EverQuote, Inc.

Ladies and gentlemen, thank you for standing by. My name is Colby and I'll be your conference operator today. At this time, I would like to welcome you to the EverQuote Q3 2025 earnings call. All lines have been placed on mute to prevent any background noise. And after the speaker's remarks, there will be a question and answer session. If you'd like to ask a question at that time, please press star then the number one on your telephone keypad. If you'd like to withdraw your question at any time, please press star one again. I'll now turn the call over to Brinley Johnson.

Thank you. Good afternoon, and welcome to EverQuote's third quarter 2025 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 are Jamie Mendel, EverQuote's chief executive officer, and Joseph Sanborn, EverQuote's chief financial officer. 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 fourth quarter of 2025. Forward-looking statements may be identified with words and phrases such as expect, believe, intend, anticipate, 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. Forelooking statements are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For discussion of those risks and uncertainties, please refer to our SEC filings, including our annual report on Form 10-K and our quarterly reports on Form 10-Q, on file with the Securities and Exchange Commission and available on the Investor Relations section of our website. 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. And with that, I'll turn it over to Jamie.

Thank you, Brindley, and thank you all for joining us today. We achieved record top and bottom line performance in Q3. Our team continues to help carriers and agents drive profitable policy growth amidst a healthy underwriting environment. We're making steady progress toward our vision of becoming the number one growth partner to PNC insurance providers by delivering, one, better performing referrals, two, bigger traffic scale, and three, a broader suite of products and services. As we innovate new products, release features, and further embed AI into our marketplace, we are fast evolving from a lead gen vendor to a growth solutions partner for our customers. We continue to partner more closely with carriers and differentiate our marketplace through Smart Campaigns, our AI bidding product. In Q3, we launched Smart Campaigns 3.0, which leverages our latest model to deliver better performance than our 2.0 version. For example, a customer who recently migrated from 2.0 to 3.0 saw a 7% improvement in ad spend efficiency, an early indication that the new model is materially improved. When customers adopt smart campaigns and experience these types of performance improvements, they often shift more budget to EverQuote. As we secure more budget, we also gain more data and as a consequence of our AI driven systems can further improve campaign performance. As evidence of this flywheel working, in Q3, we were notified by a major national carrier that we have become their number one customer acquisition partner in our channel for the first time. Turning to our local agent customers, we continue making progress in our evolution from a lead vendor to a one-stop growth partner as we roll out and gain adoption of additional products and services to help agents grow. As of October, over 35% of our local agent customers are using more than one of EverQuote's four agent products, which demonstrates broadening adoption, but also ample room for continued growth through product expansion within our existing customer base. Our consumer acquisition teams continued executing well in Q3, despite elevated competitive pressure in the insurance advertising landscape. In Q4, we have begun to ramp investments and scaling new traffic channels and programs to support future growth. Since our IPO in 2018, EverQuote has committed to growing 20% and expanding adjusted EBITDA margin by 100 to 150 basis points per year on average. Over the six year period through 2024, We delivered as promised with a 21% revenue pager and an average of over 200 basis points of margin improvement per year. As we approach the end of the year, we have confidence that we will deliver once again in 2025. And now we have set our sights on reaching a billion dollars of annual revenue in the next two to three years while transforming into a multi-product, AI-powered, profitable growth solutions provider for carriers and agents. Consistent with our track record of saying what we will do and doing what we say, We look forward to updating you on our progress as we drive full steam ahead into 2026. I'll now turn the call over to Joseph to discuss our financial results.

