EverQuote, Inc 10-Q for FY2023 Q2
EverQuote, Inc. (EVER)
About this 10-Q
EverQuote, Inc filed this 10-Q on August 8, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).
Headline figures
Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $67.99M
- down 33.3% from $101.92M a year earlier
- Net loss
- $13.19M
- compared with a net loss of $3.76M a year earlier
- Diluted EPS
- -$0.40
- compared with -$0.12 a year earlier
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of June 30, 2023, the registrant had
Table of Contents
Table of Contents
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PART I. |
5 |
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Item 1. |
5 |
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5 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
33 |
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Item 4. |
33 |
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PART II. |
34 |
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Item 1. |
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Item 1A. |
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Item 2. |
35 |
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Item 6. |
36 |
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37 |
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2
Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans, and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “expects,” “might,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “seek,” “would” or “continue,” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition liquidity and results of operations. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022, in our subsequent periodic filings with the Securities and Exchange Commission and elsewhere in this Quarterly Report on Form 10-Q, particularly in Item 1A. Risk Factors. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. While we may elect to update these forward-looking statements at some point in the future, whether as a result of any new information, future events, or otherwise, we have no current intention of doing so except to the extent required by applicable law.
Some of the key factors that could cause actual results to differ include:
3
Table of Contents
4
Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
EVERQUOTE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share amounts)
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June 30, 2023 |
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December 31, 2022 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Commissions receivable, current portion |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Acquired intangible assets, net |
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Operating lease right-of-use assets |
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Commissions receivable, non-current portion |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders' Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Deferred revenue |
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Operating lease liabilities |
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Total current liabilities |
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Operating lease liabilities, net of current portion |
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Other long-term liabilities |
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— |
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Total liabilities |
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Stockholders' equity: |
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Preferred stock, $ |
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Class A common stock, $ |
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Class B common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive income (loss) |
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Accumulated deficit |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
Table of Contents
EVERQUOTE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(In thousands, except per share amounts)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenue |
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$ |
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$ |
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$ |
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$ |
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Cost and operating expenses: |
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Cost of revenue |
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Sales and marketing |
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Research and development |
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General and administrative |
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Restructuring and other charges |
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— |
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— |
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Acquisition-related costs |
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( |
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Total cost and operating expenses |
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Loss from operations |
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Other income (expense): |
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Interest income |
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Other income (expense), net |
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Total other income, net |
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Loss before income taxes |
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( |
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( |
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Income tax expense |
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( |
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— |
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( |
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— |
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Net loss |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net loss per share, basic and diluted |
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$ |
( |
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$ |
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$ |
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$ |
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Weighted average common shares outstanding, |
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Comprehensive loss: |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Other comprehensive income (loss): |
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Foreign currency translation adjustment |
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( |
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( |
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Comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
Table of Contents
EVERQUOTE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(In thousands, except share amounts)
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Accumulated |
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Class A |
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Class B |
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Additional |
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Other |
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Total |
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Common Stock |
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Common Stock |
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Paid-in |
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Comprehensive |
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Accumulated |
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Stockholders' |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Income (Loss) |
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Deficit |
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Equity |
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Balances at December 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Issuance of common stock upon |
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— |
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— |
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— |
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— |
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— |
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Net issuance of common stock upon |
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— |
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— |
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( |
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— |
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— |
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( |
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Transfer of Class B common stock |
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— |
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( |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Foreign currency translation adjustment |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balances at March 31, 2023 |
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( |
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Issuance of common stock upon |
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— |
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— |
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— |
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— |
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— |
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Net issuance of common stock upon |
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— |
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— |
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( |
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— |
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— |
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( |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Foreign currency translation adjustment |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Balances at June 30, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
Table of Contents
EVERQUOTE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(In thousands, except share amounts)
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Accumulated |
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Class A |
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Class B |
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Additional |
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Other |
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Total |
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Common Stock |
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Common Stock |
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Paid-in |
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Comprehensive |
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Accumulated |
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Stockholders' |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Income (Loss) |
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Deficit |
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Equity |
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Balances at December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Private placement of common stock |
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— |
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— |
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— |
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— |
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Issuance of common stock upon |
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— |
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— |
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— |
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— |
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— |
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Vesting of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Foreign currency translation adjustment |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Balances at March 31, 2022 |
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( |
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Issuance of common stock upon |
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— |
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— |
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— |
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— |
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Net issuance of common stock upon |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
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Transfer of Class B common stock to |
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— |
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( |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Foreign currency translation adjustment |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Balances at June 30, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
Table of Contents
EVERQUOTE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
|
|
Six Months Ended June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash provided by (used in) |
|
|
|
|
|
|
||
Depreciation and amortization expense |
|
|
|
|
|
|
||
Stock-based compensation expense |
|
|
|
|
|
|
||
Change in fair value of contingent consideration liabilities |
|
|
( |
) |
|
|
( |
) |
Provision for bad debt |
|
|
|
|
|
|
||
Unrealized foreign currency transaction (gains) losses |
|
|
|
|
|
( |
) |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
( |
) |
|
Prepaid expenses and other current assets |
|
|
|
|
|
( |
) |
|
Commissions receivable, current and non-current |
|
|
( |
) |
|
|
( |
) |
Operating lease right-of-use assets |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
( |
) |
|
Accounts payable |
|
|
( |
) |
|
|
|
|
Accrued expenses and other current liabilities |
|
|
|
|
|
( |
) |
|
Deferred revenue |
|
|
( |
) |
|
|
( |
) |
Operating lease liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) operating activities |
|
|
|
|
|
( |
) |
|
Cash flows from investing activities: |
|
|
|
|
|
|
||
Acquisition of property and equipment, including costs capitalized |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from exercise of stock options |
|
|
|
|
|
|
||
Proceeds from private placement of common stock |
|
|
— |
|
|
|
|
|
Tax withholding payments related to net share settlement |
|
|
( |
) |
|
|
( |
) |
Net cash provided by financing activities |
|
|
|
|
|
|
||
Effect of exchange rate changes on cash, cash equivalents |
|
|
|
|
|
( |
) |
|
Net increase in cash, cash equivalents and restricted cash |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of non-cash investing and |
|
|
|
|
|
|
||
Acquisition of property and equipment included in accounts payable and accrued expenses and other current liabilities |
|
$ |
|
|
$ |
|
||
Operating lease liabilities arising from obtaining right-of-use assets |
|
$ |
— |
|
|
$ |
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9
Table of Contents
EVERQUOTE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Nature of the Business and Basis of Presentation
EverQuote, Inc. (the “Company”) was incorporated in the state of Delaware in 2008. Through its internet websites, the Company operates an online marketplace for consumers shopping for auto, home and renters and life insurance. The Company generates revenue primarily by selling consumer referrals to insurance provider customers, consisting of carriers and agents, and indirect distributors in the United States. The Company also generates revenue from commission fees paid by insurance provider customers for insurance policies it sells to consumers.
The Company is subject to a number of risks and uncertainties common to companies in similar industries and stages of development including, but not limited to, rapid technological changes, competition from substitute products and services from larger companies, protection of proprietary technology, customer concentration, patent litigation, the need to obtain additional financing to support growth and dependence on third parties and key individuals.
The accompanying condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. Since inception, the Company has incurred operating losses, including net losses of $
The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
2. Summary of Significant Accounting Policies
Unaudited Interim Financial Information
The condensed consolidated balance sheet at December 31, 2022 was derived from audited consolidated financial statements but does not include all disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements as of June 30, 2023 and for the three and six months ended June 30, 2023 and 2022 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 on file with the SEC. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of June 30, 2023 and results of operations for the three and six months ended June 30, 2023 and 2022 and cash flows for the six months ended June 30, 2023 and 2022 have been made. The Company’s results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2023 or any other period.
10
Table of Contents
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, revenue recognition and the valuation of commissions and accounts receivable, the expensing and capitalization of website and software development costs, goodwill and acquired intangible assets, the valuation of stock-based awards and income taxes. The Company bases its estimates on historical experience, known trends and other market-specific or relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, as there are changes in circumstances, facts and experience. Changes in estimates are recorded in periods in which they become known. These estimates may change, as new events occur and additional information is obtained and actual results could differ materially from these estimates.
Concentrations of Credit Risk and of Significant Customers
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts and commissions receivable. The Company maintains its cash and cash equivalents at accredited financial institutions. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
The Company sells its consumer referrals to insurance provider customers, consisting of carriers and agents, and indirect distributors in the United States and receives commissions from insurance provider customers for insurance policies sold. For the three months ended June 30, 2023,
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
The Company’s cash equivalents and contingent consideration liabilities are carried at fair value, determined according to the fair value hierarchy described above (see Note 3). The carrying values of the Company’s accounts receivable, accounts payable and accrued expenses and other current liabilities approximate their fair values due to the short-term nature of these assets and liabilities. Commissions receivable are recorded at the estimated constrained lifetime values.
