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Operator
Thank you for standing by. My name is Mark and I will be your conference operator today. At this time, I would like to welcome everyone to the EveryCode first quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw a question, press star one again. Thank you. I would now like to turn the call over to Brinley Johnson. Please go ahead.
Brinley Johnson
Thank you. Good afternoon, and welcome to EverQuote's first quarter 2024 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 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 second quarter 2024, 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 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 that 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 will refer 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.epipote.com. And with that, I'll turn it over to Jamie.
Jamie
Thank you, Brindley, and thank you all for joining us today. 2024 is off to a strong start. In the first quarter, operating results exceeded the high end of our guidance range for revenue, variable marketing margin, and adjusted EBITDA. we achieved record levels of net income, adjusted EBITDA, and operating cash flow. These results were made possible by the actions we took in 2023 to strategically realign the business and return to our roots as a capital efficient digital insurance marketplace. Since the middle of last year, we have observed auto insurance carrier underwriting profitability steadily improving. With this trend persisting into 2024, carriers have continued to reactivate campaigns, restore budgets, and reopen their state footprints in our marketplace. Actions and messaging from carriers indicate that the majority are either starting to, or planning to, restore greater emphasis on growth. Given the years-long volatility in the auto insurance market, we maintain caution while noting that we believe a sustainable auto recovery is, in fact, underway. Against an improving industry backdrop, our team continues to execute effectively, as evidenced by our bottom line performance. Alongside sequential growth in carrier revenue, we had strong growth in agent revenue compared to the fourth quarter. And as provider budgets increased, our performance marketing engine continued to optimize in real time, driving volume and variable marketing margin growth. The progress extended into our home vertical as well. as we achieved record home revenue in the first quarter. Q1 also marked numerous milestones in rebuilding technology infrastructure for future speed and scale. We moved most of our traffic to a new site infrastructure, began migrating customers to a new agent platform, and now have the majority of our traffic bidding migrated to our new ML-powered bidding platform. These changes will enable faster feature development and greater employee productivity in the future. More importantly, it sets us up to accelerate progress in areas ranging from site experiences to AI-powered bidding to new agent products and features. I want to thank the EverQuote team for the incredible tenacity they demonstrated and continue to demonstrate through the recent hard market cycle. This period of unprecedented market conditions dating back to 2021 has been an extended challenging stretch for EverQuote, but we are emerging stronger. The team which has led us through this challenging period is battle-hardened and energized by the results we're beginning to see. It's this team which gives me confidence in Evercoat's pursuit and eventual achievement of our vision to become the largest online source of insurance policies by using data, technology, and knowledgeable advisors to make insurance simpler, more affordable, and personalized. I'll now turn the call over to Joseph to discuss our financial results.
Joseph
Thank you, Jamie, and thank you all for joining. I will start by discussing our financial results for the first quarter of 2024 before providing an update on what we are currently seeing in the auto insurance sector and our guidance for the second quarter. We had a strong start to 2024 and exceeded first quarter guidance across all three of our primary financial metrics of total revenue, variable marketing margin, or VMM, and adjusted EBITDA. We produced a record level of net income as well as a record level of adjusted EBITDA. These results were driven by continued strong execution of our operating teams against an improving auto carrier landscape. Total revenues in the first quarter were $91.1 million, driven by stronger enterprise carrier spend of more than 150% from Q4 levels. Revenue from our auto insurance vertical was $77.5 million in Q1. representing roughly 85% of revenues in the period and a sequential increase of 72% from the fourth quarter of 2023. Revenue from our home and renters insurance vertical is $12.7 million in Q1, a sequential increase of 29% from the fourth quarter of 2023. VMM was $30.8 million for the first quarter, up nearly 50% from the fourth quarter of 2023. VMM as a percentage of revenues in the quarter was 33.8%, and as