EverQuote, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the EverQuote second quarter and listen only mode. After this speaker's presentation, there will be to ask a question during this time, you will need to press star one on your telephone keypad. Please be and if you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Brinley Johnson of the Blue Shirt Group. Please go ahead, ma'am.

Thank you. Good afternoon, and welcome to EverQuote's second 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 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 third quarter and full year 2020, our growth strategy, and our plans to execute on our growth strategy, key initiatives, our investments in the business, the growth levers we expect to drive our business, our ability to maintain existing and acquire new customers, our recent acquisition, and interest or ability to acquire other companies, our goals for integrations, 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. Thank you for joining us. and on the SEC's website at sec.gov. Finally, during the course of today's call, we will refer to certain non-GAAP financial measures which we believe are helpful to investors. Our 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 at investors.everquote.com. With that, I'll turn the call over to Seth Birnbaum, EverQuote's chief executive officer and co-founder. Go ahead, Seth.

Thank you, Brindley. Good afternoon, and thank you, everyone, for joining us today. Our thoughts continue to be with all the individuals and businesses impacted around the world by the pandemic. As a company, we're meeting the challenges brought about by the unprecedented combination of a global health crisis, significant economic disruption, and recent social upheaval, while continuing to execute on our growth initiatives and commitments to our customers. Our strategy continues to yield excellent results. Our tech and data-driven marketplace flywheel continues to drive network effects via more consumers and providers with deeper engagement across multiple insurance verticals. In Q2, we reported a strong second quarter across all of our key financial metrics, delivering year-on-year growth of 41% in both revenue and variable marketing margin. We also delivered positive adjusted EBITDA expansion year-over-year consistent with our model. and we have strong momentum in the business which is allowing us to raise our full year 2020 guidance which Jon will cover in more detail. In our view, significant changes in the market brought about by the pandemic will accelerate the long-term shift of insurance online and we remain focused on building the comprehensive digital insurance distribution marketplace for consumers and providers using data and technology to make insurance simpler, More affordable and personalized, ultimately reducing costs and risks. While we continue to be vigilant in shifting market dynamics brought about by COVID, we are fortunate and deeply grateful that given the resilience of our model, our growth prospects have never been stronger. The insurance industry remains profitable and continues to exhibit strong demand to invest in online channels. The moderation in consumer demand that occurred since the start of the pandemic is largely in line with our historical seasonal traffic patterns and its impact has been modest on our business given our diversity of traffic sources. Our team remains highly productive and collaborative, operating in a fully distributed manner. And we believe that the dominant dynamic for our business, the secular shift of insurance online, is further validated by the emergence of a growing cohort of successful insurtech companies, many of whom are customers or partners. We're confident we are better positioned than ever and have set the stage for a strong second half and for 2021. I am personally energized by our mission to empower insurance shoppers to better protect life's most important assets, their family, property, and future. And our team is passionate about our goal to become the destination for insurance customers, both consumers and providers, by delivering high-value experiences and broad product selection with low friction. Our strong financial performance in the quarter was achieved while continuing to invest and execute across our four growth levers. We've made strong progress with an expanding set of key initiatives, products as well as services as we lean into our massive opportunity in the shift of nearly $150 billion of insurance distribution spend online. Our four growth levers are attracting more high intent consumers to our marketplace, growing and expanding across insurance verticals, deepening consumer provider engagement, and growing provider coverage and budget. We are expanding our growth levers to incorporate personalized insurance experiences from arrival to policy sale and our digital distribution platform to extend into a direct-to-consumer agency model for specific vertical segments. Today, we're announcing two new direct-to-consumer initiatives. that extend our marketplace in health and life insurance. We're developing direct-to-consumer or DTC agency experiences in our health vertical via an acquisition and in our life vertical through an organically grown agency platform. Each will enhance the consumer shopping experience and coverage options while enabling providers to connect with incremental underserved consumers. These DTC or direct-to-consumer agency experiences will further deepen our consumer provider engagement and broaden our ability to access the $130 billion commission