EverQuote, Inc. Q3 FY2024 earnings call

Key Sections - Third quarter operating results exceeded the high end of guidance range for revenue, VMM, and adjusted EBITDA, with record levels in these metrics and net income. - Continued focus on P&C market is paying off, with carriers reactivating campaigns, restoring budgets, and reopening state footprints; local agent distribution channel has double-digit growth approaching record high revenue levels. - Technology evolution progress: finished transition to new site platforms and completed major release of new agent platform, accelerating development speed and feature roll-out. - Focus in Q4: maintain operational momentum, plan for 2025, and manage transition to one-to-one consent in compliance with FCC rule related to TCPA, expecting to complete by January 2025.

In the third quarter of 2024, total revenues were $144.5 million, up 163% from the prior year period. Revenue growth was mainly driven by stronger enterprise carrier spend. VMM was $43.9 million for the third quarter, up approximately 125% from the prior year period, and remained strong at 30.4% of revenue. Revenue from the auto insurance vertical was $130 million in Q3, up over 200% year-over-year. Revenue from the home and renters insurance vertical grew to $14.1 million in Q3, up 30% year-over-year.

Forward-looking Statements - Expect revenue for the fourth quarter to be between $131 million and $136 million, representing 140% year-over-year growth at the midpoint. - Expect VMM to be between $38 million and $40 million, representing 89% year-over-year growth at the midpoint. - Expect adjusted EBITDA to be between $14 million and $16 million versus a loss of $900,000 in the prior year's period. - Seasonal sequential decline from Q3 to Q4 is expected to be comparable to average over past five years in auto vertical, and adjusted EBITDA margins are expected to moderate to at or near Q2 levels.

Risks - Compliance with FCC's new TCPA rule related to one-to-one consent will create short-term unpredictability and headwinds, primarily affecting third-party agents, with potential for fewer leads sold but higher pricing due to improved lead quality. - Hurricanes Helene and Milton resulted in temporary pauses in carrier spend in southeastern U.S., although carriers quickly resume spend and no material lasting impact is expected.

Q: Thank you. Good evening. Congrats, Jayme and Joseph, on the quarter. I wanted to just start with the new regulation. Could you just remind us how much of the business would be exposed to the impact, and is there any way to quantify what the impact would be? For example, if it went into effect this year, is there a way to maybe size what the impact would have been, just to give us a sense of how we can reflect that in our model going forward?

A: Sure. Thanks, Mayank. I'll take the first part, and then I'll let Joseph address the sort of how to think about it from a modeling standpoint. So just as a reminder, the new rule effectively requires one-to-one consent that gives the consumer a bit more control over how they get their quotes. And so on the one hand, the effect of that will be that some consumers will opt into fewer provider options, resulting in fewer leads being sold. This specifically affects outreach that occurs telephonically. So that's mainly our agency business, the offline leads that we're selling, which is call it 25%, 30% of the business. But on the other hand, it's going to improve the quality of that product, specifically the performance of those leads for those agents, because you have fewer agents reaching out to a consumer, and that consumer will have opted in more explicitly. So net-net, what will happen is the pricing will adjust, and agents will end up paying more for what is ultimately a better, a higher quality lead product. So that's kind of how it affects us in terms of how you should think about that from a modeling standpoint. I'll let Joseph address that piece.

Q: Well, good afternoon, everyone. I guess my first question. Can you just take a step back and talk to us about the new bidding technology and the new agent platform? And from a technical perspective, I'm just curious how that interfaces with the existing agency management systems that so many of these agents have in place already?

A: Sure. So for some time now, Greg, we've been working to realign and sort of simplify our technology platforms to really support the future scale, velocity of new feature development, and specific going deep into specific use cases within the P&C market as we really focus on going deeper here. And so we've rolled out a number of new or enhanced platforms over the last year that spans our site traffic, which is now all running through a new platform, our traffic bidding platform, which effectively uses sort of AI bidding. So we have machine learning that does the vast majority of our traffic bidding today. And then we have an agent platform, which was just released, where we had a big release of it to thousands of agents, which will really accelerate our ability to deliver new features to agents. So we're making good progress there and we're seeing the benefits of it. With respect to how it interacts with agent management systems, our agent platform today is primarily focused on the delivery of our referral products. So it's setting up campaigns to help them target specific risk profiles and accept lead delivery or live call delivery of those referrals. So we do integrate with a number of agency management systems or lead management systems out there, but our technology platform lives almost like one step up funnel from that. That being said, of the re-platforming is setting the stage for us to continue to add more features to it and, really develop richer relationships with those agents that begin to span more of their needs over time. Is that answer your question?

Q: Great. Thank you. Nice work, guys. just want to ask about VMM. We've seen that just come under a little bit of pressure over the last couple of quarters. I wonder if you could give some perspective on where you think that trend's going forward and then what do you think would need to happen in the market to see that figure start to expand?

A: So thank you Jason for the question. So I think in terms of VMM margin, I think one of the things that we highlight and we highlighted in our prepared remarks is, how does resulted for us in Q3? I think we put a, as we talked about since the start of the year, we expect as we went to a more normalized environment that we would have VMM margins come down from where they were at their heights of late last year and early this year, reflecting as we got a more normalized environment with carriers looking to grow their business. And as that has continued, we expected some downward pressure on VMM margin. What we were able to do in the course of Q3 is really through the two things. I think the effect of our teams really adapting very nicely in the traffic side to the environment. Coupled with our bidding technology, we're able to maintain a very strong VMM margin. Very close to where we were in Q2, and that I think speaks to this, the investments we've made in the data and the technology that are really starting to pay off for us. And we think that will be sustainable over time. As we've talked about with the FCC changes coming up, we think there'll be some, modest pressure. We reflect that in Q, our guide for Q4 reflects some downward pressure, but very modest. We expect there'll be some in the start of the years as well as we go through these changes. But we think we'll normalize and, around these levels as we get into the middle of next year and through the FCC change. And we think that is really a level that is, to be sustainable over time for us. Again, I think the other thing I'd probably highlight for you too is that as we think about, VMM margin for us, we look at it in the context of the efficiency of our traffic operations. And ultimately, we think it's important that we're not just driving revenue, we're driving margins, so we have a sustainable financial model over time.