expected, declined from the record level of the previous quarter as we experienced a more costly advertising environment, which was partially offset by continued strong execution by our traffic teams and the ongoing benefits of our investments and our bidding technology. Turning to operating expenses and the bottom line, we continue to be very disciplined in managing expenses and driving incremental efficiency across our operations. Our efforts to streamline the business have led to improved execution and greater operating leverage. Cash operating expenses, which excludes certain non-cash and other one-time charges, were in line with expectations of $23.2 million in the first quarter, or a 23% decline from the first quarter of 2023. In the first quarter, we reached a milestone of generating positive gap in income for the first time since the third quarter of 2019, reporting a record high of $1.9 million. Adjusted EBITDA reached a record $7.6 million in Q1, a 41% improvement year-over-year on 17% lower revenues, reflecting the strong operating leverage that we have created in our model since our June 2023 strategic realignment. Adjusted EBITDA as a percentage of revenues reached 8.3% in the quarter, as the rapid increase in auto carrier recovery in Q1, coupled with our tight expense discipline, led to VMD overperformance flowing through to adjusted EBITDA. We remain steadfast in our commitment to efficient operations, and as we gain greater confidence in the sustainability of the recovery, we expect to modestly increase investments to support our future growth. As a result, as we progress through the second half of this year, adjusted EBITDA margins are likely to moderate but remain above pre-downturn levels. We delivered operating cash flow of 10.4M for the first quarter, ending the period with cash and cash equivalents of 48.6M, up from 38M at the end of the fourth quarter of 2023. Adjusted EBITDA will continue to be a close proxy for operating cash flow going forward, subject to normal working capital adjustments. Before turning to guidance, I want to provide an update on what we're seeing in the auto insurance industry this year. During our February call, we shared that many of our carrier partners had recently reiterated their prior comments to us of wanting to return to acquiring new consumers during the course of 2024. We are pleased to see this more growth-oriented mindset is taking hold, which has led to a strong start for the year with more auto insurers beginning to return to our marketplace. We are increasingly optimistic that auto recovery will be more sustainable this time around. However, we are cognizant that there is no playbook for how our carrier partners will emerge from what several insurance executives have referred to as a once-in-a-generation downturn. Given these dynamics, we expect unpredictability to persist in the near term, which makes it increasingly challenging to look at historical seasonal patterns to predict our outlook for the remainder of the year. We continue to execute on the strategy and accomplish the goals we laid out last year following our June strategic realignment. We committed to restoring consistent quarterly cash flow from operations in the first half of the year, followed by a return to our pre- downturn adjusted EBITDA margins in 2024. I am pleased to share that we achieved both of these goals within the first quarter ahead of our expectations. Furthermore, we expect our operations to continue to generate cash flow and quarterly adjusted EBITDA margins to remain at or above pre downtrend levels for the remainder of this year. Turning to our guidance for Q2 2024, we expect revenue to be between 100 and 105 million. We expect VMM to be between 31 and 33 million and we expect adjusted EBITDA to be between 7 and 9 million. In summary, We entered 2024 with deep conviction that EverQuote is extremely well positioned to directly benefit as sustainable auto care recovery takes hold and persists. We delivered strong performance in the first quarter exceeding our guidance press revenue, VMM, and adjusted EBITDA. Our ability to achieve record levels of net income and adjusted EBITDA in the first quarter demonstrate our efficient business model. We will continue to focus on strong execution and remain steadfast in our commitment to efficiency. while strategically investing in positioning EverQuote for future growth and success. Jamie and I will now answer your questions.
Operator
We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star one to join the queue. And your first question comes from the line of Rob Shuckert with William Blair. Please go ahead.
Rob Shuckert
Good afternoon. Thanks for taking the question. Jamie, maybe if you... provide some perspective, if you could, please, just in terms of, you know, how broad base of the recovery you're seeing, you know, in terms of number of carriers, increasing number of states, just any sort of like operational metrics you might be able to add to the, you know, obviously really strong performance in the quarter that I would follow up for Joseph.
