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spk01: Ladies and gentlemen, thank you for standing by, and welcome to the EverQuote Third Quarter 2020 Earnings Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will 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 Melia Johnson of the Blue Shirt Group. Thank you. Please go ahead, ma'am.
spk02: Thank you. Good afternoon, and welcome to EverQuote's third 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 Law Security's laws, including statements considering our financial guidance for the fourth 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 course leathers 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 integration, and other statements regarding our plans and prospects. Forelooking 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 forelooking statements except as required by law. Or the 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. For the discussion of material risk and other important factors that could affect our actual results, please refer to those contained in the heading Risk Factors in our most recent quarterly report on Form 10-Q, 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 to investors. The reconciliation of GAAP to non-GAAP measures is included in the press release issued after the close of market today, which is available on the investor relations section of our website and investors.agroquote.com. With that, I'll turn the call over to Zach.
spk03: Thank you, Brindley. Good afternoon, and thank you, everyone, for joining us today. Our strategy continues to yield excellent results. Our tech and data-driven marketplace flywheel continues to drive network effects with more consumers and providers having deeper engagement across multiple insurance verticals. In Q3, we reported another strong quarter across all of our key financial metrics, delivering 34% year-on-year revenue growth and 41% year-on-year VMM growth. We also delivered positive adjusted EBITDA expansion year over year, consistent with our model, and successfully closed the acquisition of CrossPoint, accelerating and expanding our opportunity in the health insurance market. We continue to have strong momentum in the business, which is allowing us to raise our full year 2020 guidance, which John will cover in more detail. So what is the big picture that we are seeing in the market right now? First, the American consumer is further embracing the convenience and safety of shopping online for a wide range of products, including insurance. We believe that this trend will continue in insurance consumer demand as life resumes post-COVID. Second, insurance distribution dollars are migrating to digital channels as the industry begins to experience an increased level of digital spend as seen in other areas of financial services. We believe that COVID is advancing this long-term trend within the insurance industry, and we continue to see high levels of demand in the carrier and agent or provider side of our insurance marketplace. And finally, perhaps most interesting to us, the insurance industry is beginning to make products easier to buy and sell through digital channels. through integration and digitization of the actual insurance products. And this is occurring across numerous segments of the insurance industry. We're confident this is one of the key trends within insurance, where EverQuote is very well positioned to capture the market opportunity. Turning back to Q3, our strong financial performance was achieved while also continuing to invest and execute across the four growth levers we outlined in the beginning of the year. attracting more high-intent consumers to our marketplace, growing and expanding across insurance verticals, deepening consumer-provider engagement, and growing provider coverage and budget. First, attracting more high-intent consumers to our marketplace. Our traffic teams executed well this quarter and focused on delivering enhanced monetization as reflected in our variable marketing margin expanding to a record 33% of revenues. Revenue per quote request increasing 18%, over Q3 2019, and a growth in consumer quote request volume of 14% year over year. Our initiatives this quarter place greater emphasis on driving improved performance in the marketplace to maximize the volume of high-quality, high-value referrals shared with our distribution partners. Examples of these initiatives are as follows. Introducing expanded targeting options for our enterprise carriers that we see as driving better monetization for our partners and our marketplace and contributing to higher margin operating point and dollars. Delivering significant workflow improvements, which led to a greater than 10% increase in conversion rate for consumers on average across our insurance verticals. successfully growing our higher monetizing and converting traffic, which resulted in enhanced efficiency in our marketplace as reflected in our variable marketing margin as a percent of revenues expanding to 33%. Next, growing and expanding across insurance verticals. In Q3, we had another strong quarter in our non-auto verticals, with revenues increasing 55% year over year with improving unit economics. These verticals continue to benefit from the network effects of our marketplace and from disciplined investments to support their growth. In our health vertical, we closed the cross-point acquisition in early September, which provided us with direct deployments with large carriers such as UnitedHealthcare, Anthem, and Humana, increasing our health carrier coverage by tenfold. Since announcing this acquisition in early August, our health vertical leadership team has been working to prepare for this year's open enrollment period, which includes substantially expanding the CrossPoint agent team. In our life vertical, our revenue