnson: Looking statements are subject to a variety of risks and uncertainties that could cause the actual results differ materially from our expectations.
Brent Johnson: For a 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.
Brent Johnson: During the course of today's call refer to certain non-GAAP financial measures, which we believe are helpful to investors a reconciliation of GAAP to non-GAAP measures was included in the press release, we issued after the close of market today, which is available on the Investor Relations section of our website and with that I'll turn it over to Jamie. Thank you Brendan and thank you.
Jamie: You all for joining us today.
Jamie: Building on the momentum we generated last year, we once again achieved record performance across our key financial metrics in Q1.
Jamie: Our team continues to execute remarkably well and its carrier profitability remains healthy carriers remain hungry for growth.
Jamie: This backdrop positions us to deliver continued progress throughout 2025.
Jamie: As I mentioned on our last earnings call over the course of last year, we streamlined our vision to become the number one growth partner to P&C insurance providers.
Jamie: Recently, delivering one better performing referrals to bigger traffic scale and three a broader suite of products and services.
Jamie: We execute with a renewed sense of focus on these priorities. We continue to make notable progress let me start with our competitive positioning.
Jamie: Differentiating our marketplace through higher performing referrals is foundational to becoming the top growth partner to insurance providers.
Jamie: To do this we rely on our scale and technology, which enable us to leverage a data advantage through the use of AI throughout our traffic and distribution systems.
Jamie: Previously mentioned, our machine learning traffic bidding platform, which has been instrumental in growing traffic and improving profitability.
Jamie: We are now extending these ml bidding capabilities to our customers through our smart campaigns product, which is gaining wider adoption and which improves carrier's performance in our marketplace.
Jamie: In one recent example, a customer's campaign performance improved by over 40% through the adoption of smart campaigns as.
Jamie: As we delivered strong performance to carriers and agents they reward us with more budget and higher bids which in turn supports continued traffic growth.
Jamie: This flywheel is working as intended and.
Jamie: And we once again expanded provider budgets to set a new high watermark for P&C quote request volume and revenue in Q1.
Jamie: Finally, as we scale, we continue to benefit from more data, which feeds our AI driven systems, enabling still further improvement in customer performance.
Jamie: Customers remain our top priority from our position as a large high performing trusted marketplace partner.
Jamie: Our focus on expanding relationships with customers and to adjacent growth areas.
Jamie: For example, we have been working to build a one stop <unk> shop for local insurance agents as we develop and rollout value add features and products on and around our core <unk> offering we are accessing more agent budget and expanding the ways. We can help agents grow.
Jamie: In Q1, we achieved several milestones in our effort to broaden these customer relationships with our paid products per agency, increasing 25% year over year in March.
Jamie: And we are doing this with increasing operational efficiency through expense discipline continued investments in simplifying our technology platforms and applying AI to automate work recent.
Recent advances have accelerated our rate of development and enabled us to ship new features and products in weeks or months, which in the past may have taken quarters. These new features build on our data and technology advantage to further reinforce our competitive moat.
Jamie: We are confident that as we continue to execute on our strategy and emerge as P&C insurance providers number one growth partner our goal of Evercore, becoming a billion plus dollar revenue company his insight.
Jamie: The roadmap to accomplish this goal is becoming increasingly clear and we are making the requisite investments to support it.
Jamie: It's an exciting time for the Evercore team and we look forward to updating you on our progress throughout the year.
Joseph Sanborn: I'll now turn the call over to Joseph to discuss our financial results.
Joseph Sanborn: Thank you Jamie and thank you all for joining.
Joseph Sanborn: I'll start by discussing our financial results for the first quarter of 2025 before providing an update on what we are currently seeing in the auto insurance sector and our guidance for the second quarter of this year.
Joseph Sanborn: Our strong momentum from 2024 continued into Q1 as we again exceeded guidance across all three of our primary financial metrics total revenue.
Joseph Sanborn: <unk> marketing dollars, where BMD and adjusted EBITDA.
Joseph Sanborn: In Q1, we delivered the fourth consecutive quarter of record revenue <unk> and adjusted EBITDA performance.
Joseph Sanborn: These impressive financial results reflect continued strong operating performance focused on driving expanding levels of profitability.
Joseph Sanborn: Total revenues in the first quarter grew to $166 6 million up 83% from the prior year period and up 13% sequentially.
Joseph Sanborn: Revenue growth was primarily driven by stronger enterprise carrier spend which was up over 175% from the comparable period last year. Our agency operations also grew 22% year over year.
Joseph Sanborn: Revenue from our auto insurance vertical was $152 7 million in Q1 up 97% year over year.
Joseph Sanborn: Revenue from our home and renters insurance vertical was $13 9 million in Q1 up 10% year over year and up 23% sequentially.