Jamie
Sure. Thanks, Ralph. So, you know, if you take a step back, I think sort of across the board, you're seeing broad-based improvement in carrier underwriting profitability. So that's been steadily improving. Over the last year, I think auto carriers have taken 20-ish points of rate, and you're seeing across a number of carriers double-digit percentage point improvements in their combined ratios. So I think the industry itself is certainly getting back to a more broad-based position of health, which is the primary leading indicator to reentry back into the marketplace. Within our marketplace, I guess a data point I can share is we've seen all the top 10 carriers from Q4 have stepped up their spend into Q1. And there is a broad base of carriers that are reactivating campaigns, restoring budgets, reopening state footprints in our marketplace. Now, If you just look at the performance we've seen so far this year and the guidance we're providing for the second quarter, what that demonstrates is a recovery that has happened quite faster than we expected in the first part of this year. And so I think a good bit of that recovery is somewhat front-loaded relative to how we expected the year to play out. And there is certainly, you know, one major carrier that has leaned in very aggressively. But by and large, we're seeing a more broad-based recovery than we were seeing this time last year. Okay, that's really helpful.
Rob Shuckert
And then, Joseph, you know, historically, I know this is unpredictable, like you talked about on the recovery path, but historically, you'd see a strong Q1. you know, seasonally maybe down Q2, up Q3, maybe, you know, Q4 is down. Just can you help us kind of think about sort of the shape of, you know, the revenue recovery as we think about sort of modeling, you know, 2024?
Joseph
Sure. Happy to, Ralph. So let me just maybe start this thing about how has the year unfolded to date, as Jamie said, relative to expectations. So the normal seasonal patterns you just described, start the year with a good start to the year, Q2 down, Q3 up, Q4 down. Given what's actually transpired, it's been a much stronger start to the year, as Jamie mentioned. And it's really been led by a handful of carers who have been aggressively expanding their state footprint more quickly, and resulting in us having a strong Q1. But if you look at our Q2 guide, Q2 guide implies auto returning to peak or near peak levels that we saw in Q1 of 2023. So as a result, we see this growth as we expected for 2024 being more front-end loaded, And so we think about how the – we think for the second half of the year, what does that imply? So we think about the carriers that are more aggressive and coming into the marketplace more aggressively. There's relatively few additional states to open at this point, in part because some of those opportunities, some of the more challenging states, some of the larger states, but the timing of those is still TBD, and some are saying it won't be until 2025. And then as we look at the broader range of carriers out there, We certainly see enthusiasm for getting back to growth mode, but the specificity of their plans for the second half is still uncertain. So we put this all together. The way we think about it is we expect to have strong year-on-year growth in the second half of the year, but we are not currently expecting sort of the seasonal pattern of sequential improvement from Q2 to Q3 apply this year, just given the front-end loaded nature of the recovery so far. So that's what we can give you right now based on what we're seeing.
Rob Shuckert
All right. Thanks, Justin. I appreciate that. Thanks, Jamie. Thanks, Ralph. Thanks, Ralph.
Operator
Your next question comes from the line of Michael Graham with Canaccord. Please go ahead.
Michael Graham
Thank you, and congrats on the strong results. Maybe just to follow up on Ralph's question, one of the other players in the industry had suggested that – volumes were recovering, but pricing was especially strong here in the early phases of this recovery. So I just wonder if you could comment on the role that pricing might be playing and whether that means this recovery is more sustainable, less sustainable. And then I just wanted to ask a quick question on operating leverage. I know you mentioned it in your prepared remarks, but you had such good flow-through here in the quarter. You know, how are you thinking about the ability to keep delivering that flow-through as you go through the year?
Jamie
Sure. Thanks, Mike. I'll take the first question, then I'll turn it over to Joseph on the operating leverage question. So, we have... We continue to see, as it relates to volume, we continue to see elevated levels of shopping persisting into Q1. And we would expect that to really persist over the course of this year. As the rate cycle unfolds, people get renewal notices. Those renewal notices are coming in with rates that are meaningfully higher than what people are paying, and that triggers shopping behavior. So for as long as the rate cycle is unfolding, and you've got to remember there's a 6- to 12-month lag from when a rate increase goes into effect to when the renewal notice may flow out to the customer. For as long as that remains in effect, we expect to see these elevated levels of shopping behavior. And so we're kind of planning for heightened levels of shopping in 2024, and then in 2025, gradual return to more normalized levels of shopping activity. As it relates to pricing, Pricing is, you know, has stepped up meaningfully from Q4 to Q1. It is operating at healthy levels, you know, by historical standards. And, you know, we'd expect some stability in higher pricing levels, assuming the auto recovery, you know, continues to maintain its foothold. So, we're benefiting from a combination, you know, certainly sequentially of higher volume and higher pricing.