per call request is over three and a half times higher for customers served through our direct-to-consumer, or DTC, agency offerings than we have experienced in our traditional life marketplace model, as the improved consumer experience leads to a greater conversion into a bound policy, as well as enhanced monetization. In our home vertical, we continue to build on our success with bundled offerings, which led to growth in the variable marketing margin and margin percentage for auto and home insurance. Our third growth lever, deepening consumer provider engagement. These initiatives center on improving customer experiences for both consumers and providers, while increasing performance is measured by enhanced monetization and retention, reduced cost per consumer, and higher LTV per customer. We are continuing our work to get the consumer one click or one call away from quotes with our focus on deep integrations with our carrier partners. 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 our marketplace efficiency. At the end of our third quarter, we are deeply integrated with 72% of our carrier partners, and we continue to make steady progress. We have also prioritized integrations around larger partners, which has resulted in 92% of referrals by volume being with deeply integrated carriers by the end of Q3. Additionally, we've been able to isolate performance on integrations with some of our larger carriers, and many are seeing sizable lifts based on recent performance as they can improve both the quote and bind rate. As an example of the benefits of deep integrations, two carriers improved their bind rate in our marketplace by 69% and 82% respectively. We are also deepening consumer provider engagement through our DTC agency experiences, where we are creating a more personalized and streamlined end-to-end consumer shopping journey with enhanced product selection and less friction from arrival to policy sale. Fourth, growing provider coverage and budget. We continue to add more providers and expand our relationship with existing carriers and agents. We grew carriers on the platform by over 25% from a year ago as we expanded coverage in our non-auto verticals. Over 90% of Q3 revenue from carriers came from those who have been on our platform for more than a year. Driving efficiency for both carriers and EverQuote is our Smart Campaigns platform, where we use machine learning to automate bidding for our carriers. Year over year, our agency business grew 64% in Q3 and represented 34% of revenues this quarter. 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. We believe these same initiatives will benefit our direct-to-consumer agency distribution by attracting more agents and consumers to our marketplace. Finally, we are continuing to win the war for talent. During Q3, Greg O'Brien joined us as SVP of Business Development from an education tech company he had led. Greg joins our already strong leadership team, including talent from top-tier technology companies such as Amazon, Wayfair, TripAdvisor, CarGroovers, and many others who complement the entrepreneur spirit of the early team that drove our success. Together, we are challenging ourselves to think bigger and be bolder. In summary, we delivered an excellent third quarter with strong execution across our verticals. As a company, we are continuing to meet the challenges brought about by the unprecedented combination of a global health crisis and significant economic disruption while continuing to execute on our growth initiatives and commitments to our customers. Our marketplace flywheel is demonstrating progress and resilience with increasing diversity across our team, traffic, verticals, distribution, and customer experiences. including direct-to-consumer agency initiatives in life and health insurance. We continue to capitalize on the shift of insurance online, and I'm very excited about what the future holds. Our thoughts continue to be, with all the individuals and businesses impacted around the world by the COVID-19 pandemic, I would like to thank our team, customers, partners, and shareholders for believing in our vision. Now I'll turn the call over to John to provide more details on our financial results.
spk05: Thank you, Seth, and good afternoon, everyone. I'll start by discussing our financial results for the third quarter of 2020, highlight our current financial performance, and then provide guidance. We are pleased to report a strong third quarter of 2020, with results ahead of our guidance across all of our key financial metrics. Third quarter revenue was $90 million, up 34% year-over-year, driven by a balance of growth in consumer volume and monetization. Third quarter revenue in our auto insurance vertical increased to $74.8 million, a growth rate of 30% year-over-year, reflecting our continued success capturing share as the insurance industry shifts online. Third quarter revenue from our other insurance verticals, which includes home and renters, life, health, and commercial insurance, increased to $15.2 million, a growth rate of 55% year-over-year, reflecting our ability to grow these smaller verticals faster due to our relatively early stage in these huge market segments. These non-auto segments represented 17% of total revenue, providing important diversity in our revenue mix. In the third quarter, our revenue growth was driven by a balance of increased consumer quote requests which were up 14% year over year to $6.3 million, and increased revenue per quote request, which was up 18% year over year to $14.30. We continue to focus on sourcing profitable, high-intent consumer traffic, which drives higher conversion for our insurance providers, which in turn delivers higher carrier bids for our consumer referrals in our marketplace. A significant increase in revenue per quote request was