Joseph Sanborn: <unk> increased to $46 9 million for the first quarter up 52% from the prior year period.
Joseph Sanborn: Variable marketing margin or <unk>, which is <unk> as a percentage of revenue was 28, 1% for the quarter as anticipated <unk> was negatively impacted by the one to one consent dynamics earlier in the quarter, which can improve as we progressed through the period turning to operating expenses in the bottom line.
Joseph Sanborn: We continue to be disciplined in managing expenses and leveraging investments in our technology platform.
Joseph Sanborn: We have been successful in driving incremental efficiency across our operations as we scale and drive top line growth, which is expanding our operating leverage.
Joseph Sanborn: In the first quarter, we reported net income of $8 million, which includes a noncash charge of $7 9 million related to divesting our remaining P&C director consumer agency assets to set an outstanding legal matter with a former owners of policy fueled an acquisition we completed in August 2021.
Joseph Sanborn: Excluding this charge, we would have reported record net income of $15 9 million in Q1.
Joseph Sanborn: Adjusted EBITDA in Q1 was a record $22 5 million compared to $7 6 million in the prior year period.
Joseph Sanborn: We delivered strong operating cash flow of $23 3 million for the first quarter ending the quarter with no debt and cash and cash equivalents of $125 million up from $102 1 million at the end of 2024.
Joseph Sanborn: Cash operating expenses, which excludes advertising spend and certain noncash and other one time charges were $24 4 million in Q1.
Joseph Sanborn: Before turning to guidance I want to provide an update on our current outlook for the auto insurance industry.
Joseph Sanborn: We believe that the long term thesis of insurance advertising spend shifting to digital channels remains firmly intact.
Joseph Sanborn: While tariffs could place some upward pressure on claims cost in the second half of this year, we remain optimistic that the benefits that we're seeing from the auto insurance recovery will continue throughout the year.
Joseph Sanborn: Based on discussions with our insurance partners carriers broadly remain focused on growing policies in force.
Joseph Sanborn: And have healthy underwriting profitability margins, which provides them with a reasonable cushion to absorb potential inflation in claims costs.
Joseph Sanborn: Softer macroeconomic environment could also benefit carriers with fewer miles driven leading to lower claims costs.
Joseph Sanborn: Now turning to guidance for the second quarter of 2025.
Joseph Sanborn: We expect revenue to be between 155, and $160 million, representing 34% year over year growth at the midpoint.
Joseph Sanborn: We expect <unk> to be between 45% and $47 million, representing 26% year over year growth at the midpoint.
Joseph Sanborn: And we expect adjusted EBITDA to be between 20, and $22 million, representing 62% year over year growth at the midpoint.
Joseph Sanborn: As mentioned last quarter, we plan to increase investments in our technology data assets and AI capabilities. During the second half of 2025 to drive continued operational efficiency and strengthen everquest long term competitive moat.
Joseph Sanborn: As we make these strategic investments, we expect to be disciplined in balancing incremental operating expenses to generate adjusted EBITDA margins at or near current levels.
Joseph Sanborn: In summary, our performance reflects our steadfast commitment to strong execution and a clear strategy as.
Joseph Sanborn: As we delivered record results across all of our key financial metrics.
Joseph Sanborn: As we further scale, we will continue to invest in building long term competitive differentiation in our marketplace.
Joseph Sanborn: Looking ahead to the remainder of the year, we believe that the strength and resiliency of our operating model will position ever quote to drive continued growth and profitability.
Joseph Sanborn: Jamie and I will now take your questions.
Speaker Change: Ladies and gentleman, who will now begin the question and answer session. At this time I would like to remind everyone. SaaS. A question. Please press star followed by the number one on your telephone keypad. If you would like to withdraw your question. Please press star one again one moment. Please for your first question.
Maria Risks: Your first question comes from the line of Maria risks of Canaccord Genuity. Please go ahead.
Maria Risks: Great. Thanks, so much for taking my questions on that congrats on the strong quarter.
Speaker Change: So you touched on the second half trends, a little bit clear understanding that you're not providing guidance for the second half, but is there any additional color, maybe you're able to share in terms of the.
Maria Risks: Broader expectations.
Maria Risks: Some of the dynamics in the second half, especially given the potential impact of tariffs and do you think that sort of carrier profitability is structurally healthier allows us to manage through any macro volatility in the near term.
Maria Risks: Thanks Maria.
Jim: This is Jim this is Jamie.
Jim: Yes, I think the general outlook for carrier profitability as favorable across the board. We continue to see broad based healthy underwriting profitability and it's not just carriers at their profitability targets in many cases some of the big carriers are sort of overshooting their profitability targets.
Jim: Yes, meaningfully they're operating meaningfully below their target combined ratios.
Jim: Which sets up this dynamic.