TAM component of the overall distribution spend in insurance. I'm excited to share Q2 highlights across our growth levers and key initiatives, including several of these newer developments which we expect to enhance customer experience, provider coverage, and budget. First, attracting more high-intent consumers to our marketplace. Our traffic teams are executing well, growing consumer quote request volume by 50% year over year in Q2. We continue to be successful, focusing on channels that bring high-intent consumers to our marketplace and delivering workflow improvements to enhance conversion across our insurance verticals. Consistent with our historical seasonal pattern, we saw Q2 traffic volume slightly lower than in Q1, and we believe COVID, compounded with recent social unrest, contributed to moderating consumer demand in late Q2. We, however, have seen traffic volume increase in July with strong unit economics. Consequently, we saw high overall traffic growth in Q2, and we have seen a return to our historically strong Q3 pattern with strong momentum in the current quarter. Overall, we continue to deliver consumer demand and variable marketing margin growth in excess of our long-term model and faster than the secular market shift online. We believe we are gaining share in insurance shopping online. Additionally, we're excited at early results from recent performance brand tests combining engaging content and marketing creatives to help us develop our brand strategy with positive ROI. Next, growing and expanding across insurance verticals. In Q2, we had another strong quarter in our non-auto verticals, with revenue increasing 133% year over year. with Solid Unit Economics as we benefited from the network effects of our marketplace and from disciplined investments in our non-auto verticals with increased headcount in the vertical teams. In Q2, we launched exciting new customer experiences in our home vertical. In addition to scaling integrations and reducing customer friction, we delivered auto and home bundling from the consumer to the provider, enabling end-to-end cross-selling. Our view is that consumers gain access to a broader panel of the top agents in the market with relevant products and discounts. We see incremental monetization for the bundled referrals, creating wins for our consumer and provider customers as well as our business. In Q2, we also began to scale an organically developed direct-to-consumer agency experience for the life insurance vertical, which we have been building for months. Through a sophisticated data-driven sales technology platform, We seamlessly connect underserved life vertical segment specific consumers from arrival to policy sale with licensed agents directly on our marketplace platform and sell life insurance policies on a commission share basis. Our DTC agency initiatives enable more comprehensive consumer coverage addressed under and unserved consumer needs, help us maximize provider inclusion from the large carriers to individual agents, and increase product selection for customers. We are confident that this will ultimately increase buy-for-user while enabling us to deliver more personalized, better consumer experiences for consumers and providers in our marketplace. In our health insurance vertical, we announced today that we are acquiring Crosspoint, a data-driven health insurance agency headquartered in Evansville, Indiana, that connects consumers to high-quality health care insurance. This acquisition positions us to accelerate the growth of our health vertical with a DTC agency capability enabling improved health insurance vertical customer experiences, deep integration, broader carrier distribution, and higher monetization with recurring revenue. Looking ahead to the fourth quarter open enrollment period, we believe we are well positioned to drive significantly higher revenues in our health insurance vertical with our expanded provider coverage and monetization opportunities. We're building our DTC agency experiences with the vision of bringing together Best-in-class agency operations like those of Crosspoint and Health with cutting-edge enabling technologies of our marketplace platform, including machine learning and AI, as we've launched in our life vertical to create an enhanced and more personalized end-to-end consumer-to-provider arrival-to-policy sale experience with greater monetization opportunities and bind or policy sale performance. Bundling in home and auto as well as DTC agency for life and health enable us to develop user experiences to enhance consumers' insurance shopping journeys, deepen engagement, and drive incremental long-term value in our marketplace. We plan to roll out our first logged in user experience in Q4 of this year. Our third growth lever, deepening consumer provider engagement. We are confident that direct-to-consumer Agency experiences in our health and life verticals will deepen customer engagement and improve the consumer experience in the insurance shopping journey. By having EverQuote act as a first-party agent to sell a policy directly to insurance shoppers in these select verticals, we will complement our provider partners in under and unserved segments, delivering a wider range of choice, personalization, and end-to-end shopping experiences that further reduce friction. Integrations also reduce friction. As you may recall, we established the goal of completing deep integrations with 100% of our carriers by the end of this year to improve consumer experience and increase provider bind rates or policy purchase rates to drive up marketplace