Good afternoon ladies and gentlemen. Thank you for attending today's EverQuote Q2 2022 Earnings Call. My name is Tia and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions-and-answers at the end. I would now pass the conference over to your host Brinlea Johnson of Blueshirt Group. You may proceed.

Thank you. Good afternoon and welcome to EverQuote's second quarter 2022 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 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 second quarter and full year 2022, our growth strategy, and our plans to execute on our growth strategy, key initiatives including direct-to-consumer agency, our investments in the business, the growth levers we expect to drive our business, our ability to maintain existing and acquire new customers, our expectations regarding recovery of the auto insurance industry, our recent acquisitions, our goals for integrations, and other statements regarding our plans and prospects, and the possible impact of inflation. 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 a discussion of material risks and other important factors that could cause our actual results, please refer to those contained under the heading Risk Factors in our most recent Quarterly Report on Form 10-Q which is on file with the Securities and Exchange Commission and available on the Investor Relations section of our website at investor.everquote.com and on the SEC's website at sec.gov. Finally, during the course of today's call, we'll refer to certain non-GAAP financial measures, which we believe are helpful to investors. A reconciliation of GAAP to non-GAAP measures is included in the press release we issued after the close of market today, which is available on the Investor Relations section of our website at investors.everquote.com. And with that, I'll turn it over to Jayme.

