EverQuote, Inc.

Ladies and gentlemen, good afternoon. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to the ever quote second quarter 2023 earnings conference call. Today's conference is being recorded and all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you, and I will now turn the conference over to Brinley Johnson, Investor Relations. You may begin.

Thank you. Good afternoon, and welcome to EverQuote's second quarter 2023 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 Jamie Mendel, EverQuote's Chief Executive Officer, and Joseph Sanborn, Chief Financial Officer of EverQuote. During the call, we'll make statements related to our business that may be considered forward-looking statements under federal securities law, including statements concerning our financial guidance for the third quarter 2023, our growth strategy and our plans to execute on our growth strategy, key initiatives, including our direct-to-consumer agency, Our investments in the business, the growth levers we expect to drive our business, our ability to maintain existing and acquire new customers, our expectations regarding recovery of the auto insurance industry, 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. For discussion of material risks and other important factors that could cause our actual results to differ materially from our expectations, please refer to those contained under the heading Risk Factors in our most recent quarterly report on Form 10-Q or annual report on Form 10-K It 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. A 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. And with that, I'll turn it over to Jamie.

Thank you, Brindley, and thank you all for joining us today. In the second quarter, EverQuote reported revenue of $68 million, variable marketing margin, or VMM, of $24.7 million, and adjusted EBITDA of negative $2.1 million. We achieved a record high VMM as a percentage of revenue of 36.3%. However, our revenue results fell below our expectations, largely driven by two factors that developed in the latter half of the second quarter, as auto insurance carriers continued to wrestle with significant profitability challenges. First, a major carrier partner reduced its budget multiple times over the quarter, resulting in their lowest levels of spend in our marketplace since the auto insurance downturn began in late summer of 2021. Second, we experienced a substantial contraction in agent demand following reductions in carrier marketing subsidies for local agents. We exited the quarter with auto demand at a new low point, which we now expect to persist into the back half of the year. In response to this renewed pullback and continued uncertainty about the timing of a more sustainable auto recovery, we initiated a restructuring of the business in June. The restructuring included a large reduction in force, an exit of our health insurance vertical and its associated direct-to-consumer agency operations, and a scale-down of our DTCA operations serving the auto and home verticals. We also took actions to strengthen our balance sheet, which Joseph will cover in more detail. The combination of actions we have taken puts EverQuote in a stronger position to weather a further prolonged period of volatility in the auto insurance market. While the restructuring was catalyzed by the lower prolonger auto insurance outlook, the specific decisions we made were informed by a deeper assessment of our overall strategy. We are also restoring greater focus on our most differentiated assets to deliver deeper value to our customers. These assets include our insurance shopping traffic scale and technology, our local agent network, and our proprietary data and associated data science and machine learning capabilities, which we expect to take on greater significance as we continue to identify AI applications for insurance distribution. And in doing so, We reset our cost structure to enable significant adjusted EBITDA expansion and cash generation as the auto insurance market recovers. While we are proud of the health and Medicare business we built over the last three years, our decision to exit the vertical reflects our renewed commitment to a greater focus. As a more people and capital intensive operation, these verticals operated with materially lower capital efficiency than our other verticals. In addition, the market's constant changing regulatory environment gave us lower conviction in our ability to win. As a result of exiting Health and Medicare, our teams will have the resources to go deeper in our remaining vertical markets with a heavier focus on our P&C marketplace. We believe the P&C market will evolve in the coming years as a result of fast-changing underwriting dynamics and that EverQuote is well-positioned to partner with carriers and local agents in adapting. In PNC, we have the industry's largest local agent network and sales operation with an installed base of over 7,000 local agents to whom we can deliver more and better products to support their growth. As the largest online source of PNC insurance shopping traffic, we have a wealth of insurance distribution data. We have been steadfast in applying this data using machine learning to make our PNC operation more effective and efficient, and now with a sharper focus, We believe we can accelerate the rate at which we deploy machine learning and artificial intelligence across aspects of our business, ranging from operational efficiency to traffic bidding. Our vision remains unchanged, to become the largest online source of insurance policies using data, technology, and knowledgeable advisors to make insurance simpler, more affordable, and more personalized. While our path to get there is evolving, I'm confident that greater focus and a more capital efficient and streamlined operation will accelerate our ability to provide compelling value to our consumers, insurance provider partners, and shareholders. Our team has demonstrated remarkable resilience and adaptability to fast changing and challenging market conditions. And I have no doubt that this strengthening of our team will pay dividends and enable us to emerge with incredible success when the market recovers. Before I turn the call over to Joseph, I wanted to thank John Wagner for his nine years of dedication to EverQuote. I am also excited to welcome Joseph Sanborn to his first EverQuote earnings call as our new chief financial officer. Joseph has been working closely with our executive team and me for the past four years, serving in a variety of finance and strategy roles. He possesses deep operational experience in and understanding of our business and brings extensive strategic finance and capital markets experience to the role. Joseph, please go ahead.