Earnings call transcript Q1 2023

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Operator

Good afternoon, and thank you for joining the EverQuote First Quarter 2023 Earnings Call. My name is Kate, and I will be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.

I would now like to pass the call over to our host, Brinlea Johnson of The Blueshirt Group.

You may proceed.

Brinlea Johnson

you. Thank welcome quarter and earnings EverQuote's to afternoon XXXX first call. Good in discussing closed. release the be our results market We'll the announced press after issued today me of EverQuote. Mendal, is, and this the Wagner, Chief John Officer Executive Officer; With Jayme Financial Chief on call EverQuote's afternoon

and considered we statements be to concerning growth investments quarter guidance the statements and initiatives the and our that plans call, to business, to XXXX, we business direct-to-consumer auto securities our our other growth agency, including recovery prospects. strategy, our second industry, our new strategy, acquire on plans make our financial execute will During in statements our under and the our drive regarding related regarding existing federal business, statements the the our may forward-looking expectations levers our including ability customers, maintain our growth to laws of for expect key insurance

be we only words considered date. may These as statements today and views identified similar reflect such and and intend, phrases not should and subsequent plan, of upcoming of our we views our we Forward-looking anticipate, statements believe, any we may, words expect, as phrases. with be as we

or update as these We any obligation law. specifically disclaim to forward-looking except by statements revise required

cause statements Forward-looking the could are risks actual are materially subject to our performance uncertainties of expectations. future and results or guarantees to that not and promises of a variety from differ

quarterly SEC's on and our Form the in other the risks on under recent refer Relations of contained to available file the investor.everquote.com with website discussion Commission a to of that and Form on report Securities most please Factors and materially at sec.gov. our heading material factors expectations, our differ XX-Q, report our Risk the at on section could our XX-K For Investor results and on important cause Exchange website from actual those that annual is

which in press measures, of investors.everquote.com. which we'll helpful Relations at investors. refer our we after to included close today's issued A is to financial we to GAAP Finally, reconciliation certain on the non-GAAP course call, release of website of today, available section is of Investor the believe during market the the are measures non-GAAP

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

Jayme Mendal

and Brinlea, for EverQuote, expectations million, $XXX.X marketing across we all both joining KPIs and strong insurance adjusted or XX.X% adjusted revenue EBITDA We million last of thank financial $X.X a you, revenue three margin which of the an VMM Thank primary percentage achieved you before today. representing first $XX.X a exceeded levels, VMM achieved us the and X.X%, of our in of of margin produced million. of downturn. auto We quarter. as EBITDA variable industry

industry progress profitably. significantly the QX was we the will Our broad-based in normalizes, grow and to business as well-positioned be and

instability, in the industry several market strong insurance occurred As period times growing has of headwinds. momentum was current our in QX auto with met

major Entering results. budgets a its carrier their partner customer QX, significantly challenged underwriting due acquisition unexpectedly to reduced

on agents, we year carrier the are in and local to auto for our We Based this seeing for provided withdraw XXXX which previously have guidance. agent the captive could of persistent subsidies insurance targeted also marketing reductions full demand decided our market year. remainder impact uncertainty the

exact in driving growth insurance an predict. conviction significant for difficult the maintain we auto to While recovery EverQuote, remains timing

diversification drive Focusing we operations, into business. efficiency parts throughout continue to on what the can we accelerating of our stable control while

network includes levels agent strong our performance record budget. agent QX resilience in where from local through local Highlights of continued

with suggesting market We position leadership in have as maintains continue in performance highest industry. that market EverQuote the and commanding to share this the a

offerings levels considerable Medicare and of enrollment our and cash with and historically which P&C make we products. Casualty our continue rate policies with high period increasing had auto generating and homeowners In the agency, lines Property or other product ancillary efficiency. we bundle to our open Direct-to-Consumer and a profitability at strong health progress And expanding

XX our now and we Direct-to-Consumer One-Stop the our foundation shop. carriers and continue Health across expand represents product combined to agency of we Medicare P&C build carrier our coverage, Our continue insurance offerings to as

rates vertical auto in changing insurance homeowners’ continuing In agents and the loss shifts non-auto into returned carrier from more budgets trend we to growth began products. auto into QX, With carriers expect continue in revenue shifting to we verticals to our adjust the resources late as that environment, XXXX. demand to home and