Thank you, Brinlea, and thank you all for joining us today. In the second quarter, we exceeded guidance expectations across our three primary financial KPIs, delivering revenue of $101.9 million, variable marketing margin or VMM of $33.1 million, and adjusted EBITDA positive $1.4 million. We attribute our success in the quarter to agile management fueled by strong analytics, as our operating teams demonstrated their ability to effectively navigate continued volatility and increased headwinds in the auto insurance industry. On the consumer side of the marketplace, strong traffic volume growth helped offset lower carrier monetization with consumer quote requests up 28% year-on-year. Our customer acquisition teams reacted swiftly, continuously adjusting ad spend in near real-time to maximize margin amidst volatile carrier demand throughout the quarter. On the provider side of our marketplace, our agent-oriented distribution channels continue to exhibit strength and resilience in Q2, even while the direct carrier channel contracted. Local agents' budget caps increased year-over-year within our marketplace. Direct-to-consumer agency or DTCA continues to perform well, representing 13% of revenues in Q2 and exceeding our internal projections. Over the course of Q2, amidst a challenging auto carrier environment and a lock-in period for health and Medicare, we drove meaningful improvement in the unit economic profitability and cash efficiency of our DTCA operations as follows. One, we continue to improve advisor performance through coaching and tenuring of agents, as well as tech and traffic optimization. Two, we increased ancillary attach rates in health and Medicare and three, we shifted policy mix towards higher LTV products. Meanwhile, the direct carrier channel continues to exhibit significant volatility. Throughout the quarter carriers exited unprofitable states and segments. As a result, in Q2, direct carrier channel monetization reached new trough levels below the lows last seen in Q4 of 2021. July demand from auto carriers shows continued deterioration, and we are not expecting this dynamic to change meaningfully within Q3. We also expect to experience lower health demand in Q3, reflecting the seasonally slower locking period ahead of Q4's open enrollment period. Turning to the broader environment, auto carriers are now citing the uncertainty caused by surging inflation as a key factor limiting their pace of recovery. While we have seen loss and combined ratios improving for certain carriers, we believe that Q3 demand will likely remain significantly depressed, and that a rebound previously expected to begin in the second half is unlikely to occur before 2023. Data that supports this outlook include one, recent actions from several carriers to further limit their customer acquisition appetite and to direct feedback from a large partner of ours. That uncertainty around the future loss environment caused by surging inflation is causing them to restrict budgets in the second half of 2022 more than previously expected. When inflation stabilizes and carriers are able to increase rates to reflect the current underwriting environment, we expect they will return to normalized levels of customer acquisition spending while driving more insurance shopping, as consumers react to higher renewal rates. In closing, we are successfully navigating a very turbulent market. In Q2, we reacted quickly to changes in market conditions by managing our ad spend and altering our cost structure to deliver more revenue and profitability. We also benefited from our strategy to diversify our distribution into agent channels. We remain in an unstable market, and the actions required in the third quarter are likely to be different than those in the second. However, with a strategy and a team that has demonstrated its capacity to adapt quickly and execute, we are confident we will continue to deliver strong financial results through the uncertainty ahead, while continuing to make progress towards our long-term vision to become the largest online source of insurance policies by combining data, technology, and knowledgeable advisors to make insurance simpler, more affordable, and personalized. We remain laser-focused on building an industry-defining company. I continue to be incredibly proud of our team's ability to navigate changes in the industry. As auto carrier demand recovers, we expect that EverQuote will be well-positioned to return to our historic trends, strong revenue growth, and expanding adjusted EBITDA. 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 and then provide guidance for the third quarter and updated guidance for the full year of 2022. Our total revenue for Q2 of $101.9 million, a decline of 3% year-over-year exceeded our guidance range provided last quarter, as growth in consumer volume and demand from non-carrier customers partially offset reductions in monetization. The reductions in monetization were related to the industry-wide pullback in auto insurance carrier advertising, which affected demand and pricing from our direct carrier customers within our auto insurance vertical. As anticipated, our auto insurance vertical decreased 6% year-over-year to $1.4 million. While the auto insurance industry's challenges were evident in a significant year-over-year reduction in carrier revenue and pricing, we benefited from a 28% year-over-year growth in overall consumer quote requests this quarter. This reflects our success in generating consumer traffic and positions us to increase our share of insurance shopping consumers now and in the future, as we are positioned well for the time when the auto insurance carrier market challenges are overcome. Apart from our direct carrier customers, revenue from all other insurance distribution channels increased year-over-year, including DTCA, which grew over 300% to $13.1 million. Within our marketplace distribution, third-party local agents continue to show resilience with revenue growing slightly year-over-year and contributing 40% of revenue. Revenue from our other insurance verticals, which includes home and renters, life, and health insurance, grew 10% year-over-year to $20.5 million for the second quarter. These non-auto insurance verticals represented 20% of second-quarter revenue, with a notable contribution from our direct-to-consumer agency within our health insurance vertical. Variable marketing margin or VMM, defined as revenue less advertising expense was $33.1 million for the second quarter, up slightly year-over-year and above our guidance range provided last quarter. VMM in absolute dollars and as a percentage of revenue were at near record levels due to reduced auctions and acquisition costs and contribution from DTCA. We've benefited from a competitively more favorable advertising landscape and by aggressively applying our analytical and operational advantage to lower costs per consumer quote request by 26% year-over-year, while also driving higher volume. Although we had fully anticipated pricing reductions in our own monetization, the upside in our margin performance reflects rapid adjustments made by our traffic teams to uncover opportunities and efficiencies, and to recalibrate our marketplace acquisition in a rapidly changing advertising environment. Turning to our bottom line, GAAP net loss was $3.8 million in the second quarter, and adjusted EBITDA was a positive $1.4 million, exceeding our guidance range provided last quarter. Our favorable VMM performance translated directly into adjusted EBITDA as we continue to manage operating expenses tightly and look for opportunities to reduce expenses. We ended the quarter with cash and cash equivalents on the balance sheet of $41.3 million. During the quarter, we consumed $3.5 million in operating cash, primarily to fund the growth and DTCA. While our auto insurance vertical was facing reduced demand from carriers, we expect to continue to use cash in operations as we grow DTCA. Just after the quarter ended, we announced the renewal of our debt facility, expanding our line of credit by $10 million to $35 million, extending maturity by three years, and adding a $10 million deferred draw term loan. We have no funds drawn against this facility and believe our cash balance combined with this facility renewal continues to provide us sufficient liquidity. Turning to our outlook and building on Jayme's comments regarding the market conditions within the auto insurance industry. We believe carriers are cautiously forecasting continued increases in claims losses given recent reporting on inflation; as a result, carrier pricing remains down and continues to be volatile. This volatility has included recent pullbacks and pauses in marketplace bids from some carriers. We believe carriers are on a defensive footing, and we are not seeing signs of an early recovery within the auto insurance industry. Therefore, we continue to manage intently to the current environment to optimize our marketplace business. As we enter the second half of the year, we anticipate that auto carrier pricing will continue to pressure margins and revenue as it has since Q3 of last year. Our reaction is to continue to focus on execution and opportunities to leverage our advantages. We are driving growth from distribution channels less affected by auto carrier pricing, such as third-party and first-party agents and our health insurance vertical. We are managing for efficiency in our advertising and operating costs, which has allowed us to maintain positive adjusted EBITDA. We are increasing our share of consumer shopping for insurance by growing consumer volumes despite a difficult market. We expect to continue this management approach in the second half of the year and are placing a greater focus on efficiency and bottom-line results as it becomes more apparent that an auto insurance recovery will stretch into 2023. Turning to guidance for Q3. We expect revenue to be between $90 million and $95 million, a year-over-year decrease of 14%. At the midpoint, we expect VMM in the quarter to be between $24 million and $27 million, a year-over-year decrease of 21% at the midpoint. We expect adjusted EBITDA to be between negative $6 million and negative $3 million. This guidance reflects depressed auto insurance carrier pricing continuing to impact our largest vertical. For the full year, we are narrowing our guidance for revenue and improving our VMM and adjusted EBITDA guidance as a result of our stronger than expected Q2 performance in our margins. We expect revenue to be between $400 million and $410 million, a year-over-year decrease of 3%. At the midpoint, we expect VMM of $122 million, a year-over-year decrease of 8% at the midpoint. We expect adjusted EBITDA of between negative $7 million and negative $1 million. In summary, we delivered results better than our guidance for the second quarter despite continued pressure from the current auto insurance cycle, reflecting our ability to dynamically manage the economics of our marketplace and capture growth from areas of diversification and resilience. We continue to execute well in a difficult market and are poised to capitalize on areas of strategic focus, and are well positioned for the time when the auto insurance carriers begin to normalize their acquisition spending. Jayme and I will now answer your questions.

