EverQuote, Inc. (EVER) Q4 2020 Earnings Call Transcript

EverQuote, Inc. (NASDAQ: EVER) This autumn 2020 earnings name dated Feb. 22, 2021

Company Contributors:

Brinlea Johnson — Managing Director

Jayme Mendal — Chief Govt Officer

John Wagner — Chief Monetary Officer

Presentation:

Operator

Welcome to the Fourth Quarter and Full 12 months EverQuote Earnings name. [Operator Instructions]

After the audio system’ presentation, there shall be a question-and-answer session. [Operator Instructions].

And now, I’ll flip it over to Brinlea Johnson of The Blueshirt Group.

Brinlea Johnson — Managing Director

Thanks, Operator. Good afternoon, and welcome to EverQuote’s fourth quarter and full yr 2020 earnings name. We’ll be discussing outcomes introduced in our Press Launch issued immediately after the market closed. With me on the decision this afternoon is Jayme Mendal; EverQuote’s Chief Govt Officer, and John Wagner; Chief Monetary Officer of EverQuote.

Through the name, we’ll make statements associated to our enterprise which may be thought of forward-looking statements beneath Federal Securities regulation, together with statements regarding our monetary steering for the primary quarter and full yr 2021, our progress technique and our plans to execute on our progress technique, key initiatives, our investments within the enterprise, the expansion levers we count on to drive our enterprise, our capability to take care of current and purchase new clients, our latest acquisition, and curiosity or capability to accumulate different firms, our targets for integration, and different statements relating to our plans and prospects.

Ahead-looking statements could also be recognized with phrases and phrases resembling we count on, we imagine, we intend, we anticipate, we plan, could, upcoming and related phrases and phrases. These statements replicate our views solely as of immediately, and shouldn’t be thought of our views as of any subsequent date. We particularly disclaim any obligation to replace or revise these forward-looking statements, besides as required by regulation.

Ahead-looking statements are usually not guarantees or ensures of future efficiency, and are topic to a wide range of dangers and uncertainties that might trigger the precise outcomes to vary materially from our expectations. For a dialogue of fabric dangers and different vital components that might have an effect on our precise outcomes, please check with these contained beneath the heading Danger Elements in our most up-to-date quarterly report on Kind 10-Q, which is on file with the Securities and Alternate Fee made out there on the Investor Relations part of our web site at investor.everquote.com and on the SEC’s web site at sec.gov.

Lastly, throughout the course of immediately’s name, we check with non-GAAP monetary measures, which we imagine are useful to traders. A reconciliation of GAAP to non-GAAP measures was included within the Press Launch issued after the shut of market immediately, which is on the market on the Investor Relations part of our web site at traders.everquote.com.

With that, I’ll flip it over to Jayme.

Jayme Mendal — Chief Govt Officer

Thanks, Brinlea. And thanks everybody for becoming a member of us immediately. As most of you realize, we suffered a tragic loss in November with the sudden passing of Seth Birnbaum; our prior CEO and expensive buddy. Whereas we proceed to mourn Seth’s passing, his legacy lives on in our work at EverQuote the place we stay laser targeted on constructing an business defining firm. I’m humbled and honored to imagine the CEO position, and communicate with you immediately.

Regardless of unprecedented challenges that 2020 introduced, our workforce executed remarkably nicely. We grew income quickly, whereas driving larger effectivity and producing considerably extra cash movement to reinvest in our future progress. In This autumn, year-over-year, we reported 32% income progress, 46% VMM progress, and optimistic adjusted EBITDA enlargement. For the total yr, we delivered 39% year-on-year income progress, 48% year-on-year VMM progress, and report adjusted EBITDA of $18.four million, up from $8.Three million in 2019.

Earlier than diving into extra element on This autumn and 2021, I need to affirm our imaginative and prescient and technique as shared with you beforehand. Our Firm’s imaginative and prescient is to develop into the biggest on-line supply of insurance coverage insurance policies through the use of knowledge and know-how to make insurance coverage less complicated, extra reasonably priced, and customized, finally lowering value and threat.