Joseph
So with regards to operating leverage, I'll just give you a little color. Following our strategic realignment last summer in June, we really focused on driving operating leverage in the business. I think what you saw in Q1 was representative of what we have done. We got a record level of adjusted EBITDA and actually also a record level of net income. The adjusted EBITDA margin in the business was 8.3% in Q1. As we think about how we're going to expand the expense-based review and the implication for EBIT down margin to point out a couple things. We think operating expenses, cash operating expenses, we refer to them, will have modest increases as we progress through the year, but we'll be very disciplined as we do that. They'll be tied to sort of this idea of maintaining adjusted EBIT down margin that is above the pre-downturn level that we've talked about as a goal, and pre-downturn levels were like 5.5% to 6%, and where they were in Q1, which is around 8.25% in Q1, And we'll manage them in a disciplined way. We're adding modest incremental investment as we progress through the year on the OpEx side positions for future growth. But at the same time, we'll be continuing to, you know, make sure we maintain that EBITDA margin and improving it as we get, you know, paying a performance in the second half of the year.
Michael Graham
Okay, great.
Jason Creyer
Thanks a lot, guys. Thank you, Michael.
Operator
Thanks, Mike. Your next question comes from the line of Corey Carpenter with J.B. Morgan. Please go ahead.
Corey Carpenter
Great. Thanks for the questions. I have two. First, just hoping you could talk more about the incremental investments that you are planning on making. You know, what maybe a little more specificity in what you plan on investing in. And then secondly, the home vertical growing 35%. If you could just talk about what you're seeing there and how you think about the sustainability of that growth going forward. Thank you.
Corey
Sure. Thanks, Corey.
Jamie
So, as Joseph mentioned, the discipline and expense management will persist, but as we get comfortable with our adjusted EBITDA levels, we will begin ramping some targeted investments back in as we progress through the course of the year. Two areas I'd highlight for you, Corey, probably not exhaustive, but there'll be some concentrated investment in the areas of data science, ML, and AI. where we have applications across the business from traffic to improving carrier performance, agent performance. So that will be one area of investment. Another is going to be in continuing to extend our advantage with local agents. Over the last year, we've spent a lot of time with the local agent customer base. I think we've got a pretty good sense of their needs and have begun making investments in improving our existing products and developing new products to better meet their needs to both deepen and expand our relationship with that agent base. So that would be another area where we'll direct some resources. To your second question about homeowners, we had record revenue in home in the first quarter. We're starting to see Some improvement in the homeowners market from an underwriting profitability standpoint, you know, it was similarly challenged to auto I think it's gone through a period of a lot of cat losses But in the first quarter of this year carriers produced better underwriting results and that was helped by by a period relatively light cat losses So, you know that the growth has been healthy and We've continued to maintain focus on it as we've stepped back from some of our previous vertical markets and shifted some of that focus to home. And we expect home to continue to grow over the course of the year. You know, I'll note that the comps will become a bit higher as we progress through the year, but we do expect to continue to grow that vertical as we progress through 2024.
Corey
Great. Thank you. Thanks, Corey.
Operator
Our next question comes from the line of Zach Cannon with B Riley Securities. Please go ahead.
Zach Cannon
Hi, good afternoon. Thanks for taking my questions and congrats on the strong results here in Q1. I really just had a question around the ramp up in advertising expenses as you start to see improvements in demand. Can you talk about some of the pricing that you're seeing in the ad environment and maybe which channels you could be prioritizing versus others as you start to see carrier demand really ramp up?