Thank you, Jamie, and thank you all for joining. Today, I will be discussing our financial results for the third quarter of 2025, as well as our guidance for the fourth quarter of this year. We delivered record results in the third quarter, achieving new quarterly highs for revenue, variable marketing dollars of EMD, adjusted EBITDA, and net income. In addition, We continue to enhance our operating performance and drove expanding levels of profitability as reflected by our record adjusted EBITDA margin. Total revenues in the third quarter grew 20% year-over-year to a record $173.9 million. Revenue growth was primarily driven by stronger enterprise carrier spend, which was up over 27% from the comparable period last year. Revenue from our auto insurance vertical increased to $157.6 million in Q3, up over 21% year over year. Revenue from our home and renters insurance vertical increased to $16.3 million in Q3, up 15% year over year. V&D increased to a record $50.1 million in the third quarter, up 14% from the prior year period. Variable marketing margin, or VMM, was 28.8% for the quarter. Turning to operating expenses in the bottom line. As we scale and drive top line growth, we continue to expand operating leverage in our business through disciplined expense management and by utilizing AI and other technology investments to deliver incremental efficiency. In the third quarter, we grew net income to a record $18.9 million, up from $11.6 million in the prior year period. Q3 adjusted EBITDA increased to a record 25.1 million, representing a 33% increase year-over-year and significantly outpacing the strong revenue growth we achieved during the same period. Adjusted EBITDA margin expanded to 14.4%. Cash operating expenses, which excludes advertising spend and certain non-cash and other one-time charges, were 25.1 million in Q3. As expected, This was up from the previous quarter by approximately $1.5 million for planned investments in our AI and technology capabilities, but effectively flat on a year-over-year basis. We reported operating cash flow of $19.8 million for the third quarter. To note, temporary timing differences in working capital impacts our cash conversion from adjusted EBITDA compared to prior quarters. During the quarter, we repurchased 900,000 shares of our Class A common stock for $21 million from Leak Ventures. which is an entity affiliated with funds advised by David Blunden, EverQuote's chairman and co-founder. We believe this was an accretive use of capital which enabled us to efficiently execute a portion of our recently announced $50 million share buyback program. This transaction approach reduced shares outstanding by 2% in a manner that did not adversely impact liquidity in EverQuote's public float. This repurchase reiterates our confidence in EverQuote's ability to generate long-term sustainable growth and free cash flow while maintaining a strong balance sheet. We ended the period with no debt and cash and cash equivalents of $146 million. We continue to operate in a favorable environment where carriers are broadly enjoying healthy underwriting margins and consumer shopping activity remains elevated. We expect these conditions to persist for the foreseeable future. Of note, Approximately 80% of our top 25 historical carrier partners were below peak quarterly spend in our marketplace in Q3, reflecting ample room for additional growth. Now turning to guidance for the fourth quarter of 2025. We expect revenue to be between $174 and $180 million, representing 20% year-over-year growth at the midpoint. We expect V&D to be between 46 and 48 million, representing 7% year-over-year growth at the midpoint. And we expect Digestive EBITDA to be between 21 and 23 million, representing 16% year-over-year growth at the midpoint. As we continue to deliver better-than-expected revenue, we are taking the opportunity to invest in existing and new traffic lines in Q4. While these traffic investments will further build our competitive differentiation and better position EverQuote for long-term growth, They are expected to put some pressure on VMM and VMD in the period, which in turn impacts Q4 adjusted EBITDA and associated margin. Based on the midpoint of our guidance for Q4, we're expecting full-year 2025 annual growth in revenues of approximately 35% and annual growth in adjusted EBITDA of over 55%, reflecting our strong operating leverage. It is also worth noting that the midpoint of our Q4 revenue guide in combination with Q3 results, implies top line growth of 20% for the second half of 2025, compared to prior record revenues in the second half of 2024. In summary, our performance year to date reflects our steadfast commitment to strong execution and a clear strategy. As we look ahead to 2026 and beyond, we remain focused on our goal of creating a $1 billion revenue business by being the leading growth partner for P&C Insurance, and delivering on our long-term target of achieving average annual revenue growth of 20% with 20% adjusted EBITDA margins, a rule of 40 company. We believe that our clear strategy and the strength of our team and operating model will position EverQuote to deliver continued growth and expanding profitability. Jamie and I will now take your questions.

