Good afternoon, and welcome to EverQuote’s Second Quarter 2018 Earnings Call. We'll be discussing the results announced in our press release issued today after the market close. With me on the call this afternoon is Seth Birnbaum, EverQuote's CEO and Co-Founder; Tomas Revesz, CTO and Co-Founder; and John Wagner, CFO of EverQuote. During the call, we may make statements related to our business that may be considered forward-looking, including statements concerning our financial guidance for the third quarter and full year 2008 (sic) [ 2018 ], our growth strategy and our plans to execute on our growth strategy, the growth levers we expect to drive our business, our ability to maintain existing and acquire new customers, our expansion into international markets and other statements regarding our plans and process. Forward-looking statements may be identified with words and phrases such as we expect, we believe, we intend, we anticipate, we plan, may, upcoming and similar words and phrases. These statements reflect our views only as of today and should not be considered our views as of the subsequent date. We specifically disclaim any obligation to update or revise these forward-looking statements, except as required by law. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For a discussion of material risks and other important factors that could affect our actual results, please refer to the contained -- under the heading Risk Factors in our quarterly report on Form 10-Q filed after the close of the market today and as updated by others SEC filings, all of which are available on the Investor Relations section of our website at investors.everquote.com and on the SEC's website at sec.gov. Finally, during the course of today's call, we will refer to certain non-GAAP financial measures, which we believe are helpful to investors. A reconciliation of GAAP to non-GAAP measures is included in the press release we issued after the close of the market today, which is available on the Investor Relations section of our website at investors.everquote.com and on the SEC's website at sec.gov. With that, I'll turn the call over to the CEO, Seth Birnbaum.

Good afternoon. Thank you, Brinlea, and thank you, everyone, for joining us. We are very excited to be hosting our first earnings call as a newly public company. I want to start by extending special thanks to our new investors for their confidence in our team and company. We've enjoyed meeting many of you, and EverQuote's journey is just beginning. It's still the early days of the shift of insurance online. We are so glad to have you as part of our team. The insurance industry is a large, traditional industry, but it is evolving rapidly from the applications of new technology, data and distribution. Here at EverQuote, we're excited to help drive the future of the industry with the largest online marketplace for insurance shopping in the United States. Last year, 100 million Americans went online looking for insurance. At the same time, in the U.S., non-health care insurance providers spent $120 billion on distribution, nearly all of it, over $117 billion, on marketing and sale offline. To address this major opportunity, over the past 8 years, we've developed a market-leading technology and data platform to make insurance shopping easy, personal and efficient, saving consumers billions of dollars in the process by our estimates. We believe our financial results for the quarter illustrate the strength of our marketplace, our strength in data and analytics, focused execution on our multichannel and provider-inclusive distribution strategy and demonstrates the strong secular trend from which we are benefiting. Our second quarter was a great quarter. Revenue increased 37% year-over-year, while Variable Marketing Margin grew by 41%. We reported year-over-year acceleration in our auto insurance business, up 23%, and delivered acceleration in our new verticals with home and life growing by 420%. The growth was broad-based, with many of our largest carriers bidding up,…

Thank you, Seth, and good afternoon, everyone. I'll start by discussing our second quarter financial results with highlights for the quarter and then provide third quarter and full year 2018 guidance. Given this is our first earnings quarter, I'll start by providing a quick overview of how our business model works. We operate an online insurance marketplace which connects consumers shopping for insurance with relevant insurance providers. We generate revenue from our insurance marketplace through the sale of consumer referrals. A consumer referral is a connection we make between the consumer shopping for insurance and an insurance provider who has expressed through our platform a desire to quote insurance to consumers of that profile. We make that connection either online in the form of a quick referral or offline in the form of a call or data referral. We recognize our revenue at the time of referral. Our revenue is primarily derived from our auto insurance vertical with our new verticals, home and life insurance, contributing to revenue at a growing rate. Turning to our financial results for the second quarter of 2018. We are very pleased to report that our total revenue grew to $41.1 million, a 37% year-over-year improvement and a substantial increase from the 28% year-over-year growth in our first quarter. Revenue from our auto insurance vertical increased 23% year-over-year to $35.5 million, while revenue from our home and life vertical increased 420% year-over-year to $5.6 million. Our strong revenue growth in the quarter was primarily the result of a significant increase in the average revenue per quote request of 34% over the prior year period. Total quote requests for the quarter grew modestly to $3 million. The improvement in revenue per quote request was driven by progress within our insurance provider network. During 2018, we increased…

[Operator Instructions] The first question we have is Douglas Anmuth from JPMorgan.