Jamie
Yeah. So we, you know, as carrier demand has come back, so too has some competition in the advertising environment, particularly in the more vertical specific channels, you know, like paid search as an example. And so, Zach, I mean, the way we're always managing the business to maximize our variable marketing margin dollars, And so where we think we can get incremental volume or incremental dollars, we'll bid into that, which may cause some VMM margin percentage compression, but it results in more variable margin dollars for us. So as we've seen the advertising environment become more competitive, we've seen a little bit of compression in VMM, but it's more than made up for in the costs Increases are more than made up for by volume and pricing. With the higher pricing, what that has changed from a channel standpoint is it now makes insurance as a category more competitive in some of the more broad-based channels. So channels that aren't industry-specific, you know, display or social or things like that, have really come back to life in the first part of the year. They may run at slightly lower margin, but there's a lot of incremental sort of volume and dollars to go get. And so we've been able to reactivate a number of those channels as monetization has come back over the first four months of this year.
Joseph
And maybe I could add, just to give you a little context on sort of VMM margins, you think about what it means for business as we progress through the year. So we had Q1 was just under 34%. We had sort of, as expected, we was down from the There are levels we saw in Q4, which was an environment that was very depressed. As we progress into Q2, you see our guide implies about 31% for VMM margin. We think it will be sort of in the low 30s for the year on balance. And I guess sort of three factors I'd give you to sort of help understand what's driving it. One is, first and foremost, advertising costs. As we get auto recovery, the costs around acquiring advertising is rising. There's more demand, and that's getting up costs. for the advertising. The second, which is driving it from our point of view, is we have a, especially in Q2, as we're ramping our traffic, you're effectively testing back into certain channels. And in doing that, it's less efficient until you scale them. So that's a part that's impacting Q2. And the third is just at a high level from the business, as we get more, we have a relatively higher VMM margin in agency than enterprise, generally speaking. As we've seen the ramp in enterprise care, Q1 driving, being driven by enterprise care, ramping at a much higher rate, that is developing in the next shift to carry, which is bringing down the VMM margin a hole in the business.
Zach Cannon
Understood. That's extremely helpful. Well, thanks for taking my question, and best of luck here in Q2. Thanks, Zach.
Operator
Your next question comes from the line of Greg Peters with Graham and James. Please go ahead.
Greg Peters
Yeah. Hey, good afternoon. This is Sidon for Greg. Just with the recovery and the auto carriers, it doesn't feel like they've fully restored their budgets, but your second quarter guidance seems to imply revenue near the quarterly run rate you were achieving in 2021. Just curious if you could discuss how you view your market share and if it's fair for us to assume that it's increased the last couple of years.
Jamie
Yeah. So we, you know, we are today the largest digital P&C insurance marketplace. You just look at that by revenue. Now, over the last couple of years, we've been in a very constrained budget environment. In that environment, we've been mostly focused on maximizing profitability and improving the value we're delivering to our customers, whether that's through better targeting, higher intent traffic. In some cases, that means actually pulling back on volume. But even still, you know, we remain the largest digital insurance marketplace in PNC. And so... As we do that, we expect, as we continue to make these investments, we expect our position to continue to strengthen. Do you want to talk about the relative, like, benchmarking in terms of revenue versus historical periods?
Joseph
Yeah, sure. So, I mean, when you think about auto revenues, our peak was Q1 of 2023 for auto, not for total revenues, but for auto. So, remember, we had the health business prior to June of 23. So if you look at this audit, it was just under 90 million in Q1 of 23. And if you look at that, our Q2 guide, and what's implied by that Q2 guide, we're sort of at or near the peak levels implied in Q2 that we saw in Q1 of 23. So we look to the second half of the year, You know, we believe that auto recovery, we're still very bullish on the outlook for auto recovery. I think what we're highlighting, though, is what exactly will happen in the second half of 24 depends on factors we don't yet know. So one is, you know, other carriers coming to the market. Some carriers are, a handful of carriers have been more aggressive in getting rate increases. They've been aggressively leaning into our marketing Q1, and we expect that to continue in Q2. As you get to the end of Q2, for those large, some of these handful of very large carriers have leaned in aggressively. There's relatively few states they can open at this point in our marketplace, because they've opened so many. The states that remain are some of these very large states with relatively more challenging regulatory environments. And, you know, how when those will open is an open question. Some are saying it won't be in a meaningful way until 2025. So I think that's a piece to think about it. The second piece I'd say, if you look at the second half of the year, we're expecting a strong year-on-year growth in the second half of 2023 to the second half of 2024. I think the thing we highlight in response to Ralph's question is, how will the seasonality play out? And I think as we look at it right now, we've had a very front-end loaded recovery. Well, that's what we expected. So it's hard to know the normal sequential increase you see from Q2 to Q3 will apply based on what we are seeing today, just given the environment. But we're very bullish on the long-term view. And as Jamie said, trying to measure it, we are the largest PNC marketplace today. But as we look at measuring market turning, we'll be talking about more of that over time, I think, as we get to a more – a market where there's more predictability in the market and you're seeing more broad-based of tariffs coming in.