Accounts Receivable
The Company provides credit to customers in the ordinary course of business and believes its credit policies are prudent and reflect industry practices and business risk. The Company monitors economic conditions to identify facts or circumstances that may indicate that its receivables are at risk of collection. The Company provides reserves against accounts receivable for estimated losses, if any, that may result from a customer’s inability to pay based on the composition of its accounts receivable, current economic conditions, and historical credit loss activity. Amounts determined to be uncollectible are charged or written-off against the reserve. As of June 30, 2023 and December 31, 2022, the Company’s allowance for credit losses was $
11
Table of Contents
Revenue Recognition
The Company derives its revenue primarily by selling consumer referrals to its insurance provider customers, including insurance carriers, agents and indirect distributors. The Company also generates revenue from commission fees for the sale of policies, primarily in its health and automotive verticals. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606 Revenue from Contracts with Customers (“ASC 606”), the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation.
The Company only applies the five-step model to contracts when collectibility of the consideration to which the Company is entitled in exchange for the goods or services it transfers to the customer is determined to be probable. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.
Referral Revenue
The Company recognizes referral revenue when it satisfies its performance obligations by delivering the referrals to its customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those referrals.
Commission Revenue
The Company’s commission revenue consists of the estimated constrained lifetime values (the “constrained LTVs”) of commission payments the Company expects to receive from health insurance carriers and auto insurance carriers on the sale of insurance policies to consumers and renewals of such policies. Commission revenue is recognized upon satisfaction of the Company’s performance obligation. The Company considers its performance obligation related to commissions for both the initial policy sale and future renewals of the policy to be satisfied upon submission of the policy application. Therefore, a significant portion of the commission revenue the Company records upon satisfaction of its performance obligation is paid by the Company’s insurance provider customer over a multi-year time frame as policyholders renew and pay the insurance provider for their policies. The current portion of commissions receivable consists of estimated commissions on new policies sold and estimated renewal commissions on policies expected to be renewed within one year, while the non-current portion of commissions receivable are commissions for estimated renewals expected to be renewed beyond one year. Commission revenue represented approximately
The Company estimates commission revenue for each health insurance product by using a portfolio approach to a group of policies by product type and the application submission date of the relevant policy, which are referred to as “cohorts.” The Company’s estimate of constrained LTVs is based on an analysis of historical commission payment trends for relevant policies to establish an expected lifetime value and incorporates management’s judgment in interpreting those trends to calculate LTVs and to apply constraints to such LTVs. Significant factors impacting historical trends include carrier mix, average policy duration and conversion rates of paying policies.
Commission revenue from auto insurance carriers consists of constrained LTVs of commission payments the Company expects to receive for selling an insurance policy based on the effective date of the policy. The Company’s estimate of constrained LTVs is based on an analysis of historical commission payment trends for relevant policies to establish an expected lifetime value and incorporates management’s judgment in interpreting those trends to calculate LTVs and to apply constraints to such LTVs. The most significant factor impacting historical trends is average policy duration.
The Company applies a constraint to its estimated LTVs to only recognize the amount of variable consideration that it believes is probable that it will be entitled to receive and will not be subject to a significant revenue reversal in the future.
To the extent that commission payment trends change or the underlying factors impacting commission payments change, the Company’s estimate of constrained LTVs could be materially impacted. To the extent the Company makes changes to its estimates of constrained LTVs, it recognizes any material impact of the change to commission revenue in the reporting period in which the change is made, including revisions of estimated lifetime commissions either below or in excess of previously estimated constrained LTVs recognized as an adjustment to revenue and the related contract asset. The Company recognizes revenue for new policies by applying the latest estimated constrained LTV for that product.
12
Table of Contents
Disaggregated Revenue
The Company presents disaggregated revenue from contracts with customers by distribution channel, as the distribution channel impacts the nature and amount of the Company’s revenue, and by vertical market segment. The Company’s direct distribution channel consists of insurance carriers and third-party agents. The Company’s indirect distribution channel consists of insurance aggregators and media networks who purchase referrals with the intent to resell. Revenue generated via the Company’s direct distribution channel is generally higher per referral than revenue generated by the Company’s indirect distribution channels and provides the Company with additional insights and data regarding insurance provider demand and referral performance.
Total revenue is comprised of revenue from the following distribution channels:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Direct channels |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Indirect channels |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Total revenue is comprised of revenue from the following insurance verticals (in thousands):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Automotive |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company has elected to apply the practical expedient in ASC 606 to expense incremental direct costs of obtaining a contract, consisting of sales commissions, as incurred as the expected period of benefit of the sales commissions is one year or less. At June 30, 2023 and December 31, 2022, the Company had not capitalized any costs to obtain any of its contracts.
Deferred Revenue
Amounts received for referrals prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the accompanying consolidated balance sheets. Amounts expected to be recognized as revenue within 12 months of the balance sheet date are classified as current deferred revenue. Deferred revenue was $
Commissions Receivable
Commissions receivable are contract assets that represent estimated variable consideration for commissions to be received from insurance carriers for performance obligations that have been satisfied. The current portion of commissions receivable are estimated commissions expected to be received within one year, while the non-current portion of commissions receivable are expected to be received beyond one year.
The Company assesses impairment for uncollectible consideration when information available indicates it is probable that an asset has been impaired. There were
Advertising Expense
Advertising expense consists of variable costs that are related to attracting consumers to the Company’s marketplace and generating consumer quote requests, including through its verified partner network, and promoting its marketplace to insurance carriers and agents. The Company expenses advertising costs as incurred and such costs are included in sales and marketing expense in the accompanying consolidated statements of operations and comprehensive loss. During the three months ended June 30, 2023 and 2022, advertising expense totaled $
13
Table of Contents
Net Income (Loss) per Share
Basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding for the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of outstanding stock options and unvested restricted stock units. For periods in which the Company reports a net loss, diluted net loss per common share is the same as basic net loss per common share, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.
The Company has two classes of common stock outstanding: Class A common stock and Class B common stock. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion.
The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:
|
|
June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Options to purchase common stock |
|
|
|
|
|
|
||
Unvested restricted stock units |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
The table above does not include shares of Class A common stock issuable upon settlement of contingent consideration for the Company’s acquisitions. Such shares are also not included in the Company’s calculation of basic or diluted net loss per common share until issued.
Recently Issued Accounting Pronouncements
In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (Topic 820), which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The guidance also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The guidance includes disclosure requirements including the fair value of equity securities subject to contractual sale restrictions included in the balance sheet, the nature and remaining duration of the restriction and circumstances that could cause a lapse in the restriction. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, with early adoption permitted. The amendments in this update are to be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. The Company is currently assessing the impact of the adoption of this guidance on its consolidated financial statements.
14
Table of Contents
3. Fair Value of Financial Instruments
The following tables present the Company’s fair value hierarchy for its assets and liabilities which are measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022 (in thousands):
|
|
Fair Value Measurements at June 30, 2023 Using: |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Fair Value Measurements at December 31, 2022 Using: |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent consideration liability associated with |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Contingent consideration liability associated with |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
There were
Money market funds were valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy.
Contingent consideration liabilities relate to the acquisition of Policy Fuel, LLC and its affiliated entities (“PolicyFuel”) in 2021. The former owners of PolicyFuel are eligible to receive a variable number of shares of Class A common stock upon the achievement (at varying levels) of certain annual revenue targets over the three-year period following the acquisition. Contingent consideration liabilities are valued by the Company using significant inputs not observable in the market (a Level 3 measurement). The valuation of contingent consideration uses assumptions and estimates to forecast a range of outcomes for the contingent consideration. The Company assesses these assumptions and estimates on a quarterly basis as additional data impacting the assumptions is obtained. Changes in the fair value of contingent consideration related to updated assumptions and estimates are recognized as acquisition-related costs within the consolidated statements of operations and comprehensive loss.
The Company uses a Monte Carlo simulation model in its estimates of the fair value of the contingent consideration related to the PolicyFuel acquisition. The most significant assumptions and estimates utilized in the model include forecasted revenue (an acquisition specific input) and the market value of the Company’s Class A common stock (an observable input). Other assumptions utilized in the model include equity volatility, revenue volatility and discount rate.