the result of multiple factors, including recent enhancements to our targeting options that allow our carriers to more accurately bid to expected conversion, which results in higher referral pricing for high converting consumer referrals. Increased carrier data integrations, which improve policy sale rates for our carriers, which the carrier then may reflect in referral pricing as carriers often compute their bids in based on expected cost per new policy sold. Strong demand from carriers and a specific desire to acquire new consumers online during the pandemic. higher referral bids on the newly introduced insurance bundling referrals, and higher monetization associated with our newest direct-to-consumer agency operations, which, although still small in revenue contribution, produced higher revenue per referral as compared to marketplace monetization alone. Overall, our improved monetization reinforces the marketplace flywheel by allowing us to bid more competitively on higher converting traffic. leading to a cycle of higher marketplace performance and further improvements in monetization. The benefits of these improvements is most evident in our key metric, variable marketing margin, which we define as revenue less advertising expense. In the third quarter, variable marketing margin, or VMM, was $29.4 million, an increase of 41% year over year. As a percentage of revenue, VMM expanded 150 basis points year over year to a record 32.7%. We manage our marketplace to increase variable marketing margin dollar contribution, but this focus on performance also generally results in improvements to VMM as a percentage of revenue. This quarter, our monetization gains, reflected as an improvement in revenue per quote request, outpaced the relative increase in acquisition costs. This was true even as we sourced more expensive, higher intent, and higher converting insurance shopping consumers in a competitive insurance advertising market. Our growing VMM is the result of our data and technology advantage in consumer acquisition and our scale and monetization leverage in distribution. We believe we are directly benefiting from network effects as we scale our marketplace. While factors such as volume of quote requests or revenue per quote request are largely a result of managing the business for VMM dollar contribution, we do believe that higher revenue per quote request and the resulting higher VMM as a percentage of revenue is sustainable, and you'll see we've reflected this in our guidance for the balance of the year. We expect traffic volumes to remain steady and revenue growth in Q4 to be fueled by increases in revenue per quote request, reflecting the performance and value insurance providers recognize in our referrals. Turning to the bottom line, third quarter gap net loss was $3.2 million, or a loss of 12 cents per share based on approximately 27.5 million weighted average shares outstanding. This compares to a GAAP net income of $173,000 in the prior year period. Our GAAP net loss was impacted by $7.2 million in stock compensation expense, in line with our previous guidance of $15 to $16 million of stock compensation for the second half of 2020. We delivered adjusted EBITDA of $5.2 million, or 5.8% of revenue for the third quarter, above the high end of our guidance range. Excluded from adjusted EBITDA this quarter was $480,000 in costs related to the acquisition of our DTC agency cross-point insurance advisors, and approximately $100,000 of related purchased intangibles amortization. We expect amortization of the purchased intangibles to be approximately $600,000 in Q4. We generated $6 million in positive cash flow from operating activities in the quarter, ending the quarter with $46.1 million in cash and cash equivalents on the balance sheet. This includes using $14.9 million in cash from the balance sheet to fund the acquisition of CrossPoint Insurance Advisors. To note, Q3 represents the second full quarter since the emergence of COVID-19, and we continue to closely monitor the impact of the pandemic. Though the current environment has become more than norm, we're cognizant that we are weathering an unusual combination of both a pandemic and a major election, both of which can impact advertising and consumer traffic and acquisition. While we are aware the spike of COVID-19 cases presents risks, we are cautiously optimistic that the resilience demonstrated by our business model will continue. Now, turning to our Q4 guidance. which reflects these operational trends as follows. We expect revenue to be between 90.4 and 92.4 million dollars, a year-over-year increase of 24% at the midpoint. We expect variable marketing margin to be between 29.3 and 30.3 million dollars, a year-over-year increase of 37% at the midpoint. and we expect adjusted EBITDA to be between $4 and $5 million, a year-over-year improvement of 7% at the midpoint. For the full year 2020, we are pleased to be, again, increasing our guidance, reflecting our strong Q3 performance and our improved Q4 guidance as follows. We expect revenue to be between $340 and $342 million, a year-over-year increase of 37% at the midpoint, and an increase from our prior guidance of $331 to $336 million. We expect variable marketing margin to be between $106 and $107 million, a year-over-year increase of 45% at the midpoint, and an increase from our prior guidance of $101 to $104.5 million. And we expect adjusted EBITDA of between $17 and $18 million, a year-over-year increase of 111% at the midpoint, and an increase from our prior guidance of $15 to $17.5 million. In summary, we delivered strong third-quarter financial results ahead of our prior guidance. We're experiencing continued momentum reflected in our improved outlook and expect to close a record year at EverQuote. Seth and I look forward to answering your questions.