efficiency. This is one of our key initiatives for 2020. And at the end of the second quarter, I'm pleased to say we are well on our way to our goal of 100% deep integrations with 66% of our carrier partners and we continue to make steady progress. Four, growing provider coverage and budget. We continue to add more providers and expand our relationships with existing carriers and agents. This quarter, over 94% of revenue from carriers came from those who've been on our platform for more than a year. We added several new customers to our smart campaigns platform where we use machine learning to automate bidding for our carrier partners. resulting in more efficient marketing spend at desired KPI targets. We also began to offer the option for carriers to bid on our referrals on either an ROI or conversion rate metric to better meet their individual targeting preferences. Our agency business expanded to 37% of revenues this quarter, up from 24% last quarter, which further diversified our revenue mix and contributed to increased revenue per quote request sequentially. Our investments to expand agent demand via content marketing, consultative sales, top-notch service, and carrier partnerships, to name just a few, are paying off. Of note, our accelerated growth program, which focuses on larger agencies, has ramped up for agents who are increasing their acquisition and marketing spend with us online. Rounding out key initiatives. Data sciences, machine learning, AI, and team building. I'm happy to share some insights into progress. We continue to build our engineering and data sciences 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. An example of our work in Q2 includes deploying an internal anomaly detection platform, allowing for faster and more automated issue identification and resolution to improve many aspects of a consumer's journey, including integration. We believe that given our success with team building, we are winning the war for talent and we are thrilled to be a magnet for top talent. We've been successful hiring while developing current talent to support growth, scale, and innovation. EverQuote leaders are raising the performance bar with every hire and promotion. During Q2, we hired a significant number of full-time employees, including 20 engineering, tech, and data folks. Notably, we've also added three senior leaders to our team since our last earnings call. Mike Connolly as SVP of Agency Sales and Customer Success who joined from CarGurus, Tom McDermott as SVP of Health and Medicare who joined from Wayfair, and Michael Aldis as VP Insurance Data and Product Services from Liberty Mutual. We believe that continuing to add top talent to the team is another key indicator of our future growth and ability to capitalize on our massive market opportunity. I also want to take a moment to talk about EverQuote's actions related to the important topic of diversity and inclusion, which has been an integral part of our culture since our founding. We believe that supporting diversity and inclusion is critical to both our success in winning the war for talent and creating an inclusive marketplace for the broadest possible range of insurance consumers. Like all decisions in our business, our efforts in diversity, equity, and inclusion, or DEI, are data-driven and extend to protecting the integrity of our analytics from potential bias. As we continue to grow as a company, we want to ensure that our long-standing commitment to DEI remains integral to our strategic decision-making and governance. Yesterday, we announced that Darrell August, who is foundational in our growth and leads our strategy group and our DEI initiatives, was named to our board. We are confident that our board's decision-making will be enhanced by his presence and counsel. We view DEI in the context of our broader commitment to Environmental, Social, and Governance, or ESG, considerations in managing our company. Since our founding, we have recognized the importance of incorporating broader social considerations into building a great company, which we believe ultimately drives higher long-term shareholder value. We look forward to sharing more with you about our efforts around ESG. Finally, I wanted to touch on our strategic plan, which we refer to internally as our path to $1 billion, and includes bold bets on initiatives such as direct-to-consumer agency experiences. This plan is our internal roadmap for how we plan to build a large and impactful company that can lead and accelerate the digital transformation of the $2 trillion insurance industry online. We're confident that we have the elements and a deterministic path to grow our business to $1 billion of revenue consistent with our long-term model. In summary, we delivered a solid second quarter with strong execution across our verticals and see continued strength in the business as Jon will reflect in our guidance. Our marketplace flywheel is demonstrating progress and resilience with increasing diversity across our team, traffic, verticals, distribution, and customer experiences, including direct consumer agency initiatives in life and health insurance. We are confident that we are better positioned now than at any point in our history to capitalize on the shift of insurance online. I would like to thank our customers, our partners, and our shareholders for believing in our vision and for their ongoing support, as well as our terrific employees who each share my passion about EverQuote's incredible future. Now, I'll turn the call over to Jon to provide more details on our financial results.