EverQuote Inc
For the period ended Sep 30, 2024. Filed Nov 5, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 5, 2024
EVER$28.82-4.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0000950170-24-091761
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-05.
0000950170-24-121035
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 60 previous paragraphs and 113 current paragraphs.
55 unchanged; 5 reworded; 52 added; 0 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 2 previous and 18 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (52)
Current report
Results of Operations
Current report
Comparison of the Three and Nine Months Ended September 30, 2024 and 2023
Current report
The following tables set forth our results of operations for the periods shown:
Current report
(1) Comprised of revenue from the following distribution channels:
Current report
(2) Includes stock-based compensation expense as follows:
Current report
(3) See “—Non-GAAP Financial Measure” for information regarding our use of adjusted EBITDA as a non-GAAP financial measure and a reconciliation of adjusted EBITDA to its comparable GAAP financial measure.
Current report
Revenue
Current report
Revenue increased by $89.5 million from $55.0 million for the three months ended September 30, 2023 to $144.5 million for the three months ended September 30, 2024. The increase in revenue was due to an increase of $86.9 million in our automotive vertical and an increase of $3.3 million in our home and renters insurance vertical, partially offset by a decrease of $0.7 million in our other insurance verticals. The increase in revenue from our automotive vertical was due to an increase in carrier spend for referrals of $87.4 million, primarily from our largest customer. The increase in revenue from our home and renters insurance vertical was primarily due to an increase in carrier spend for referrals. The decrease in revenue from our other insurance verticals was due to a decrease in carrier spend for referrals due primarily to our exit from the health insurance vertical.
Current report
Revenue increased by $120.5 million from $232.2 million for the nine months ended September 30, 2023 to $352.7 million for the nine months ended September 30, 2024. The increase in revenue was due to an increase of $127.6 million in our automotive vertical and an increase of $9.6 million in our home and renters insurance vertical, partially offset by a decrease of $16.8 million in our other insurance verticals. The increase in revenue from our automotive vertical was due to an increase in carrier spend for referrals of $132.1 million, primarily from our largest customer, partially offset by a decrease in commission revenue of $4.5 million. The increase in revenue from our home and renters insurance vertical was primarily due to an increase in carrier spend for referrals. The decrease in revenue from our other insurance verticals was due to a decrease in commission revenue of $10.3 million and a decrease in carrier spend for referrals of $6.5 million, both due primarily to our exit from the health insurance vertical.
Current report
Cost of Revenue
Current report
Cost of revenue decreased by $0.7 million from $6.2 million for the three months ended September 30, 2023 to $5.5 million for the three months ended September 30, 2024. Cost of revenue decreased primarily due to a decrease in depreciation expense for technology assets that were fully depreciated in the three months ended September 30, 2023 as they were no longer going to be used. Decreases in personnel-related costs of $0.5 million primarily related to decreased headcount in our call center were fully offset by increases in third-party call center costs due to increased volume.
Current report
Cost of revenue decreased by $2.0 million from $17.5 million for the nine months ended September 30, 2023 to $15.5 million for the nine months ended September 30, 2024. Cost of revenue decreased primarily due to a decrease in personnel-related costs of $1.1 million related primarily to decreased headcount in our call center, partially offset by an increase in third-party call center costs of $0.2 million due primarily to a net increase in call volume. Depreciation costs decreased by $1.0 million in 2024 due primarily to depreciation costs of technology assets that were fully depreciated in 2023 as they were no longer being used. Hosting costs also decreased by $0.3 million.
Current report
Sales and Marketing
Current report
Sales and marketing expense increased by $65.3 million from $46.5 million for the three months ended September 30, 2023 to $111.8 million for the three months ended September 30, 2024. The increase in sales and marketing expense was primarily due to an increase in advertising costs of $65.0 million due to an increase in carrier spend.