Our technique is predicated on constructing a singular ecosystem of insurance coverage distribution property, that related by our proprietary knowledge and know-how, will allow us to emerge because the insurance coverage procuring vacation spot for shoppers, and the distribution platform of selection for suppliers throughout all main traces of insurance coverage. This ecosystem contains the next. On the patron acquisition aspect of {the marketplace}, we’ve got two platforms. Our efficiency advertising and marketing platform for managing site visitors by way of our owned and operated web sites, and our verified accomplice community, which is a fast-growing platform by way of which third events can leverage and profit from our insurance coverage distribution.

We even have two platforms on the supplier distribution aspect of {the marketplace}. Our third-party market community of carriers and native brokers, and our first-party Direct-to-Shopper or DTC company staffed with EverQuote brokers, which was initiated in 2020 and is targeted solely on life and well being. Our DTC company is modest in scale, however rising rapidly. Between site visitors and distribution, matches our proprietary knowledge and know-how, which connects shoppers to suppliers by way of the bottom friction and highest performing path from arrival to coverage. This powers all the pieces from site visitors bidding, to web site expertise, to shopper supplier connections.

From add to coverage sale, all of our experiences are rising more and more customized to every particular person shopper. We make investments in these property to drive our 4 progress levers. First, attracting extra buyers; second, increasing non-auto verticals; third, optimizing and deepening shopper supplier engagement; and fourth, rising insurance coverage supplier protection and funds.

Our robust monetary efficiency in This autumn resulted from investments paying off throughout all 4 progress levers. For every lever, I’ll share This autumn highlights and 2021 focus areas. Let’s start with our first progress lever, attracting extra buyers. Our shopper acquisition groups executed nicely in This autumn, rising quantity into enhanced monetization, as mirrored in our VMM increasing to 33%, income per quote request rising 18%, and quote request quantity rising 12% year-over-year.

In December, we welcomed the brand new Chief Advertising Officer, Craig Lister. Craig joins us from NortonLifeLock with intensive expertise scaling knowledge and tech powered LTV-based shopper acquisition packages, and in constructing a model in efficiency advertising and marketing context. Wanting forward, investments in each of our shopper acquisition platforms will proceed rising the quantity of insurance coverage buyers to our market.

In our efficiency advertising and marketing platform, we plan to drive effectivity and scale by extra tightly aligning shopper intent and lifelong worth to our site visitors bidding and supplier pricing. We plan to additional personalize and align end-to-end consumer experiences, and to broaden funding in new channels, together with TV.

We’re additionally persevering with to put money into our Verified Associate Community by rolling out new merchandise that allow verified companions to entry our distribution community in numerous methods. Over time, we plan to construct this providing into an business customary platform for any firm looking for to monetize insurance coverage intent amongst its viewers, making EverQuote a ubiquitous distribution platform for the business.

The second progress lever is increasing non-auto verticals. In This autumn, our non-auto verticals continued their fast progress trajectory with revenues rising 55% year-over-year with bettering unit economics. In our well being vertical, we had been happy with the workforce’s efficiency throughout the open enrollment interval, or OEP. We closed on the acquisition of Crosspointe, a DTC company platform in well being in late September. We developed a plan with aggressive coverage sale targets for OEP, and exceeded our preliminary plan by practically 15%.

As well as, three medical health insurance suppliers turned to EverQuote’s DTC company to help their OEP gross sales efforts illustrating the potential for companions to leverage our tech-enabled company platform by way of coverage gross sales, as a service providing. Our transfer into DTC company and Life and Well being has considerably elevated the scale of our instantly addressable market, as we now entry not solely digital promoting and advertising and marketing budgets, but additionally the a lot bigger alternative of fee {dollars} straight from carriers.

Wanting forward, we stay excited by the potential in non-auto verticals, and imagine that over time, we will develop non-auto verticals to 50% of whole income. We plan to speculate aggressively in Well being and Life, the place our groups will leverage our DTC company platform to drive transformational change within the EverQuote procuring expertise, together with by growing, enduring and multi-line relationships with shoppers, which can allow us to seize larger LTV.

The third progress lever is optimizing and deepening shopper supplier engagement. These initiatives scale back friction from the procuring expertise, and enhance efficiency for suppliers. We’re happy to share that we achieved deep integrations with all however one among our carriers, resulting in decrease friction procuring experiences for our shoppers, and higher shopping for efficiency for suppliers. The remaining provider can be nicely alongside within the technique of finishing their deep integration with EverQuote.