We will now begin the question-and-answer session. The first question is from the line of Jed Kelly with Oppenheimer. You may proceed.

Great. Thanks for taking my question. Two, if I may. Just in terms of managing the back half, can you talk about how you're sort of managing the business for share gains? Because I imagine some of your other competitors are facing difficult challenges. And then number two, just as it comes for guidance in the back half, I mean, can you give us a sense on how conservative you're being? You're saying the recovery might not start till 2023 and it makes sense. But I guess given where the carriers are and sort of resetting their rates and driving more profitable business, where can they go until they can start reestablishing to be profitable? Thank you.

Thanks, Jed. So, with respect to share gains, I think the data we look at now will show our growth of our insurance business relative to that of others in recent periods. We do believe we're taking share during this period and attribute that to diversification in our distribution network, as well as the growth of our direct-to-consumer agency. We'll see what the entirety of the landscape looks like as we come through the earnings season. But certainly if you look back, we've managed to continue to post outsized results relative to our peers in terms of our growth over the first part of this year.

Jed, it's John here. I'll add to that on the share gains. I'll just point out that the strength we had in traffic this quarter was also on an increase in VMM in absolute dollars and as a percentage of revenue. That is very consistent with our management philosophy, which is to grow as fast as we can, as long as we are adding traffic that is incrementally beneficial to VMM. So, it is kind of a wholesome increase in quote request volumes this quarter. And that's why we decided to share that metric with you. In terms of the guidance on the back half of the year and the question of how conservative it is; the guidance methodology has not changed. We strive to give you guidance that shares some insight into what we see in the business and gives you an idea of what we think is a high confidence plan in our guide. What we have included in there is the idea that auto insurance carrier pricing will remain down through the end of the year. And that's a slight revision in our outlook in terms of what was previously a slight improvement in the second half of the year—now seeing that as flat. So, that's factored in there, but that's truly what we believe.

Thank you.

Thanks, Jed.

Thank you. The next question is from the line of Mayank Tandon with Needham. You may proceed.