Current report
Sales and marketing expense increased by $78.0 million from $195.5 million for the nine months ended September 30, 2023 to $273.5 million for the nine months ended September 30, 2024. The increase in sales and marketing expense was primarily due to an increase in advertising costs of $88.9 million due to an increase in carrier spend, partially offset by decreases in personnel-related costs of $9.9 million, primarily in our DTC agency. Personnel-related costs included stock-based compensation expense of $5.1 million and $6.8 million for the nine months ended September 30, 2024 and 2023, respectively. Technology services and agent license fees also decreased by $0.7 million and $0.6 million, respectively, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, due primarily to our exit from the health insurance vertical and the reduction in personnel.
Current report
Research and Development
Current report
Research and development expense increased by $1.8 million from $6.3 million for the three months ended September 30, 2023 to $8.0 million for the three months ended September 30, 2024. The increase in research and development expense was due primarily to an increase in personnel-related costs related primarily to net compensation. Personnel-related costs included stock-based compensation expense of $1.3 million and $1.8 million for the three months ended September 30, 2024 and 2023, respectively.
Current report
Research and development expense increased by $0.3 million from $21.6 million for the nine months ended September 30, 2023 to $21.9 million for the nine months ended September 30, 2024. The increase in research and development expense was due to an increase in personnel-related costs related primarily to net compensation, partially offset by a decrease in stock-based compensation expense. Personnel-related costs included stock-based compensation expense of $4.1 million and $6.5 million for the nine months ended September 30, 2024 and 2023, respectively.
Current report
General and Administrative
Current report
General and administrative expenses increased by $1.9 million from $5.7 million for the three months ended September 30, 2023 to $7.6 million for the three months ended September 30, 2024. The increase in general and administrative expenses was primarily due to an increase in personnel-related costs of $1.5 million and an increase in professional fees of $0.2 million for consulting services. Personnel-related costs included stock-based compensation expense of $2.2 million and $1.4 million for the three months ended September 30, 2024 and 2023, respectively.
Current report
General and administrative expenses increased by $2.8 million from $19.3 million for the nine months ended September 30, 2023 to $22.1 million for the nine months ended September 30, 2024. The increase in general and administrative expenses was primarily due to an increase in personnel-related costs of $2.4 million and an increase in professional fees of $1.1 million for consulting services, partially offset by decreases in legal fees of $0.4 million and bad debt expense of $0.2 million. Personnel-related costs included stock-based compensation expense of $6.0 million and $4.6 million for the nine months ended September 30, 2024 and 2023, respectively.
Current report
Restructuring and Other Charges
Current report
Restructuring and other charges of $19.8 million and $23.6 million for the three and nine months ended September 30, 2023, respectively, consisted of costs related to the Reduction Plan we implemented in June 2023. For the three and nine months ended September 30, 2023, restructuring and other charges primarily included the loss on the sale of health insurance vertical assets of $19.4 million and an asset impairment charge of $0.4 million for the right-of-use asset related to our Cambridge, Massachusetts office lease. For the nine months ended September 30, 2023, restructuring costs and other charges also included net employee separation charges and non-cash compensation related to the restructuring of $3.8 million.
Current report
Acquisition-related
Current report
Acquisition-related costs for the nine months ended September 30, 2023 of $0.2 million consisted of the decrease in fair value of our contingent consideration liabilities recorded as the result of our 2021 acquisition of PolicyFuel. We did not record any changes in fair value of our contingent consideration liabilities in the three months ended September 30, 2023 or in either of the three and nine months ended September 30, 2024.
Current report
Other Income (Expense)
Current report
Interest income increased by $0.1 million and $0.5 million in the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023, respectively, due to an increase in interest earned on our cash balances. Other income (expense), net was not significant for any periods presented.
Current report
Income Tax Expense
Current report
Our income tax expense consisted primarily of state income taxes as well as federal income taxes for the portion of our taxable income that was not offset by operating loss and tax credit carryforwards. We maintain a valuation allowance on our overall net deferred tax asset as it is deemed more likely than not the net deferred tax asset will not be realized.