Are home to used playbook to replicating health, in marketplaces. growth our the vertical reignite In we the QX, Medicare life, and

over balance efforts. restore in DTC a as non-auto after growth agent broader period year the Medicare following We these of our management contraction in headcount the part to are of expense moving of verticals aggressively reduction

channels agent in auto diversify EverQuote further carrier the enable and channel. direct from to non-auto Progress verticals

addition, before, bids ever drive the levels at rolled as traffic granular QX operations ad we continue VMM more optimize learning efficiency to In greater we bidding We record than business. a which enabling technology, near benefit efficiency. throughout machine leverages from to in margin to achieved high our new spend out

industry-defining market EBITDA, billion-dollar levels management a a operating digital expenses. working that as our belief also discipline steadfast of to XXX of we We return we for full redefine well to auto continue in age. advertising insurance and of and produced our continued plus the insurance ahead to can the create adjusted company pre-downturn recovery. distribution We Thanks an remain

insurance a access more to manner. in find being assembled delivered major personal combination consumers a resulting consumer right of of set have lines, the to insurance their distribution products them, assets, likely each preferred one-of-a-kind products provides comprehensive across for We in which

recommendations build leveraging on industry's consumers widest We which across the for needed. shopping personalized access to right can set the products assets them easily knowledgeable insurance insurance experts personalized, on major of for from received will increasingly access they through focus a as advice destination products these differentiated and

aspects traffic experience intelligence to our continues to amass we to and as the of product to EverQuote’s ranging insurance learning more data, recommendations. across which from increasingly are value we machine personalization, distribution long-term compound using business deploy artificial bidding

data will in technology adoption roots believe we the we deep it AI our the technology, and industry leave proliferates. insurance and With as of

use embracing drive meaningfully EverQuote doing potential is cases and/or AI quickly entirely can finding become more enable new things. its of ways it accessible, As or greater productivity where services products, applications

Our most mission families, it important assets, make is customers future. protect for to property their to life's and health easy

Our policies vision is to technology become largest the source by make knowledgeable data, to personalized. affordable of using and simpler online advisors more insurance and insurance

stabilization work do to While in to require drive left we to have time. realize difficult vision, excellence a fully we of that period much industry operational continue and this

the shopping the digital bring assets, ultimately We selling. the carriers, company insurance believe only deliver experience conviction and and to consumers, industry's full agents age to potential with that team of EverQuote the to need is and the that insurance buying the

our we believe achieving for compelling will vision, our Our incredible remains team value when consumers, insurance provider deliver shareholders. passionate which realized, partners, about and

I'll to discuss our Now, results. financial it to John over turn

John Wagner

discussing quarter decision good I'll start by and the full financial for quarter for the the afternoon, and context provide Jamie, for you, to XXXX. year everyone. withdraw first guidance our Thank then the our and for results second guidance of

revenue year-over-year, exceeded total provided $XXX.X range the but million for quarter. X% a decline of represented Our of guidance QX our last for quarter first

XXXX, a demand auto within insurance largest QX, QX within resurgence following our insurance their in of auto being combination seasonally million and quarter X% of due of a QX carrier Revenue initial year-over-year claims improvement vertical, the to in vertical our losses. from the sequential XX% of a increased stronger improvement from XX.X to customer, our over quarter the

and from revenue. local Coupled level Revenue insurance the million with health agent XX% of consistent nearly home performance insurance year-over-year life record for our achieved a revenue. total XX% and auto verticals, represented of at includes insurance to first of our quarter from network which revenue, XX% renters, decreased we and $XX.X other

vertical. our Consumer optimizing attributable our agency unit efficiency the bringing with VMM, was The provided quarter moderation defined as planned double-digit quarter. range Variable marketing or revenue, and advertising margin growth and guidance in in decline $XX.X offset in economics million an on Direct-to our home last less revenue our by for first expense cash was to emphasis insurance

quarter. was XX.X% monetization, as percentage variable lower revenue margin Despite of near-record for marketing a the a