The following table provides a roll-forward of the aggregate fair values of the Company’s contingent consideration liabilities for which fair value is determined by Level 3 inputs (in thousands):
|
|
Contingent |
|
|
|
|
Consideration |
|
|
|
|
Liabilities |
|
|
Fair value at December 31, 2022 |
|
$ |
|
|
Change in fair value of contingent consideration related |
|
|
( |
) |
Fair value at June 30, 2023 |
|
$ |
|
|
15
Table of Contents
4. Goodwill and Acquired Intangible Assets
Goodwill is not amortized, but instead is reviewed for impairment at least annually or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. The Company considers its business to be
There were
Acquired intangible assets consisted of the following (in thousands):
|
|
|
|
|
June 30, 2023 |
|
||||||||||
|
|
Weighted Average Useful Life |
|
|
Gross Amount |
|
|
Accumulated |
|
|
Carrying Value |
|
||||
|
|
(in years) |
|
|
|
|
|
|
|
|
|
|
||||
Customer relationships |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Developed technology |
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Other identifiable intangible assets |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
December 31, 2022 |
|
||||||||||
|
|
Weighted Average Useful Life |
|
|
Gross Amount |
|
|
Accumulated Amortization |
|
|
Carrying Value |
|
||||
|
|
(in years) |
|
|
|
|
|
|
|
|
|
|
||||
Customer relationships |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Developed technology |
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Other identifiable intangible assets |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Future amortization expense of intangible assets as of June 30, 2023 is expected to be as follows (in thousands):
Year Ending December 31, |
|
|
|
|
2023 (remaining six months) |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
$ |
|
|
As of June 30, 2023, the Company reassessed its asset groupings and performed an interim impairment analysis on certain intangible assets with a net book value of $
5. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Accrued employee compensation and benefits |
|
$ |
|
|
$ |
|
||
Accrued advertising expenses |
|
|
|
|
|
|
||
Other current liabilities |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
16
Table of Contents
6. Loan and Security Agreement
On July 15, 2022, the Company executed a Loan and Security Modification Agreement (the “2022 Loan Amendment”) to amend its Amended and Restated Loan and Security Agreement, dated as of August 7, 2020 (the “2020 Loan Agreement”) with Western Alliance Bank (the “Lender”), to increase the revolving line of credit available thereunder from $
Pursuant to the 2022 Amended Loan Agreement, borrowings under the revolving line of credit cannot exceed
Under the 2022 Amended Loan Agreement, the term loan could have been drawn through December 31, 2023 and borrowings would have borne
Borrowings are collateralized by substantially all of the Company’s assets and property. Under the 2022 Amended Loan Agreement,
17
Table of Contents
7. Stock-Based Compensation
2008 and 2018 Plans
The Company has outstanding awards under its 2008 Stock Incentive Plan, as amended (the “2008 Plan”), but is no longer granting awards under this plan. Shares of common stock issued upon exercise of stock options granted prior to September 8, 2017 will be issued as either Class A common stock or Class B common stock. Shares of common stock issued upon exercise of stock options granted after September 8, 2017 will be issued as Class A common stock.
The Company’s 2018 Equity Incentive Plan (the “2018 Plan” and, together with the 2008 Plan, the “Plans”) provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other stock-based awards. The number of shares initially reserved for issuance under the 2018 Plan is the sum of
Options and restricted stock units (“RSUs”) granted under the Plans vest over periods determined by the board of directors. Options granted under the Plans expire no longer than
During the six months ended June 30, 2023, the Company granted
Inducement Grants
In connection with the acquisition of PolicyFuel in 2021, the Company granted service- and service- and performance-based RSUs to newly hired employees. The RSUs were approved by the Company’s board of directors and were granted as an inducement material to the new employees entering into employment with the Company in accordance with Nasdaq Rule 5635(c)(4) (the “Inducement Awards”). The Inducement Awards were granted outside of the 2018 Plan.
Stock-Based Compensation
The Company recorded stock-based compensation expense in the following expense categories of its consolidated statements of operations and comprehensive loss (in thousands):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Cost of revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restructuring and other charges |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of June 30, 2023, unrecognized compensation expense for RSUs and option awards was $
18
Table of Contents
8. Commitments and Contingencies
Leases
The Company leases office space under various non-cancelable operating leases. There have been no material changes to the Company’s leases during the three and six months ended June 30, 2023. For additional information, please read Note 12, Leases, to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
Indemnification Agreements
In the normal course of business, the Company may provide indemnification of varying scope and terms to third parties and enters into commitments and guarantees (“Agreements”) under which it may be required to make payments. The duration of these Agreements varies, and in certain cases, is indefinite. Furthermore, many of these Agreements do not limit the Company’s maximum potential payment exposure.
In addition, the Company has entered into indemnification agreements with members of its board of directors and executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers.
Through June 30, 2023, the Company has not incurred any material costs as a result of such indemnifications. The Company does not believe that the outcome of any claims under indemnification arrangements will have a material effect on its financial position, results of operations or cash flows, and it has not accrued any liabilities related to such obligations in its consolidated financial statements as of June 30, 2023 and December 31, 2022.
Legal Proceedings and Other Contingencies
The Company is from time to time subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of its business. While the outcome of these claims cannot be predicted with certainty, management does not believe that the outcome of any of these legal matters will have a material adverse effect on the Company’s consolidated results of operations or financial condition.
9. Retirement Plan
The Company has established a defined-contribution plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). The 401(k) Plan covers all employees who meet defined minimum age and service requirements, and allows participants to defer a portion of their annual compensation on a pre-tax basis. As currently established, the Company is not required to make any contributions to the 401(k) Plan. The Company contributed $
10. Related Party Transactions
The Company has, in the ordinary course of business, entered into arrangements with other companies who have shareholders in common with the Company. Pursuant to these arrangements, related-party affiliates receive payments for providing website visitor referrals. During the three months ended June 30, 2023 and 2022, the Company recorded expense of $
On February 23, 2022, the Company sold
19
Table of Contents
11. Restructuring and Other Charges
In June 2023, the Company committed to exiting its health insurance vertical to increase focus on core verticals and implemented a workforce reduction plan (the “Reduction Plan”) to improve operating efficiency. The Reduction Plan includes the elimination of
The Company’s restructuring liability, which was included in accrued employee compensation and benefits, consisted of the following (in thousands):
|
|
Employee |
|
|
Non-cash |
|
|
|
|
|||
|
|
Separation Payments |
|
|
Compensation |
|
|
Total |
|
|||
Accrued Balance at December 31, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Expense |
|
|
|
|
|
|
|
|
|
|||
Payments |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Non-cash |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Accrued Balance at June 30, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
In connection with its decision to exit the health insurance vertical, the Company reassessed asset groupings and determined that certain long-lived assets including definite-lived intangible assets related to the health insurance vertical with a net book value of $
12. Subsequent Events
On August 1, 2023, the Company entered into a Purchase and Sale Agreement (the “Purchase Agreement”) with MyPlanAdvocate Insurance Solutions Inc. (the “Buyer”), a Delaware corporation, pursuant to which the Company agreed to sell to the Buyer assets relating to its health insurance vertical, by selling to the Buyer all of the issued and outstanding membership interests of its subsidiary, Eversurance, LLC (“Eversurance”), for cash consideration of $
In connection with the sale of Eversurance, the Company entered into a Loan and Security Modification Agreement (the “2023 Consent and Release”), pursuant to which the Lender consented to the sale of Eversurance and released any security interests it had in the membership interests of Eversurance.
On August 7, 2023, the Company executed a Loan and Security Modification Agreement (the “2023 Loan Amendment”) to amend the 2022 Amended Loan Agreement to, among other things, eliminate the term loan availability, decrease the revolving line of credit from $
20
Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our consolidated financial statements and the related notes and other financial information included in our Annual Report on Form 10-K for the year ended December 31, 2022, on file with the Securities and Exchange Commission. The following discussion and analysis contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below, elsewhere in this Quarterly Report on Form 10-Q, particularly in Item 1A. Risk Factors, and in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022.
EverQuote makes insurance shopping easy, efficient and personal, saving consumers and insurance providers time and money.
We operate a leading online marketplace for insurance shopping, connecting consumers with insurance providers. Our mission is to empower insurance shoppers to better protect life’s most important assets—their family, property, and future. Our vision is to become the largest online source of insurance policies by using data, technology and knowledgeable advisors to make insurance simpler, more affordable and personalized, ultimately reducing cost and risk. Our results-driven marketplace, powered by our proprietary data and technology platform, is reshaping the insurance shopping experience for consumers and improving the way insurance providers attract and connect with consumers shopping for insurance.
Finding the right insurance product is often challenging for consumers, who face limited online options, complex, variable and opaque pricing, and myriad coverage configurations. We present consumers with a single starting point for a comprehensive and cost-effective insurance shopping experience. Our marketplace reduces the time consumers spend searching across multiple sites by delivering broader and more relevant results than consumers may find on their own. In addition to our marketplace, we operate a direct to consumer, or DTC, insurance agency. Our DTC agents bind policies for consumers, further streamlining the consumer shopping experience. Our services are free for consumers, and we derive our revenue from sales of consumer referrals to insurance providers and directly from commissions on sales of policies.
Insurance providers, which we view as including carriers, our own DTC agents, and third-party agents, operate in a highly competitive and regulated industry and typically specialize in pre-determined subsets of consumers. As a result, not every consumer is a good match for every provider, and some providers can struggle to reach the segments that are most desirable for their business models. Traditional offline and online advertising channels reach broad audiences but lack the fine-grained consumer acquisition capabilities needed for optimally matching consumers to specific insurance products. We connect providers to a large volume of high-intent, pre-validated consumer referrals that match the insurers’ specific requirements. The transparency of our marketplace, as well as the campaign management tools we offer, make it easy for insurance carriers and third-party agents to evaluate the performance of their marketing spend on our platform and manage their own return on investment.