Thank you. We will now begin the question and answer session. If you'd like to ask a question, please press star, then the number one on your telephone keypad to raise your hand, enter the queue. If you'd like to withdraw your question at any time, simply press star one again. Thank you. Your first question comes from the line of Maria Ripps. Your line is open.

Great. Good afternoon, and thanks so much for taking my questions, and congrats on the strong quarter here. Just first, just in terms of sort of broader industry backdrop, As you pointed out, carrier profitability has been strong, and some investors have been asking whether carriers are approaching peak margins. Can you share your view on the sustainability of current profitability levels and what that means for customer acquisition spend?

Sure. Thanks, Maria. So yeah, carrier underwriting is back to a very healthy and steady state level. acquisition spend tends to lag the profitability a bit. And so we still see quite a bit of room to go in terms of the advertising spend keeping pace with the profitability trends. We've still got at least we've got one major carrier, national carrier that's in the process of reactivating in Q4. We've still got 80% of our top 25 partners below their historical high watermark of spend. And, you know, still certain state carrier combinations that are kind of working their way through. So the good news is these soft market cycles tend to last, you know, five plus years. And we think we're in the very early stages of it. So we do see some opportunity for continued strengthening as the balance of the carriers, you know, catch up in terms of their advertising spend with respect to where their underwriting profitability is now.

That's very helpful. And then you've talked about sort of elevated investments in AI capabilities, technologies, sort of data assets here in the second half of the year. To the extent you can talk about this, what are some sort of key platform features or innovations that investors sort of should expect in 2026?

Yes, so some of our most significant investment has been in our Smart Campaigns product. That's our machine learning based carrier bidding product. We've been getting broader adoption of that product over the course of the last year or two, and we've been investing in improving model accuracy and adding features to those models. And all the results that we've seen so far as customers adopt smart campaigns and then as we upgrade to newer versions is that they drive meaningful performance in carrier improvement. and sorry, meaningful improvement in carrier performance. So as that happens, the net effect is the carrier will allocate more budget in our direction relative to alternatives, and it helps kind of propel this flywheel of better performance, better pricing, more traffic, more data, and that helps us drive more performance. So that's the area we've been most focused on. We do expect to extend some of the AI bidding products to local agents as we turn the corner to the next year, and that's an area we've been focused on. I've also spoken a bit about conversational voice. We have managed to introduce AI voice into our call workflows, and that's achieving good levels of performance, and that's really beginning to allow us to interact more with customers through sort of AI modalities, which we expect to extend from that voice modality down funnel and into others over time.

Got it. That's very helpful. Appreciate the call.

Thanks, Maria. Your next question comes from the line of Zach Cummins with B Reilly Securities. Your line is open.

Yeah. Thanks for taking my questions. Good afternoon and congrats on a strong performance here in Q3. Jamie or Joseph, both of you can probably comment on this, but can you give me a little more insight into kind of the incremental investments that you're making into new channels in Q4? Is there any way to break out kind of the anticipated impact that you're seeing to VMM in Q4 as a result of these channels? Just trying to get a sense of what's the best way to think about VMM over the next couple of quarters.

Sure. Why don't I start, and then I'll let Joseph expand on it. So, you know, the channels, There's a handful of channels that, uh, you know, we have most of which we have been active in, in the past, but have, you know, subsided through the hard market. And now we're in the process of rebuilding. These are some of the characterize them as higher funnel channels. So that, that could be social video display, connected TV, things like that. And typically when you launch new campaigns in these channels, it takes a while to kind of get the right, you know, creative, the right bidding strategy in place. Um, and, and for that period of time, when you're just the early stages of optimizing those campaigns, they tend to run at lower, in some cases, even negative margin. And so that's, that's the, that's kind of how it flows through into the financials. Um, the other, the other sort of category that we're focused on is, uh, AI search. You know, historically we've not done much SEO traffic here at EverQuote, uh, for better or worse, you know, today I'd say that's, it's kind of a positive thing because We haven't been – there's been nothing to sort of disrupt as the organic search results have changed. And so we view the AI search as kind of a clean sheet for us, and we're making some investments and beginning to build out our presence in those platforms.