spk01: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Your first question in queue is from Ron Josie.
spk07: with jmp securities thanks for taking the question appreciate it um maybe two please uh bigger picture on rpqr i think john you mentioned several factors that drove that 18 growth overall um as we think about 2021 and beyond can you just talk about you know the the sustainability here and in your opening remarks Seth, I think you talked, or maybe it was John, you talked about targeting enhancements, bundling benefits, and maybe just if you could double-click a little more on those targeting and bundling benefits, that'd be helpful. And then as you think about quote requests, you know, they were down sequentially in the quarter. Anything you do to help us understand sort of the progress throughout the quarter? And, John, I think you guided sort of stable quote requests for 4Q. You're talking about sequential. If I had any more insights on that, that'd be helpful. Thank you.
spk03: Maybe I'll lead off. Hi, Ron, Seth. Thanks a lot for joining us. So in terms of targeting, we've had a focus now, and we talked about it for several calls, on targeting higher converting consumers in our traffic operations. The traffic teams have just done or the marketing teams have just done an exceptional job executing that. It has been. They're compounded with some targeting options that we've added for our provider partners, where in addition to targeting economic ROI, they can also target conversion rate, which also drove up RPQR on higher converting traffic, thus allowing us to source or to – deliver more high converting traffic to the marketplace. It also buffers or moderates the lower converting traffic, which has, for us, a lower margin profile. So overall, it doesn't just drive up the conversion rate. It also drove up the compounding effect of both traffic operations and those increased targeting options drove up variable marketing margin operating point and variable marketing dollars in a way that we believe is sustainable. You want me to take bundling? Sure, go right ahead. And so, you know, bundling, that's auto and home, providing the option for consumers and providers to attach discounts related to bundling auto and home insurance, which simply put basically provides a higher value consumer or higher value referral to our provider partners, which is just one of the elements which drove up our PQR in the quarter.
spk05: And then, Ron, I think the kind of outstanding question of those that Seth didn't hit on was around next quarter and giving maybe a little bit of color on what we expect and where we think revenue growth will come from. Certainly the story for the second half of this year is certainly one that's colored by the comps from last year. You know that this time last year we had 80% growth in traffic, so we certainly are up against some strong comps. Even with those strong comps, we're continuing to grow quote requests and grow traffic. We think that continues in Q4, so we still look for year-over-year growth in quote requests. But certainly with our success that we've had with higher-performing, higher-intentful consumer traffic, more of the growth will come from revenue per quote request. So I guess if you're looking for color there, we would say look for year-over-year increases in the number of quote requests, but a lot of the growth will be driven by the success we've had in revenue per quote requests based on our traffic.
spk07: Got it. Thank you.
spk01: Your next question is from Jed Kelly with Oppenheimer.
spk04: Great, guys. Thanks for taking my call. Can you hear me okay? Sure, Jed. All right. Yeah, so I guess, John or Seth, can you sort of talk about your traffic acquisition strategy? I know you had some temporary issues with some of the unrest. Can you talk about sort of how you're managing that? And then can you talk about any insight to how EverQuotes compare competing relatives to its competitors? I think One of your competitors recently reported, I guess they had strong growth in auto insurance. So any update on just your performance relative to the competition?
spk03: Sure. Again, we executed well in traffic both prior quarter and this quarter. I think you're referring to sort of the ins and outs around the pandemic. and the election. Again, I think traffic execution and strategy hasn't changed outside of the continued progress we've made to drive higher converting traffic, which is resulting not only in an increasing RPQR, but increasing performance on variable marketing margin and variable marketing margin dollars. We haven't seen Any distinct competitive changes in the insurance advertising environment? Overall, it is a competitive environment. And, again, I think we expected and saw some headwinds from the pandemic and the elections. It's a hotly contested election season, a lot of advertisers pouring in, and we've modeled for that and reflected it in our guidance, but nothing out of the ordinary. And traffic teams have really executed well both last quarter and this quarter against our strategy of higher converting traffic.