to higher on acquisition, carriers XX% work pricing by policy consumers claims Though to they raise shopping in margin rising increases point cost cover more technology price drove traffic aggressively. consumer to investments led year-over-year. limit as down spending we losses, bidding Our volumes operating to those traffic continue a and consumer new increased are their to as most reacting

and a marketplace insurance improve, deliver auto performance, expanding based pre has downturn conditions that range to was quarter. bottom-line. net our $X.X was quarter. the provided was insurance quarter, Turning levels reflects our QX in to auto EBITDA our Adjusted to on last profitability. for auto above industry loss GAAP million million demonstrating the stronger positive as potential insurance guidance the return The result first in first $X.X

sequential Operating $XX significant million of EBITDA. cash and with million balance cash the cash $XX.X quarter, equivalents the We first flow cash adjusted was quarter a of positive improvement reflecting outstanding facility. on $X.X cash the no contribution our of million and and flow use a debt ended the debt for sheet on from greater year-over-year

market within the auto Turning to our conditions industry. an including outlook update on insurance

strong improved in our growing customer As we a in new increased which performance, our return on witnessed their anticipated, as experienced demand carrier acquisition. vertical largest of consumer resulted they QX, financial in improved an driven by insurance very focus auto

persistent auto are a earlier low March a decrease rates continuing this, take of combination profitability one-time At and in an a in action would of decisive achieve Outside rate carrier and levels claims suffered QX, This trough more to reduction by to of in to who carrier entering related claims order demand dropping their XXXX. other expenses. increasing carriers however aggressively in nearly and are a insurance factors major experience in abrupt adequacy. resulted the significant rate in increase downturn, in caused QX profitability levels all more of

third-party of may the support in resilient, agents resulted business of has captive agent some and anticipate been the we prolonged of second of network further year. Although impact their which reductions our reductions, this this during a for the possibility nature downturn agent has half local carrier

that acquisition. will withdraw and impacting for to increase will the our full QX of But guidance financial be premium improvement we new insurance decision Ultimately, auto delayed their year. guidance confident for auto increases insurance and the for this to improve our timing continues consumer remain for therefore carriers demand performance consequently

of $XX XX% a the decrease For million, QX, at midpoint. we million XX between revenue year-over-year expect and be to

to we be VMM million $X in year-over-year decrease to be expect million, at $X between of negative $XX the midpoint million. a adjusted and million XX% between and quarter expect the $XX We EBITDA negative and

demand. executing In conviction summary, we we eventual near judiciously and our will insurance quarter for are we that delivered the term, results in while well, directly uncertainty managing the guidance normalization and better the higher from expenses. auto significantly have the carrier of of level recognize than Though first we benefit

questions. your answer now will I and Jayme

Operator

Thank you.

begin We question now [Operator answer session. will the and Instructions]

first line Our will with the Ralph be Blair. of Schackart from William question

Your open. line is now

Ralph Schackart

Good afternoon. Thanks for taking the question.

on situation. in in a of still and guess pretty carrier, then QX follow-up out sort And I you earlier or I know sort then I have thoughts carrier dynamic just those that that conversations progressing it's with How that a carriers profitability? large the March, could any of and/or carriers? that with is And was return other the are out, carried of Just may when conversations terms trending market in then low follow-up.

Jayme Mendal

Hey, how we commitment are They pulled business well-known pointed managing watch like. that's a looks what that us to on - data to - trends. the publicly, firm right? a path to. ratio Sure. The target of ought have carrier have combined we that understood to re-engagement available, the the back they their continue have don't and large Ralph. We sort this They the like don't, watch

do rate so, we their to to occur they combined And And manage ratio they're are in target, specific we to reactivate down expect expect to state-by-state. as take as states, spend. able able to it them

us the month-to-month. So, is that reviewing things given they've signal they're

hopeful state the significant to ratio in think interpretation them come numbers combined of but for part at based they year. and on the speaking inside we of the probably their is don't bring a first QX, their the looking that normalized which expect that back are gotten we with movement part best I any for quarter, year, more largely have the would line them will the

consistent right know increase re-engagement. see message direction. benefiting on are back With is from respect a carrier previous which to rate part a receptivity to We burning has from now And seeing the seems are the other to it they of we in that even expect the carriers, we and rate from everyone's get XXXX rate their are when that states, adjusting states carriers step significant there plans increases. announced some got California. like would that California, a One upwards they XX-point in year good increase large continue

combined to of trending we step get back beginning middle or of of in with direction these ratios to do. line combined ratios their the segment-by-segment to other So, by, line see least call to And slowly more a carriers they get we the get start their right line are at in state-by-state or some expect that as would in in it year. they'll at sight

