Good day, and thank you for standing by. Welcome to EverQuote's Second Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I will now turn the call over to your first speaker, Brinlea Johnson of The Blueshirt Group. You may begin your conference.

Thank you. Good afternoon, and welcome to EverQuote's second quarter 2021 earnings call. We will be discussing the results announced in our press release issued today after the market closed. With me on the call this afternoon is Jayme Mendal, EverQuote's Chief Executive Officer; and John Wagner, Chief Financial Officer of EverQuote. During the call, we will make statements related to our business that may be considered forward-looking statements under federal securities laws, including statements concerning our financial guidance for the third quarter and full-year 2021, our growth strategy and our plans to execute on our growth strategy, key initiatives, including our direct-to-consumer agencies, our investments in the business, the growth levers we expect to drive our business, our ability to maintain existing and acquire new customers, our recent and planned acquisitions, and interest or ability to acquire other companies, our goals for integrations, and other statements regarding our plans and prospects. Forward-looking statements may be identified with words and phrases such as we expect, we believe, we intend, we anticipate, we plan, may, upcoming and similar words and phrases. These statements reflect our views only as of today. It 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 a discussion of material risks and other important factors that could affect our actual results, please refer to those contained under the heading Risk Factors in our most recent quarterly report on Form 10-Q and our annual report on Form 10-K, which is on file with the Securities and Exchange Commission and available on the Investor Relations section of our website at investor.everquote.com and on the SEC's website at sec.gov. Finally, during the course of today's call, we 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 market closed today, which is available on the Investor Relations section of our website at investors.everquote.com. With that, I'll turn it over to Jayme.

Thank you, Brinlea, and thank you, everyone for joining us today. We delivered a strong second quarter with growth across all of our key metrics. Year-over-year revenue increased 34% and variable marketing margin or VMM, grew 40%. We generated increased adjusted EBITDA and our strongest adjusted EBITDA margin since going public, while continuing to make significant strategic investments in our growth levers. With over 30% revenue growth in the first half of the year, we continue building towards our vision of becoming the largest online source of insurance policies by using data and technology to make insurance simpler, more affordable and personalized. At the beginning of the year, I outlined four growth levers in our strategy, including: Number one, attracting more shoppers; number two, growing insurance provider coverage and budget; number three, optimizing and deepening consumer provider engagement; and number four, expanding non-auto verticals. I'd like to provide an update on progress against our strategy and the context of these growth levers. Before discussing Q2, I'll share the strategic rationale for our recently announced acquisition of PolicyFuel. PolicyFuel operates in property and casualty or P&C insurance verticals, providing policy-sales-as-a-service offerings to enable carriers to complement their own call center operations with access to dedicated advisor teams that focus exclusively on selling that provider’s offerings to its target customers. PolicyFuel earns revenue based on policies sold and broadens EverQuote’s ability to access the $135 billion commission component of our total addressable market. We are excited to welcome PolicyFuel’s founders and team to EverQuote, and expect the transaction to close by the end of Q3. To put this in the context of our strategy, last year, we kicked off a series of strategic initiatives that began to evolve our business to capture a larger portion of the economic value chain of each insurance transaction, while at the same time, bringing us closer to our customers. We launched our direct-to-consumer agency initiative and health verticals with our acquisition of Crosspointe and in the life vertical with a homegrown agency. With the planned acquisition of PolicyFuel and P&C, we will complete the foundation for a multi-vertical tech and data-enabled DTC agency platform. We believe this platform will enable EverQuote to deliver better buying experiences for consumers, improved performance for providers and higher monetization and margin for our business over time thus advancing progress against all of our growth levers simultaneously. In addition to PolicyFuel, we continued making operational investments in our existing DTC agency platform in Q2 as we build the team, process and technology to support a steep ramp in health and Medicare agent capacity in advance of this year's open enrollment period in Q4. As part of this effort, we recently hired Garett Kitch, formerly VP of Medicare Sales at eHealth to lead our health and life DTC sales operations. Garett's track record of rapidly scaling teams of health insurance agents to drive significant growth has already proved valuable as we prepare for this year’s open enrollment period, which we expect to have approximately 3x the number of agents compared to last year. We decided to step-up investments in open enrollment readiness compared to our original operating plans, which we believe will help us more rapidly build a long-term profitable growth engine in our health DTC agency. In addition, based on feedback from carrier partners, we continue enabling more granular and targeted bidding for providers as we shift focus away from the volume of referrals we deliver towards the volume of consumer and provider outcomes. Furthermore, we continue investing in machine-learning applications to improve the alignments and matching of the right consumer to the right provider with whom they are most likely to bind. These actions have led to improvement in monetization as carrier pricing now aligns more closely to bind performance and along with investments in DTC agency, marked progress in our evolution from being paid per referral to per policy. In the second half of this year, our growth will be more balanced between continued monetization expansion and consumer volume growth. However, as we continue to focus on capturing more of the economic value in each transaction, metrics based on the volume of quote requests or referrals will increasingly be less relevant to analyzing and understanding the performance of our business. As we build EverQuote, we are guided by serving customers on both sides of our marketplace, consumers seeking a more streamlined shopping experience with personalized coverage options and insurance providers seeking more profitable policies. Q2 marked another quarter of consistent forward progress in service of these customer needs. We are pleased with our Q2 performance and we are excited by the important steps we are taking to accelerate that progress through the critical strategic initiatives, most notably, our direct-to-consumer agency platform. As we advanced through this year of investment and additional foundations for growth, I firmly believe that we have the right strategy and team to emerge as an industry-defining company as the $2 trillion insurance industry moves into the digital age. Thank you all again for your time. Now I'll turn the call over to John to provide more details on our financial results.