Jim: Then.
Jim: Obviously being interested and leaning into growth right now and we're seeing that in some of the market recovery that has occurred so far this year and we expect to further develop into the balance of the year and it also creates a bit of cushion.
Speaker Change: Would there be any loss pressures created by the tariffs and adjust if you want to expand on the tariff piece any further sure.
Jim: Yes.
Jim: Give you a little context, I guess, we think about the segment, let me start with the first half just to recap to give you some basis as we look into the second half. So obviously Q1 really strong quarter just the momentum we had starting with auto recovery in 2024 continued into 2025.
Jim: Our guide for Q2 huge second quarters has 34% growth top line at the mid point. So again, another strong quarter. What I would note is as we've talked about in our February call is as the auto carriers are starting to get into more normalized levels of premium increases, we're expecting growth to moderate for us as well and just the broader spend so as you think about the second half of this.
Jim: This year, we've made that comment before in our February call. We reiterate that in this call. The other thing I would note as you think about the second half just compared to where we were last year. As you think about the comps first part of last year. We had in Q1, you had $91 million of revenue is driven really by a few carriers coming on is auto recovery started actually took a step up in <unk>.
Jim: Q2, and then a significant step up in the second half of the year to about 140 $550 million, so that impacts the comps being about the second half of this year.
Jim: With that context, the other piece I would say with regards to.
Jim: Tariffs, how that could impact the business.
Jim: Here's what we know today as Jamie said the carriers are generally quite healthy and as they think about tariffs.
Speaker Change: When this came out in early April you had the carriers just like everyone else sort of pausing to say what does this mean, how should we assess the impact on our business. What we've heard from the carrier. Since then as they remain focused on growth. They are underwriting margins are quite healthy and they would also note that the ability to absorb increase in inflation.
Jim: Claims costs should <unk>.
Jim: Tariffs impact auto parts in the second half of the year. They have more cushion to absorb that now they are quite healthy contrast that Maria stay with like 2022 with an when there was a significant increase in cost that the carriers are in a much more precarious helfman underlying perspective today is quite different so as you look to the second half of the year would say, it's very much similar to what we had with.
Jim: When we talked about in February so the same views same look at seasonality.
Jim: I think tariffs will continue to monitor and see how that change things, but at this point.
Jim: Based on everything we know as carriers seem to be proceeding as planned with their wanting to grow growth in adding policies in force.
Jim: Got it that's very helpful. Thank you and then.
Jim: We will talk about how the industry has responded to the cadence of fulfill so regarding one on one concern I believe you were planning to maintain sort of the requirement for at least a portion of your traffic can you maybe update us on that and also talk about whether some of your competitors that all have implemented this practice.
Jim: Yes, so as far as the requirement goes requirement no longer exists and so.
Jim: We continue to persist and sort of the same environment. We were in before that 101 consent rule change so everybody at cutover.
Jim: A couple of weeks and then effectively rolled back those changes.
Jim: As I mentioned in.
Jim: The February call there were things that we learned through the process of testing our way into one to one consent.
Jim: Sort of confirmed certain hypotheses around our ability to improve quality and performance for our customers.
Jim: By virtue of <unk>.
Jim: Preserving certain amount of like exclusivity on portions of traffic and things like that so we have mechanism is that we did a lot of testing around in preparation for one to one consent, which remain in place today, even absent one to one consent being required.
Jim: I can't really speak to exactly how.
Jim: All the other.
Jim: Companies in the space have responded.
Jim: I would say on the surface level looks like most have just reverted back to their prior state.
Jim: Like us I'm sure there may be some nuanced under the covers with with some of those experiences but for the most part it looks like the industry has largely reverted to to the pre one to one state at this point.
Speaker Change: Got it. Thank you so much for the color.
Maria Risks: Thanks Maria.
Speaker Change: Your next question comes from the line of Jason <unk> of Craig Hallum. Please go ahead.
Wonderful. Thank you guys. Appreciate you taking the questions I was wondering just ask about Vietnam.
Speaker Change: You are guiding to a little bit of a step up and I'm curious if you can quantify how much the impact was in Q1 from <unk> and then as we look forward.
Speaker Change: Just in terms of AI and ml are you seeing any of that benefit DMM, yet or when do you expect that to kind of drive a little bit more tailwind to those rates. Thank you.
Speaker Change: So thanks, Jason for the question appreciate it so as you noted.
Speaker Change: Q1, we had BMS with 28% to 20, a little over 20%, 21% as you noted our guide implies a step up to sort of 20% little over 29%.
Speaker Change: As you look at Q1, it's hard to specifically break out what was one to one which was not one to one in part because our traffic operations are not so divided between Dave shared a shared resource between our enterprise business. So it's hard to break it out that being said if you were sitting in our seats right now in the company.
