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Operator: Good afternoon, ladies and gentlemen. And thank you for standing by. My name is Calvin and I will be your conference operator today. At this time, I would like to welcome everyone to the EverQuote First Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. I would now like to turn the call over to Brinlea Johnson. Please go ahead.

Brinlea Johnson : Thank you. Good afternoon and welcome to EverQuote’s first quarter 2025 earnings call. We will be discussing the results announced in our press release issued today after the market closed. With me on the call this afternoon are Jayme Mendal, EverQuote’s Chief Executive Officer; and Joseph Sanborn, EverQuote’s Chief Financial Officer. During the call, we will make statements related to our business that may be considered forward-looking statements under federal securities laws, including statements concerning our financial guidance for the second quarter of 2025. Forward-looking 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 our views as of any subsequent date. We specifically disclaim any obligation to update or revise these forward-looking statements, except as required by law. Forward-looking statements are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. 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. Finally, during the course of today’s call, we will refer to certain non-GAAP financial measures, which we believe are helpful to investors.

A reconciliation of GAAP to non-GAAP measures was included in the press release we issued after the close of market today, which is available on the Investor Relations section of our website. And with that, I’ll turn it over to Jayme.

Jayme Mendal: Thank you, Brinlea. And thank you all for joining us today. Building on the momentum we generated last year, we once again achieved record performance across our key financial metrics in Q1. Our team continues to execute remarkably well, and as carrier profitability remains healthy, carriers remain hungry for growth. This backdrop positions us to deliver continued progress throughout 2025. As I mentioned on our last earnings call, over the course of last year we streamlined our vision to become the Number 1 growth partner to P&C insurance providers by efficiently delivering; one, better performing referrals; two, bigger traffic scale; and, three, a broader suite of products & services. As we execute with a renewed sense of focus on these priorities, we continue to make notable progress.

Let me start with our competitive positioning. Differentiating our marketplace through higher performing referrals is foundational to becoming the top growth partner to insurance providers. 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. I have previously mentioned our Machine Learning traffic bidding platform, which has been instrumental in growing traffic and improving profitability. We are now extending these ML bidding capabilities to customers through our Smart Campaigns product, which is gaining wider adoption, and which improves carriers’ performance in our marketplace. In one recent example a customer’s campaign performance improved by over 40% through adoption of Smart Campaigns.

As we deliver strong performance to carriers and agents, they reward us with both more budget and higher bids which, in turn, supports continued traffic growth. This flywheel is working as intended, and we once again expanded provider budgets to set a new high watermark for P&C quote request volume and revenue in Q1. Finally, as we scale, we continue to benefit from more data, which feeds our AI-driven systems, enabling still further improvements in customer performance. Customers remain our top priority. From our position as a large, high performing, trusted marketplace partner, we are focused on expanding relationships with customers into adjacent growth areas. For example, we have been working to build a one-stop growth shop for local insurance agents.

As we develop and roll out value-add features and products on, and around, our core leads offering, we are accessing more agent budget and expanding the ways we can help agents grow. 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. 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 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 years. These new features build on our data and technology advantage to further reinforce our competitive moat.

We are confident that as we continue to execute on our strategy and emerge as P&C insurance providers Number 1 growth partner, our goal of EverQuote becoming a $1 billion plus revenue company is in sight. The roadmap to accomplish this goal is becoming increasingly clear, and we are making the requisite investments to support it. It’s an exciting time for the EverQuote team, and we look forward to updating you on our progress throughout the year. 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. I will 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. Our strong momentum from 2024 continued into Q1, as we again exceeded guidance across all three of our primary financial metrics: Total Revenue, Variable Marketing Dollars or VMD, and Adjusted EBITDA. In Q1, we delivered the fourth consecutive quarter of record revenue, VMD, and adjusted EBITDA performance. These impressive financial results reflect continued strong operating performance, focused on driving expanding levels of profitability. Total revenues in the first quarter grew to $166.6 million, up 83% from the prior year period and up 13% sequentially.