Since 2011, our core mission has been to make finding insurance easy and more personal, saving consumers and insurance providers time and money. We are working to build the largest and most trusted online insurance marketplace in the world. In pursuing this goal, we have consistently innovated through our disruptive data driven approach. Highlights of our history of innovation include:
21
Table of Contents
In the three months ended June 30, 2023 and 2022, our total revenue was $68.0 million and $101.9 million, respectively, representing a year-over-year decrease of 33.3%. We had net losses of $13.2 million and $3.8 million for the three months ended June 30, 2023 and 2022, respectively, and had $(2.1) million and $1.4 million in adjusted EBITDA for the three months ended June 30, 2023 and 2022, respectively. In the six months ended June 30, 2023 and 2022, our total revenue was $177.2 million and $212.6 million, respectively, representing a year-over-year decrease of 16.6%. We had net losses of $15.7 million and $9.5 million for the six months ended June 30, 2023 and 2022, respectively, and had $3.3 million and $3.9 million in adjusted EBITDA for the six months ended June 30, 2023 and 2022, respectively. See the section titled “—Non-GAAP Financial Measure” for information regarding our use of adjusted EBITDA and its reconciliation to net income (loss) determined in accordance with generally accepted accounting principles in the United States, or GAAP.
In June 2023, we committed to exiting our health insurance vertical, an area that would have required significant capital investment and scale to effectively compete amid an increasingly unpredictable regulatory environment, to increase focus on core verticals, and implemented a workforce reduction plan, or the Reduction Plan, to improve operating efficiency. The Reduction Plan includes the elimination of 175 employees, or approximately 28%, of our workforce. As a result, we incurred $3.8 million in severance charges in the three months ended June 30, 2023, in connection with the workforce reduction, consisting of cash expenditures for employee separation costs of $2.7 million that are expected to be paid over the next twelve months and non-cash charges for the modification of certain equity awards of $1.1 million. We expect these reductions to produce cost savings in non-marketing operating expenses of over 15%. We expect to complete the exit of our health insurance vertical and the Reduction Plan by the end of 2023. In connection with our decision to exit the health insurance vertical, we evaluated certain long-lived assets on our balance sheet for potential impairment. As of June 30, 2023, we had not recorded any impairment charges as a result of our evaluation. We will evaluate the impact to our balance sheet as we execute our exit, including the sale of Eversurance in August 2023 described below, which will result in additional charges in the third quarter of 2023.
On August 1, 2023, we entered into a Purchase and Sale Agreement, or the Purchase Agreement, with MyPlanAdvocate Insurance Solutions Inc., or the Buyer, a Delaware corporation, pursuant to which we agreed to sell to the Buyer assets relating to our health insurance vertical, by selling to the Buyer all of the issued and outstanding membership interests of our subsidiary, Eversurance, for cash consideration of $13.2 million, subject to customary post-closing adjustments. Among the assets sold were $32.2 million of commissions receivable as of June 30, 2023, which were expected to be collected over the next seven years, long-lived assets with a net book value of $1.1 million as of June 30, 2023 and the Evansville, Indiana office lease. The transaction closed concurrently with execution of the Purchase Agreement. There were no employees of Eversurance at the time of the sale.
On August 7, 2023, we amended our 2022 Amended Loan Agreement (as defined below) to, among other things, decrease the revolving line of credit, eliminate the term loan availability, adjust the interest rate and amend certain financial ratio and other covenants. See “Liquidity and Capital Resources” below.
Factors Affecting Our Performance
We believe that our performance and future growth depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below, elsewhere in this Quarterly Report on Form 10-Q, particularly in Item 1A. Risk Factors, and in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022.
Auto insurance industry risk
We derive a significant portion of our revenue from auto insurance providers, including our two largest insurance carrier customers who represented 12% and 11%, respectively, of total revenue for the three months ended June 30, 2023 and 25% and 11%, respectively, of total revenue for the six months ended June 30, 2023, and our financial results depend on the performance of the auto insurance industry. The auto insurance industry has experienced deteriorating underwriting performance due to a sudden and persistent rise in the severity of claims caused by inflationary increases in the cost to repair and replace vehicles and settle medical and injury claims. The increase in claims severity has reduced underwriting performance for auto insurance carriers, causing them to implement policy premium increases and reduce spending on new customer acquisition. The reduction in new customer acquisition spending by auto insurance carriers had a negative impact on the pricing and demand for consumer referrals in our marketplace during 2022 and in the second quarter of 2023.
The state of the auto insurance market remains dynamic. In January 2023, we saw a major carrier return to higher spending patterns, but subsequently reduce customer acquisition spending in the second quarter of 2023 due to higher than expected claims losses. We expect revenue from referrals to continue to be impacted by changes in demand from our insurance carrier customers caused by cost inflation, claim severity and frequency and the adequacy of policy premiums to cover the cost of claims.
22
Table of Contents
Expanding consumer traffic
Our success depends in part on the growth of our consumer traffic. We have historically increased consumer traffic to our marketplace by expanding existing advertising channels and adding new channels such as by engaging with consumers through our verified partner network. Over the long term, we plan to increase consumer traffic by leveraging the features and growing data assets of our platform. However, we have decreased advertising spend in response to lower demand for consumer referrals and we have the ability to decrease advertising spend in the future, when the revenue associated with such consumer traffic does not result in incremental profit to our business. We have also increased the number of quote requests acquired from our verified partner network. While we plan to continue to increase the number of quote requests we acquire from our verified partner network, our ability to acquire quote requests in significant volume, at prices that are attractive, and that represent high-intent shoppers that insurance providers will purchase referrals for will impact our profitability.
Increasing the number of insurance providers and their respective spend in our marketplace
Our success also depends on our ability to retain and grow our insurance provider network. Historically, we have generally expanded both the number of insurance providers and the spend per provider on our platform. Recently, we have experienced a decrease in carrier spend in the automotive vertical as described above.
Key Business Metrics
We regularly review a number of metrics, including GAAP operating results and the key metrics listed below, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections, and make operating and strategic decisions. Some of these metrics are non-financial metrics or are financial metrics that are not defined by GAAP.
Adjusted EBITDA
We define Adjusted EBITDA as net income (loss), adjusted to exclude: stock-based compensation expense, depreciation and amortization expense, restructuring and other charges, acquisition-related costs, interest income and the provision for (benefit from) income taxes. Adjusted EBITDA is a non-GAAP financial measure that we present in this Quarterly Report on Form 10-Q to supplement the financial information we present on a GAAP basis. We monitor and present Adjusted EBITDA because it is a key measure used by our management and board of directors to understand and evaluate our operating performance, to establish budgets and to develop operational goals for managing our business. Adjusted EBITDA should not be considered in isolation from, or as an alternative to, measures prepared in accordance with GAAP. Adjusted EBITDA should be considered together with other operating and financial performance measures presented in accordance with GAAP. Also, Adjusted EBITDA may not necessarily be comparable to similarly titled measures presented by other companies. For further explanation of the uses and limitations of this measure and a reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure, net income (loss), please see “—Non-GAAP Financial Measure”.
Variable Marketing Margin
We define variable marketing margin, or VMM, as revenue, as reported in our consolidated statements of operations and comprehensive loss, less advertising costs (a component of sales and marketing expense, as reported in our consolidated statements of operations and comprehensive loss). We use VMM to measure the efficiency of individual advertising and consumer acquisition sources and to make trade-off decisions to manage our return on advertising. We do not use VMM as a measure of profitability.
Key Components of Our Results of Operations
Revenue
We generate revenue primarily by selling consumer referrals to insurance provider customers, consisting of carriers and agents, as well as to indirect distributors. To simplify the quoting process for the consumer and improve performance for the provider, we are able to provide consumer-submitted quote request data along with each referral. We recognize revenue from consumer referrals at the time of delivery. We support three secure consumer referral formats:
23
Table of Contents
We also generate revenue from commissions paid to us by insurance carriers for the sale of policies, primarily in our health and automotive verticals. Commission revenue represented approximately 10% and 13% of total revenue in the three months ended June 30, 2023 and 2022, respectively. Commission revenue represented approximately 10% and 13% of total revenue in the six months ended June 30, 2023 and 2022, respectively. Commission revenue is recognized upon satisfaction of our performance obligation, which we consider to be submission of the policy application to the insurance carrier. We recognize revenue based on our constrained estimate of commission payments we expect to receive over the lifetime of the policies sold, which we refer to as constrained lifetime values, or constrained LTVs, of commission payments.