Ralph Schackart

just Great. follow-up. Thanks. quick a And

in agents, On you that I business or for is the seen this have half that second you. impacted, in that you're the Thank of potentially be just Or QX that local QX? to happen something guess year? bracing

Jayme Mendal

Yeah.

been we removing we've seen marketing to state-by-state, to it. So, dollars segment-by-segment the provide subsidy able them of They year. have subsidy course And carriers they - have been impact, the through some some have removing over but dollars been grow agents. this

QX record agent levels exit of did we budgets. with So

would some dollars. of we make They But withdrawal support the those likely continue without good of higher to have progress. been

of those will we subsidy what these dollars the carriers carriers where the are the for able to to get they are will additional remove return in to year states rates. And expect carriers same – Now, that as marketplace that balance is dollars subsidy profitable. not continue the

be So we hard budget year. the continue it balance will of do expect for the growing to

we maintain good that really in position But market. a

market volume of share. that performance dominant are a provide have We that the the competitors channel. any We highest of into sending

longer to we channel continuing feel that term. about so, over And good build the

Ralph Schackart

Appreciated. Jayme. Okay. Great. Thanks,

Jayme Mendal

Ralph. Thanks

Operator

Thank you.

Morgan. of Our next Cory JP with from be the line question Carpenter will

is now line open. Your

Cory Carpenter

the for question. thanks Hey,

negative the the you if on XQ. to it policy side negative Medicare could competitors then, impact impacts Whether even you in guide it proposed of business, just more? about talk did the changes if Advantage? could to we’re from any seeing positive health Just And in some hurts back those or side the EBITDA potentially,

the your on cost on side, is curious resources. focus like sounded just So it reallocating

maybe just like But where it it about feel feel or how of further maintaining expense make Thank forward? to is need go you your you base cuts kind you if you.

Jayme Mendal

Thanks, Cory. Sure.

the or to the few about in regulation, respect changes represents, put business Advantage context with X% minus into it Advantage So a of Med just points. Med call to plus

it been the describing last preparing new in was what think initially those effect December new take rules. in is guess I they marketing for I you're since of rules year. CMS were we've And proposed to –

in business. to having working in ensure been big they've since ready we're on Now And new with the finalized view we've do been compliance work that we’re a aligned, with our requirements. execute our not to carriers we as them impact

on contacts I think any in unsolicited contacts. tend focus and the rules to of beneficiaries engage don't Medicare unsolicited we

some rules in-person prohibiting business. plan. the spoken from We the like applies enroll Medicare paid vast of new as consumer-initiated do Nobody personal interprets been calling schedule that a have of may believe in to brokerage waiting we majority EverQuote. period. marketing at us that don’t there's is while XX-hour traditional Medicare to activities to marketing the appointments, salespeople So, our we've that the that which to don't Medicare consumer And calls, which that a XX-hour our apply rule attention

comply our So, interpret see we we'll these to of don't business. rules an carriers continue to as impact with having on But it. with our much work and today,

John Wagner

beginning very And going guess, to that. John take action in we sure the regard that that I the business back forward, for demand take we were were going the insurance second to to especially expenses, make downturn, And the of here. with I'll quick operating the that correctly we pretty vertical. Cory, of saw resourcing part to auto it’s the

do we've done that. continued we've and So to that

operating we guidance imply we've does done expenses have QX that that levels and lower of steps see You'll already. internally the some provided for that

that think So, have, made expenses. we for I tightly the we to the parts of to trying will I could you manage toughest continue even in adjusted EBITDA. expect we've year And priority of business think a downturn, manage full always the

when feel demand possible we even that that conditions. we something maintain about of would regardless is That strongly even, that

what be from see would might us. line that in with So, you

Cory Carpenter

Okay. guys. Thank you,

Jayme Mendal

Thanks, Cory.

