EverQuote, Inc.

Ladies and gentlemen, thank you for standing by and welcome to EverQuote's first quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, and Lee Johnson of the Blue Shirt Group. Thank you. Please go ahead.

Thank you. Good afternoon and welcome to EverQuote's first quarter 2020 earnings call. We'll be discussing the results announced in our press release issued today after the market closed. With me on the call this afternoon is Seth Birnbaum, EverQuote's chief executive officer and co-founder, and John Wagner, chief financial officer of EverQuote. During the call, we 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 and full year 2020, our growth strategy, and our plans to execute on our growth strategy, key initiatives, our investment in the business, the growth levers we expect to drive our business, our ability to maintain existing and acquire new customers, our interest or ability to acquire other companies, our goals for integration, and other statements regarding our plans and prospects. Forward-looking statements may be identified with words and phrases such as we expect, we believe, we intend, we anticipate, we 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 not promises or guarantees of future performance and are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including uncertainties with respect to the COVID-19 pandemic and the matters discussed under the heading Risk Factors in our most recent annual report on Form 10-K, which is on file with the Securities and Exchange Commission and available on the investor relations section of our website at investor.everquote.com and on the SEC's website at sec.gov. Finally, during the course of today's call, we referred to certain non-GAAP financial measures which we believe are helpful for investors. A reconciliation of GAAP to non-GAAP measures was included in the press release we issued after the close of market, which is available on the investor relations section of our website at investors.everquote.com. With that, let me turn the call over to Zach.