Current report
Variable Marketing Margin
Current report
The increase in variable marketing margin in the three and nine months ended September 30, 2024 was due primarily to increased carrier spend, partially offset by a decrease in variable marketing margin due to the relative mix of referral types.
Current report
Liquidity and Capital Resources
Current report
As of September 30, 2024, our principal sources of liquidity were cash and cash equivalents of $82.8 million and up to $25.0 million of availability under our revolving line of credit pursuant to the 2023 Amended Loan Agreement (defined as the Amended and Restated Loan and Security Agreement, dated as of August 7, 2020 between us and Western Alliance Bank, as Lender, or the 2020 Loan Agreement, as amended by the Loan and Security Modification Agreement dated as of July 15, 2022, or the 2022 Loan Amendment, as amended by the Loan and Security Modification Agreement dated as of August 1, 2023, or the 2023 Consent and Release, as amended by the Loan and Security Modification Agreement, dated as of on August 7, 2023, or the 2023 Loan Amendment, as amended by the Loan and Security Modification Agreement, dated as of September 4, 2024).
Current report
Pursuant to the 2023 Amended Loan Agreement, borrowings under the revolving line of credit cannot exceed 85% of eligible accounts receivable balances, bear interest at the greater of 7.0% or the prime rate as published in The Wall Street Journal and mature on July 15, 2025. In an event of default, as defined in the 2023 Amended Loan Agreement, and until such event is no longer continuing, the annual interest rate to be charged would be the annual rate otherwise applicable to borrowings under the 2023 Amended Loan Agreement plus 5.00%.
Current report
Borrowings are collateralized by substantially all of our assets and property. Under the 2023 Amended Loan Agreement, we have agreed to certain affirmative and negative covenants to which we will remain subject until maturity. The covenants include limitations on our ability to incur additional indebtedness and engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses. In addition, under the 2023 Amended Loan Agreement and through the maturity date, we are required to maintain a minimum Adjusted Quick Ratio of 1.10 to 1.00 defined as the ratio of (1) the sum of (x) unrestricted cash and cash equivalents held at the Lender plus (y) net accounts receivable reflected on our balance sheet to (2) current liabilities, including all borrowings outstanding under the 2023 Amended Loan Agreement, but excluding the current portion of deferred revenue (in each case determined in accordance with GAAP). At any time the Adjusted Quick Ratio is less than 1.30 to 1.00 the Lender shall have the ability to use our cash receipts to repay outstanding obligations until such time as the Adjusted Quick Ratio is equal to or greater than 1.30 to 1.00 for two consecutive months. As of September 30, 2024, we were in compliance with these covenants and we had no amounts outstanding under the revolving line of credit.
Current report
Since our inception, we have incurred operating losses on an annual basis and may incur losses in the future. We believe our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next 12 months, without considering the borrowing availability under our revolving line of credit. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our revenue, the timing and extent of spending on business initiatives, purchases of capital equipment to support our growth, sales and marketing activities, impact to our business from our restructuring, expansion of our business through acquisitions or our investments in complementary offerings, technologies or businesses, market acceptance of our platform and overall economic conditions. If we do not achieve our revenue goals as planned, we believe that we can reduce our operating costs. If we need additional funds and are unable to obtain funding on a timely basis, we may need to significantly curtail our operations in an effort to provide sufficient funds to continue our operations, which could adversely affect our business prospects.
Current report
Cash Flows
Current report
The following table shows a summary of our cash flows for the nine months ended September 30, 2024 and 2023:
Current report
Net cash provided by operating activities
Current report
Operating activities provided $46.4 million in cash during the nine months ended September 30, 2024, primarily resulting from our net income of $19.9 million, net non-cash charges of $19.5 million and net cash provided by changes in our operating assets liabilities of $7.1 million. Net cash provided by changes in our operating assets and liabilities consisted primarily of a $30.8 million increase in accounts payable and accrued expenses and other current liabilities and a $3.7 million decrease in commissions receivable, partially offset by an increase in accounts receivable of $27.1 million. Operating activities used $2.0 million in cash during the nine months ended September 30, 2023, primarily resulting from our net loss of $44.9 million and net cash used by changes in our operating assets and liabilities of $1.3 million, partially offset by net non-cash charges of $44.2 million, which included the loss on sale of health insurance vertical assets of $19.4 million. Net cash used by changes in our operating assets and liabilities consisted primarily of a $13.6 million decrease in accounts payable and accrued expenses and other current liabilities, partially offset by decreases in accounts receivable, prepaid expenses and other current assets and commissions receivable of $7.3 million, $2.6 million and $2.6 million, respectively.