With regards to – so just turning to the numbers on VMM, if you look at the midpoint of our guide, it's sort of close to 27% on VMM margin. We were closer to 28.8% in Q3, comparable in Q2. So when I think about the impact, it's probably a couple hundred basis points of investment you're doing in new traffic channels on the VMM line. So just to give you a context, and I think it's how we think about VMM. In general, we still think it's going to be in the high 20s over time. It'll fluctuate quarter to quarter based on what's going on in the broader market. I think it's important to call out when you think about VMM margin, two factors. One is It reflects the advertising environments we do not control. We do not control what's the advertising environment broadly. What we do control is how we apply our models and our technology to be efficient in going after that advertising dollar. And, Zach, you and I have talked about this in the past, but just for context, if you look at our VMM margin being in the high 20s, go back to 2022 when our business was, you know, much smaller. The VMM margin in auto was in the high 20s, and we were, you know, 250, $275 million business. The fact we're two and a half times bigger now in scale and we're having the same margin speaks to, yes, there has certainly a more competitive advertising environment and more folks going after it, but our bidding technology is working. We're getting more efficient, and that's driving results. So we'll continue to make those investments this quarter, and you'll see those benefits as we progress into 2026 and beyond.

Understood. And just my one follow-up question is just The broader appetite that you're seeing from your carrier partners to ramp up budgets, I thought it was interesting to hear that 80% of your top 25 still isn't at peak spend. So just curious what you're hearing from some of these partners and how they're thinking about deploying budgets as we move into 2026.

Chris, maybe we'll start with, you know, where we are now in Q4. So typically we have a seasonally down Q4. on the average of seasonality for the past seven years. You know, typically Q3 to Q4 is down, so, you know, 4% or 5% dip. We're actually showing that we're actually expecting a quarter that's up at the midpoint, actually up in the full range of our guidance. So I think that reflects that we see carriers seeing really healthy underwriting margins that we've been talking about throughout this year. As we progress through the year, some of the uncertainty has been replaced by greater certainty, whether it be the impact of tariffs on underwriting costs, whether it be the cap environment. As we've gone further into the year, they're feeling stronger, and we're seeing that result in what we're seeing today, which is them defining the normal seasonal pattern and really engaging to continue customer acquisition. As you look to next year, as Jamie touched on, the backdrop remains very strong for carriers. We see an environment where the health will continue on the underwriting margins for everything we're seeing and hearing from our carrier partners. As Jamie mentioned, often the health of the carriers It becomes before you actually see the spend pick up as fully. So I think there's continued growth you'll see from carriage into next year. And you match that on the consumer side where we have consumers continuing to shop for alternatives. And that's a really good combination for us.

Understood. Well, thanks for taking my questions and congrats again on strong results. Thank you, Zach. Thanks, Zach.

Your next question comes from the line of Jason Cryer with Craig Holland. Your line is open.

Great. Thank you, guys. So we're hearing a lot more from carriers that are pursuing kind of strategies that would have rebating to consumers. So I'm just curious what your take is on that, if there's any impact, if that kind of takes away from budget that historically could go into performance marketing or if that has any impact on what you guys could potentially absorb from carriers. Thank you.

We've been we have not heard anything about that in our interactions with carriers. I think it's a representative of the broader underwriting environment, which, again, is quite healthy, meaning the carriers are quite profitable. And so rebates are one way they can sort of approach that, depending on what problem they're trying to solve. But I would say the overarching problem that most carriers right now are trying to solve is growth. And that's, you know, that's all they talk to us about. And that's reflected in how they're kind of leaning into the marketplace broadly right now.

Appreciate it. And then, so last year, as we got into this, you know, this time of the year, we saw somewhat of a budget flush from carriers. You know, you'd pointed out the, you know, attractive profitability metrics. You know, is that predicated on guide or I'm just curious, what you are assuming in the balance of Q4 here, what's baked into the guide?