spk04: Got it. And then just one more question. We are seeing some more insure techs go public. I think Rube just went public. Any opportunities for you to sort of work with some of these newer insurance models and the ability to streamline a more digitized, I guess, streamlined process?
spk03: Yeah, it's one of the more exciting sort of changes in the market from our perspective, Jed. So Root is a great partner of ours. And we've said before, in fact, a number of the insurtechs I believe you're referring to are partners or customers. And we've said now for several quarters, if not the year, that these insurtechs basically represent a new class of budget for EverQuote as they seek to expand their specific books of business in their target populations. And so great new budget for us. One of the contributors to strong RPQR is some of these insurtechs coming online and spending more year on year. We expect that trend to continue, and we expect to be an excellent partner for them. The other exciting aspect I think some of these folks like Ruth and others are bringing to the marketplace is these improved digitized experiences that support not just online integration for quoting, but also online integration for binding and seamless offline experiences, which we can integrate and do in our marketplace. And so that's really exciting from a customer perspective as well. We expect it to drive the business in both ways, increased conversion rate and increased performance, both for the consumer as well as for EverQuote and our partners.
spk05: Jed, I'd probably just add that because of a lot of these insure techs are very focused on specific areas, they have disruptive models, but often very specific to certain consumer sets. They tend to do very well on the Evercore platform because the primary value that we give to them is the ability to target very specifically on whatever their underwriting preference is or their strengths are. So that ability to target on the platform is kind of unmatched when you go into even digital advertising. So we often see them get good traffic on the platform because they have a very specific need.
spk03: Thank you. I think it's worth mentioning just in general, Jed, before you check out for next question, The opportunity and the shift of the insurance business online is just massive. And I'll give you some examples. If we look at all the revenue of the insured tax, inclusive of Everport, instead of marketplaces, it's probably roughly 2% of the distribution spend, 1% of premiums. is with the insure tech space and shifted online. So we think that the opportunity to grow is just abundant across the market space, and we're not competitively constrained. For us, it's really an execution story, and our team has really executed well both across the verticals and the levers this past quarter.
spk04: Thank you. Great quarter. Thanks.
spk01: Your next question is from Michael Graham with Canaccord.
spk06: Hey, thanks, guys. A quick follow-up on Ron's question earlier, just on RPQR. If you have a bundled consumer, does that count as one or two quote requests? And then two sort of more substantial questions. The first one is... It seems like this year was a pretty good year for the auto insurance industry with not a lot of miles driven, not a lot of claims activity. I'm wondering if you could loop back to whether or not you feel like that has loosened up some budget this year and just are you getting any hints about what people are thinking about next year? And then lastly, you mentioned you had great growth from agents, and I just wonder if you could you know, unpack that a little bit in terms of like, is that from new products or new, you know, a new orientation? Or is it just a natural evolution of that demand?
spk03: So I'll take it, Michael. Good to hear from you. Good evening. It's Seth. So we would count these bundled referrals as one quote request typically. So it's just a single quote request. And in terms of driving value, it's a significant incremental value. And we talked about it on the last call, both in terms of the overall premium for a bundled consumer, but also in terms of retention and risk profiles. As far as what we're seeing in the industry, we do see driving levels coming back up, but what we've seen so far is the P&C, the auto and home insurers, remain outside of some storm activity. Certainly in autos, they remain quite profitable, leaned in on growth. We'd expect that to continue certainly into next year. There's also a compounding effect, which we're excited by. It's early days, but With the pandemic sort of ongoing and potentially even re-ramping, I think the public in general doesn't want to take public transportation. There hasn't been really any kind of increase in flying. And it's led to, at least early days, the increase in car ownership and people are driving more. And so there is an opportunity for increasing auto premiums at a time when you have kind of reduced demand. losses or incremental profitability, which bodes really well for the distribution environment into next year for us from our perspective.
spk06: Okay, that's great. And thanks for that, Seth. And any comments on the strong growth from agents?
spk03: Oh, sure. I mean, that's been a focus area for us for some time, agents increasing. And I'd say it's twofold. One is it's certainly superb execution. I would call out our head of agency, Nick Graham, who him and the whole team have just done an outstanding job across the board in terms of customer service, support, building new products for agents, which we've spoken about again, Michael, things like agency call programs that really get the agent's interacting and engaged with the online consumer in seamless ways and really help increase consumer choice but also get that online consumer into the agent's hands in a way that helps them grow their business. And I think the team has just done an outstanding job in executing, and it's worth sort of shouting them out on this call. It is also compounded with the fact that agents increasingly are viewing the online channel generally and EverQuote specifically as a great place to grow their business.