Thank you, Jayme, and good afternoon, everyone. I'll start by discussing our financial results for the second quarter, provide a brief overview of our recent agreement to acquire PolicyFuel and conclude with guidance for the third quarter and our updated guidance for the full-year. We are very pleased to report strong second quarter 2021 results with performance above our guidance range for revenue, VMM and adjusted EBITDA. Our revenue for the quarter was $105.1 million, an increase of 34% year-over-year, building on last year’s strong growth in the comparable period. Revenue in our auto insurance vertical increased to $86.4 million, a growth rate of 34% year-over-year, which reflected healthy demand in our core vertical from both carriers and agents through the period of COVID reopening in Q2. Revenue from our other insurance verticals, including home, renters, life, health and commercial insurance, increased to $18.7 million, a growth rate of 36% year-over-year and representing 18% of revenue. We continue to attract high intent, more valuable consumers, fueling a 34% increase in revenue per quote request year-over-year, while quote requests remained flat at 6.8 million. Looking ahead to Q3, we anticipate some moderation in carrier demand for acquisition of new insurance consumers, but we believe we will maintain much of the improvement we have made in monetization. We expect revenue per quote request to moderate slightly in Q3 from Q2’s record levels, while continuing to grow modestly on a year-over-year basis. We also expect the volume of consumers coming to our marketplace to emerge as a significant driver of revenue with an expected mid-teens year-over-year growth rate in quote requests in Q3. This is consistent with our expectations expressed in prior remarks that we believe consumer volume and monetization will both contribute to our year-over-year growth in the second half of 2021. We delivered second-quarter variable marketing margin or VMM, which we define as revenue less advertising expense, of $32.8 million, an increase of 40% year-over-year, which exceeded the high end of our guidance range provided last quarter. As a percentage of revenue, second-quarter VMM expanded to 31%, up from 30% in Q2 of last year. Notably, consumer acquisition costs captured in cost per quote request were significantly higher this quarter, reflecting a more competitive online advertising landscape, but we are outpaced by growth in revenue per quote request resulting in our margin improvement this quarter. As we look forward, we expect consumer acquisition costs to be stable at current levels, which are elevated from comparable Q3 2020 levels. We expect that slight reductions in monetization coupled with current elevated consumer acquisition costs will put pressure on VMM growth and VMM as a percentage of revenue in Q3. Looking further ahead into Q4, we expect our VMM operating point to improve and to be largely consistent with Q4 of 2020, given our expected strong growth within our health direct-to-consumer agency during the annual health open enrollment period and the higher VMM margin profile associated with that revenue stream. Turning to profitability. GAAP net loss improved to $1.9 million or a loss of $0.06 per share based on $28.9 million weighted average shares outstanding. This included $6.1 million in stock-based compensation. For the balance of the year, we expect stock-based compensation to be between $18 million and $19 million, including the impact of new grants in Q4 related to our announced acquisition. We delivered adjusted EBITDA of $6.6 million or 6.3% of revenue for the second quarter, which was above the high-end of our guidance range