For the periods presented, our total revenue consisted of revenue generated from our automotive and other insurance verticals, which includes home and renters, life and health insurance verticals, as follows:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Automotive |
|
$ |
49,744 |
|
|
$ |
81,375 |
|
|
$ |
139,443 |
|
|
$ |
169,050 |
|
Other |
|
|
18,241 |
|
|
|
20,540 |
|
|
|
37,762 |
|
|
|
43,546 |
|
Total Revenue |
|
$ |
67,985 |
|
|
$ |
101,915 |
|
|
$ |
177,205 |
|
|
$ |
212,596 |
|
We expect an overall decrease in revenue in 2023 as compared to 2022 as we have experienced and expect to continue to experience decreased spending from our carrier partners, primarily due to factors discussed above. We also expect other revenue to decrease in 2023 as compared to 2022 as a result of our decision in June 2023 to exit our health insurance vertical.
Cost and Operating Expenses
Our cost and operating expenses consist of cost of revenue, sales and marketing, research and development, and general and administrative expenses and acquisition-related costs.
We allocate certain overhead expenses, such as rent, utilities, office supplies and depreciation and amortization of general office assets, to cost of revenue and operating expense categories based on headcount. As a result, an overhead expense allocation is reflected in cost of revenue and each operating expense category. Personnel-related costs included in cost of revenue and each operating expense category include wages, fringe benefit costs and stock-based compensation expense.
Cost of Revenue
Cost of revenue is comprised primarily of the costs of operating our marketplace and delivering consumer referrals to our customers. These costs consist primarily of technology service costs including hosting, software, data services, and third-party call center costs. In addition, cost of revenue includes depreciation and amortization of our platform technology assets and personnel-related costs.
Sales and Marketing
Sales and marketing expense consists primarily of advertising and marketing expenditures as well as personnel-related costs for employees engaged in sales, marketing, data analytics and consumer acquisition functions and amortization of sales and marketing-related intangible assets. Advertising expenditures consist of variable costs that are related to attracting consumers to our marketplace, generating consumer quote requests, including the cost of quote requests we acquire from our verified partner network, and promoting our marketplace to carriers and agents. Advertising costs are expensed as incurred. Marketing costs consist primarily of content and creative development, public relations, memberships, and event costs. In order to grow our business and brand awareness, we expect that we will continue to commit substantial resources to our sales and marketing efforts. We expect our sales and marketing expense will decrease in the near term as we expect decreased carrier spend for referrals, which will impact our advertising expenditures, and we expect personnel-related costs to decrease as a result of the Reduction Plan we implemented in June 2023.
Research and Development
Research and development expense consists primarily of personnel-related costs for software development and product management. We have focused our research and development efforts on improving ease of use and functionality of our existing marketplace platform and developing new offerings and internal tools. We primarily expense research and development costs. Direct development costs related to software enhancements that add functionality are capitalized and amortized as a component of cost of revenue. We expect that research and development expense will decrease as a result of the Reduction Plan we implemented in June 2023.
24
Table of Contents
General and Administrative
General and administrative expense consists of personnel-related costs and related expenses for executive, finance, legal, human resources, technical support and administrative personnel as well as the costs associated with professional fees for external legal, accounting and other consulting services, insurance premiums and payment processing and billing costs. We expect that general and administrative expense will decrease as a result of the Reduction Plan we implemented in June 2023.
Restructuring and Other Charges
Restructuring and other charges includes costs related to the restructuring and our exit of the health insurance vertical.
Acquisition-related
Acquisition-related costs include expenses associated with third-party professional services we utilize for the evaluation and execution of acquisitions as well as changes in the fair value of our contingent consideration liabilities recorded as the result of our acquisitions of Eversurance and PolicyFuel, which occurred in 2020 and 2021, respectively.
Other Income (Expense)
Other income (expense) consists of interest income and other income (expense). Interest income consists of interest earned on invested cash balances. Other income (expense) consists of miscellaneous income (expense) unrelated to our core operations.
Income Taxes
Income tax expense is based on our estimate of taxable income, applicable income tax rates, net research and development tax credits, net operating loss carrybacks, changes in valuation allowance estimates and deferred income taxes.
Non-GAAP Financial Measure
To supplement our consolidated financial statements presented in accordance with GAAP and to provide investors with additional information regarding our financial results, we present in this Quarterly Report on Form 10-Q adjusted EBITDA as a non-GAAP financial measure. Adjusted EBITDA is not based on any standardized methodology prescribed by GAAP and is not necessarily comparable to similarly titled measures presented by other companies.
Adjusted EBITDA. We define adjusted EBITDA as our net income (loss), excluding the impact of stock-based compensation expense; depreciation and amortization expense; restructuring and other charges; acquisition-related costs; interest income; and our provision for (benefit from) income taxes. The most directly comparable GAAP measure to adjusted EBITDA is net income (loss). We monitor and present in this Quarterly Report on Form 10-Q adjusted EBITDA because it is a key measure used by our management and board of directors to understand and evaluate our operating performance, to establish budgets and to develop operational goals for managing our business. In particular, we believe that excluding the impact of these items in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core operating performance.
We use adjusted EBITDA to evaluate our operating performance and trends and make planning decisions. We believe adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in the calculation of adjusted EBITDA. Accordingly, we believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects.
Adjusted EBITDA is not prepared in accordance with GAAP and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of adjusted EBITDA rather than net income (loss), which is the most directly comparable financial measure calculated and presented in accordance with GAAP. Some of these limitations are:
25
Table of Contents
In addition, other companies may use other measures to evaluate their performance, all of which could reduce the usefulness of adjusted EBITDA as a tool for comparison.
The following table reconciles adjusted EBITDA to net income (loss), the most directly comparable financial measures calculated and presented in accordance with GAAP.
Reconciliation of Net Loss to Adjusted EBITDA:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Net loss |
|
$ |
(13,193 |
) |
|
$ |
(3,756 |
) |
|
$ |
(15,722 |
) |
|
$ |
(9,471 |
) |
Stock-based compensation |
|
|
6,007 |
|
|
|
7,600 |
|
|
|
12,516 |
|
|
|
15,130 |
|
Depreciation and amortization |
|
|
1,463 |
|
|
|
1,405 |
|
|
|
2,870 |
|
|
|
2,916 |
|
Restructuring and other charges |
|
|
3,832 |
|
|
|
— |
|
|
|
3,832 |
|
|
|
— |
|
Acquisition-related costs |
|
|
(37 |
) |
|
|
(3,779 |
) |
|
|
(150 |
) |
|
|
(4,671 |
) |
Interest income |
|
|
(271 |
) |
|
|
(37 |
) |
|
|
(458 |
) |
|
|
(45 |
) |
Income tax expense |
|
|
78 |
|
|
|
— |
|
|
|
364 |
|
|
|
— |
|
Adjusted EBITDA |
|
$ |
(2,121 |
) |
|
$ |
1,433 |
|
|
$ |
3,252 |
|
|
$ |
3,859 |
|
Results of Operations
Comparison of the Three and Six Months Ended June 30, 2023 and 2022
The following tables set forth our results of operations for the periods shown:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Statement of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue(1) |
|
$ |
67,985 |
|
|
$ |
101,915 |
|
|
$ |
177,205 |
|
|
$ |
212,596 |
|
Cost and operating expenses(2): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue |
|
|
5,547 |
|
|
|
6,059 |
|
|
|
11,317 |
|
|
|
12,043 |
|
Sales and marketing |
|
|
58,795 |
|
|
|
87,854 |
|
|
|
149,032 |
|
|
|
184,004 |
|
Research and development |
|
|
7,450 |
|
|
|
8,245 |
|
|
|
15,377 |
|
|
|
16,441 |
|
General and administrative |
|
|
5,768 |
|
|
|
7,357 |
|
|
|
13,598 |
|
|
|
14,298 |
|
Restructuring and other charges |
|
|
3,832 |
|
|
|
— |
|
|
|
3,832 |
|
|
|
— |
|
Acquisition-related costs |
|
|
(37 |
) |
|
|
(3,779 |
) |
|
|
(150 |
) |
|
|
(4,671 |
) |
Total cost and operating expenses |
|
|
81,355 |
|
|
|
105,736 |
|
|
|
193,006 |
|
|
|
222,115 |
|
Loss from operations |
|
|
(13,370 |
) |
|
|
(3,821 |
) |
|
|
(15,801 |
) |
|
|
(9,519 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
271 |
|
|
|
37 |
|
|
|
458 |
|
|
|
45 |
|
Other income (expense), net |
|
|
(16 |
) |
|
|
28 |
|
|
|
(15 |
) |
|
|
3 |
|
Total other income, net |
|
|
255 |
|
|
|
65 |
|
|
|
443 |
|
|
|
48 |
|
Loss before income taxes |
|
|
(13,115 |
) |
|
|
(3,756 |
) |
|
|
(15,358 |
) |
|
|
(9,471 |
) |
Income tax expense |
|
|
(78 |
) |
|
|
— |
|
|
|
(364 |
) |
|
|
— |
|
Net loss |
|
$ |
(13,193 |
) |
|
$ |
(3,756 |
) |
|
$ |
(15,722 |
) |
|
$ |
(9,471 |
) |
Other Financial and Operational Data: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Variable marketing margin |
|
$ |
24,653 |
|
|
$ |
33,091 |
|
|
$ |
60,246 |
|
|
$ |
67,355 |
|
Adjusted EBITDA(3) |
|
$ |
(2,121 |
) |
|
$ |
1,433 |
|
|
$ |
3,252 |
|
|
$ |
3,859 |
|
26
Table of Contents
(1) Comprised of revenue from the following distribution channels:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Direct channels |
|
|
81 |
% |
|
|
86 |
% |
|
|
84 |
% |
|
|
87 |
% |
Indirect channels |
|
|
19 |
% |
|
|
14 |
% |
|
|
16 |
% |
|
|
13 |
% |
|
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
(2) Includes stock-based compensation expense as follows:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Cost of revenue |
|
$ |
59 |
|
|
$ |
95 |
|
|
$ |
113 |
|
|
$ |
154 |
|
Sales and marketing |
|
|
2,272 |
|
|
|
2,964 |
|
|
|
4,545 |
|
|
|
6,174 |
|
Research and development |
|
|
2,285 |
|
|
|
2,650 |
|
|
|
4,659 |
|
|
|
5,061 |
|
General and administrative |
|
|
1,391 |
|
|
|
1,891 |
|
|
|
3,199 |
|
|
|
3,741 |
|
Restructuring and other charges |
|
|
1,123 |
|
|
|
— |
|
|
|
1,123 |
|
|
|
— |
|
|
|
$ |
7,130 |
|
|
$ |
7,600 |
|
|
$ |
13,639 |
|
|
$ |
15,130 |
|
(3) See “—Non-GAAP Financial Measure” for information regarding our use of adjusted EBITDA as a non-GAAP financial measure and a reconciliation of adjusted EBITDA to its comparable GAAP financial measure.