Thank you, Brindley. Good afternoon, and thank you, everyone, for joining us today. Our company, much like most of the country, has adapted to shelter in place brought upon by the COVID-19 pandemic. Our thoughts are with all the individuals and businesses impacted around the world, and we extend our heartfelt thanks to all of the healthcare workers, first responders and other essential employees for their selfless efforts. Throughout this crisis, we have been and remain dedicated to the safety of our team, our families and partners, as well as our broader community. While we are vigilant and cautious during the rapidly shifting market dynamics brought about by COVID-19, we are fortunate that our company is in a strong position. Our online insurance marketplace is demonstrating flexibility and resilience as consumers continue to go online to shop and save on insurance, a non-discretionary expense for the vast majority of auto, home, and health insurance consumers. The insurance industry remains healthy, with personal lines insurers showing strong financial performance, resulting in a number of our distribution partners increasing bids and budgets since shelter-in-place began. Our employees were able to smoothly transition to work from home Given that the foundation of our business is our proprietary distributed data platform and extensive use of cloud-based services for our products and systems, our resilient business model continues to benefit from the network effects and the power of our marketplace for connecting insurance consumers and providers, resulting in strong financial performance. And we are raising our full year guidance, which Jon will detail shortly. Quickly touching on our first quarter results. We are pleased to report we exceeded expectations across all of our key financial metrics. Year over year, revenue increased 56% and variable marketing margin, one of the primary metrics for managing our business, was up 72% year on year. And we continue to expand adjusted EBITDA on our path to profitability consistent with our model. We believe the changes forced by COVID-19 may benefit our business by accelerating the shift online in insurance. Our business continues to be strong, and we remain confident in our long-term model. Before talking in more detail about the first quarter and progress on key initiatives, I want to address the dynamics of our business and market in the face of the COVID-19 outbreak. During this unprecedented period, I have been humbled and inspired countless times by our dedicated and talented employees. who smoothly transitioned to serving our customers and partners remotely. We have adapted our business with a focus on maintaining a highly engaged and collaborative team dynamic through such efforts as daily operating stand-ups across our operating teams, weekly company-wide town halls, and daily one-on-one project team check-ins. We are pleased to see our team's productivity remain strong eight weeks into shifting remote. Our business model and operational efficiency also benefit from our proprietary bid-to-buy and data technology, flexible cost structure, cloud-based service architecture, data and reporting infrastructure, as well as established, distributed communication tools and business processes. During this period, we have had no layoffs, no furloughs, and no reductions in our employees' salaries. We continue to add to our talent base as we remotely onboard new team members. I'm also impressed by and thankful for our agents and carrier partners who have shifted to remote operations and continue to partner with us to grow their businesses efficiently as we execute on our mission and work to deliver exceptional service to customers throughout this crisis. Truly, thank you. It's an honor to work with all of you during these challenging times. From a market perspective, we are fortunate that the insurance industry remains healthy. Our largest verticals, auto and home insurance, are benefiting from fewer claims being filed as consumers are staying home and driving less due to nationwide stay-at-home orders. This has resulted in many carriers publicly reporting strong profitability for Q1 and passing savings on to consumers. Based on what we are seeing in our marketplace, some carriers are now investing more in online customer acquisition, as we believe they are leaning into incremental profitability in their business and driving up new premium volumes. which may have moderated in the second half of March in the immediate aftermath of the shelter-in-place decision. In addition, we continue to see both consumer demand and provider budgets remain strong in our verticals, both for auto and non-auto. Early indications are that the impact from any moderation in premiums in the personal lines insurance market are being outweighed by increased profitability, which we believe supports continued investment in acquiring consumers particularly in large efficient online channels such as ours. A similar dynamic is occurring on the agency side of our business where we believe COVID-19 is creating a relatively favorable environment for EverQuote. After shifting to remote operations, we are seeing increased demand for our consumer referrals from agents in our marketplace and many agents are leaning into the transition from offline to online customer acquisition. With some growing spend and reporting increased productivity, some captive agents are also receiving COVID-19 relief packages from their carriers which can help support their marketing efforts. On the demand side of the marketplace, our offerings provide consumers who are belt-tightening in a weaker economy an opportunity to shop and save on the largely non-discretionary expense of insurance. We are proud of the feedback we receive from consumers. Such as one who recently shared with us that EverQuote has helped us narrow down which insurers to look for. I like that it's a one-stop shop. You go to one place and put in what you're looking for. This is more helpful than trying to navigate all the different insurance companies that are out there on our own, which would have been very time-consuming. With the same coverage and number of vehicles, we save $1,400 per year. Our surveys of individuals who purchased insurance through our marketplace indicate that consumers realized an average savings of $610, which we estimate has resulted in aggregate savings of billions of dollars for millions of consumers who've bought insurance through our marketplace, which is especially important now. While we saw some moderation in consumer shopping volume in late March and early April, we are seeing evidence The carrier support for consumers and agents, as well as government stimulus efforts, are positively benefiting consumer demand, and that the performance of our channel for providers is reflected in increasing bids or pricing to EverQuote. Based on initial indications, we expect that the impact from any moderation in consumer demand will be offset by the benefits of a relatively more favorable environment for advertising costs. During Q1, we continue to invest and execute across our growth levers. Growing provider coverage and budget, attracting more high-intent consumers to our marketplace, and deepening consumer engagement, resulting in an increasing conversion rate, while also growing and expanding across insurance verticals. Our traffic teams are executing well and growing consumer volume, delivering an 80% year-over-year increase in consumer quote request volume in Q1 year-on-year. We have also been successful focusing on channels that bring high intent consumers to our marketplace and improving the workflows to enhance conversion. Our non-auto verticals, which consist of home and renters, life, health, and commercial insurance revenue, increased 90% year over year as we benefited from the network effects of our marketplace and from our targeted investments in growth. In our home vertical, for example, we are testing and implementing features that dramatically improve the consumer experience, increase conversion, and lead to better partner outcomes. While these improvements are consumer focused, our provider partners are receiving even more accurate and precise data than ever before, leading to fewer rejected referrals and more accurate filtering to align with their desired consumer profile. We also continue to add more providers and deepen our relationship with existing carriers and agents. This quarter, more than 95% of revenue from carriers came from those who have been on our platform for more than a year. Our agency business grew its revenue by 62% over the prior year, adding over 1,000 new agencies to the platform and increasing revenue from our Accelerated Growth Program, or AGP, which consists of our larger agents, by more than 30% since the start of the year. An example of our successful partnership with our AGP agents is John Heath, who started his agency from scratch seven years ago and turned to EverQuote to achieve rapid, profitable growth. Jon shares that EverQuote helped him grow his business by 600 policies per year, a substantial percentage of which are for more profitable, multi-line and longer-term consumers. At the beginning of the year, I listed three primary initiatives for 2020. Let me provide an update on each one. First, we established the goal of completing deep integrations with 100% of our carriers by the end of 2020 to improve the customer experience and bind rates or policy purchase rates. Integrations create a more efficient marketplace with less friction for consumers and providers, delivering better customer experience. One of our top five carriers, for example, recently launched a deep pre-fill integration where EverQuote populated over 20 data fields onto their online quote flow. This pre-fill reduced the need for the consumer to re-enter information to get a quote and the carrier reported that the integration directly improved performance on their applicable campaign KPI by 28%. We understand that this leads to greater efficiency for the carrier, a better consumer experience and higher performance for EverQuote. At the end of the first quarter, we are over halfway to our 2020 goal with 56% of our carrier partners deeply integrated and we continue to make steady progress. We continue to build our engineering and data science capabilities as we seek to better leverage our large and rapidly growing data set of consumer and carrier preferences to drive consumer satisfaction and operating leverage. We are creating unique experiences for each consumer profile and cost-effectively testing which approach best improves relative performance. This past quarter we added a number of great hires to our talented and growing data sciences and machine learning engineering team. and with these resources, we have launched significant ML automation to customize and improve many aspects of a customer's journey. Which brings us to the third key initiative, team building. We have been successful hiring new talent while developing current talent to support growth, scale and innovate. During Q1, we expanded our team and hired a record number of new engineers in the quarter. We have experienced minimal attrition and are attracting onboarding Developing and Retaining Employees Successfully as We Scale. We continue to hire and we have seen tailwinds in our engineering, tech, and data talent recruiting. Some of our recent senior hires include David Brainard as Head of Engineering, who joined from Wayfair, Lee Basio as Head of Insurance Data Services, who joined from Amazon, and Maya Gamunek as Head of Performance Marketing from TripAdvisor. Given our large and growing market, we believe a major lever for continued growth is building our team. In summary, we delivered a strong first quarter with solid execution across our verticals. Our key revenue growth drivers coupled with our disciplined approach to managing our operations led to strong financial results and cautious optimism even in the light of the macro environment. As our country adapts to what we expect to be prolonged periods of social distancing, we believe that the pandemic will accelerate digital transformation in the insurance industry, which has been a laggard moving online. We feel very lucky and are grateful to be in a strong sector and in the opportunity for EverQuote to be in a dominant position as insurance continues to shift online. At EverQuote, we will continue to evolve, refine, and weave the elements of our growth and strategy together and work to increase value for customers, expand our business, and maximize shareholder value over the long term. We'll be smart, data-driven, and flexible, cognizant of how challenging this crisis is but we remain optimistic on the year and beyond. I would like to thank our customers, our partners, and our shareholders for believing in our vision and for your ongoing support. I'm honored to work with this team that we continue to build and have the deepest gratitude for their dedication and hard work in these unprecedented times. I'm especially appreciative of our PeopleOps team who have been our unsung heroes in this period. Their countless efforts have enabled each employee to remain productive and supported. We believe we will ultimately emerge a stronger company and have set the stage for future growth and profitability. Now I'll turn the call over to Jon to provide more details on our financial results.