provided last quarter. This fueled record operating cash flow of $7.7 million and resulted in $54.5 million of cash and cash equivalents on the balance sheet at the end of the quarter. As we look through the second half of the year, we've refined our operating plan to better support our health DTC agency in the second annual enrollment period since our acquisition of Crosspointe last September. As Jayme mentioned, we have accelerated our recruitment of new EverQuote health agents, increased the training and development time of our agents, and strengthened our agent incentives. We are ensuring that our agents are fully onboarded and ready to advise consumers on policy choices when open enrollment begins in Q4. The addition of DTC agency resources earlier than planned increases our confidence in our aggressive growth plans in Q4 for our health vertical, but it also increases our forecasted operating expenses in the second half of the year and consequently reduces our anticipated adjusted EBITDA. Given that our plans are to triple health DTC agency revenue in Q4 over the same period in 2020, we believe the additional expense is justified in establishing a strong foundation for this rapidly growing new distribution channel. As Jayme mentioned, on July 20, after the quarter ended, we were pleased to announce the expected acquisition of PolicyFuel. EverQuote agreed to pay approximately $16 million in cash at closing with additional potential consideration to be paid in EverQuote's stock contingent on the company achieving growth targets for policy-sales-as-a-service revenue. We expect the acquisition to close by the end of Q3 and plan to fund the acquisition using cash from our balance sheet. Looking ahead, we are excited about PolicyFuel's strong business model and anticipated future contributions. PolicyFuel reported trailing 12 months revenue through March 31, 2021 of approximately $10 million and is modestly profitable. We have reflected the impact of PolicyFuel in our guidance, including approximately $3 million of revenue in 2021. Turning to our outlook. As a result of our strong execution in Q2 and our confidence in the upcoming open enrollment period, we maintained our conviction in our full-year revenue and VMM guidance. However, we are lowering our guidance for full-year adjusted EBITDA to reflect incremental investment in our health DTC agency and temporarily muted VMM growth in Q3. For Q3, we expect revenue to be between $109 million and $111 million, a year-over-year increase of 22% at the midpoint. We expect variable marketing margin to be between $33 million and $34 million, a year-over-year increase of 14% at the midpoint and we expect adjusted EBITDA to be between $4.5 million and $5.5 million, a year-over-year decrease of 4% at the midpoint. For the full-year 2021, we expect revenue to be between $440 million and $446 million, a year-over-year increase of 28% at the midpoint and an increase from our prior guidance of between $434 million and $442 million. We expect variable marketing margin to be between $138 million and $141 million, a year-over-year increase of 28% at the midpoint and an increase from our prior guidance of between $136 million and $140 million and we expect adjusted EBITDA of between $23 million and $26 million, a year-over-year increase of 33% at the midpoint and a decrease from our prior guidance of between $26 million and $30 million. In summary, we delivered strong second quarter financial results and executed well against our plan for the first half of 2021. We remain confident in our ability to execute against the market opportunity as insurance shifts online. Jayme and I look forward to answering your questions.