Revenue:
|
|
Three Months Ended June 30, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
||||||||||
Revenue |
|
$ |
67,985 |
|
|
$ |
101,915 |
|
|
$ |
(33,930 |
) |
|
|
-33.3 |
% |
Revenue decreased by $33.9 million from $101.9 million for the three months ended June 30, 2022 to $68.0 million for the three months ended June 30, 2023. The decrease in revenue was due to a decrease of $31.6 million in revenue from our automotive vertical and a decrease of $2.3 million in our other insurance verticals. The decrease in revenue from our automotive vertical was primarily due to a decrease in carrier spend for referrals of $27.9 million and a decrease in commission revenue of $3.8 million. The decrease in revenue from our other insurance verticals was primarily due to a decrease in commission revenue of $2.2 million.
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
||||||||||
Revenue |
|
$ |
177,205 |
|
|
$ |
212,596 |
|
|
$ |
(35,391 |
) |
|
|
-16.6 |
% |
Revenue decreased by $35.4 million from $212.6 million for the six months ended June 30, 2022 to $177.2 million for the six months ended June 30, 2023. The decrease in revenue was due to a decrease of $29.6 million in revenue from our automotive vertical and a decrease of $5.8 million in our other insurance verticals. The decrease in revenue from our automotive vertical was primarily due to a decrease in carrier spend for referrals of $23.1 million and a decrease in commission revenue of $6.5 million. The decrease in revenue from our other insurance verticals was primarily due to a decrease in commission revenue of $4.3 million and a decrease in carrier spend for referrals of $1.4 million.
Cost of Revenue
|
|
Three Months Ended June 30, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
||||||||||
Cost of revenue |
|
$ |
5,547 |
|
|
$ |
6,059 |
|
|
$ |
(512 |
) |
|
|
-8.5 |
% |
Percentage of revenue |
|
|
8.2 |
% |
|
|
5.9 |
% |
|
|
|
|
|
|
||
27
Table of Contents
Cost of revenue decreased by $0.5 million from $6.1 million for the three months ended June 30, 2022 to $5.5 million for the three months ended June 30, 2023. Cost of revenue decreased primarily due to a decrease in third-party call center costs of $0.9 million as a result of shifting call referrals from third-party call centers to employees and a decrease in calls related to our health insurance vertical. Hosting costs also decreased by $0.2 million. These decreases were partially offset by increased personnel-related costs, depreciation and amortization expense, and office and occupancy allocations of $0.3 million, $0.1 million and $0.1 million, respectively.
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
||||||||||
Cost of revenue |
|
$ |
11,317 |
|
|
$ |
12,043 |
|
|
$ |
(726 |
) |
|
|
-6.0 |
% |
Percentage of revenue |
|
|
6.4 |
% |
|
|
5.7 |
% |
|
|
|
|
|
|
||
Cost of revenue decreased by $0.7 million from $12.0 million for the six months ended June 30, 2022 to $11.3 million for the six months ended June 30, 2023. Cost of revenue decreased primarily due to a decrease in third-party call center costs of $1.5 million as a result of shifting call referrals from third-party call centers to employees and a decrease in calls related to our health insurance vertical. Hosting costs also decreased by $0.6 million. These decreases were partially offset by increased personnel-related costs and office and occupancy allocations of $1.0 million and $0.2 million, respectively.
Sales and Marketing
|
|
Three Months Ended June 30, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
||||||||||
Sales and marketing expense |
|
$ |
58,795 |
|
|
$ |
87,854 |
|
|
$ |
(29,059 |
) |
|
|
-33.1 |
% |
Percentage of revenue |
|
|
86.5 |
% |
|
|
86.2 |
% |
|
|
|
|
|
|
||
Sales and marketing expense decreased by $29.1 million from $87.9 million for the three months ended June 30, 2022 to $58.8 million for the three months ended June 30, 2023. The decrease in sales and marketing expense was primarily due to a decrease in advertising costs of $25.5 million due to a decrease in carrier spend and a decrease in personnel-related costs of $2.6 million, primarily in our DTC agency. Personnel-related costs included stock-based compensation expense of $2.3 million and $3.0 million for the three months ended June 30, 2023 and 2022, respectively. Office and occupancy costs decreased by $0.2 million due to a reduction in personnel from 2022 to 2023. Agent marketing and technology service costs each also decreased by $0.2 million for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
||||||||||
Sales and marketing expense |
|
$ |
149,032 |
|
|
$ |
184,004 |
|
|
$ |
(34,972 |
) |
|
|
-19.0 |
% |
Percentage of revenue |
|
|
84.1 |
% |
|
|
86.6 |
% |
|
|
|
|
|
|
||
Sales and marketing expense decreased by $35.0 million from $184.0 million for the six months ended June 30, 2022 to $149.0 million for the six months ended June 30, 2023. The decrease in sales and marketing expense was primarily due to a decrease in advertising costs of $28.3 million due to a decrease in carrier spend and a decrease in personnel-related costs of $5.2 million, primarily in our DTC agency. Personnel-related costs included stock-based compensation expense of $4.5 million and $6.2 million for the six months ended June 30, 2023 and 2022, respectively. Office and occupancy costs also decreased by $0.3 million due to a reduction in personnel from 2022 to 2023. Technology services, agent marketing, and referral verification service costs also decreased by $0.4 million, $0.3 million and $0.2 million, respectively, for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.
Research and Development
|
|
Three Months Ended June 30, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
||||||||||
Research and development expense |
|
$ |
7,450 |
|
|
$ |
8,245 |
|
|
$ |
(795 |
) |
|
|
-9.6 |
% |
Percentage of revenue |
|
|
11.0 |
% |
|
|
8.1 |
% |
|
|
|
|
|
|
||
28
Table of Contents
Research and development expense decreased by $0.8 million from $8.2 million for the three months ended June 30, 2022 to $7.5 million for the three months ended June 30, 2023. The decrease in research and development expense was primarily due to a decrease in personnel-related costs.
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
||||||||||
Research and development expense |
|
$ |
15,377 |
|
|
$ |
16,441 |
|
|
$ |
(1,064 |
) |
|
|
-6.5 |
% |
Percentage of revenue |
|
|
8.7 |
% |
|
|
7.7 |
% |
|
|
|
|
|
|
||
Research and development expense decreased by $1.1 million from $16.4 million for the six months ended June 30, 2022 to $15.4 million for the six months ended June 30, 2023. The decrease in research and development expense was primarily due to a decrease in personnel-related costs.
General and Administrative
|
|
Three Months Ended June 30, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
||||||||||
General and administrative expense |
|
$ |
5,768 |
|
|
$ |
7,357 |
|
|
$ |
(1,589 |
) |
|
|
-21.6 |
% |
Percentage of revenue |
|
|
8.5 |
% |
|
|
7.2 |
% |
|
|
|
|
|
|
||
General and administrative expenses decreased by $1.6 million from $7.4 million for the three months ended June 30, 2022 to $5.8 million for the three months ended June 30, 2023. The decrease in general and administrative expenses was primarily due to a decrease in personnel-related costs of $1.0 million and decreases in corporate insurance and other taxes of $0.3 million.