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. Revenue from our auto insurance vertical was $152.7 million in Q1, up 97% year-over-year. Revenue from our home and renters insurance vertical was $13.9 million in Q1, up 10% year-over-year and up 23% sequentially. VMD increased to $46.9 million for the first quarter, up 52% from the prior year period. Variable Marketing Margin, or VMM, which is VMD as a percentage of revenue, was 28.1% for the quarter. As anticipated, VMM was negatively impacted by the one-to-one consent dynamics early in the quarter, which then improved as we progressed through the period.

Turning to operating expenses and the bottom line. We continue to be disciplined in managing expenses and leveraging investments in our technology platform. 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. In the first quarter, we reported net income of $8 million, which included a non-cash charge of $7.9 million related to divesting our remaining P&C direct-to-consumer agency assets to settle an outstanding legal matter with the former owners of PolicyFuel, an acquisition we completed in August 2021. Excluding this charge, we would have reported record net income of $15.9 million in Q1. Adjusted EBITDA in Q1 was a record $22.5 million, compared to $7.6 million in the prior year period.

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. Cash operating expenses, which excludes advertising spend, and certain non-cash and other onetime charges were $24.4 million in Q1. Before turning to guidance, I want to provide an update on our current outlook for the auto insurance industry. We believe that the long-term thesis of insurance advertising spend shifting to digital channels remains firmly intact. While tariffs could place some upward pressure on claims costs in the second half of this year, we remain optimistic that the benefits that we are seeing from the auto insurance recovery will continue throughout the year.

Based on discussions with our insurance partners, carriers broadly remain focused on growing policies in force and have healthy underwriting profitability margins, which provides them with a reasonable cushion to absorb potential inflation in claims costs. A softer macro environment could also benefit carriers with fewer miles driven leading to lower claims costs. Now, turning to guidance for the second quarter of 2025. We expect revenue to be between $155 million and $160 million, representing 34% year-over-year growth at the mid-point. We expect VMD to be between $45 million and $47 million, representing 26% year-over-year growth at the midpoint. And, we expect adjusted EBITDA to be between $20 million and $22 million, representing 62% year-over-year growth at the midpoint.

As mentioned last quarter, we plan to increase investment in our technology, data assets and AI capabilities during the second half of 2025 to drive continued operational efficiency and strengthen EverQuote’s long-term competitive moat. 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. In summary, our performance reflects our steadfast commitment to strong execution and a clear strategy, as we delivered record results across all of our key financial metrics. As we further scale, we will continue to invest in building long-term competitive differentiation in our marketplace. Looking ahead to the remainder of the year, we believe that the strength and resiliency of our operating model will position EverQuote to drive continued growth and profitability.

Jayme and I will now take your questions.

Operator: Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions].One moment please for your first question. The first question comes from the line of Maria Ripps of Canaccord Genuity. Please go ahead.

Maria Ripps: Great. Thanks so much for taking my questions and congrats on the strong quarter. So you touched on the second half trends a little bit here, understanding that you are not providing guidance for the second half. But is there any additional color maybe you are able to share in terms of the sort of maybe broader expectations or some of the dynamics in the second half, especially sort of given the potential impact of auto tariffs? And do you think that sort of carrier profitability is structurally healthier now sort of to manage through any macro sort of volatility in the near term?

Jayme Mendal: Thanks, Maria. This is Jayme. Yeah, I think that the general outlook for carrier profitability is 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. They have less, meaningfully – they are operating meaningfully below their target combined ratios, which sets up this dynamic of them obviously being interested in 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 it to further develop into the balance of the year. And it also creates a bit of cushion should there be any loss pressures created by the tariffs. I don’t know, Joseph, if you want to expand on the tariff piece any further?