Showing the first 40 of 52 passages. Open the source sections for the rest.
Reworded paragraphs (5)
Previous wording
In the three months ended June 30, 2024 and 2023, our total revenue was $117.1 million and $68.0 million, respectively, representing a year-over-year increase of 72.3%. We had net income of $6.4 million for the three months ended June 30, 2024 and a net loss of $13.2 million for the three months ended June 30, 2023, and had $12.9 million and $(2.1) million in adjusted EBITDA for the three months ended June 30, 2024 and 2023, respectively. In the six months ended June 30, 2024 and 2023, our total revenue was $208.2 million and $177.2 million, respectively, representing a year-over-year increase of 17.5%. We had net income of $8.3 million for the six months ended June 30, 2024 and a net loss of $15.7 million for the six months ended June 30, 2023, and had $20.5 million and $3.3 million in adjusted EBITDA for the six months ended June 30, 2024 and 2023, respectively. See the section titled “—Non-GAAP Financial Measure” for information regarding our use of adjusted EBITDA and its reconciliation to net income (loss) determined in accordance with generally accepted accounting principles in the United States, or GAAP.
Current wording
In the three months ended September 30, 2024 and 2023, our total revenue was $144.5 million and $55.0 million, respectively, representing a year-over-year increase of 162.7%. We had net income of $11.6 million for the three months ended September 30, 2024 and a net loss of $29.2 million for the three months ended September 30, 2023, and had $18.8 million and $(1.9) million in adjusted EBITDA for the three months ended September 30, 2024 and 2023, respectively. In the nine months ended September 30, 2024 and 2023, our total revenue was $352.7 million and $232.2 million, respectively, representing a year-over-year increase of 51.9%. We had net income of $19.9 million for the nine months ended September 30, 2024 and a net loss of $44.9 million for the nine months ended September 30, 2023, and had $39.3 million and $1.3 million in adjusted EBITDA for the nine months ended September 30, 2024 and 2023, respectively. See the section titled “—Non-GAAP Financial Measure” for information regarding our use of adjusted EBITDA and its reconciliation to net income (loss) determined in accordance with generally accepted accounting principles in the United States, or GAAP.
Previous wording
For the six months ended June 30, 2024 and 2023, we derived 87% and 79%, respectively, of our revenue from auto insurance providers and our financial results depend on the performance of the auto insurance industry. Furthermore, total revenue from our largest auto insurance carrier customer was 34% and 25% of our revenue for the six months ended June 30, 2024 and 2023, respectively. In the last two years, the auto insurance industry experienced deteriorated underwriting performance due to a rise in claims, inflation, and inadequate policy premiums. This deteriorated underwriting performance caused our insurance carrier customers to reduce spending on new customer acquisition, which had a negative impact on the pricing and demand for consumer referrals in our marketplace throughout 2023. The state of the auto insurance market remains volatile and while we believe we are seeing improvements in spending patterns in 2024, including from our largest carrier, not all of our carrier customers have increased their spend in a proportional or significant manner, and a full recovery could be prolonged by further cost inflation, increased claim severity and frequency, or insufficient policy premium increases.