Speaker Change: The first week.
Speaker Change: First part of the quarter, you would see <unk> margins were much lower and we knew a lot of the things we're doing around getting ready for <unk> Im sorry, getting ready for one to one and then trying to unwind it and I was once we had the change in late January. So we started to see as we progressed through the period as I mentioned in my prepared remarks, we're starting to see <unk> improve and get to levels, where we started.
Look into Q2 with reflecting in our guidance.
Speaker Change: And as we look through the remainder of the year I guess it <unk> no different than what we said in our February call, which is we see Vms margin sort of in these high 20 range and we'll see it sort of we think it will stay in that in that zone throughout throughout the remainder of the year.
Speaker Change: And then Jamie do you want add the second part, yes, so so with respect to the impact of some of the AI or efforts.
Speaker Change: The benefit of those two I think you'd expect to see those in two places over time I mean, the way, we think about the impact of implementing AI and ml solutions.
Speaker Change: Number one is I think there's use cases that we've begun adopting these technologies into that really drive operational efficiency.
Speaker Change: And so examples of that are AI tools that will make the workforce more productive that allow us to do.
Speaker Change: Our body of work, but with fewer people.
Speaker Change: Then there is.
Speaker Change: Set of applications that are more sort of customer oriented.
Speaker Change: That was really meant to kind of improve customer outcomes.
Speaker Change: So with respect to the <unk>, specifically I think the place that we would point to where we have start we've seen some of the impact and we'll continue to see more is in the traffic bidding technology. So thats.
Speaker Change: And ml bidding platform, that's used by our traffic operations.
Speaker Change: That's it.
Speaker Change: The tool that has taken a body of work that used to consume a team of 15 to 20 people down to <unk>.
Speaker Change: Five ish people.
Speaker Change: So there is that more of the operating efficiency piece, but it's also allowed us to bid more precisely for traffic and Thats, where we have more control over.
Speaker Change: He helped us preserve and expand VM.
Speaker Change: So that would be an example of where you sort of see it hit in both places and I think theres a number of other use cases and applications that we will continue to develop that will affect us on the Vienna mine, but I think actually.
Speaker Change: Yes more of the impact will start to flow through also in terms of the operating efficiency as we adopt more tools and automate more of the work.
Speaker Change: Thank you guys.
Speaker Change: Thanks, Jason.
Speaker Change: Your next question comes from the line of Zach Cummins of B Riley. Please go ahead.
Zach Cummins: Yes, hi, good afternoon, Joseph and Jamie Congrats on the strong results to start the year.
Zach Cummins: My first question I'm, just curious around the agent channel can you talk about just some of the results Youre seeing there, especially after you rolled out your new platform.
Speaker Change: On the agency side.
Zach Cummins: Sure.
Zach Cummins: So the agent business is healthy and continues to be.
Zach Cummins: Part of the distribution landscape, where we feel we have a meaningful advantage over others.
Zach Cummins: It had healthy growth, 20%, 30% growth this quarter and thats after as kind of a challenging start where we rolled out one to one consent and then and then rolled it back.
Our focus there is really on deepening relationships with agents. Our vision is very clear we want to build this one stop <unk> shop for local insurance agents.
Zach Cummins: And we intend to do that or have begun to do that by rolling out value added features and products.
Zach Cummins: Basically right on top of an around the quarter leads offering.
Zach Cummins: We're starting to get some real traction with this I think we are beginning to access more agent budget. As a result, we're certainly expanding the ways in which we help agents grow and I think it's also enabling us to build deeper relationships with the carriers who support these agents.
Zach Cummins: No.
Zach Cummins: Yes.
Zach Cummins: It's a big strategic focus area for us and one that we continue to invest in and we're making good progress with.
Zach Cummins: Understood and my one follow up question, maybe geared towards Joseph I know there is no formal guidance in second half of the year, but just given your base case assumptions.
Zach Cummins: Are you assuming any pickup for a more challenged states like California, or New York or meaningful pickup from from other maybe lagging carriers.
Zach Cummins: Really haven't come online just curious whats in your baseline assumptions versus what could be potential upside levers for the model.
Zach Cummins: Sure.
Zach Cummins: So thanks for the question. So I guess when I think about the model not much changed since what we had in February which is California, and New York were not online explorations that we are going to come on line. It seems to be still the consensus right now.
Zach Cummins: As we get feedback on the market and talk to our carrier partners. So thats one wildcard I think with regards to the other side is so it can be something that came on sooner maybe to the positive side I think on the tariff question is the one that's come up a lot. We are addressing our previous question with Maria but I think that is one we'll just we'll watch an hour.
Zach Cummins: <unk> the industry is quite healthy seems to be able to be able to absorb some level of increases and especially at the levels that are being talked about right now, but obviously that could change and what sort of watch that but we remain.