Joseph Sanborn : Sure. Give you a little context. I guess we are thinking about the second half. 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. Our guide for Q2, second quarter has 34% growth top line at the midpoint, 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 a broader spend. So if you are thinking about the second half of this year, we’ve made that comment before in our February call, and I’m going to 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 revenues driven really by a few carriers coming on as auto recovery started. That took a step up in Q2 and then a significant step up in the second half of the year to around $145 million, $150 million. So that impacts the comps in about the second half of this year. Just with that context, the other piece I would say with regards to tariffs, how that could impact the business, you know here’s what we know today. As Jayme said, the carriers are generally quite healthy, and as they think about tariffs, you know 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 in our business? What we’ve heard from the carriers since then is they remain focused on growth. Their underwriting margins are quite healthy. And they would also note that their ability to absorb increase in inflation on claims costs should 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, say with like 2022 at the end, when there was a significant increase in cost for the carriers on a much more precarious health from an underwriting perspective. Today, it’s quite different. So, if you look to the second half of the year, I would say it’s very much similar to what we had with what we talked about in February. So the same views, same look at seasonality.

I think tariffs will continue to monitor and see how that changed things. But at this point, based on everything we know, carriers seem to be proceeding as planned with their wanting to grow growth and adding policies in force.

Maria Ripps: Got it. That’s very helpful. Thank you. And then can you maybe talk about how the industry has responded to the vacated FCC rule regarding one-on-one consent? 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 like talk about whether some of your competitors sort of have implemented this practice?

Jayme Mendal: Yes. So as far as the requirement goes, the requirement no longer exists. And so, we continue to persist in sort of the same environment we were in before that one-to-one consent rule change. So everybody had cut over for a couple of weeks and then effectively rolled back those changes. As I mentioned in the February call, there were things that we learned through the process of testing our way into one-to-one consent that sort of confirmed certain hypotheses around our ability to improve quality and performance for our customers by virtue of preserving certain amount of like exclusivity on portions of traffic and things like that. So we have mechanisms 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.

I can’t really speak to exactly how, you know, all the other companies in the space have responded. I would say on the surface level, it looks like most have just reverted back to their prior state. Like us, I’m sure there may be some nuance under the covers with some of those experiences. But for the most part, it looks like the industry has largely reverted to the pre-one-to-one state at this point.

Maria Ripps: Got it. Thank you so much for the color.

Jayme Mendal: Thanks, Maria.

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

Jason Kreyer: Wonderful. Thank you, guys. Appreciate you taking the questions. I wanted to ask about VMM. You’re 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 TCPA. And then as we look forward, just in terms of AI and ML, are you seeing any of that benefit VMM yet? Or when do you expect that to kind of drive a little bit more tailwind to those rates? Thank you.

Joseph Sanborn : So thanks Jason for the question. I appreciate it. So as you noted, Q1 we had VMM 28%, a little over 28%, 28.1%. As you noted, our guide implies a step up to sort of a little over 29%. As you look at Q1, it’s hard to specifically break out what was one-to-one, what was not one-to-one, in part because our traffic operations are not so divided between their shared – it’s a shared resource between our enterprise customer agencies. So it’s hard to break it out. That being said, if you were sitting in our seats right now in the company, through the first week and the first part of the quarter, you would see VMM margins were much lower. And we knew a lot of the things we were doing around getting ready for VMM – sorry, getting ready for one-to-one and then trying to unwind it once we had the change in late January.

So we started to see as we progressed through the period, I mentioned in my prepared remarks, we started to see VMM improve and get to levels where we’re starting to – as we look into Q2, we’re reflecting in our guide. And as we look through the remainder of the year, I guess, on VMM, no difference than what we said in our February call, which is we see VMM margins sort of in the high 20 range, and we’ll see it sort of – we think it will stay in that zone throughout the remainder of the year. And then, Jayme, do you want to add the second part?

Jayme Mendal: Yeah. So with respect to the impact of some of the AI or ML efforts and the benefit of those to VMM, 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, number one is, I think there’s use cases that we’ve begun adopting these technologies into, that really drive operational efficiency. And so examples of that are AI tools that will make the workforce more productive, that allow us to do a particular body of work with fewer people. Then there’s a set of applications that are more sort of customer oriented that are really meant to kind of improve customer outcomes. So with respect to the VMM line specifically, I think the places that we’d point to where we’ve seen some of the impact and we’ll continue to see more is in the traffic bidding technology.