And your first question will come from Ron Josey from JMP Securities. Your line is open.

Great. Thanks for taking the question. Jayme, I wanted to follow up on your comments around the volume of quote requests being less relevant here. And then John, we heard the guidance for mid-teens growth in Q3. But specifically on being less relevant, can you talk about how EverQuote has succeeded in just focusing on high intent customers, I think was the commentary, which may lead to just call it, consistent quote request growth going forward? And then following up from that, earlier in the year, we talked quite a bit about the verified partner network. And so Jayme, can you just talk a little bit more, how that's coming along and how that's impacting quote request growth? Thank you.

Sure. Thanks, Ron. The way that we're evolving our thinking on traffic and quote requests in general is really optimizing increasingly for the outcome for the thing that we get paid for, which is the placement auto policy with carriers. To the extent that we can drive higher quality and more favorable outcomes with fewer arrivals and fewer quote requests, those are trade-offs that we're willing to make. Examples of actions that we've taken that might result in this include increasing the granularity with which carriers can bid on traffic to target for certain new characteristics and intent levels that they weren't able to target for previously. The net result of this has been for them to increase their bids or pricing on certain subsets of our traffic and decreased pricing on other subsets. As that flows through our bidding into the traffic landscape, the net result is meaningfully higher monetization, but on lower growth in quote request volumes, and those are trades we're comfortable making because it improves the ROI for the carriers and improves their performance, which drives our overall growth and wins us more and more budget as a result. So that's one example. Another example is with increasing attention on investments in the data and technology that matches each individual consumer to the right set of options for them. Through the tightening of that routing, again, we're able to drive up performance and downstream bind rates, which improves the provider performance. Our focus is on the policy sale, the outcome, which is what the customer cares about on both sides of the marketplace, and as a result, we're focusing less on the raw volume of quote requests or referrals. To the second part of your question, Ron, the verified partner network continues to grow. We launched the new products into that program in the first part of the year. The first part of the year focused very much on building and launching a product. Those are in market now, and we've had some good reception from both sides of the marketplace. As we begin to operationalize and scale, we expect that to account for some of the increased growth rate in volume in the second half of the year.

Got it. Thank you.

And your next question will come from the line of Cory Carpenter from JPMorgan. Your line is open.

Hey. Thanks for the question. I had two. I wanted to circle back to a comment you made, I believe, on anticipating some moderation in carrier demand for customer acquisition spend. I think that was more of a general industry comment. Hoping you could talk a bit more about some of the drivers on what you're seeing there? And then maybe secondly, last quarter you talked a bit about unifying the health and life direct-to-consumer agency under one leadership team. Just curious any lessons learned there and how you're thinking about integrating PolicyFuel with those two existing businesses? Thanks.

Sure, Cory. I'll kick that off with regard to what we're seeing around pricing and monetization. We're certainly coming off of a very strong quarter for monetization in Q2. We saw record levels of revenue per quote request and strong demand coming from carriers and agents even as we went through reopening. That said, we're coming off of a year of increases in modernization. We do anticipate some moderation in monetization and revenue per quote request. We think that as we return to a more normal scenario in terms of our autos vertical, we've certainly been the beneficiary of some surplus profit in the past year through COVID. We expect that we will start to see some normalization and some moderation in monetization. But certainly, we're going to maintain much of the monetization that we've gained over the past year. What we've reflected is some slight moderation against a still fairly competitive traffic backdrop within the traffic side of the business.

Cory, I can address your second question. Yes, we made the decision to unify the health and life direct-to-consumer agency platforms and operations earlier this year. As we integrate PolicyFuel, the view right now is that there are certain platform elements that will accrue efficiency to any agency operation within EverQuote that will migrate to shared infrastructure that may include things like data systems, technology recruiting and other elements of the operation. Where we don't see a benefit of having the vertical or market-specific expertise, we will move towards building a more scalable platform that can be leveraged across any type of insurance product. However, where we do perceive benefit and specialization, like in carrier relations or agent and sales operations, we will continue to maintain separate management for those parts of the business. Through the integration, PolicyFuel will continue to operate largely uninterrupted and then we'll begin looking at the different platform elements that we'd pull into the more unified structure.

Thank you both. Very helpful.

And your next question will come from the line of Jed Kelly from Oppenheimer. Your line is open.

Hey. Great. Thanks for taking my question. Just a couple – just one on the competition that you're seeing for traffic. Can you talk about what's driving that? Is that more companies receiving more investments? And then just on PolicyFuel, can you provide an example, in checks or some context on how that'll benefit some of your larger agency carrier or larger carrier partners?