Corey
Okay. Thank you.
Operator
Your next question comes from the line of Jason Creyer with Craig Halem Capital Group. Please go ahead.
Jason Creyer
Thank you. This is Cal Bartizall for Jason. So just to start, you know, following up on some of the commentary that you had on agents I'm just kind of curious what you're seeing there, what maybe the pockets of strength and if there's any green shoots that you're seeing from captive carriers that would indicate an upswing in the agent channel.
Jamie
Sure. So our agent business performed well in the first quarter. We did see the return of some carrier subsidies there. Now, it's been happening in a fairly targeted way, right, similar to how we've seen direct carriers kind of reenter the market state by state. We're seeing subsidy dollars reenter the market state by state. But overall, you know, it's been a favorable trend. Going forward, as I mentioned earlier, we've spent a lot of time with agents over the last year. I think it's an area we'll continue to invest to extend our advantage. I think we have an opportunity to grow the agent base specifically in that independent agent channel and deepen our relationships with agents, so more spend per agent, more sticky relationships by improving the existing products and services we're offering them as well as extending into sort of adjacent products and services to help them solve for their growth needs.
Jason Creyer
Perfect. Thanks. And then just a second one from me, quick. Just wanted to follow up on kind of some of the comments earlier about some of this new bidding technology, some of the things you guys are doing on the tech side. You know, as we've seen VMM, you know, as the Q2 guide implies, kind of getting back towards where it kind of has been historically. I mean, do you think that there's any upside to historic levels, particularly as you continue to roll out these tech improvements?
Jamie
Yeah, I wouldn't over-index any one quarter on the VMM front. Joseph explained some of the factors that have contributed to the VMM compression on a percentage basis from one quarter to the next. I think over a longer period of time, certainly some of the investments we are making, particularly in our bidding platform, have structurally improved the VMM of the business. we're now able to take data, you know, more data at more granular level in real time about a consumer, about our distribution, about, you know, the auctions in which we are competing, and apply, you know, ML more effectively to generate profit-maximizing bids. And that has been responsible for just a structural expansion of the VMM as a percentage. Right now, we're in a period of time where the advertising landscape is in transition. We're testing back into new channels. Our distribution mix is shifting, and so there's a bit of fluctuation. But we continue to expect our VMM levels to settle out probably somewhere between where they were at their peak and somewhere where they've been historically. And the structural increase there largely can be attributed to some of the bidding technology that we've rolled out.
Joseph
Maybe I can just expand on the numbers more specifically. We talked about this in our prior call and some of our public comments last quarter. But when you look at 2023, you had VMM margins that had lots of things going on. You had puts and takes of DTCA, not DTCA. You had also the very depressed environment where we were able to get advertising relatively cheaply. What we did say, if you look back on those comments, we said normalize VMM margin just for the marketplace, including DTCA. It was sort of high 20s, low 30s starting last year. We had some improvement as we progressed through the year in the normalized marketplace. And what we said going into this year is we expect it would settle up between that 30 to 35 range. And we said Q1 would be just under 34. It landed just under 34. We continue to believe this year we'll have incremental improvement relative to the 30 last year. Maybe this year is in the 31, 32 range. So we see a dynamic where you continue to build every year incremental BMM margin percentage. very much like we articulated. I appreciate it's not the perfect story to watch, but if you look over time, I think you'll see our investments in the bidding technology are what's really driving that, is you sort of normalize behaviors quarter to quarter on, especially with advertising and recovery with an auto. It's hard to look at those right now, but the bidding technology will be more sustainable. We'll talk about it as we progress through the year.