Operator

Thank you.

be Graham will from of Canaccord. with Michael question next Our line the

now is line open. Your

Michael Graham

of you're last to profitability, a thinking to I the in kind guidance, some full-year think overall, peers. understandable environment I just on what that just the is your from heard – follow Thank on just of, management. to totally about am you, it’s And this question maybe trying level like, given how sort expense pull understand we of

And, you loss QX have a and slight targeted EBITDA a wondering. now just for

investment you're a not are quarterly the the in basis? thinking how back, like, how to areas does is, And of are where environment of thinking on you're there major incur of kind much the question if because central cutting a about how like to other they're short-term, importance be loss improve related just about of Sort kind business? of you'd a entertaining willing not you

Jayme Mendal

off Sure. like Michael. I'll Thanks. on start one. that us

have through adjusted QX. we think a QX. expenses that We slight But around there's, as we've said keep there's the could that in demand year. adjusted move EBITDA we see yeah, to So return as that steps and believe we guided believe we we to will possibly QX to operating the reasons EBITDA a into loss modest loss taken for

again period that by within we and then, we’re annual do enrollment Medicare. expect the health QX, And in the influenced vertical

adjusted we're as EBITDA. committed managing, full nature. think, in possible to to is year as variable not our model pretty much And forget that I a So, much to positive of

see when until you've do things which not reductions advertising up so, seen in see expenses, we cost, reductions in do we And only like now.

But of that with costs, technology you down. also scales revenue our comes actually that costs semi-fixed some some see

see adjusted EBITDA our stays we're a I scenario, profile difference going even you're that think not comfortable see longer. demand we if which in a dramatic So, lower to

John Wagner

focused right of to channel. investments, respect diversify have we're impact with parts direct think the stability where carrier and business is I further from the in now potential which will Mike, we where us the on And

vertical so in look with progress Medicare seen fast following place invest a through so marketplaces that have homeowners, far agent we forward marketplaces. great and which our channels. non-auto some into we And continuing Health, shifted We've the redirected those first Life, And resources. resources to in was and

recovery would as might which the I course the as how from growth affected depending place headcount, flexed with able advisor flow it proceeds on it to if historically that year, the incremental cash a probably marketplace. have auto over the of there's come we we're from the think that be support

the that's of a that that take we at one investment would area So probably look first

Michael Graham

Alright.

Sounds guys. you, good. Thank

Jayme Mendal

Thanks, Mike.

Operator

Thank you.

the Our question from Oppenheimer. Jed with will be next line of Kelly

Your now open. line is

Jed Kelly

your great. believing Hey, of your question. for capacity of XQ Is the my are? taking are Since quarter Thanks for back of it just carrier to kind I conversation, the commentary, if to board you that given the go this think rates is likely for internal trough time kind the projections state you where that takes some year?

Jayme Mendal

of we this So, we business been sort market cycle. it throughout few in a haven't of times hard prediction the gotten right. And

going I'm began, year trough back make a QX major What to and another you can we the we we relative not as aggressively. prediction. in So with leaning carrier one is, tell really – definitely was it pretty probably would expected

higher in is that due despite losses. ratios then that happened areas rate what’s inflation have remained to And elevated auto subsequently loss affect for longer increases

And cost they're to a to continuing vehicles. time see repair so, longer and

across a QX. historical right the in for higher seems previous for catastrophe revise of benefit increases from labor, Well, sort upwards there, pretty earning been to year. Thanks than be to need rate going a most higher and receptive. has and balance They're of state increases losses the injury And to carriers, the consistent okay? in slightly we rate severity, our the plans to parts response

to the trough? say, year. improve comfort that. things just like is so, the think think a And continue the the claim very to have QX be some that and we can will make likely But, a balance I too put there's stake in we of much over ground uncertainty to I

Jed Kelly

like into one until we're kind you as margins in near of And do environment? it's I canoe Got mid-XXs be which low it. margin to VMM of VMM this mean, at math, So, my competitors the of thing ever looking it hold I kind then, been? based preserve a these we margins when demand expect on levels demand looks at of your comes XX% your your margins, thing can the back. mean, would seeing same guidance,

Jayme Mendal

are QX in Yeah, what good improved seeing. in an that we've is, reflect does that margins very VMMM fact we had VMM revenue. reflected reflect QX. a just, does so percentage VMM That we of that implies as guidance the a It what

I a as is we technology that our to lot combination we've advertising. that favorable well of mentioned as technology, a a for out attributable of in as market new think bidding rolled

opportunities more lot a so landscape. And on the

so, guidance we those are feel we certainly is very and we've you VMM in terms that And that confident think and the given levels. of in much that what seeing maintaining I

Jed Kelly

All right. Thank you.