So that’s an ML bidding platform that’s used by our traffic operations. That’s the tool that has taken a body of work that used to consume a team of 15 to 20 people down to five-ish people, and so there’s more of the operating efficiency piece. But it’s also allowed us to bid more precisely for traffic, and that’s where we have more control over, and it’s really helped us preserve and expand VMM. So, that would be an example of where you sort of see it hit in both places. And I think there’s a number of other use cases and applications that we will continue to develop that will affect us on the VMM line. But I think actually 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.

Jason Kreyer: Thank you, guys.

Jayme Mendal: Thanks, Jason.

Operator: Your next question comes from the line of Zach Cummins of B. Riley. Please go ahead.

Zach Cummins : Hi, good afternoon, Joseph and Jayme. Congrats on the strong results at the start of the year. My first question, I’m just curious around the agent channel. Can you talk about just some of the results you are seeing there, especially after you’ve rolled out your new platform on the agency side?

A – Jayme Mendal: Sure. The agent business is healthy. It continues to be a part of the distribution landscape where we feel we have meaningful advantage over others. It had healthy growth, 20% to 30% growth this quarter, and that’s after it’s kind of a challenging start where we rolled out one-to-one consent 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 growth shop for local insurance agents. And we intend to do that or have begun to do that by rolling out value-add features and products, basically right on top of and around the core leads offering. We’re starting to get some real traction with this. You know, I think we’re 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. So it’s a big strategic focus area for us, one that we continue to invest in and we’re making good progress with.

Zach Cummins : Understood. And maybe one follow-up question, maybe geared towards Joseph. I know there’s no formal guidance in the second half of the year, but just given your base case assumptions, are you assuming any pickup from more challenged states like California or New York, or meaningful pickup from other maybe lagging carriers that really haven’t come online? Just curious what’s in your baseline assumptions versus what could be potential upside levers for the model?

A – Joseph Sanborn: Sure. So thanks, Zach, 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 with expectations. They were going to come online. That seems to be still the consensus right now as we get feedback on the market and talk to our carrier partners. So that’s one wild card. I think with regards to the other side is – so that could be something that came on sooner, maybe to the positive side. You know, I think on the tariff question is the one that’s come up a lot, we – I addressed it in our previous question with Maria, but I think that is one we’ll just sort of we’ll watch. And in our minds, the industry is quite healthy.

It seems to be able to be able to absorb some level of increases, and especially the levels that are being talked about right now. But obviously that could change and we’ll sort of watch that. But we remain optimistic that the auto recovery that’s started in the first half of the year will continue, even with these dynamics going on in Washington. So there’s really not a lot of change in our outlook from what we had in the start of the year. I guess the last thing on other carriers, there’s really no new news to update you on. So the new carriers coming on that were not previously with us in any meaningful way in Q1.

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

Joseph Sanborn: Thank you very much.

Jayme Mendal: Thanks Zach.

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

Ralph Schackart : Good afternoon. Thanks for taking the question. Jayme, in the prepared remarks you talked about your data advantage and machine learning in terms of the traffic bidding on the platform. And then you talked 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. You know, what kind of impact did that have on sort of the overall platform? And then I have a follow-up.

Jayme Mendal: Yeah. Sure, thanks Ralph. So we think that just the volume of consumers that shop with EverQuote enables us to build a real advantage in the scale of data that we have. So we process tens of millions of auto and home insurance quote requests per year. It’s a lot of consumer data, provider data, and consumer provider sort of match data and outcome data that we get from those engagements. Now, the Smart Campaigns product that you described is something that we’re building on top of the proprietary data that we have. And you can sort of think about it beginning as the traffic bidder – the beginning of it comes from the traffic bidder 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 effectively, with more sort of granular and accurate predictions around the value of each unit of traffic and automating a lot of the bidding, 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. And without fail, when a customer adopts Smart Campaigns relative to managing their own campaigns, we see an improvement in performance, and that improvement will vary based on the customer and how effective they were before they adopt Smart Campaigns. But by virtue of turning it over to us, we see improvement in their performance as they compete in our marketplace. And so the reason I sort of called it out this quarter, is I think we’ve gotten sort of critical mass adoption on this product. Like the feature set is sufficiently developed at this point, and the number of customers is meaningful that we’re beginning to sort of see it make an impact.