Thanks. Yeah, so for the guide to Q4 is obviously assuming carriers define the normal seasonal pattern being down from Q3 to Q4. So that, what the underlying basis of that is the carriers are seeing sort of pulling forward investment into this quarter. I won't use the term you used. I'll say they were pulling forward growth investment into Q4 customer acquisition from, and I think that's clearly happening. And that's reflected in our guide.

And Joseph, that year-end budget flush isn't really having much of an impact to VMM? That's not a component of the sequential pressure?

So I guess when you look at the VNV line, all of the things equal, Q4, if you have the environment where you're defying the seasonal pattern on revenues being higher than the norm, that can put some pressure on advertising costs, particularly in Q4. On some traffic areas, we have broader competition from, you know, retail and holidays. So there can be some impact in VMM in the quarter from that. But I'd say that's, you know, relative to what we described earlier, that's more modest than our investments in the new traffic channels. I think theoretically you have, it has some impact in the Q4. But I guess when I still come back to the carriers and their budgets for the period, I think we go into this saying they feel very Jason Schultz, bullish and they're reflecting that I think relative to last year at this time. Jason Schultz, I think they're coming into this quarter, seeing with a with a greater sense of you know clarity and how the year is progressing they're quite healthy. Jason Schultz, As they progress through the year, the uncertainty, they may have seen whether it's from tariffs affecting underwriting costs or uncertainty over the cat environment those uncertainties and replaced by clarity is they've gotten those they're able to lean in early in Q4 and we're reflecting that in our guide.

Jason Schultz, All right, appreciate the thoughts thanks.

Jason Schultz, Thank you Jason.

Your next question comes from Ralph Shockart with William Blair. The line is open.

Good evening. Thanks for taking the question. On the call today, Jamie, you talked quite a bit about transforming the model from lead generation vendor to a multi-product provider, which obviously would be pretty important in a strategic shift. Just any more color you can put in this without disclosing exact products for competitive reasons, but just conceptually, just trying to figure out where you're focused on product innovation. And then can you maybe sort of talk about the evolution of this change in the model? And would you be, I guess, sort of moving away from a transactional model or sort of like entertaining new revenue model in the future? Any help on that would be great. Thank you.

Yeah. Thanks, Al. Yes. So, I mean, we have strong, large relationships with, you know, all the big carriers and thousands of local agents. And those relationships have been built and are predicated predominantly on the sort of referral, right, the click or the lead that we're selling to the carrier or the agent. And our sense is that the carriers and the agents are we can deliver them a lot more value by wrapping sort of value-add technology data services around that core referral product. So in the case of a carrier, the example we've talked about is giving them bidding services through smart campaigns, AI-enabled bidding solution. There are other services that I, on the carrier side, will not mention at this time. On the agent side, again, the vision is to really evolve to become their one-stop shop for all things growth. So agents spend money on leads to generate growth, but there are a lot of other things that they spend money on, whether it's telephony services or calls or digital services. And we've now built out a much more robust product suite that allows us to solve for the vast majority of agents' needs as it relates to growing their local agency. So the idea is build these deeper relationships, which add a lot more value. They're built on mutual trust, more data sharing, and they're built on top of some of our distinct advantages and the data that we have and the technology that we're able to build around that data to ultimately deliver more performance for the agent, for the carrier, and also allow them to consolidate to have fewer vendors to deal with. So that's like the thrust of the strategy. As it relates to the commercial model, Ralph, I think over time the answer is yes. And we started doing this with the local agents. We do have, albeit relatively modest relative to the scale of EverQuote, but we do have a nice chunk of recurring subscription revenue that is building with the local agents as we execute on this strategy. And so I do think there's opportunities to begin to think about evolving the commercial model over time. But the most important thing to us right now is to get the products right, to get them adopted, to prove the value, and then we build from there.

That's great. Thanks, Jim. Thanks, Ralph.

Your next question comes from the line of Mayank Tandon, Needham & Company. Your line is open.