Sure. Hi, Jed. Thanks for the question. I'll take the first part and talk about what we're seeing on the traffic landscape. We're continuing to see the competitive landscape for insurance-related traffic and advertising. We're seeing influence from general sources of traffic that are less insurance-specific as they pivot back into digital advertising. Even something like travel has some effect on the overall customer acquisition cost landscape for us. We’re seeing a bit of a combination. Insurance stayed strong through the pandemic, insurance-related advertising, and I think we're seeing some uplift from just the general online digital advertising now that we're fully into reopening.

PolicyFuel operates – we're referring to as a policy-sales-as-a-service model, where they have dedicated teams of advisors or agents that complement our marketplace and provide the value-added service of taking the referral and actually binding the policy on behalf of the carrier. For existing carriers, the benefit would be two-fold. The first is one-off performance. In many cases, EverQuote through and with PolicyFuel will be able to apply our technology, our process, our data to sell more effectively and drive improved performance on the referrals that we're sending them. Secondly, capacity; when carriers run into capacity constraints, this can be a relief valve for them to enable them to scale beyond whatever their internal capacity allows. The net result is going to be more profitable policies coming from EverQuote to the carrier. The other sort of category of a carrier that will benefit is even in addition to existing carriers, you've got a whole bunch of carriers in the market today that have not yet fully capitalized on acquiring customers through digital channels. Those are carriers that may be regional players distributing through local independent agents. They have great insurance products but haven’t fully participated in the digital marketplace. By extending the service to those carriers, we feel we're unlocking an incremental segment of the market that has historically not engaged meaningfully in the digital marketplaces.

Got it. And then as a follow-up, I think you mentioned during open enrollment for healthcare, you want to be up 3 times. Is that on revenue and how much revenue was from open enrollment last year? And then as you build out your DTC capabilities with more agents, do you plan to provide total bookings or total policies written and the total commissions you're generating?

We expect our health DTC agency revenue to be up at least 3 times, that's our plan, as well as our agents servicing that. That’s significant, and it speaks to the new seasonal pattern we're seeing emerge, where Q4, traditionally weaker on the auto side, is now anticipated to become a seasonally strong quarter due to our investments in health. We are considering what metrics we provide in order to give insight into this open enrollment. Stay tuned on that; we expect to update you.

Thank you. Could you just maybe talk about the sort of growth rates that you expect to see between auto and your other verticals? We've seen the growth rates sort of coalesce here over the last few quarters. And just wondering do you expect that to persist or just maybe any comment on the general health of the auto vertical? And then kind of building on what Jed was asking, can you just talk a little bit about the investments you're making in DTC into open enrollment are mostly agents and sort of hiring ahead of some of that volume? Can you talk about how you think about the payback or the return on investment for an agent and how good are you at bringing those folks on and gaining productive?

There are a few questions in there, Mike. In terms of the auto, non-auto split, historically, non-auto has outpaced auto. Our expectation is that over the long-term, non-auto will continue to outpace auto. Right now our focus are kind of high confidence paths to drive non-auto growth back up to levels we're accustomed to seeing, specifically health and Medicare markets, so we're focused on investing and preparing for and executing through the Q4 open enrollment period. We do expect that will have a meaningful impact in restoring the growth rates we're accustomed to seeing. With respect to that investment, if we go back and look at the performance of the agents we've hired to date; as we launched the health and Medicare marketplace in 2019, we acquired Crosspointe in September of 2020, had a month to integrate and ramp for open enrollment last year successfully and profitably. This gave us confidence that the market opportunity could support aggressive growth. We are hiring Garett Kitch from eHealth, who managed a big part of their sales operation. As he's onboarded, we've pulled forward some of the investment and growth there. We have high confidence that the scale will come and the profitability will follow based on the experience we had last year and the team's experience.

We expect non-auto to continue to grow faster than auto certainly in the second half of the year, but in Q3, the growth rates will be closer between autos and non-autos, and then going into Q4 where we put the investment, we believe that the growth engine for non-autos this year is around health. We'll see growth rates significantly outpace auto in the fourth quarter versus the third.