So it’s an exciting product for us. I think it fits squarely within the strategy. It builds directly on our data advantage and the application of sort of AI or ML tooling, in this case, to improve performance for providers, should get us more budget, should get us more data, should allow us to keep improving performance.

Ralph Schackart : Great, thanks. That’s really helpful. And then just a follow-up question. Obviously, auto care spends are turning and that revenue segment is doing quite well. But as you think about kind of the home and renters opportunity, does that allow you to kind of focus on this a little bit more, that auto is in recovery mode and growing really nicely? Maybe kind of talk about the products that you have within that business line and sort of just overall thoughts of scaling that revenue line item. Thank you.

Jayme Mendal: Yeah, sure. So yeah, home remains a focus for us. We were encouraged last quarter to see the underlying combined ratios beginning to improve for carriers in the homeowners products. Unfortunately, in Q1 we also had the wildfires, which led to significant cat losses. And home was somewhat disproportionately impacted by 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, if it follows the course that we saw with auto insurance, as 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, and it’ll probably take some time for the market to fully recover. But we do expect to see continued growth in home.

Ralph Schackart : Okay, great. Thanks Jayme.

Jayme Mendal: Thanks, Ralph.

Operator: Your next question comes from the line of Mayank Tandon of Needham. Please go ahead.

Mayank Tandon : Thank you. Good evening. Congrats, Jayme and Joseph on a strong quarter once again. A couple of questions. First and foremost, Jayme, could you talk about the penetration of the budget within your top five customers, for example? You know, 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 based on the newer carrier that you don’t have today that you could bring on over time?

Jayme Mendal: It’s a good question, Mike. And I might kind of break – I might segment out the customer base into a few different segments to try and answer it. On the one hand, you’ve got this sort of agent-based carriers. And with those captive carriers, and they represent a good chunk of the market, call it roughly a third of the premium out there. With these carriers, we’re really limited only by our ability to continue to grow our local agent base, and so that’s more of an operational and go-to-market sales marketing constraint. We think that through the introduction of some of the new products that we’ve talked about, and continuing to focus on having best-in-class performance on our leads, we’ll 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. Then I’d go to the other end of the spectrum, which is kind of like the big digital-savvy carriers. These are the ones that represent a lot of the budget that’s in market today in terms of digital advertising. And there, in many cases, we’re really operating without set budgets per se. So these carriers will effectively buy as much traffic, as many referrals as they can get, subject to 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, hence our focus and our sort of deep investments in these ML applications to help drive more performance for the carriers.

I don’t believe we are budget-constrained per se. I believe the budget is sort of limited by more efficiency and more performance, and so that’s where we’re focused. And then you’ve got this sort of like other group of carriers who are a bit less savvy and a bit less sophisticated, and there historically we’ve run into sort of budget limitations. Again, it ultimately comes back to performance. And for them, I think we are just working with the industry to evolve, and that means like building integrations from our site to theirs. It’s all the basic blocking and tackling that will allow these carriers to actually get performance. So hit their LTV targets in acquiring traffic through our channel. And that’s the one where today I think we wish it would perhaps move faster, but it will evolve over time, and I think that all that, we will help these carriers develop more performing digital funnels, and as and if we do, there will be ample budget there as well.

So from our perspective, 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. And therefore, I think we’re just focused on addressing the kind of key leverage points that will enable us to continue unlocking more budget year after year.

Mayank Tandon : That’s very helpful color. I appreciate that. A quick follow-up for you, Joseph. Capital allocation, obviously you are in a very good spot with your balance sheet and cash flow. What are you thinking in terms of priorities for use of cash?

A – Joseph Sanborn: Sure. So thanks, Mike, for the question. I’d probably say this. When we think about cash, I’d probably highlight three things. The first is, you’ll see our cash, its $125 million. It’s the cash we built at the end of Q1. We’ll continue to add to that investment. We still have high cash converting with EBITDA becoming operation cash flow. And I think to how that’s impacted and how we operate business is significant too. I would highlight, as we think about making – 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, the things we would not look at 12, 18 months ago.