Jed. Thanks,

Operator

Thank you.

from be Dan of will question the Day next line Our with Securities. Riley B.

Your is open. now line

Daniel Day

Yeah, afternoon, taking the guys. questions. for Thanks

agent one us helpful. me. revenue channel I reminder said just about? talked past in a that the think Can quick you percent would for you've you've first remind - be business what that of Just from percent of the

Jayme Mendal

I'm sorry, channel? Was Dan. the agent it

Daniel Day

carrier channel to Yeah, yeah, the as direct channel? the agent opposed

Jayme Mendal

of consistent downturn. that been Yeah, yeah, XX% then, hovers through it around And the revenue. percent has

for has us. resilient channel So a been very that

Daniel Day

it. Got

Wondering, terms sort how are QX that of comments I in monetizing of terms other Any us just into traffic the realized them provide and the challenge you QX? to robust marketplace has But quote lot Okay. getting been requests. to a traffic in like the passed side. in a on can through. rate the marketplace, at hikes of of

Jayme Mendal

few factors strength the volume you traffic the so, is marketplace. And rate cycle. first, in there's the to a relative been Yes, contributing that, first say the than quote In grew definitely quarter, as we XX%. more a request has

as the a notices. shopping, see get as renewal So, their as to continue result, elevated norm. you driving, levels that's double-digit increases people of rate And

this our and our take which it’s technology But drive we of ad at growth some to newest to during contributing the out spend meaningfully time, ability record believe same real share we've is well. levels fitting material in and driving period, efficiency been as our rolling

John Wagner

of shopping is natural intuitive reaction envelopes those now say a very And up include for Dan, what that that consumers. seeing are I out effect in their research that largely we that It's industry would increases more consumers expected. as policy the double-digit just There's largely that, shopping consumers backs premiums. they're and

Daniel Day

And a last it. and quick accretive Got there? about place, one, shelf where guys you opportunities the remind you call for on Whether work? accelerated potential this just see sort re-deceleration delayed to acquisitions, this opportunities or the is although ideas either on actually maybe best us of put talked could to you or any that conversations, of you're terms where targets having in capital

Jayme Mendal

we accelerating opportunities arise rate actually market are opportunities which themselves. are I depressed sensitive. The Well, continue presenting is at auto think to the see

So, any it accelerated efforts. I decelerated neither say, nor has would for us,

We in continue companies to space. with meet the

can into of that Our consideration. progress that's can will can, view that But take now. what extent us sense right in things we sort makes accelerate is, our we meaningfully for that strategies the we that way share against our a of

Daniel Day

right. All Thanks guys. questions. taking the Appreciate

Jayme Mendal

Thanks, Dan.

Operator

That you. call. concludes Thank our

closing will turn over management the remarks. for to now We team back

Jayme Mendal

like. spend have normalizes. and even to that what would recovery of Thank joining it's time high you have auto QX conviction this just carrier while experience another extended for stabilize look just of of Thank uncertainty, a start a we’ll start today. to period all All glimpse unfortunate the acquisition it's right. And a recovery And and provides in before to matter false you. us we partial

can hell in a much doing that the emerge our in team the marketplace control job DTCA. unit of diversified we economics improving a a in interim, the profitability ensure stronger, includes and more business our things And to is controlling we

and strengthening AI business. verticals, beginning accelerating advantage our We throughout are the incorporate local agents our non-auto to with

EverQuote’s future bright. is

We come. for all have And quarters the we made to in building the look digital sharing insurance Thanks updates destination progress hardened to forward towards the future.

Operator

call. That participation. today’s your for Thank concludes you

lines. You now may disconnect your

EverQuote (EVER) 8 May 232023 Q1 Earnings call transcript