Good evening and thanks for taking the question. Two questions, if I could. First on the open enrollment reinvestment. Do you have any associated incremental revenues associated with that contemplated in the revised 2021 outlook? Doesn't really look like it on our end, but just wanted to ask that. And then secondly, how should we think about these reinvestments? Are they one-time in nature? We're just really trying to staff up more agents here in 2021, or could it be something that you'll contemplate on a yearly basis given the performance of how you assess this current reinvestment? Thank you.

With regard – maybe the second part first. I would say if you think about the expenses we've added, it's really in two buckets. One is the pulling forward of resources into Q3 to ensure that we're ready for Q4 and open enrollment; the other component is foundational expenses associated with health DTC agency. Neither one really scales as revenue scales, so they are foundational expenses. What we've reflected is our conviction around what we believe is possible with health DTC agency contributions in Q3. And as we've outlined, we've stated that is a tripling of revenue over Q4 of 2020.

Thank you. Good evening. Jayme, maybe just to start with the policy-as-a-service. Is there a way to parse out how big that opportunity is versus say your core lead gen model? If there's a way to do that? And then what is sort of the growth dynamic within that segment of the market relative to your core lead gen revenue model?

The policy-sales-as-a-service, while a value-added service, enables us to tap directly into the $135 billion of commission in the total addressable market. To the extent that policy-sales-as-a-service delivers high performance at or above what the carriers can do themselves, we expect it to unlock quite a bit more budget. It's hard to quantify, but the majority of the dollars in the value chain live in those commissions that we are now tapping directly into.

Got it. That's helpful. And as a follow-up, I wanted to ask about M&A in general and maybe more broadly capital allocation. John, you did Crosspointe, that seems to have been a successful deal. I know you're focusing on digesting PolicyFuel for now, but how are you thinking about M&A in general? Are you seeing more attractive opportunities in the market? Or is it just way too expensive right now to kind of buy something in insurtech? Maybe broader comments around M&A approach and then capital allocation in general? Thank you.

We've been consistent in how we've talked about M&A and executed on it as an opportunity for us to grow along our stated growth levers and potentially to do so faster than we would organically. You saw that with Crosspointe; you’re seeing that with PolicyFuel. We’ll continue to look for opportunities along that line. You have two good representative acquisitions in Crosspointe and PolicyFuel.

Thank you and good evening. Jayme and John, as part of the open enrollment initiative going on in the third quarter, how many agents do you plan to bring onboard in the quarter in order to execute on that?

What we've said is we're more than tripling agents in Q4 compared to last open enrollment season. That puts us over 100 agents.

Okay. And in general in looking at the margin structure of the PolicyFuel business, how does it differ if at all with EverQuote in general?

One of the reasons we're excited about DTC in general is that it's not just a growth lever; we think of it as a margin lever as well. We expect higher VMM margin as we go deeper with the consumer in terms of the value of the transaction, and over time, we expect it to be a higher EBITDA business as well. We think it's unlocking both growth and margin potential.

Thank you. If I may, just going back to the comment earlier, I fully understand why you would want to optimize for revenue per quote request based on the outcome. Are there – but in speaking about the third quarter, it does look like you're looking to increase the number of quote requests. Is that from an execution standpoint a matter of optimizing in your model to increase the number of quote requests being given out to the different agencies? Or is there something more?

It's a function of a couple of things. The primary one is in Ron's question about the verified partner network. We have launched new products into that market. We've enrolled some new partners into the program and we're moving from piloting into operationalizing and scaling with several of these partners. We expect to drive up volume through those partnerships.

And that concludes our Q&A. I would now like to turn it back to the management for closing remarks.

Thank you. Well, thank you all for joining us today. We're pleased with our strong Q2 performance, and we're excited by the steps we're taking to accelerate progress against the strategy, most notably building the foundation for a multi-vertical tech and data-enabled direct-to-consumer agency platform. We're confident in the outlook for the remainder of 2021, and we're laser-focused on our vision to become the largest online source of insurance policies by using data and technology to make insurance simpler, more affordable, and personalized. With continued execution, strength of our team, and increasing clarity of focus in our strategy, we are energized to continue building EverQuote into an industry-defining company as the $2 trillion insurance industry moves into the digital age. Thank you all so much and have a great evening.

And this concludes today's conference call. Thank you for participating. You may now disconnect.