We were looking at investments 12, 18 months ago where we had – we actually would not do many high or potentially high ROI opportunities because the time to money was just too long. We just couldn’t take the thinned down GDN. That has certainly changed in our investment philosophy today, and so I think that’s really helpful as we think about making investments that help build our competitive advantage longer-term, those investments will be key. That’s the first one I’m highlighting it on. That’s how the cash is impacting how we operate the business. Second, as we think about M&A, we’ve touched on we believe P&C of the year, we can build a really large business. We’ll start to look at M&A opportunities we think can fit into accelerating our capabilities and building up those capabilities, if we can do it faster through acquisition than through doing it organically.

I think I’d highlight as we look at M&A, a couple of things I would consider. First is, we focused on how does it help our P&C providers continue to grow their business. That thesis we have, helping them be more successful in growing and acquiring consumers, key to how we think about it. Second would be, the financial discipline. Just like as we’ve done with operating the business overall, we are driving towards how does an acquisition – drive to a view of, how does an acquisition add incremental cash flow to the business? That would be the second competitive advantage. And the third I would say is how does that acquisition fit from a technology perspective, cultural perspective? Is it an asset light business or an asset heavy business? I think we should see us leaning towards the former, consistent with what we’ve made there before, that would be in M&A.

Then the last is – so the third category of cash is might we consider buybacks? And we’ve had this question in the past and I’d say is, we’ll think about that in the context of all these, as we think through capital allocation more fully this year. What I’d say in buybacks, we see sort of the potential benefits of obviously reducing share count, outstanding and all. We’re also mindful that we are still a small cap company that could be impacted on the public vote and we’re super conscious of that as well. So those are the three things that highlight how cash impacts we think about, organic investment, how we think about M&A and how we think about potential buybacks.

Mayank Tandon : Very helpful. Thank you so much.

Joseph Sanborn: Thank you.

Jayme Mendal: Thanks.

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

Jed Kelly : Hey, great, great for taking my question in a fantastic quarter.

Jayme Mendal: Thanks Jed.

Jed Kelly : Just looking at the guidance, it kind of looks like your operating expenses, so non-traffic acquisition costs are going to stay relatively flat with the second, with the first quarter. Can 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.

Joseph Sanborn: Sure. So thanks for the question. I guess when we think about Q1, as you are alluding to, we’re just a little under $25 million in cash operating expenses, similar to where we’re in Q4 and Q3. So in Q2, the guide implies sort of similar levels as well maybe modestly, certainly modestly higher than Q1. And I think what I’d say is that reflects, even as we’ve been making investments visible, we’re conscious of efficiency. It continues to be part of the DNA of the company. Even as we’re getting this much stronger recovery, that efficiency is coming into a lot of things we think about. As we think about the second half of the year, I talked about in my prepared remarks that we are planning to make incremental investments in the second half of the year, particularly around our technology capabilities, our data capabilities, our AI capabilities.

And we’ll be making small investments in the second half to support those areas. You know, those investments will not yield results this year. Those are 2026, 2027 type return. 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 you’ll see us also look at how we can partner with third parties potentially to do some of this work as well. So we’re looking at both levers. What I think it means from an operating expense level on how we’ll manage this, 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 as how we’re adding costs in.

You know, obviously as we progress from Q1 to Q2, we’re getting more specificity in terms of how we think about the plans for the second half of the year, and we’ll share more as we have – as we get more – make some final decisions, we’ll start sharing with folks, sharing that with you and others. But again, seeing it building in the second half in these investment areas that we described, but sort of still being conscious of driving, maintaining EBITDA margins at or near current levels.

Jed Kelly : And when you say EBITDA margins, you mean overall, or are they as a percentage of VMM?