Thank you. Good evening, Chris, Jamie, and Joseph on the quarter. Jamie, I wanted to touch on the billion-dollar revenue target. is that an organic target or would you also factor in m a to get to that level because when i think about what joseph said the 20 growth model then that would get you close to a billion dollars in actually two two and a half years so just curious on sort of what are the underlying drivers behind that target and whether it's organic or does it include potential m a yes so we we have a plan to achieve that goal organically uh and

I'll let Joseph expand on how we think about M&A in this context. But when I talk about our path to a billion dollars, it's an organic path, and we've got the roadmap. You know, on the distribution side, it's really about just executing the playbook, which is improving the performance for carriers and agents through use of our AI products like smart campaigns in order to get more budget and more favorable pricing. We can take that budget, that pricing, and push it downstream back into traffic. to increase our traffic share. But at the same time, we're going to be expanding into more traffic channels, as we've talked about earlier already. So we're accessing more traffic and winning more of it. And then, you know, we've got a lot of room to continue growing in our non-auto verticals, specifically in-home, and as we can start to consider other P&C verticals that might make sense under that umbrella. So that's more or less the the ingredients of the path to a billion, and we think we can get there organically in the timeframe that I suggested.

I think you kind of got there. Mike, just for those who weren't doing the math as quickly as you, that implies if it took three years, it'd be sort of mid to high teens would be the growth rate. If it took two years, it'd be sort of low 20s in terms of this is revenue growth rate. So I think that gives you a sense of how we frame it. Like we feel bullish on our ability to get here through organic means. Do we see an opportunity to potentially supplement that through M&A? Yeah, we see that opportunity as well. In our minds, M&A comes back to the same criteria we've discussed previously with folks is we view it as accelerating our strategy to win in P&C and being the number one growth partner to carriers and agents in this vertical. We think there could be opportunities to do that. We do by no means see those as necessary to achieve that billion-dollar goal.

Got it. That's super helpful. And then also just turning to margins, I think Joseph, you said 100 to 150 bips is the target model. I know that's not guidance, but just as I think about that, is that going to come from eventually maybe a little bit of an improvement in BMN when some of these maybe advertising pressures abate, or would it be more heavily weighted towards operating leverage in the model?

So I think when I look at EBITDA, I just give some context, right? So 2023, we had none, right? 2024, we went to 11.6%. I think we brought a lot of operating leverage into the model and really focused where we were spending on our investments in technology, the things that give us greater leverage. If you look at 2025 in the midpoint of our guide, it implies we're actually going to gain over 200 basis points at the midpoint from 2024, sort of 13.6% or whatever. I think you're seeing this as an appreciating clip over the past few years. So we look to next year, you know, we always say 100 to 150 base points on average. And I'd probably say we're targeting towards the lower end of that for next year as we think about EBITDA. But I also would say that our EBITDA, we view it as continuing to be high cash converting. So that EBITDA will be a very high cash conversion into operating cash flow in the period just subject to normal working capital. And then in terms of margins, you know, I would say we still sort of, we continue to see VMM in the high 20s. I think it's important to give some context in this, which is, you know, it is a market where there's things we control and there's things we don't control. We don't control the broad advertising environment where we buy advertising. So if there's more demand in that market or less demand in that market, that can impact advertising costs in the period. What we do control is the investments we make in our bidding technology and how we use that technology to be more efficiently acquire traffic and drive that to our carriers and agents. And so when I think about the business, I'd say we still think high 20s. It'll fluctuate, you know, quarter to quarter based on various things going on in the market and also the investments we're making. But again, on the operating expense and then the operating expense side, you know, we certainly will see a step up from Q4 to Q1 as we, you know, customarily do. And we'll continue to be making investments in our technology around AI and other areas, our data that we think will build on. We're playing investments to win. We're not just trying to do this to drive 20% growth and get to the EBITDA margin overnight. We are going to do it in a way that's setting us up to really succeed in this market long-term and really be the premier growth partner to carriers and agents in the long-term.