Zach Cummins: Optimistic that the auto recovery this per start in the first half of the year will continue even with these dynamics going on in Washington.
Zach Cummins: So theres really not a lot of change in our outlook from what we had.
Zach Cummins: And the start of the year I guess lastly on other carriers, there's really no new news to update you on a set of new carriers coming on that were not previously with us.
Zach Cummins: Meaningful way in Q1.
Zach Cummins: Understood well, thanks for taking my questions and best of luck with the rest of the cordis.
Speaker Change: Thank you very much thanks Ed.
Speaker Change: Your next question comes from the line of Brown <unk> of William Blair. Please go ahead.
Speaker Change: Hi, good afternoon, thanks for taking the question.
Speaker Change: Jim in the prepared remarks, you talked about your data advantage and machine learning.
Speaker Change: In terms of the traffic building on the platform.
Speaker Change: You're talking about smart campaigns, gaining adoption, maybe just give us a sense of where you are in that adoption and as more adopt the smart campaigns product.
Speaker Change: What kind of impact could that have on sort of the overall platform that I'll follow up.
Speaker Change: Yeah sure. Thanks, Ralph.
Speaker Change: So we think the just the volume of.
Speaker Change: Of consumers that shop with ever quote enables us to build a real advantage in the scale of data that we have so we process.
Speaker Change: Tens of millions of auto and home insurance quote requests per year. So a lot of consumer data provider data and consumer provider sort of match data and outcome data.
Speaker Change: Yes that where we get from.
Speaker Change: From those.
Speaker Change: Engagements.
Speaker Change: Now the smart campaigns product that you described is something that we are building on top of the proprietary data that we have.
Speaker Change: And you can sort of think about it beginning as the traffic bidder at the beginning of it comes from the traffic data that we built for ourselves so for a while now we've been talking about this sort of ml bidding platform that we use in our own traffic operations, which has really enabled us to manage traffic very effect.
Speaker Change: With more sort of granular and accurate predictions around the value of each unit of traffic in automating a lot of the bidding.
Speaker Change: And we've benefited quite a bit from that so with smart campaigns effectively what we're doing is we're taking that capability, we're sort of repackaging, it and making it available as a product to the customers who bid into our auctions.
Speaker Change: And without fail when a customer adopt smart campaigns relative to managing their own campaigns, we see an improvement in performance and that improvement will vary based on the.
Speaker Change: The customer and how effective they were before they adopt smart campaigns.
Speaker Change: By virtue of turning it over to US we see improvement in their performance as they compete in our marketplace.
Speaker Change: And so the reason I sort of called it out this quarter as I think we've gotten sort of critical mass adoption on this product.
Speaker Change: The feature set is sufficiently.
Speaker Change: Did well developed at this point and the number of customers is meaningful that we're beginning to sort of see it make an impact.
Speaker Change: So it's an exciting product for us I think it fits squarely within this strategy it builds directly on our data advantage and the application of sort of AI and ml tooling in this case.
Speaker Change: To improve performance for providers should get us more budget should get us more data should allow us to keep improving performance.
Speaker Change: Okay. That's really helpful. And then just a follow up question, obviously auto carrier spuds returning in that revenue segment is doing quite well.
Speaker Change: But as you think about kind of the home and renters opportunity does.
Speaker Change: Does that allow you to kind of focus on this a little bit more that autos in recovery mode and growing really nicely.
Speaker Change: I'm talking about the products that you have within that business line and sort of just overall thoughts of scaling that revenue. Thank you.
Speaker Change: Yes sure.
Speaker Change: Yes home remains a focus for us.
Speaker Change: We were encouraged last quarter to see the underlying combined ratio is beginning to improve and for carriers and the homeowners products.
Speaker Change: Unfortunately in Q1, we also had the wildfires, which led to a significant cat losses.
Speaker Change: And home was somewhat disproportionately impacted that one to one transition and rollback. So we had some muted growth for home in the first quarter, but we expect it to return to higher growth in Q2, and it remains an area of focus I think the carrier appetite.
Speaker Change: If it follows the course that we saw with auto insurance.
Speaker Change: As that underlies those underlying combined ratios remain healthy we do expect to see more carrier demand flowing through over the course of this year and into next enterprise takes some time for the market to fully recover but we do expect to see continued growth in home.
Speaker Change: Okay, great. Thanks, Kevin.
Speaker Change: Thanks, Rob.
Speaker Change: Your next question comes from the line of <unk> Tandon of Needham. Please go ahead.
Speaker Change: Thank you good evening, Congrats Jamie and Joseph one a strong quarter once again.
Speaker Change: Couple of questions.