A – Joseph Sanborn: Adjusted EBITDA margins as measured as a percentage of revenue, all right. So, I think it’s probably the simplest way to think about it. It’s typically how we refer to them. I think EBITDA, I know you sometimes you look at EBITDA relative to VMM, and so I appreciate that. I’d say, I think framing it relative to revenue is probably the way most folks look at it. So I’d sort of stick with that in terms of me assessing my comments.

Jed Kelly : Okay, so you would expect then your VMM margins to go up as revenue normalizes in the back half?

A – Joseph Sanborn: So I guess what I’d say is, VMM 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 20’s as we progress through the year. So that’s – it has not changed from what we said in February. Yeah, is it possible a 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 to sort of in the high 20s. And it’ll fluctuate a bit here to there based on just the normal traffic operations in a given quarter. And then as we progress through the second half of the year, you’ll see more investments coming in. You’ll see incremental cash operating expense and that will impact EBITDA, but we expect we’ll still be maintaining EBITDA margins at or near current levels. And again EBITDA, adjusted EBITDA measured as a percentage of revenue.

Jed Kelly : Thank you.

Joseph Sanborn: Thanks, Jed.

Operator: Your next question comes from the line of Greg Peters of Raymond James. Please go ahead.

Mitch Rubin : Hey, thanks for taking my call. This is Mitch on behalf of Greg Peters. I want to ask about the trends you’ve been seeing in the competitive environment over the last 12 months and how you see that changing over the rest of the year. Thanks.

Jayme Mendal: Thanks, Mitch. So I think the big change in the competitive environment, both on the distribution side and the traffic side are somewhat similar. And that is the carriers have really stepped back into the market in a big way. And so that has just kind of continually reset the landscape every time a big carrier makes sort of a big change. And you see us 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 traffic side. And so you’ll see some of our acquisition costs come up, somewhat commensurate, with the increase in monetization. Beyond that, there’s nothing really noteworthy that has changed.

I will say, as we think about our position in the market, EverQuote has made a decision to really focus on P&C. We think we have differential scale, particularly as it relates to the local agent base. And we think we use technology and data in a way that is unique to us. And so our strategy begins with the performance of our customers, how we use our data and technology to deliver outsized performance through better bidding, better routing. As we do this, we’ve continued to 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, that’s the flywheel we’re 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 record levels of traffic volume, our scale in Q1, and that’s giving us more data to optimize. So the market landscape is always shifting, but we’re confident that we’ve got the right strategy. And as we continue to execute it, the market share will continue to accrue our way.

Joseph Sanborn: And maybe just to add on to that, you know context from a financial perspective. So revenues were up 13% sequentially in Q1 for us. I think that is 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 up rather than down from Q3. So I think those are signs that from a financial viewpoint, the strategy that Jayme articulated is coming through into the numbers. So I just want to highlight those as well.

Mitch Rubin : Thank you for the answers. And you just mentioned the seasonality that you guys had last year. Are you expecting any seasonality in the variable high margin this year, the second one?

A – Joseph Sanborn: So I think in general what I’d say in VMM is, we sort of see it in the high 20’s for the year. You know, it was 28% in Q1, a little over 29% supplied by the guide in Q2. It’ll fluctuate sort of in that high 20’s zone. You know, is it possible it could dip over 30% in a quarter? It’s possible, but I think in the high 20’s is probably the right way to sort of think about it. If there’s an upside benefit, it may be a benefit of seasonality or just another dynamic in the advertising environment that appears in a given quarter. But I wouldn’t necessarily say it’s a seasonality dynamic on VMM as much as just a reflection of what’s going on in the broader advertising environment at a given time.

Mitch Rubin : Got it. Makes sense. Well, thank you guys.

Joseph Sanborn: Thank you.

Jayme Mendal: Thanks, Mitch.

Operator: There are no further questions at this time. And with that, I will now turn the call back over to the management for closing remarks. Please go ahead.

Jayme Mendal: Thank you. Well, thanks everyone for joining us today. We continue to be energized by the progress that we’re making here at the new EverQuote, 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. The 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 grow more and around it goes. 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.

Operator: Ladies and gentlemen, this concludes your conference call. We thank you for participating and ask that you please disconnect your lines.