Wanted to ask a couple of things. First, can you guys just talk about the trade-off between revenue per quote request and quote volume? You obviously saw very good growth in RPQR, but modest quote growth. If you could talk about how are you thinking about optimizing and balancing that quarter-to-quarter? And then just related, John, you mentioned a couple of the traffic sources, trying some new things and some things that weren't fully optimized yet, if you could give us some more color there on the higher quality sources that you're going after to drive traffic.

Great. This is Seth. As we've learned over time, continually growing quote volume into constrained budget on the provider side can reduce revenue per quote request. So this past quarter, we did an excellent job in managing the volume growth and we've moderated the autos -- the quote requests in autos to maximize VMM dollars. We've also shifted to some higher-performing traffic and leaned in on growing the quote requests for the new vertical. So overall, traffic performed really well in Q2. We're also leaning in on our distribution for our stated strategy of enabling autos to really catch up with traffic by expanding coverage and budget on the provider side of the network. And we did see, again, better traffic management and performance, and that was reflected on the provider side of EverQuote's marketplace with increased bids and/or budget from a vast majority of the providers, and that resulted in some of that increase of revenue per quote request. Going forward, as we talked about in the roadshow quite a bit, we'll continue to balance the distribution and traffic intelligently as we grow, optimizing always for VMM dollar production and growth, and that's how we manage the business and that's precisely what our teams did in Q2.

Anything on the new traffic sources? The quality that you're going after?

Yes. This is sort of 2 -- so 2 focuses for our traffic teams. One, obviously, is raw conversion rate to a buy-in. So that's a bid from an ad impression all the way to the buy-in which creates both consumer satisfaction as well as provider performance. The other part of our marketplace which is really unique is going after a higher LTV consumers. So we do see increasing demand from providers for premium preferred consumers, and those are a large percentage of our marketplace. So that's the other metric of quality that we go after. There was a second question, Doug and I apologize.

You've covered it.

Okay. Great. Okay. Terrific.

Our next session then comes from Nat Schindler from Bank of America Merrill Lynch.

Just wanted to see if you could help me out on and give us any update on how you are integrating any of the carriers and improving the consumer experience? Right now it seems that many are still reluctant to show prices on your system or -- and let you pass information directly into their system. How do you see this evolving over time?

So I'm going to take, just the high-level integrations, and then Tomas will cover how we see the evolution of the consumer experience. Just off the bat, we actually did do 13 net new integrations with carrier partners in Q2, either net new or deeper integrations. Now remember, Nat, those integrations have 2 impacts on our marketplace. One is they definitely result in higher consumer satisfaction, as it's a much less friction in the process of shopping for insurance. And then the second part of that, obviously, is it dramatically increases provider performance in the marketplace as well. And so we've made some significant progress. We actually built a team to just do integration because of the benefits the team is running and we have really a strong momentum going and doing more of those integrations going forward. I'll let Tomas take the question of how we see consumer experience evolving over time.

Sure. Now, there's 2 parts to this answer. First is the depth of integration varies from partner to partner. There is very little disagreement with partners or providers in the industry that improving and streamlining the process of handing consumers off from the marketplace into their hands is benefited by these integrations. A lot of the progress is gated by the fact that many of these companies are, in and of themselves, implementing systems that can support these kinds of digital integrations for the first time. And these are typical sort of longer life cycle IT projects in big companies. But all of them are moving happily in this direction, and we work closely with all of them to make as much progress as they are able to support us in doing. Over the long term, many of our partners -- and part of our strategy to be inclusive of partners so that the consumer has the best set of choices available to them -- many of our partners still wish to retain the final leg of that pricing conversation with the consumer themselves. Pricing, especially in auto insurance in the U.S., is still a complex exercise and one that in order to deliver an accurate, bindable quote or rate, many of our partners wish to take that final leg. So ultimately, we see the consumer experience evolving to a very seamless handoff to that final dialogue with the provider, whether it's online with a click-to-quote experience, perhaps, or offline where the consumer is getting on the phone with an agent in a call center and ready to talk about the final configuration or details of their policy as the near to midterm destination of the consumer experience. And all of our partners are in agreement, largely, with creating that experience. Much of the work is simply time and energy from engineering and road maps on both sides of the house.