spk06: Awesome. Thank you, Seth. Appreciate it.
spk01: Your next question is from Ralph Shuckard with William Blair.
spk09: Good evening. Seth, in the prepared remarks, you talked about the insurance industry making products easier to buy and sell through the channels. I think you highlighted numerous segments. Just curious if you could kind of drill into that a little bit more, give us some color on what you're seeing there. Is it something happening because of COVID or part of a longer-term trend? And then just maybe one more cross-point, I know it's early, but just curious how that's doing versus your expectations. Thanks.
spk03: Sure. So in terms of when we talked about insurance products are being streamlined and digitized, and some of the great examples are folks like Roots and Lemonade who are wonderful partners. And streamlining is in two ways. It's making the entire insurance experience digital. sort of readily accessible online, everything from shopping through quoting and binding as well as claims. And so that makes them sort of very good partners for integrating into our direct-to-consumer marketplace. And I'll give you a very specific example. What we've seen in life insurance has probably been the sort of furthest forward, if you will, the most leaned in, there are a growing number of life insurance products that are sort of streamlined issues, don't require a medical visit, and folks can just sort of buy them and complete their purchase online and offline, but without seeing a medical rep or going to a doctor's visit. And so these kinds of streamlined underwriting and integrating, quoting, and binding obviously enable us to do two things, full integration to give the consumers a very low friction experience when shopping, and it increases the overall product diversity available to our online consumers. So it's very exciting. The LIFE one is probably the most explicit example, and a lot of times they call these simplified issue products. With regards to CrossPoint, I certainly let John chime in a bit, but it's going to plan. We've completed the integration and, you know, really happy with the progress that both the CrossPoint team has made, but really integrating with our existing vertical healthcare initiatives to grow the business. Sure.
spk05: So, Ralph, I'd just add that, obviously, in this quarter, CrossPoint contribution was limited to one month. of the quarter, so obviously not significant in this quarter, but very pleased with how fast that team has integrated into our health vertical and looking forward to their contribution in Q4 during the open enrollment period. Great. Thanks, Seth. Thanks, Jeff.
spk03: Thanks, Ralph.
spk01: Your next question is from Mayank Tandon with Needham.
spk08: Thank you. Good evening, Seth and John. I wanted to start with healthcare, John. Sorry, Seth, maybe for you, and then I'll come back to John. Just some insights into who the typical consumer is shopping for healthcare on your platform, who the providers are, and just the value proposition, how it works for both the consumer and your healthcare providers.
spk03: Sure. So as you know, an increasing swath of consumers in the U.S. are shopping for health care, and that's everything from U65, which is typically short-term or under 65-year-old consumer, to the over 65 with Medicare Advantage and Medicare Supplemental. If you think about it, Mayank, and this is part of why we're excited about the health care vertical in general, is somebody who's turning 65 or 55, which is the sort of typical age when shopping, is is looking, is very comfortable online, right? So these are folks who grew up with the internet, sort of 15, 20 years of internet e-commerce, And so they're increasingly comfortable shopping for health care products online. What's particularly exciting to us about the CrossPoint acquisition and integration is it literally increased our carrier coverage across the consumer segment. So we sort of have product for literally or nominally nearly all the types of consumers that will be and are shopping for health care online. It increased our carrier representation in health care, our carrier panel product, So really exciting to have a very broad offering for the online healthcare shopping consumer given CP.
spk08: Got it. That's helpful, Seth. And then, John, just moving back to the code request volume, just trying to get a handle on the sequential drop. I get the fact that the year-on-year comps are really hard given the outperformance last year, but could you maybe just walk through the trend line through the quarter And then sort of pivoting off that into 21, given that comps do sort of level off, should we expect maybe a more balanced growth between quote requests and revenue per quote looking out into 21? Sure.