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
||||||||||
General and administrative expense |
|
$ |
13,598 |
|
|
$ |
14,298 |
|
|
$ |
(700 |
) |
|
|
-4.9 |
% |
Percentage of revenue |
|
|
7.7 |
% |
|
|
6.7 |
% |
|
|
|
|
|
|
||
29
Table of Contents
General and administrative expenses decreased by $0.7 million from $14.3 million for the six months ended June 30, 2022 to $13.6 million for the six months ended June 30, 2023. The decrease in general and administrative expenses was primarily due to a decrease in personnel-related costs of $0.7 million and decreases in corporate insurance and other taxes of $0.4 million, partially offset by an increase in legal fees of $0.3 million.
Restructuring and Other Charges
Restructuring and other charges consist of costs related to the Reduction Plan we implemented in June 2023. For the three and six months ended June 30, 2023, restructuring and other charges consisted of employee separation costs of $2.7 million and non-cash charges for the modification of certain equity awards of $1.1 million.
Acquisition-related
Acquisition-related costs for the three months ended June 30, 2023 and 2022 solely consisted of the change in fair value of our contingent consideration liabilities recorded as the result of our acquisitions. We recorded credits to acquisition-related costs for the three months ended June 30, 2023 and 2022 of less than $0.1 million and $3.8 million, respectively, related to the decrease in the fair value of our contingent consideration liability primarily due to changes to our future revenue forecasts and, to a lesser extent, changes in market value of our Class A common stock.
Acquisition-related costs for the six months ended June 30, 2023 and 2022 solely consisted of the change in fair value of our contingent consideration liabilities recorded as the result of our acquisitions. We recorded credits to acquisition-related costs for the six months ended June 30, 2023 and 2022 of $0.2 million and $4.7 million, respectively, related to the decrease in the fair value of our contingent consideration liability primarily due to changes to our future revenue forecasts and, to a lesser extent, changes in market value of our Class A common stock.
Other Income (Expense)
Interest income increased by $0.2 million and $0.4 million in the three and six months ended June 30, 2023, respectively, compared to the three and six months ended June 30, 2022 due to increases in interest rates earned on our cash balances. Other income (expense), net was not significant for any periods presented.
Income Tax Expense
We recorded income tax expense of $0.1 million and $0.4 million in the three and six months ended June 30, 2023, respectively. We maintain a valuation allowance on our overall net deferred tax asset as it is deemed more likely than not the net deferred tax asset will not be realized.
Variable Marketing Margin
|
|
Three Months Ended June 30, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
||||||||||
Revenue |
|
$ |
67,985 |
|
|
$ |
101,915 |
|
|
$ |
(33,930 |
) |
|
|
-33.3 |
% |
Less: total advertising expense (a component of sales and marketing expense) |
|
|
43,332 |
|
|
|
68,824 |
|
|
|
|
|
|
|
||
Variable marketing margin |
|
$ |
24,653 |
|
|
$ |
33,091 |
|
|
$ |
(8,438 |
) |
|
|
-25.5 |
% |
Percentage of revenue |
|
|
36.3 |
% |
|
|
32.5 |
% |
|
|
|
|
|
|
||
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
||||||||||
Revenue |
|
$ |
177,205 |
|
|
$ |
212,596 |
|
|
$ |
(35,391 |
) |
|
|
-16.6 |
% |
Less: total advertising expense (a component of sales and marketing expense) |
|
|
116,959 |
|
|
|
145,241 |
|
|
|
|
|
|
|
||
Variable marketing margin |
|
$ |
60,246 |
|
|
$ |
67,355 |
|
|
$ |
(7,109 |
) |
|
|
-10.6 |
% |
Percentage of revenue |
|
|
34.0 |
% |
|
|
31.7 |
% |
|
|
|
|
|
|
||
30
Table of Contents
The decrease in variable marketing margin in the three and six months ended June 30, 2023 was due primarily to decreased carrier spend.
Liquidity and Capital Resources
As of June 30, 2023, our principal sources of liquidity were cash and cash equivalents of $31.0 million and up to $45.0 million of term loan availability and availability under our revolving line of credit, in the aggregate pursuant to the 2022 Amended Loan Agreement (defined as the Amended and Restated Loan and Security Agreement, dated as of August 7, 2020, or the 2020 Loan Agreement, as amended by the Loan and Security Modification Agreement executed by the Company on July 15, 2022, or the 2022 Loan Amendment. On August 7, 2023, we entered into a Loan and Security Modification Agreement, or the 2023 Loan Amendment, which amended our 2022 Amended Loan Agreement, with Western Alliance Bank, as the Lender, to among other things, eliminate the term loan availability thereunder, decrease the revolving line of credit available thereunder from $35.0 million to $25.0 million, adjust the interest rate and amend certain financial and other covenants. We refer to the 2022 Amended Loan Agreement, as amended by the 2023 Loan Amendment, as the 2023 Amended Loan Agreement.
Pursuant to the 2023 Amended Loan Agreement, borrowings under the revolving line of credit cannot exceed 85% of eligible accounts receivable balances, bear interest at the greater of 7.0% or the prime rate as published in The Wall Street Journal and mature on July 15, 2025. In an event of default, as defined in the 2023 Amended Loan Agreement, and until such event is no longer continuing, the annual interest rate to be charged would be the annual rate otherwise applicable to borrowings under the 2023 Amended Loan Agreement plus 5.00%.
Borrowings are collateralized by substantially all of our assets and property. Under the 2023 Amended Loan Agreement, we have agreed to certain affirmative and negative covenants to which we will remain subject until maturity. The covenants include limitations on our ability to incur additional indebtedness and engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses. In addition, under the 2023 Amended Loan Agreement and through the maturity date, we are required to maintain a minimum Adjusted Quick Ratio of 1.10 to 1.00 defined as the ratio of (1) the sum of unrestricted cash and cash equivalents held at the Lender plus (y) net accounts receivable reflected on our balance sheet to (2) current liabilities, including all borrowings outstanding under the 2023 Amended Loan Agreement, but excluding the current portion of deferred revenue (in each case determined in accordance with GAAP). At any time the Adjusted Quick Ratio is less than 1.30 to 1.00 the Lender shall have the ability to use our cash receipts to repay outstanding obligations until such time as the Adjusted Quick Ratio is equal to or greater than 1.30 to 1.00 for two consecutive months.
Since our inception, we have incurred operating losses and may continue to incur losses in the foreseeable future. We believe our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next 12 months, without considering the borrowing availability under our credit facility. In June 2023, we committed to exiting our health insurance vertical and implemented the Reduction Plan, which included the elimination of approximately 28% of our workforce. We expect these reductions to produce cost savings in non-marketing operating expenses of over 15%. On August 1, 2023, we sold assets relating to our health insurance vertical. Among the assets sold were all of the issued and outstanding membership interests of Eversurance for proceeds of approximately $13.2 million, subject to customary post-closing adjustments. Eversurance included commissions receivable of approximately $32.2 million as of June 30, 2023, which were expected to be collected over the next seven years. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our revenue, the timing and extent of spending on business initiatives, purchases of capital equipment to support our growth, sales and marketing activities, impact to our business from our restructuring, expansion of our business through acquisitions or our investments in complementary offerings, technologies or businesses, market acceptance of our platform and overall economic conditions. If we do not achieve our revenue goals as planned, we believe that we can reduce our operating costs. If we need additional funds and are unable to obtain funding on a timely basis, we may need to significantly curtail our operations in an effort to provide sufficient funds to continue our operations, which could adversely affect our business prospects.
31
Table of Contents
Cash Flows
The following table shows a summary of our cash flows for the six months ended June 30, 2023 and 2022:
|
|
Six Months Ended June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(in thousands) |
|
|||||
Net cash provided by (used in) operating activities |
|
$ |
2,111 |
|
|
$ |
(7,373 |
) |
Net cash used in investing activities |
|
|
(2,022 |
) |
|
|
(1,989 |
) |
Net cash provided by financing activities |
|
|
108 |
|
|
|
15,557 |
|
Effect of exchange rate changes on cash, cash equivalents |
|
|
16 |
|
|
|
(27 |
) |
Net increase in cash, cash equivalents and restricted cash |
|
$ |
213 |
|
|
$ |
6,168 |
|
Net cash provided by (used in) operating activities
Operating activities provided $2.1 million in cash during the six months ended June 30, 2023, primarily resulting from the offset of net non-cash charges of $16.6 million and net cash provided by changes in our operating assets and liabilities of $1.2 million to our net loss of $15.7 million. Net cash provided by changes in our operating assets and liabilities consisted primarily of a $7.3 million decrease in accounts receivable and a $1.9 million decrease in prepaid expenses and other current assets, partially offset by a decrease in accounts payable and accrued expenses and other current liabilities of $7.5 million and a net change of $0.3 million in our operating lease right-of-use assets and liabilities. Operating activities used $7.4 million of cash during the six months ended June 30, 2022 primarily resulting from our net loss of $9.5 million and net cash used by operating activities of $11.3 million, partially offset by net non-cash charges of $13.4 million. Net cash used by changes in our operating assets and liabilities consisted primarily of an $11.4 million increase in commissions receivable and a $1.0 million increase in accounts receivable, partially offset by a net $1.4 million increase in accounts payable and accrued expenses and other current liabilities.