And our next question comes from Ron Josey with JMP Securities.

I wanted to ask a little bit more, Tomas, what you were just talking about with Nat, but specifically maybe a different angle. 90% of revenues now coming direct from the providers and so can you just talk about or remind us the advantages of working directly with provider, what do they give you? And how could that -- how does that accelerate integrations that you just talked about?

Sure, and thank you for the question. The benefits to working directly with providers include a number of things. One is the ability to actually create those integrations so that our systems are talking to each other directly and not through intermediaries. It enables us to launch these projects together with them and actually create these integrations without having to step through a third-party. The others that provide us a great deal more insight and feedback from those providers on how our referral is performed, it enables the creation of solutions or products like smart campaigns, which Seth mentioned. And it provides ultimately for a higher level of provider ROI through the use of more intimate exchange of information and technologies that allow both them and us to optimize their campaigns, to hone in on those segments of the consumer set that they are most effective in acquiring.

And ultimately, one of the unique aspects of what we do is that direct-to-provider integration for an improved consumer experience, but also that data feedback gives us that bid to bind data asset that uniquely enables us to find the relevant matches for consumers and drive higher ROI for the provider. So that direct distribution is really differentiated.

And our next question comes from Michael Graham with Canaccord.

I just wanted to ask about the growth. You had really accelerating growth, you had good upside to numbers in Q2. Could you just talk about the visibility that you had, sort of the linearity of that in the quarter? Is that something that can kind of come in at the end of the quarter? And then just wanted to think here about how you're thinking about the Q3 guidance. It's sequentially sort of flat with what you just reported in Q2. But I think historically, even in a tough year like last year, you have sequential uptick in Q3. So I'm just wondering, John, how you're thinking about that? If you could frame that out for us?

So absolutely. We start to see more of the quarter as we go through it. We look at revenue and we look at results on a daily basis and are able to look into the quarter that way. So that -- absolutely, that picture develops as we go through the quarter. As we look out to kind of our guidance philosophy, we have a kind of a judicious guidance philosophy. We very much guide kind of line of sight to what we believe we can identify and what we can deliver in terms of revenue, VMM and EBITDA. So what we give you for guidance, both for the quarter as well as next year, is what I would say is high confidence that we have in that guidance.

[Operator Instructions] And our next question comes from Jason Helfstein at Oppenheimer.

Just 2. So first, just want to follow up a little on Mike's question, so -- and then another one. So to the extent that you're saying you're seeing kind of revenue and VMM slowing in the fourth quarter at 20%, is there a reason why that you're seeing just given the type of growth that you just did? Or are you just being conservative? That would be fine too, but if your signal is indicating 20%, maybe talk about why that's the case. And then obviously, in the quarter, pricing was exceptionally strong, reflecting the quality of what you're doing for those agents, carriers, advertisers used to pay. Do you feel like your pricing certain, you will call them advertisers out of the market? And kind of how do you -- what are the levers to drive volume or get it, let's just call it, more balanced, which will result in greater revenue growth over time -- VMM growth over time?

Thanks, Jason. So on the first part, in terms of Q3, we very much guide to what we can see line of sight, what we feel confidence in. And in terms of the full year, we do consider the seasonality that we normally see within Q4. As we said that Q4 is seasonally a down quarter for us, and we expect that to continue. So we do consider that in our full year guidance as it implies kind of our Q4 guidance inside of that. Seth, do you want to talk about a little bit about the pricing?

Yes, Jason, just to clarify, and again apologies, can you sort of ask the question again just as a single part, your second half about pricing?

Yes, sure. So with request for a quote of -- revenue per quote of 34%, would that imply that you were pricing out of the market certain advertisers? And how do you think about, over time, as you sell the merits of the ROI, effectively bringing advertisers into your marketplace who right now are effectively not there? So basically, trying to drive both volume and pricing more balanced over time.