Speaker Change: First and foremost Jamie could you talk about deep penetration of the budget within your top five customers. For example, now how much more headroom to grow with them versus growth coming from new carriers coming online. How do you think about the long term opportunity within the existing client base and the newer carrier that you don't have today that you could bring on.
Speaker Change: Overtime.
Speaker Change: It's a good question Mike.
Speaker Change: Mike.
Speaker Change: Am I kind of break EBIT segment out the customer base into a few different segments.
Speaker Change: I can answer it.
Speaker Change: On the one hand, you've got this sort of agent based carriers.
Speaker Change: And with those captive carriers and they represent.
Speaker Change: Good chunk of the market call it roughly a third of the premium out there.
Speaker Change: With these carriers were really limited only by our ability to continue to grow our local agent base and so thats more of an operational and go to market sales marketing constraints, we think that through the introduction of some of the.
New products that we've talked about.
Speaker Change: Continuing to focus on having best in class performance on our leads will be able to continue growing the agent base and further penetrating that share of wallet. So we don't really see any natural constraint there at the carrier level.
Speaker Change: And I would go to the other end of the spectrum, which is kind of like the big digital savvy carrier. These are the ones that represent a lot of the budget. That's in market today in terms of digital advertising.
Speaker Change: And they're in many cases, we're really operating without.
Speaker Change: Budget set budgets per se.
Speaker Change: So these these carriers will effectively buy as much traffic as if any referrals as they can get subject to.
Speaker Change: Hitting certain efficiency targets as it relates to their AD spend and so the key to unlocking more budget is driving better performance per unit of traffic that you are sending to them.
Speaker Change: Hence our focus and our deep investments in these ml applications to help drive more performance for the carriers I don't believe we our budget constrained per se I believe the budget is it sort of limited.
Speaker Change: By more efficiency and more performance and so that's where we're focused.
Speaker Change: And then you've got this sort of like.
Speaker Change: Other group.
Speaker Change: Carriers, who are a bit less savvy and a bit less sophisticated.
Speaker Change: And there historically.
Speaker Change: Historically, we've run into sort of budget limitations again, it ultimately comes back to performance.
Speaker Change: And for them I think we are.
Speaker Change: Working with the industry to evolve and that means building.
Speaker Change: Integrations from our site to theirs.
Speaker Change: All the basic blocking and tackling that will allow these carriers to actually get.
Speaker Change: Performance, so I'll hit their LTV to CAC targets and acquiring traffic through our channel.
Speaker Change: And Thats, the one where today I think we wish it would perhaps move faster, but it will evolve over time.
Speaker Change: And I think that all of that we will help these carriers develop more performing digital funnels.
Speaker Change: And as and if we do there will be ample budget there as well.
Speaker Change: So from our perspective, we've we've made this decision to really focus on the P&C market in part because it's very very large we don't perceive there to be budget constraints that are holding back our growth per se.
Speaker Change: And therefore, I think we're just focused on addressing that kind of led to key leverage points that will enable us to continue unlocking more budget year after year.
Speaker Change: That's very helpful color I appreciate that a quick follow up before you Joseph capital allocation, obviously youre in a very good spot with your balance sheet and cash flow. What are you thinking in terms of priorities for use of cash.
Speaker Change: Sure.
Speaker Change: Thanks, Mike Good question.
Speaker Change: I would say is when we think about cash at probably highlight three things.
Speaker Change: First is.
You'll see our cash of $125 million cash rebuild at the end of Q1, we will continue to accident numbers and we still have high cash converting EBITDA John.
Speaker Change: And I think how thats impacted how we operate business significant two I would highlight new as we think about <unk> as we think about the investments we make organically in the business around our technology, our data assets, our AI capabilities. We're increasingly looking at longer term time horizon investments that things, we would not look at 12 to 18 months ago.
Speaker Change: We will see investments drove 18 months ago, we had and we actually.
Speaker Change: Not too many high are potentially high ROI opportunities because the time to money wishes tool, we just couldnt take them.
Speaker Change: That is certainly changing our investment philosophy today and so we're I think thats really helpful. As we think about making investments to help build a competitive range longer term those investments.
Speaker Change: The first one on highlights.
Speaker Change: The cash impact how we operate the business.
Speaker Change: Second as we think about new M&A, we've touched on and we believe P&C is the year. We can we can build a really large business.
Speaker Change: We'll start to look at M&A opportunities, we think can fit into accelerating our capabilities in building out those capabilities that we can do it faster through acquisition and through doing it organically.
Speaker Change: We can highlight as we look at M&A couple of things I would.
Speaker Change: First is we focused on how does it help our P&C providers.
Speaker Change: Continue to grow their business that thesis, we have and helping them be more successful in growing and foreign consumers.
Speaker Change: We think about it.