Jason Creyer
All right. Very helpful. Thank you. Thank you.
Operator
Our next question comes from the line of Jed Kelly with Oppenheimer. Please go ahead.
Jed Kelly
Hey, great. Thanks for taking my question. Just looking at the industry in whole, it seems like, you know, everyone's doing pretty well. So we're assessing like how you're performing relative to your carriers or up relative to the other competitors. How should we assess what key metrics should we look at? And then, um, I think you went to the corner with 48 million in cash, um, You talk about, you know, is that the right balance going forward and how you kind of do your balance sheet. Thanks.
Corey
Sure. Thanks, Jed.
Jamie
Yeah, so as you say, I mean, I think we're focused on us, right? And we've gotten up to a very strong start this year. We have... Results that exceeded the high end of the range on all metrics that we managed to. We've got record levels of adjusted EBITDA, of operating cash flow, of net income. And all that, you know, is really made possible by the actions we took last year to refocus the business into a capital-efficient, PNC-focused digital insurance marketplace. You know, Jed, as we look out across the market, I think we view ourselves increasingly like there's an element of it which is our model is digressing a bit from that of some of our peers simply in that we are more focused. Like we are a pure play focus on P&C. We are of the mind that going deeper in this market with carriers, with agents, with consumers in a world where, you know, we are the leading player in the space. We have access to a tremendous amount of proprietary data in the space. And we think that using that data and going deeper in this market will pay off over time and allow us to extend that advantage. So I don't know exactly what metrics to point you to. We're really focused on delivering more value to our customers in the P&C insurance market. And I think that it's hard for us to find a comp that is similarly focused. So I would just measure us on what we say we're going to do and how we do against that.
Joseph
Maybe I'll take your second question, Jed, which is around capital allocation. So let me just put a couple things in context. We ended Q1 with close to $50 million in cash, just under $50 million in cash. And obviously a significant improvement from where we were a year ago, right? and where we were in the summer of 2023. I think it reflects, as Jamie said, we're a managing team that is saying what we're going to do, and we're doing that, and we're executing upon it. And the operating leverage we've driven more cash to the balance sheet. We do not need, and we expect to be cash flow positive going forward as a company. As we think about the cash position, we're pleased to see where it's at also until last year. What we'd say is we are confident in our ability to drive long-term growth organically. And as Jamie mentioned, we believe by going deeper to help clients' needs within P&C, we're actually going to add value that will make us increasingly differentiated from the broader market for participants. And so that's why we feel confident about driving long-term growth organically, but we'll continue to selectively evaluate acquisition opportunities to drive inorganic growth. And we'll be very disciplined about this, and we'll apply the same disciplined approach we've used to manage our operating expenses. We use the same approach looking at acquisitions. But that's certainly sort of something we'll consider with our cash over time. As we've said in our prior call with regards to M&A, we believe that, you know, M&A will make sense over time as the sector consolidates so there will be more M&A. And we believe that we are well positioned to be a leader in this space long term. And we have the team and the approach that we think will win long term.
Jed Kelly
Thank you.
Operator
Thanks, Seth. Our last question comes from the line of Mayank Tandon with Needham. Please go ahead.
Needham
Thank you. Good evening. Congrats, Jamie and Joseph, on a strong quarter. A couple of clarifying questions. Joseph, sorry I missed this, but I think you walked through some of the assumptions for the back half, even though you're not giving formal guidance. But just to be clear, if the recovery holds that you're seeing right now, would you still expect to see sequential growth? Maybe not the same seasonality that you've seen historically, as you said, But some sequential growth in the back half, the 3 and 4Q, just based on what we're seeing in the market right now.