Great. So one thing to bear in mind about EverQuote is that all providers come through a unified auction. So as you increase provider demand, the revenue per quote request tends to ride up, again, as long as you're very smart about how you manage the consumer flow to those providers. Along those lines, remember, Jason, integrations give providers significant leverage. So I think there's a big tool for bringing in providers and making them competitive, right. The integration can give up to a 41% lift for a full quit to quote -- or call to quote integration leverage for our provider and of course, obviously, again, much higher customer consumer satisfaction. The other big tools that we're rolling out are things like smart campaign, and what those really do is enable our systems, both machine learning and data, to sort of create a level playing field for providers so that they can efficiently bid in the marketplace. So for us, it's really tools and technologies for bringing in providers, and they still have to have great products and great fit for consumers to compete. But if they do, will be a really great place for them to grow their business.

And, John, just one follow-up to the guidance. So do you not want us to look at the exit VMM rate in the fourth quarter as indicative of 2019 and just think of 2019 to stand on its own? What's your comment around seasonality?

Yes, very much to stand on its own. We've talked a little bit before about the seasonal trends that we see within the business. So as we come into Q3, it is generally a strong quarter for us. And as we come into Q4, it will be generally a weaker quarter for us. I think it gives us confidence based on the strong performance we saw this quarter into '19. But as such, we'd say that we're not giving any guidance on '19, and it will stand on its own at this point.

And our next question comes from Ralph Schackart at William Blair.

You called out some strength in the premium preferred consumer segment in the quarter. Anything sort of unique or specific in terms of why the carriers or agents focus on this market segment? Was it perhaps some of the favorable trends you saw in traffic that enabled stronger bidding and auction environment? But any color you could add around it would be great.

I actually suspect that it's more to do with industry dynamics. There are simply more carriers going after premium and preferred consumers versus the standard or non-standard consumers. All are great markets and we have relatively large consumer flows across -- the consumers really is a place for everybody to come find insurance. But again, from a provider perspective, there is a lot of competition at the high-end of the market.

Maybe a follow-up separately. Can you maybe give a sense of your expectations for the home and life revenue stream as sort of an extension or bolt-on to your auto business? Long-term expectations, how that revenue opportunity would compare to your core auto business?

For us, we see, if you take home and life combined, they will grow over the long term to be as big as auto insurance. So sort of equivalent opportunity. I mean, again, one of the most exciting aspects of the dynamic of EverQuote in our platform approach is that when we launch these verticals, they are launching with very good economics along VMM. They are going through the cycle faster than autos. And perhaps the most exciting aspect for us is the operating leverage. We've built out the engineering, we have the accumulated data, and it's really -- it's very efficient for us to launch these new verticals, these adjacent verticals in the marketplace. That's what we're seeing with home and life. As just to scale, again, Ralph, we do expect them to get, certainly home and life combined, to be as big as autos is, and grow certainly.

And our next question comes from the line of Aaron Kessler from Raymond James.

A couple of questions, guys. First, maybe just a follow-up to that on, kind of thinking about other verticals longer term. Any update there in terms of where the verticals may launch? And then timing of those? And also just maybe mobile traffic, if you can update us what percentage is mobile and kind of how that's been trending as well?

Sure. The next verticals for us are renters and commercial. We've actually begun to develop the team for those. And our plans are unchanged. We do expect to launch them in the near term, certainly within 2019. As far as mobile, we do see sort of gradual increase, I think way more modest than we saw in '16 and '17, and the majority of our traffic is mobile, but not huge shifts over the last 2 quarters.

Great. And maybe just a quick update also on the direct first and direct percentages, I think you said 90% this quarter. Can you give us an update where that was last quarter? I think it was maybe like 85% for all of '17 versus where that was in Q1.

I recall Q1 was 86%.

It was just under 90%. We're just over 91% -- 90% now.

Oh, was it in Q1? In Q1, it was under 90%, and now we're just over 90%.

And there are no further questions.

Thank you very much. So thank you very much, everyone, for joining us. It's a pleasure. Look forward to talking to you again next quarter or seeing you out on the road, and it is truly a privilege and an honor, and we look forward to working with everyone. Bye-bye.

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