spk05: That's fine. So why don't I take the back half of that first? 2021, I would say yes. First of all, it would be reasonable to expect that we would take this momentum around revenue per quote request into 2021, and certainly that would probably lend itself to a balanced growth between quote requests and revenue per quote requests next year. Obviously, we plan on guiding to 2021 next year, but we're excited about As Seth mentioned, the strength that we're seeing within the industry backdrop and that next year looks to be prime for a good year for us. I think if you look at the traffic in terms of what we're seeing in Q3 and Q4, and first I'd always start with the idea that we're going to manage the business for variable marketing dollars, and I think that's very much what you saw this quarter. we had tremendous success being able to capture higher intent, higher-performing traffic, and that led to the higher revenue per quote request. It really drove that, and that is very much a kind of a virtuous cycle that allowed us to be more competitive on higher-performing traffic and leads to higher revenue per quote request and then in turn leads to higher margin percentages. And more importantly, higher variable marketing dollars. So Q3 we see as really strong performance. We expect as we go into Q4, you know, that strength in revenue per quote costs will continue. And that has been, you know, a focus on higher converting, higher performing targets. Clearly part of the story is the comps that we're up against for last year when you'll remember we were growing the business on a traffic basis, 80% year over year. So just maintaining that is a sign of strength, but we believe that we're going to continue to grow that year over year as well. So we're going to manage the business for variable marketing dollars, but I think next quarter you'll see a continued blend of growth from traffic volumes as well as revenue per quote request, but certainly given the success we've had on higher converting traffic, you should expect to see more of our growth coming from revenue per quote request.
spk08: Okay, understood. Thanks.
spk03: Yeah, just some incremental color. You also saw variable marketing margin dollars grew at 41% year on year. I think the variable marketing margin percentage, you know, it's all leverage increase in the business. to just shy of 33%, which is a high for us. We're obviously optimistic that that continues, that's reflected in the guidance that John gave. But just as importantly, headed into next year, ideally we see some progress with clearing the pandemic, And the election year will, for better or for worse, be over. And so I think some of those, if you will, headwinds will subside, which gives us sort of a great platform headed into 2021 on both the traffic and the revenue per quote request side.
spk08: That makes sense.
spk03: Thanks, Seth. Thanks, John.
spk08: Great job.
spk07: Thanks, Mike.
spk01: Your final question in queue is from Douglas Inman with J.P. Morgan.
spk09: Great. Thanks for taking the question. I have two. First, just on the deep integrations, I think you've mentioned 72% at this point. I just want to check if you're still on track toward 100% by year end. And then just how are you thinking about the buying rate improvements from here? Is there still room to go higher? Do you think you've achieved kind of full benefits at this point? And then just second, also curious on your login user experience, where you are in terms of launching that and if there's any kind of early thoughts or takeaways on traffic or engagement there. Thanks.
spk03: Sure. Hi, Doug. Thanks for joining. What's super critical, so we are making good progress on the integrations. I mean, one of the things, and I'm both impressed and excited by it, is we added more than 20 new carriers to the platform this quarter. I think that was an unexpected upside surprise, which certainly puts some pressure on our goal of all carriers integrated. But the great or the even better news is that 92% of our consumer referrals are now have a deep integration. So that's, you know, we prioritize the larger integrations first. We'll continue to do so, and we feel really good about that goal, and we'll keep pushing on it even as new carriers flow onto the platform. The other sort of upside for us is that these deep integrations, and, you know, I quoted just two of our larger partners seeing significant bind rate increases. you can still go, you know, all the way. And we see a growing swath of our referrals that are fully integrated to a quote. We will add to that integrations that allow consumers to bind right online from our workflow to our providers. So we'd expect continued progress in going to click the quote, bind the quote, and that we will see a continued increase in bind rate with the current deeply connected or deeply integrated providers as well as getting to that 100% mark.
spk09: Any thoughts on the logged-in experience?
spk03: Sure. Apologies. So on the logged-in user experience, you know, that's in our sprint cycles now, making good progress on that. No data to report, but we will update you on the next call as planned.
spk09: Okay. Thank you.
spk01: There are no further questions in queue at this time. Management, I'll turn the call back over to you for closing remarks.
spk03: Sure. Thank you, everybody, so much for joining us today. We delivered a strong quarter with solid execution across both our verticals and all of our growth levers. We really are well positioned and confident that we'll close out a record year here at EverQuote, both in terms of growth, but also variable marketing margin, which is sort of our North Star. business metric. We will continue to capitalize on the shift of insurance online, build up our great team, and I'm genuinely optimistic and excited about our future market opportunity as this massive insurance industry shifts online. Thanks so much.
spk01: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
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