In 2021, we’ll make a lot of investments to additional take away friction from arrival to coverage sale. For instance, we’re making a extra unified procuring expertise by facilitating extra on-line to offline connections on behalf of native brokers. We’re additionally enabling on-line quoting and buying of insurance policies in our Dwelling, Well being and Life verticals.

Lastly, I’ll contact on our fourth progress lever, rising supplier protection and funds. We continued so as to add third occasion market suppliers, and broaden relationships with current carriers and native brokers. In This autumn, we grew the variety of market carriers on the platform, as we expanded protection in non-auto verticals, and we delivered excessive progress in our third-party company enterprise.

We additionally noticed digital carriers emerge as a rising buyer phase. Our shared D&A for leveraging know-how and knowledge to make insurance coverage procuring extra environment friendly, makes them a pure match for leveraging EverQuote’s nicely established shopper concentrating on and deep integration capabilities, and for supporting innovation and testing of recent, extra superior performance-enhancing options.

We are sometimes requested if these firms are opponents. We don’t see them that manner. They’re at first, companions and clients inside our inclusive supplier ecosystem. Wanting forward, on the again of robust progress and bettering effectivity in our third-party company enterprise, we’re rising funding in go-to-market and product improvement groups to additional enhance agent efficiency.

In abstract, we delivered a powerful This autumn to shut out a report yr. We drove progress throughout all 4 progress levers, and made key investments to drive future progress, together with in our verified accomplice community on the patron acquisition aspect of {the marketplace}, and in our DTC company platform on the distribution aspect.

We enter 2021 with the readability in technique and deal with execution. We’ll proceed to put money into new platforms, experiences and capabilities that can improve the patron procuring expertise, enhance supplier efficiency, and finally, get extra individuals the protection they want of much less value in friction. With the continued shift on-line of the $2 trillion insurance coverage business, we anticipate huge enduring game-changing firms to be born. I imagine EverQuote is well-positioned to be a type of firms. Now we have the workforce, the execution muscle, and the technique to develop into the web vacation spot for insurance coverage, and we’re simply getting began.

Now I’ll flip the decision over to John to offer extra particulars on our monetary outcomes.

John Wagner — Chief Monetary Officer

Thanks, Jayme, and good afternoon everybody. I’ll begin by discussing our monetary outcomes for the fourth quarter and full yr 2020, after which present steering for the primary quarter and full yr 2021. We’re happy to report very robust fourth quarter and full yr 2020 outcomes throughout all of our key monetary metrics, exceeding our income, Variable Advertising Margin, and adjusted EBITDA steering offered final quarter.

We delivered fourth quarter income of $97.Three million, up 32% year-over-year, and full yr 2020 income of $346.9 million, up 39% from the earlier yr. Fourth quarter income in our Auto Insurance coverage vertical elevated to $76.2 million, a progress fee of 27% year-over-year, reflecting a continued wholesome auto insurance coverage business, and robust urge for food for brand spanking new buyer acquisition from our provider and agent insurance coverage suppliers.

Wanting on the full yr, income from our Auto Insurance coverage vertical elevated to $283.2 million, up 33% over the earlier yr. Fourth quarter income from our different insurance coverage verticals, which incorporates Dwelling & Renters, Life, Well being, and Business Insurance coverage elevated to $21.1 million, a progress fee of 55% year-over-year, and represented a report 22% of whole income.

For the total yr, income from our different insurance coverage verticals elevated 74% year-over-year to $63.7 million, and represented 18% of whole income. In This autumn, our different insurance coverage verticals benefited from the Well being & Medicare open-enrollment interval. This included a greater than doubling of the historic progress fee of our not too long ago acquired Crosspointe DTC medical health insurance company. This acceleration was pushed by integrating our efficiency advertising and marketing and Verified Associate platforms with Crosspointe’s Direct-to-Shopper gross sales operations.

The early outcomes of our Crosspointe acquisition present a proof level of the acquisition technique of leveraging our experience in shopper acquisition to speed up the expansion of an acquired enterprise. This autumn was consultant of what we count on to be a brand new sample of sequential This autumn income progress relative to Q3, pushed by the contribution of open enrollment season inside our medical health insurance vertical.