Right. Very helpful, Colorado. Thank you so much. Congrats.

Thank you, Mike. Thanks, Mike. Thank you.

Your next question comes from Jed Kelly with Oppenheimer. The line is open.

Hey, great. Thanks for taking my question. Just on investing in some of the newer traffic channels, how much of this is at your discretion doing this versus some of your competitors that are probably also operating at low 20% margins? And I imagine they're doing this to drive more traffic to carriers to get more budget. So can you just talk about how much of your discrepancy versus potentially responding to competitors?

It's entirely at our discretion, right? I mean, we are making, like, investments that are very much consistent with our long-term strategy. And, you know, we think these are investments that will help us achieve that billion-dollar goal, you know, grow at 20%. get to that 20% adjusted EBITDA margin over time. So this is all very consistent with our long-term strategy. We don't pay super close attention to how our competitors' margins or ad costs are moving around over time. We have our financial plan, and we've got a pretty good track record of achieving that plan. I can appreciate that. Others may choose to make certain tradeoffs at various points in time. But we've had a pretty consistent track record just kind of executing our plan and staying heads down. And getting into these channels will be important for us to achieve that plan because the demand from the carriers and agents is definitely there right now. And we've got to be able to continue growing volume to meet that demand.

And then just as a follow-up, How should we view your OPEX and sort of your longer-term goals as a percentage of VMM, I guess, because, you know, one could argue your VMM is actually your true revenue, right? So how should we look at that? Thanks.

Yeah, I guess, Chad, I appreciate you made that comment before. I continue to look like EBITDA margins in a traditional sense relative to revenues, just EBITDA margins. They were 11.6% in 24, and the midpoint of our guide puts them, you know, mid 13 and a half this quarter, so a couple hundred basis improvement from last year. And we'll add another hundred basis points, you know, as our target for next year. And we'll continue to do that, you know, 150 basis points every year thereafter. So I think that's how we think about it. And, of course, as VMD scales, of course, the thing we are doing is some dollars will go to the bottom line to drive incremental adjustee, but then some dollars in a given quarter will go to investment. Those investments we have principally in technology areas, and particularly around AI, and are leveraging our data assets to help us build positions for longer-term growth and competitive differentiation. And that remains our strategy, and that's how we're approaching it. And that means OpEx, you'll see those investments as we build through next year. But just as we've done this year, we've managed very carefully in terms of, as we've added incremental investments, you've seen as we've said at the start of this year, They would add 150 basis points in just EBITDA. We've added actually 200 basis points, if you look at the midpoint of our guide, if that is achieved. And so I think we're very good at saying what we're going to do in the next year against that and then delivering those results.

Thank you. Very helpful and great quarter.

Thank you, Ted. Your next question comes from the line of Corey Carpenter with JP Morgan. Your line is open.

Hey, guys. Good afternoon. I had two financial questions. Just on the traffic investments, how long do you expect those to impact VMM margins? And do you ultimately expect them to run a parity with your other channels? That's the first question. And the second question, a lot of talk around the 20% growth target. Maybe just ask directly, is that something you think is achievable next year given the tougher comp? Thank you.

Yeah. So I'll take the first one. I mean, the investments typically, you know, when we're ramping up a new channel or a new traffic program, it's one to two quarters where we're launching, we're optimizing, and we're scaling. At which point, I do think that these channels would kind of blend in at comparable, you know, at VMM levels to our existing traffic portfolio. So we don't view these channels as weighing down VMM in the long term. but there's a bit of a startup cost that you incur when we start launching into some of the new channels.

And then in terms of our, how we think about top line growth, there's some context, right? As we look at, obviously, as you point out, we've had some tougher comps, relatively speaking, as given the very strong growth we've had, you know, 24 into 25 as auto recovery has progressed. You know, what I, we mentioned our prepare remarks is in the second half of 25, you've had 20% year-on-year growth relative to the second half of 24, which was a record prior to this year, second half of this year. So I think you're seeing us continuing to do well as levels start to normalize. And then we talk about our two to three year goal of getting to a billion dollars in revenue. So I'm not going to tell you in this call if we're going to get exactly 20% next year or not. But I think as we look at it, we feel very good about averaging 20% over time. And importantly, getting to that billion dollar goal in two to three years of top line growth organically.