Speaker Change: Second will be to the financial discipline, just because we've done with operating the business overall.
Speaker Change: Driving towards how does an acquisition, we would drive to a view how does an acquisition net incremental cash flow to the business that would be the second competitive advantage in.
Speaker Change: In the third I would say.
Speaker Change: Is how does that acquisition fit from a technology.
Speaker Change: G perspective, cultural perspective is it an asset light business or an asset heavy business I think we did see is leaning towards the former considerably we've made evercore <unk> M&A.
Speaker Change: Last is the third category of cash as you know might be consider buybacks and we've had this question in the past and I would say as well.
Speaker Change: We'll think about that in the context of all of these as we think to capital allocation. We are fully this year, what I would say in buybacks, we see sort of the potential benefits of us reducing share count outstanding at all we're also mindful that we are still a small cap company that did the impacts on the public float and restore constant as well those are the three things I'd highlight.
Speaker Change: Our cash impacts we think about organic investment, how we think about M&A and how we think about central.
Speaker Change: Very helpful. Thank you so much.
Speaker Change: Thank you thanks.
Speaker Change: Your next question comes from the line of Jed Kelly of Oppenheimer. Please go ahead.
Jed Kelly: Great Great Great for taking my question and fantastic quarter.
Speaker Change: Just looking at the guidance cut.
Speaker Change: Yes.
Speaker Change: It kind of looks like year over year operating.
Speaker Change: <unk> expenses, so non traffic acquisition cost is going to stay relatively flat with the second with the first quarter could you give us a sense on how we should be viewing your operating expenses throughout the balance of the year I assume you have pretty good visibility on that.
Speaker Change: Sure so as.
Speaker Change: So thanks for the question I guess, when we think about Q1 as you are alluding to with just that little under $25 million in cash operating expenses.
Speaker Change: And when we were in Q4 and Q3. So in Q2, the guide implies sort of similar levels as well maybe.
Speaker Change: Maybe modestly certainly modestly higher than Q1.
Speaker Change: And I think what I'd say is that reflects even as we've been making investments because we're conscious of efficiency continues to be part of the DNA of the company, even as we're getting a much stronger recovery that efficiencies coming into a lot of things.
Speaker Change: As we think about the second half of the year I talked about in our prepared remarks that we are.
Speaker Change: I need to make incremental investments in the second half of the year, particularly around our technology capabilities, our data capabilities and our AI capabilities, and we will be making some investments in the second half to support those areas.
Speaker Change: Those investments will not yield was also shadows.
Speaker Change: 2026, 2027 type return.
Speaker Change: We're still going through the process now to finalize some of our decisions, but we certainly will have some incremental hires in select areas, particularly around technology areas and then Youll see US also looking at how we can partner with third party essentially to do some of this work as well. So we're looking at both both levers.
Speaker Change: Well I think it means from an operating expense level on how we'll manage it is I think it's safe to say that think about EBITDA margins being sort of at or near current levels. We're going to use that same discipline is that we are adding kaufman obviously as we progress from Q1 to Q2 again, we're getting more specificity in terms of how we think about the plans for the second half of the year.
Speaker Change: We'll share more as we as we have as we get more make some final decisions, we'll start sharing folks that with you and others, but again.
Speaker Change: That building in the second half in these investment areas that we described but so it is still being conscious of driving maintaining EBITDA margins at or near current levels.
Speaker Change: And when you say EBITDA margins, you mean overall or are they as a percentage of Vms.
Speaker Change: Adjusted EBITDA margins as measured as a percentage of revenue alright, So I think it probably the simplest way to think about it.
Speaker Change: Typically how we refer to them I think EBITDA right now you said and as you look at you look at EBITDA relative to <unk> and so I appreciate that I'd say I think framing relative to revenues by the way most folks look at it so its sort of stick with that.
Speaker Change: In terms of assessing my comments.
Speaker Change: Okay. So you would expect then European that margins to go up as revenue normalizes in the back half.
Speaker Change: So with.
Speaker Change: So I guess, what I'd say is.
Speaker Change: But his DMM margins were 28% in Q1 28, 1% the midpoint of the guide in Q2 implies just over 29% and I sort of see it staying in the high <unk> as we progressed through the year.
Speaker Change: So that's.
Speaker Change: It has not changed from what we said in February.
Speaker Change: Is it possible quarter could go higher just take over 30, I guess, that's possible, but again I think the view is we're sort of managing the business drove in the high <unk>.
Speaker Change: And it will fluctuate a bit here to there.
Speaker Change: Based on just the normal the normal traffic operations in any given quarter.
Speaker Change: And then as we progressed through the second half of the year Youll see more investments coming in Youll see incremental cash operating expense.
Speaker Change: And that will that will impact EBITDA, but we expect will still be maintained EBITDA margins at or near current levels and again EBITDA as adjusted EBITDA measured as a percentage of revenue.