Hey, good afternoon, guys. This is actually Kyle Peterson on for Mayank. Thanks for taking my questions. Just wanted to touch on some of the traffic and improvement from both quote request and efficiency perspective. How much of some of the gain and improvement here was due to just stronger consumer demand, engagement, and interest versus potential ad costs coming down? I know there's been a lot of talk on potential advertising recession and such. So, just wanted to see if you guys could tease out those two factors to the best you can?

Sure. I think it's a combination of things. Typically, when you're in an upward rate cycle, increasing rates induce shopping behavior; people get their renewal notices, their renewal premiums go up, and that will drive shopping behavior. I think the overall landscape is benefiting from more consumer shopping behavior. Within that, you'll see us taking share, driven by the continued strength and stability of our unique distribution channels, as well as our direct-to-consumer agency and local agent network, allowing us to compete more effectively within the rising tide of consumer shopping volume.

Okay, that's helpful. And then, I guess, just a quick follow-up, specifically on the potential M&A pipeline and scaling of the DTC business. It's great to see that growing out nicely and helping diversify the business. Are you guys seeing any potential opportunities to grow inorganically in that channel? Any color on opportunities or targets would be helpful?

We made two acquisitions in the last two years of the health insurance brokerage Crosspointe, and health and Medicare, and then P&C brokerage, which is PolicyFuel. We spent the better part of the last year really integrating those acquisitions into our operations and together into a unified direct-to-consumer agency platform, serving consumers across all major personal lines of insurance. Our view within DTCA is that we have the foundational building blocks to grow that organically in the near term. We're always active, keeping an eye on the market for opportunities to accelerate our strategy, though that's not a high priority for us in the near term.

Understood. Thanks, guys.

Thanks, Kyle.

Thanks, Kyle.

Thank you. The next question comes from the line of Michael Graham with Canaccord. You may proceed.

Thank you. Hey, guys congrats on the DTCA growth. It was like 13% of revenue this quarter, and I'm just wondering if you see any kind of natural limit to sort of how big it could get in your revenue mix? And then I wanted to ask relative to pushing out the rebound until 2023, have the carrier partners verbalized what they would need to see to get more aggressive? And is there anything about historical seasonal patterns that you think might influence—assuming a recovery does happen next year—when it happens?

I'll take this one. If you look at the carrier data, there are a number of carriers reporting combined ratios publicly at different cadences. Those looking more frequently see their profitability coming in line, meaning their combined ratios coming down at or below target levels. The expectation was that as soon as that happened, the growth spigot would reopen, but increasing uncertainty around the overall inflationary environment is causing carriers to pause before they lean back into growth. We're seeing a bit more contraction than expansion. One major carrier indicated their intent to manage to a fixed budget through the end of the year as a risk mitigation strategy. To identify leading indicators, we'd want to look at carrier performance, inflation, and price indices for vehicles and repair costs. Q3 tends to be stronger than Q4, so we'd expect to see some strength in Q3 compared to Q4.

It does. Yes, thank you. I appreciate that, Jayme. And the other quick one was just DTCA; is there any natural limit to how big that can get in your revenue mix?

There's no clear indication of a limit to how big it could get. We are pleased with the growth and are focusing on managing the business for improved unit economics. The goal for growth in DTCA is to ensure we achieve the return we seek as we scale it.

Okay, makes sense. Thank you, John. Thanks, Jayme.

Thanks, Mike.

Thank you. The next question comes from the line of Ralph Schackart with William Blair. You may proceed.

Good evening. Thanks for taking the question. Just first, you talked about modifying your bidding strategy. Given the volatility and on the call, you talked about recalibrating the acquisition teams. Just curious how much of that is short-term in nature to respond to the current environment versus things that you're doing today that will make the platform stronger when the macro environment improves? And then I have a follow-up.

Thanks, Ralph. Good question. Some elements are shortsighted, aimed at real-time responsiveness to changes. However, there are also structural changes with respect to how we acquire consumers. We're doing a lot of data science modeling to predict aspects of consumer shopping behavior and pulling in more data into these predictions, using them to inform how we bid for customers and distribute them effectively. Those models are improving significantly and remain a continued area of focus to build on that momentum through the back half of the year.