Changes in accounts receivable, accounts payable and accrued expenses and other current liabilities were generally due to changes in our business and timing of customer and vendor invoicing and payments. Collection of commissions receivable depends upon the timing of our receipt of commission payments from insurance carriers. A significant portion of our commissions receivable is classified as long-term.
Net cash used in investing activities
Net cash used in investing activities was $2.0 million for each of the six months ended June 30, 2023 and 2022. Net cash used in investing activities for the six months ended June 30, 2023 and 2022 was attributable to the acquisition of property and equipment, which included the capitalization of certain software development costs. During the six months ended June 30, 2023 and 2022, we capitalized $1.9 million and $1.3 million, respectively, of software development costs.
Net cash provided by financing activities
During the six months ended June 30, 2023 and 2022, net cash provided by financing activities was $0.1 million and $15.6 million, respectively. Net cash provided by financing activities during the six months ended June 30, 2023 consisted of proceeds received from the exercise of common stock options, partially offset by tax withholding payments relating to net share settlements. Net cash provided by financing activities during the six months ended June 30, 2022 consisted of $15.0 million of proceeds from the issuance and sale of shares of common stock in a private placement with Recognition Capital, LLC, an entity which is owned and controlled by David Blundin, Chairman of the Board of Directors and co-founder of our company, and $0.6 million from the exercise of common stock options.
Contractual Obligations and Commitments
There have been no material changes to the contractual obligations reported in our Annual Report on Form 10-K for the year ended December 31, 2022.
Critical Accounting Policies and Significant Judgments and Estimates
Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors that we
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believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
The following critical accounting policies reflect significant judgments and estimates used in the preparation of our condensed consolidated financial statements:
There have been no material changes to our critical accounting policies from those disclosed in our financial statements and the related notes and other financial information included in our Annual Report on Form 10-K for the year ended December 31, 2022, on file with the Securities and Exchange Commission. For further disclosure, refer to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual Report on Form 10-K.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We have a credit agreement that provides us with credit at a floating rate of interest. As of June 30, 2023, we had no outstanding borrowings under our credit facility and therefore no material exposure to fluctuations in interest rates.
We contract with vendors in foreign countries and we have foreign subsidiaries. As such, we have exposure to adverse changes in exchange rates of foreign currencies associated with our foreign transactions and our foreign subsidiaries. We believe this exposure to be immaterial. We do not hedge against this exposure to fluctuations in exchange rates.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
Information with respect to legal proceedings and this item is included in Note 8 of the Notes to the Unaudited Condensed Consolidated Financial Statements contained in Part I, Item I of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
Item 1A. Risk Factors.
In addition to risks and uncertainties in the ordinary course of business that are common to all businesses, important factors that are specific to our industry and company could have a material and adverse impact on our business, financial condition, results of operations and cash flows. You should carefully consider the risk factors set forth in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022 and in our subsequent periodic filings with the Securities and Exchange Commission. Other than as reflected in the following updated risk factors, there has been no material change from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2022:
A significant portion of our revenue in recent periods was derived from two customers, and our results of operations could be adversely affected and stockholder value harmed if we lose business from these customers.
Sales to Progressive Casualty Insurance Company accounted for 11% and 25% of our revenue for the three and six months ended June 30, 2023, respectively, and 21% of our revenue for the year ended December 31, 2022. Sales to State Farm Mutual Automobile Insurance Company accounted for 12% and 11% of our revenue for the three and six months ended June 30, 2023, respectively, and 11% of our revenue for the year ended December 31, 2022. These customers made purchases from us under short-term agreements and may decrease or cease doing business with us at any time with no notice. As a result, we have no assurances that these customers will continue to purchase from us at their historical levels or at all. If these customers were to reduce their level of purchases from us or discontinue their relationships with us, the loss could have a material adverse effect on our results of operations in both the short and long term.
Our business is substantially dependent on revenue from automotive insurance providers and subject to risks related to automotive insurance and the larger automotive industry.
A substantial majority of the referrals made through our marketplace are for automobile insurance and our financial prospects depend significantly on the larger automotive industry ecosystem. Revenue from automotive insurance providers accounted for 79% of our total revenue for the six months ended June 30, 2023 and revenue from automotive insurance providers accounted for 80% and 79% of our total revenue for the years ended December 31, 2022 and 2021, respectively. The automotive insurance industry has experienced deteriorating underwriting performance due to a sudden and persistent rise in the severity of claims caused by inflationary increases in the cost to repair and replace vehicles and settle medical and injury claims. The increase in claims severity has reduced underwriting performance for auto insurance carriers, causing them to implement policy premium increases and reduce spending on new customer acquisition. If insurance carriers continue to experience large or unexpected losses through the offering of insurance, these carriers may continue to decrease the amount of money they spend with us. For example, in January 2023, we saw a major carrier return to higher spending patterns, but subsequently reduce customer acquisition spending in the second quarter of 2023 due to higher than expected claims losses. In addition, decreases in consumer demand in the automotive industry in general could adversely affect the demand for insurance and, in turn, the number of consumers using our marketplace to request insurance quotes. For example, trends in the automotive industry, such as from the effects of ride sharing applications, including Uber and Lyft, distracted driving and autonomous driving technologies, have the potential to adversely affect automobile purchases and to decrease the demand for auto insurance. Similarly, we believe that shortages of semiconductor chips for new car production, as well as the availability of automotive parts used in car repair, have resulted in higher insurance claims losses and increasing insurance carrier loss ratios.
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Our recent restructuring may not result in anticipated savings or operational efficiencies, could result in total costs and expenses that are greater than expected and could disrupt our business.
In June 2023, we committed to exiting our health insurance vertical and implemented a workforce reduction plan to reduce the total number of our employees by approximately 28%. We undertook these initiatives to strengthen our balance sheet, improve operational efficiencies and operating costs and better align our workforce with current business needs, top strategic priorities and key growth opportunities. We may not realize, in full or in part, the anticipated benefits and savings from this restructuring due to unforeseen difficulties, delays or unexpected costs. In addition, we may incur additional expenses not currently contemplated due to events associated with the restructuring. If we are unable to realize the expected operational efficiencies and cost savings from the restructuring, or if we incur additional expenses related to the restructuring, our operating results and financial condition would be adversely affected. Furthermore, the restructuring may be disruptive to our operations. For example, our management may need to divert a disproportionate amount of its attention away from our day-to-day strategic and operational activities and devote a substantial amount of time to managing the organizational changes brought about by the reduction in force. In addition, our workforce reduction could yield unanticipated consequences, such as attrition beyond planned staff reductions, increased difficulties in our day-to-day operations and reduced employee morale. If employees who were not affected by the reduction in force seek alternative employment, this could result in unplanned additional expense to ensure adequate staffing of our company or harm our productivity. Our workforce reduction could also harm our ability to attract and retain qualified personnel who are critical to our business. Any failure to attract or retain qualified personnel could adversely affect our business.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent Sales of Unregistered Equity Securities
There were no shares of equity securities sold or issued, or options granted, by us during the three months ended June 30, 2023 that were not registered under the Securities Act of 1933, as amended, and that were not previously reported in a Current Report on Form 8-K.
Issuer Purchases of Equity Securities
We did not purchase any of our registered equity securities during the period from April 1, 2023 to June 30, 2023.
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Item 6. Exhibits.
Exhibit Number |
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Description |
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2.1 |
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10.1 |
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10.2 |
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31.1 |
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31.2 |
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32.1† |
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32.2† |
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101.INS |
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Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.LAB |
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Inline XBRL Taxonomy Extension Labels Linkbase Document |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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104 |
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
† The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of EverQuote, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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EVERQUOTE, INC. |
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Date: August 8, 2023 |
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By: |
/s/ Jayme Mendal
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Jayme Mendal Chief Executive Officer and President (Principal Executive Officer) |
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Date: August 8, 2023 |
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By: |
/s/ Joseph Sanborn
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Joseph Sanborn Chief Financial Officer and Treasurer (Principal Financial Officer) |
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Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jayme Mendal, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of EverQuote, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 8, 2023
/s/ Jayme Mendal
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Jayme Mendal Chief Executive Officer and President (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Joseph Sanborn, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of EverQuote, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 8, 2023
/s/ Joseph Sanborn
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Joseph Sanborn |
Chief Financial Officer and Treasurer |
(Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Jayme Mendal, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report on Form 10-Q of EverQuote, Inc. for the fiscal quarter ended June 30, 2023 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of EverQuote, Inc.
/s/ Jayme Mendal
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Jayme Mendal |
Chief Executive Officer and President |
(Principal Executive Officer) |
August 8, 2023 |
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Joseph Sanborn, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report on Form 10-Q of EverQuote, Inc. for the fiscal quarter ended June 30, 2023 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of EverQuote, Inc.
/s/ Joseph Sanborn
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Joseph Sanborn |
Chief Financial Officer and Treasurer |
(Principal Financial Officer) |
August 8, 2023 |