Current wording
For the nine months ended September 30, 2024 and 2023, we derived 88% and 79%, respectively, of our revenue from auto insurance providers and our financial results depend on the performance of the auto insurance industry. Furthermore, total revenue from our largest auto insurance carrier customer was 39% and 20% of our revenue for the nine months ended September 30, 2024 and 2023, respectively. In the last two years, the auto insurance industry experienced deteriorated underwriting performance due to a rise in claims, inflation, and inadequate policy premiums. This deteriorated underwriting performance caused our insurance carrier customers to reduce spending on new customer acquisition, which had a negative impact on the pricing and demand for consumer referrals in our marketplace throughout 2023. The state of the auto insurance market remains volatile and while we have seen improvements in spending patterns in 2024, including from our largest carrier, not all of our carrier customers have increased their spend in a proportional or significant manner, and a full recovery could be prolonged by further cost inflation, increased claim severity and frequency, or insufficient policy premium increases.
Previous wording
We also generate revenue from commissions paid to us by insurance carriers for the sale of policies in our automotive insurance vertical, and prior to our exit from health, in our health insurance vertical. Commission revenue is recognized upon satisfaction of our performance obligation, which we consider to be submission of the policy application to the insurance carrier. We recognize revenue based on our constrained estimate of commission payments we expect to receive over the lifetime of the policies sold, which we refer to as constrained LTVs, of commission payments. Commission revenue represented less than 10% of total revenue for the three and six months ended June 30, 2024 and approximately 10% of total revenue for the three and six months ended June 30, 2023.
Current wording
We also generate revenue from commissions paid to us by insurance carriers for the sale of policies in our automotive insurance vertical, and prior to our exit from health, in our health insurance vertical. Commission revenue is recognized upon satisfaction of our performance obligation, which we consider to be submission of the policy application to the insurance carrier. We recognize revenue based on our constrained estimate of commission payments we expect to receive over the lifetime of the policies sold, which we refer to as constrained LTVs, of commission payments. Commission revenue represented less than 10% of total revenue for the three and nine months ended September 30, 2024 and 2023.
Previous wording
Sales and marketing expense consists primarily of advertising and marketing expenditures as well as personnel-related costs for employees engaged in sales, marketing, data analytics and consumer acquisition functions and amortization of sales and marketing-related intangible assets. Advertising expenditures consist of variable costs that are related to attracting consumers to our marketplace, generating consumer quote requests, including the cost of quote requests we acquire from our verified partner network, and promoting our marketplace to carriers and agents. Advertising costs are expensed as incurred. Marketing costs consist primarily of content and creative development, public relations, memberships, and event costs. We expect our sales and marketing expense will increase as we expect increased carrier spend for referrals, which will impact our advertising expenditures, though we expect personnel-related costs to decrease in 2024 from 2023 as a result of the Reduction Plan.
Current wording
Sales and marketing expense consists primarily of advertising and marketing expenditures as well as personnel-related costs for employees engaged in sales, marketing, data analytics and consumer acquisition functions and amortization of sales and marketing-related intangible assets. Advertising expenditures consist of variable costs that are related to attracting consumers to our marketplace, generating consumer quote requests, including the cost of quote requests we acquire from our verified partner network, and promoting our marketplace to carriers and agents. Advertising costs are expensed as incurred. Marketing costs consist primarily of content and creative development, public relations, memberships, and event costs. We expect our sales and marketing expense will increase as we expect increased carrier spend for referrals in 2024, which will impact our advertising expenditures, though we expect personnel-related costs to decrease in 2024 from 2023 as a result of the Reduction Plan.
Previous wording
General and administrative expense consists of personnel-related costs and related expenses for executive, finance, legal, human resources, technical support and administrative personnel as well as the costs associated with professional fees for external legal, accounting and other consulting services, insurance premiums and payment processing and billing costs. We expect that general and administrative expense will increase slightly in 2024 from 2023.
Current wording
General and administrative expense consists of personnel-related costs and related expenses for executive, finance, legal, human resources, technical support and administrative personnel as well as the costs associated with professional fees for external legal, accounting and other consulting services, insurance premiums and payment processing and billing costs. We expect that general and administrative expense will increase in 2024 as compared to 2023.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.