Speaker Change: Thank you.
Chad: Thanks, Chad.
Speaker Change: Your next question comes from the line of Greg Peters Raymond James. Please go ahead.
Speaker Change: Hey, Thanks for taking my call. This is an edge on behalf of Greg I wanted to ask.
Speaker Change: Ask about trends you've been seeing in the competitive environment over the last 12 months.
Speaker Change: What's changing over the rest of the year.
Speaker Change: Yes.
Speaker Change: Thanks Mitch.
Speaker Change: So I think the big change in that.
Speaker Change: The competitive environment, both on the distribution side on the traffic side are somewhat similar and that is the carriers have really stepped back into the market.
Speaker Change: Big way.
Speaker Change: And so that has just kind of.
Speaker Change: Continually reset the landscape every time, a big carrier makes sort of a big change and you'll see us.
Speaker Change: Reacting and adjusting on both sides, we benefit from the added monetization as a provider of traffic to the carriers and then we're competing for some of that traffic on the.
Speaker Change: On the traffic side, and so youll see some of our acquisition costs come up somewhat commensurate with the with the increased monetization.
Speaker Change: Beyond that.
Speaker Change: It's there's nothing really noteworthy that has changed I will say.
Speaker Change: As we think about our position in the market.
Speaker Change: Evercore has made a decision to really focus on P&C.
Speaker Change: We think we have differential scale, particularly as it relates to the local agent base.
Speaker Change: And we think we use technology and data in a way that.
Speaker Change: That is unique to us and so are our strategy against with the performance of our customers. How we use our data and technology to deliver outsized performance through better better bidding better routing as we do this we have continued to.
Speaker Change: Get more budget higher bids that allows us to compete more effectively for traffic more traffic more data more data more ability to improve performance.
Speaker Change: That's the flywheel, where after and right now all signs are pointing to that flywheel working we've seen wider adoption of some of our performance enhancing features like smart campaigns, which we talked about earlier as a result, we're seeing record budget and revenue. This quarter, that's enabled us to acquire a record levels of traffic volume or scale.
Speaker Change: Q1, and that's giving us more data to optimize so.
Speaker Change: The market landscape is always shifting but we're confident that we've got the right strategy and as we continue to execute it well.
Speaker Change: Sure, we'll continue to accrue our way.
Speaker Change: And maybe just to add onto that context from a financial perspective. So revenues were up were up 13% sequentially in Q1 for us I think that is.
Speaker Change: Favorable relative to what we've seen from others in the market and I think that's on top of a Q4 that was seasonally.
Speaker Change: <unk> rather than down from Q3, so I think those are signs that from a financial viewpoint.
Speaker Change: A strategy that Jamie articulated.
Speaker Change: Coming through into the numbers.
Speaker Change: So I just wanted to highlight those as well.
Speaker Change: Thank you for the answers and.
Speaker Change: That's in the seasonality.
Speaker Change: We had last year are you expecting any seasonality in the variable mark to market this year and the second one.
Speaker Change: So I think in general what I would say in <unk> as we sort of see it in the high <unk> for the year.
Speaker Change: It was 28% in Q1 grew over 29% supplied by the guiding Q2, it'll fluctuate sort of in that high <unk> zones.
Speaker Change: Is it possible it could dip over 30% a quarter, it's possible, but I think in the high <unk> is probably the right way to sort of think about it.
Speaker Change: An upside benefit it may be a benefit of seasonality is another dynamic in the advertising environment.
Speaker Change: Peers in a given quarter, but we would necessarily say, it's a seasonality dynamic on <unk> as much as just a reflection of what's going on in the broader advertising environment, a given time.
Speaker Change: Got it makes sense well thank you guys.
Richard: Thank you thanks Richard.
Richard: There are no further questions at this time and with Iron Mountain turn the call back over to management for closing remarks. Please go ahead.
Speaker Change: Thank you well thanks, everyone for joining us today.
Speaker Change: We're we continue to be energized by the progress that we're making here at the new ever quotes so to speak we are intensely focused on using data technology and AI to help P&C customers grow and the strategy is bearing fruit.
Speaker Change: Team's continued execution allowed us to deliver a fourth consecutive quarter of record performance across all three of our key financial metrics and the flywheel that I described is turning as we grow we're collecting more data as we apply that data to benefit customer performance, we get more budget and pricing power and this helps us.
Speaker Change: Grow more than around the coast. So right now as carrier profitability remains healthy we have a really good backdrop for continued progress this year and we're looking forward to sharing progress again next quarter. Thank you all.
Speaker Change: Ladies and gentlemen. This concludes your conference call. We thank you for participating in <unk> could you. Please disconnect your lines.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.