Great. That's helpful. Thank you both. Thank you, Corey.

Our final question comes from Mitch Rubin with Raymond James, your line is open.

Hey, thank you guys for taking my questions. This is Mitch on behalf of Greg Peters. So I was wondering if you could provide us with an update on the progress of California with carrier participation and how much impact a full panel of carriers would be. Thanks.

Yeah, so California has been sort of steadily kind of ramping, carrier by carrier, segment by segment. And so there is meaningful spend in the state now. I think it's like a top three to five state in Q3. Of course, it is the largest state, so it's still just not quite proportional to its potential scale yet. So we view California as having still some room to grow. It's a little hard to dimensionalize that, but, you know, we think that there could be still some meaningful upside left in California as we progress into next year. And we would hope to get California back to kind of a steady state environment sometime in 2026.

Great. Thank you for calling on that. So my follow-up is you guys have done a great job of managing on advertisement costs. Where is there any room for improvement? Where is most of the incremental leverage going to come from investments in technology?

So I think the way we look at the business is we're always looking to drive efficiency in the business, right? How do we simplify? How do we be more efficient in the business? And as we've talked about in some of our prior calls, I think it has been one thing that's been ingrained in us as a management team is how do we think about how we spend our dollars in a way that we're getting the right return for shareholders. Having gone through the period we did, it's sort of a silver lining in that period. So that has continued. And we're continuing to see ways that we bring more efficiency into business. So for example, this year, headcount is up roughly 10% if I look into Q3 where we landed. But operating costs are basically the same. At Reflex, we are driving efficiency. We're changing the composition of the team. We're also using technology to make the team more efficient and get more productivity through the team. As we look ahead to next year, we're not seeing a lot of significant increase in headcount, but we are seeing continued investment in AI areas, and including technologies that help the team leverage AI more efficiently. And so that's where I think you'll continue to see us doing that, and that will be driving, I think, a lot of leverage for us in efficiency going forward.

Yeah, just to give maybe a couple of examples, right, like Our AI bidding technology has really allowed us to do a lot more with our traffic operations teams where we've effectively automated a huge amount of work that used to be manual. Now we've turned that and we smart campaigns out to our carriers and our carrier facing teams now have to do a lot less manual campaign management on behalf of carriers. So all of our bidding automation has been a huge unlock in terms of efficiency. Within our engineering organization, you know, we've got broad adoption now of co-pilots for engineering. In some cases, you know, we have teams that are writing code, like they're just inferencing code as the primary way of writing code. So we're getting some real benefit in our engineering organization. What else? We've talked about our voice agents, right? So our call center operations are, you know, we're now begun to introduce voice agents into that to reduce some of the reliance on human call center operators. So it's really at every sort of within every function of the business, we are finding ways to drive efficiency. And we are, in fact, going function by function to sort of systematically identify activities that can be automated using Gen AI or, you know, just good old-fashioned software. And, you know, that is a process that will continue all through next year.

Thanks. I appreciate the comment on that. Congratulations on the great print.

Thank you. All right.

Yes. Go ahead. Go ahead, operator.

No further questions in queue. I'd like to turn the conference back over to management for closing remarks.

Thank you. Thank you. And thank you all for joining. The state of the business is strong. It's getting stronger as we continue to produce record performance quarter after quarter. We are accelerating right now our innovation of new products, features, traffic data, AI capabilities. And as we do, we're transforming from a lead gen vendor to a growth solutions partner for our customers. We are very energized to continue growing towards our billion-dollar revenue goal as we build EverQuote into the leading growth partner for P&C insurance providers. Thanks all for joining today.

This concludes today's conference call. You may now disconnect.