And Ralph, I'll add that there are certain times in our business where growth has been fueled by monetization, and other times by volume. If you look at periods in which we've taken volume, we generally hold onto that volume. In this period of growth through volume, it serves to load us up for monetization improvements when the auto insurance industry normalizes.

John, and a question for you, the follow-up here: Just in terms of the EBITDA guide. I think you’ve done about $4 million or so EBITDA year-to-date for the first half, and I think the full-year outlook is about calls for about minus $4 million. Are there any sort of deferred projects or are that sort of pricing environment flowing through the model? Just want to get a little bit more color on that. Thanks.

That's mainly just pricing and demand flowing through, not so much any deferred projects or new investments. We're still making investments in the business; however, we are focused on calibrating our resources and investments to the market we're experiencing, prioritizing bottom-line management. While we came into this year intending to maintain positive EBITDA for the year, we’ve had to adjust our expectations, focusing on effectively managing the bottom line.

Okay, thanks, John. Thanks, Jayme.

Thanks, Ralph.

Thank you. The next question is from the line of Cory Carpenter with JPMorgan. You may proceed.

Thanks for the question. Just wanted to ask outside the current car insurance market, how would you expect EverQuote to perform in a recessionary environment? It sounds like on the call in some ways you're benefiting from lower ad competition and higher quote requests. But just curious if you could talk to different impacts of a slowing economy and how that may impact you guys over time? Thank you.

We typically think of the business as being relatively countercyclical or at least, it would perform relatively well in a down economy. The reason for that is auto insurance tends to be a top three to five non-discretionary spending item in people's personal income statements. As they seek personal savings, people are conditioned to shop for insurance. This behavior could lead to continued growth in insurance shopping volume as consumers feel greater pressure. Plus, with the current cycle of steadily increasing insurance rates, we anticipate that effect to be amplified. The primary factor affecting carrier profitability right now is accident severity, the cost to repair and replace vehicles. As the economy softens, we expect factors like the used car market to loosen and demand for vehicles to decrease, which could affect accident frequency and repair costs positively. Thus, various elements in a soft economy could serve as favorable contributors for EverQuote's business.

Great. Thank you.

Thank you. Our last question will come from the line of Aaron Kessler at Raymond James. You may proceed.

Hey, guys, this is Alex Bolton on for Aaron Kessler. Maybe just a point of clarity on guidance. You're not expecting carrier pressure to outweigh the favorable advertising environment? I guess I'm just asking if the favorable advertising environment is not within guidance and if it remained could be favorable to guidance?

Yes, when you look at the guidance, we consider what's factored in. We cannot exclude what we are experiencing regarding carrier pricing and the volatility; we've seen pullbacks that are reflected in our outlook. Q2 was lower in terms of carrier pricing compared to Q4, and we've seen some pullbacks into July. We've included that in our outlook. However, what we saw in Q2 was a scenario that allowed us to adjust in response to other favorable portions of the advertising landscape, which enabled us to outperform our expectations in terms of margins. This type of favorable dynamic is not factored in guidance because we lack high confidence in how it might play out.

Okay, great. And then maybe to touch on investments for the annual enrollment period and 2Q and any investments you're planning for 3Q? Could the hiring environment be a headwind at all?

Looking ahead, we are considering DTCA investments as we head into the AEP period in Q4. Hiring and investment strategies will be governed by our expectation of improving unit economics within the DTCA. This year, we are focused on unit economics, and while we're excited about the growth we saw last year, we will temper our investments into DTCA in Q3 and Q4.

Okay, great. Appreciate the answers.

Thanks, Alex.

Thank you. There are no additional questions at this time. I will pass it back to the management team for any closing remarks.

Well, thanks everyone for joining us today. It's a challenging period for the auto insurance carriers, but we continue to benefit from our strategy to diversify our distribution channels and continue managing the business well amid heightened levels of volatility. As we look ahead, as auto carrier demand recovers, we expect that EverQuote will be well-positioned to return to strong revenue growth and expanding adjusted EBITDA as we remain laser-focused on building an industry-defining company. Thank you all for your time.

That concludes today's conference call. Thank you. You may now disconnect your line.