Joseph
Yeah, I guess here's the comment I said earlier, Mike, and I'll just repeat them for the group, which is going into the year, we expect to have a gradual auto recovery. Good Q1, and the seasonal pattern would be Q2 would go down, Q3 would go up, Q4 would go down. What we've actually seen play out is something quite different, which is we've seen a much stronger start to Q1, and that is progressing into Q2. And as we progress into Q2, you're seeing in our guide, implied by our guide, that auto is added near the peak levels we saw in Q1 of 2023. So we look at that backdrop. We say, what's going to happen as we progress into the second half of the year? So first we know what's been driving a lot of the growth in the first half of the year and making it more front-end loaded is that a handful of the very large carriers have leaned in aggressively. And they've been opening more and more states as they progress through Q1, and certainly as they're progressing into Q2, and we expect that to continue. As we think to the end of Q2 and the second half of the year, we think it's going to be limited opportunity for these handful of large carriers that have leaned in aggressively to open more states this year, because it'll be contingent upon some of the larger states with a more challenging regulatory environment. And they may or may not open this year. They may not open until 2025, based on how rate increases are going in those states. So we look at that piece. We overlay, what do we know about the broader carrier landscape? We see the broader carriers. We see carriers who are not as advanced in getting rate sufficiency as a couple of the large carriers who come in. Certainly bullish about wanting to get back to growth mode. The specificity of their plans for the second half are as a result, we are seeing it's an unpredictable environment. So in that context, based on what we know right now, we're not expecting that sequential increase from Q2 to Q3. And the same reason we didn't have the sequential pattern, the seasonal pattern effectively didn't hold from Q1 to Q2. It's hard to think it would continue into Q3 and then Q4. So we're not expecting sequential growth right now based on what we know. But as I said, as it progresses, we will see. I think the wild card will be do other carriers come back in faster? Do they get confidence in rate adequacy? And it still remains to be seen how fast they'll move. But we remain bullish about auto recoveries here. And it's just a question of how fast it progresses through the year. But really, we view it as a multi-year recovery. And it'll drive growth in 2025 and beyond as well as this year. And the second half of this year will have strong year-on-year comps relative to 2023.
Needham
Right. No, that's very clear. Thank you so much for clarifying. And then as a quick follow-up, Jamie, I think you were asked about pricing. And I just wanted to go back to some of the key underlying drivers. So could you just walk through what is driving RPQ? I know you don't provide the details like maybe in the past, but just, you know, Is it more bundled offerings? Is it better integration with the carriers? What are some of the underlying factors that are driving our trends for you?
Jamie
Yes. So I think it's actually a bit more straightforward than that. The recent upticks in revenue per quote request are largely driven by what we call the auto recovery. So we have had carriers stepping back into the marketplace really since the beginning of this year. And that means more carriers participating, expanding their state footprints, and increasing their budgets and their bids, their willingness to pay. So you've got a competitive dynamic beginning to form, which is resulting in pricing going up and more carriers willing to pay for the traffic that we're generating. And then you have a similar dynamic on the agent side. So we've seen a meaningful step up in demand sequentially from Q4 into Q1. So on, you know, although we are seeing an increase in volume in quote request volume, we're seeing an even larger increase in revenue per quote request sequentially as we come into this year.
Needham
Okay. That sounds simple enough. Thank you so much for taking my questions. Appreciate it.
Operator
Thanks, Mike. Thanks, Mike. That concludes our Q&A session. I will now turn the conference back over to the management for closing remarks.
Jamie
Thank you. I just want to thank everyone once again for joining us on the call today. The team and I are energized by how strong a start to the year we've had here. You know, over the last couple of years, we've made a number of difficult decisions to realign the business towards a brighter future. And the benefits of those decisions are now very clear as we produce record levels of net income, adjusted EBITDA, and operating cash flow in Q1. And now with a solid foundation, a battle-hardened team, and more focus than ever before, we're excited to continue building a great business into this incredible market opportunity of bringing insurance distribution into the digital age. Thanks all.
Operator
Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect. Ladies and gentlemen, that concludes today's conference.
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