Turning to our metrics. Quote request from the fourth quarter elevated 12% year-over-year to $6.6 million, with contributions to progress coming from each our Efficiency Advertising and Verified Associate platforms. Income per quote request elevated 18%, reflecting our continued deal with attracting excessive performing shoppers most valued by our suppliers. Income per quote request additionally benefited from unusually favorable finish of the yr supplier funds capability in our auto insurance coverage vertical, and better monetization related to our well being DTC company operations within the year-end open enrollment interval.

These enhancements in site visitors volumes and monetization led to report Variable Advertising Margin or VMM for This autumn, which exceeded our steering offered final quarter. Outlined as income much less promoting expense, VMM is our main metric for managing the worthwhile progress of {the marketplace}. This quarter, VMM was $31.9 million, a rise of 46% year-over-year. As a share of income, fourth quarter VMM expanded to 33%, up from 30% in This autumn of final yr.

This report VMM was a mirrored image of the aforementioned monetization enhancements from robust supplier demand in This autumn funds capability in autos, in addition to the open enrollment interval for Well being & Medicare insurance policies. On condition that these drivers had been particular to This autumn, we might not count on to take care of this stage of VMM share in Q1, however do imagine we’ll proceed to see VMM share enlargement over time, whereas we goal and handle for incremental Variable Advertising Margin {dollars} in absolute phrases. For the total yr, VMM grew 48% year-over-year to $108.6 million. As a share of income, full yr VMM expanded to 31%, up from 30% within the earlier yr.

Turning to profitability. Fourth quarter GAAP internet loss was $3.Eight million or a lack of $0.13 per share primarily based on roughly 28 million diluted weighted common shares excellent. Fourth quarter’s GAAP internet loss mirrored a $1.Eight million non-cash cost to account for the change within the honest worth of the Crosspointe acquisition earn-out primarily based on the improved efficiency and outlook of that enterprise. Full yr GAAP internet loss was $11.2 million or a lack of $0.41 per share. We delivered report adjusted EBITDA of $5.four million or 5.5% of income for the fourth quarter, pushed by our better-than-expected income and VMM efficiency.

On account of our bettering efficiency throughout the quarter, we accelerated spending on operational assets to put the inspiration for progress in 2021, whereas nonetheless delivering favorable efficiency in opposition to our steering vary. For the total yr, we delivered adjusted EBITDA of $18.four million or 5.3% of income, up practically 2 share factors from the earlier yr. On the stability sheet, we ended the quarter with $42.9 million in money and money equivalents, reflecting a $3.2 million use of money in working money movement throughout the quarter, pushed by the timing of payables and receivables at year-end. For the total yr 2020, working money movement was a optimistic $10.7 million.

Turning to our outlook for 2021. We count on income progress to proceed to exceed our long-term mannequin of 20%, with continued greater progress from our different insurance coverage verticals. As Jayme outlined, we’re making vital investments in our enterprise pushed by the large market alternative that we see. These operational investments help our progress initiatives in DTC company, Verified Associate Community, and in know-how and knowledge platforms to speed up the long-term progress of our market, and proceed to construct our aggressive moat.

We count on to have the ability to make these investments, whereas nonetheless rising adjusted EBITDA on a full yr foundation, in line with the low finish of our long-term mannequin. For Q1, our steering is as follows. We count on income to be between $100 million and $102 million, a year-over-year improve of 24% on the midpoint. We count on Variable Advertising Margin to be between $30.5 million and $31.5 million, a year-over-year improve of 30% on the midpoint. And we count on adjusted EBITDA to be between $four million and $5 million, a year-over-year enchancment of 18% on the midpoint.

For the total yr 2021, our steering is as follows. We count on income to be between $430 million and $440 million, a year-over-year improve of 25% on the midpoint. We count on Variable Advertising Margin to be between $135 million and $140 million, a year-over-year improve of 27% on the midpoint. And we count on adjusted EBITDA of between $25 million and $30 million, a year-over-year improve of 49% on the midpoint.

In abstract, fourth quarter monetary outcomes capped off a yr of accelerating momentum and robust efficiency at EverQuote. Our workforce has stayed targeted on execution, as evident in our outcomes, and has positioned us nicely for continued progress in 2021.

And with that, Jayme and I stay up for answering your questions.