EverQuote, Inc. (EVER) Q3 2018 Earnings Report, Transcript and Summary

Good afternoon, My name is Mariama, and I will be your conference operator today. At this time I would like to welcome everyone to the EverQuote Q3 2018 Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn the call over to Allise Furlani of The Blueshirt. You may begin your conference.

Thank you. Good afternoon and welcome to EverQuote’s third quarter 2018 earnings call. We’ll be discussing the results announcing our press release issued today after the market close. With me on the call this afternoon is Seth Birnbaum, EverQuote’s, Chief Executive Officer and Co-Founder; and John Wagner, Chief Financial Officer of EverQuote. During the call, we will make statements related to our business that may be considered forward-looking, including statements concerning our financial guidance for the fourth quarter and full year 2018, our growth strategy our plan 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, reflects our views only as of today and should not be considered our views as of any subsequent date. We specifically disclaim any obligation to update or revise these forward-looking statements except as required by law. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations or discussion of material risks and other important factors that could affect our actual results please refer to those contained under the heading Risk Factors in our most recent quarterly report on Form 10-Q, which is on file with the Securities and Exchange Commission and available on the investor relations section of our website and investors.everquote.com and on the SEC’s website at sec.gov. Finally, during the course of today’s call, we’ll refer to certain non-GAAP financial measures, which we believe are helpful to investors. The reconciliation of GAAP to non-GAAP financial measures was included in the press release we issued after the market closed today, which is available on the investor relations of our website at investors.everquote.com. With that, I’ll turn the call over to the Seth Birnbaum, CEO.

Thank you, Allise. Good afternoon everyone and thank you for joining us today to discuss our third quarter results. We have enjoyed meeting many of you in EverQuote’s journey it’s still in the early days as insurance shifts online. Before we get rolling, I want to give a quick overview of our agenda today. I’ll briefly highlight our long-term vision and then discuss our Q3 results, which came in favorable to guidance across the board. Then I’ll discuss the challenges we’ve seen in the first half of Q4 and explain what we’re doing about it. The insurance industry is a large traditional industry, it is evolving rapidly through the application of new technology, data and distribution strategies. Here in EverQuote, we’re excited to help drive the future of the industry with the largest online marketplace for insurance shopping in the United States. Ultimately, we want to be the smartest place to shop for online consumers. Last year, 100 million Americans went online looking for insurance. At the same time in the U.S., the non-healthcare insurance providers spends $120 billion on distribution, nearly all of it over $117 billion was spent offline. To address this opportunity, we’ve develop the market leading technology and data platform over the past eight years to make insurance shopping easy, personal and efficient, saving consumers billions of dollars in the process. We believe our financial results for the quarter to illustrate the strength of our marketplace data and analytics, execution on our multichannel and provider inclusive distribution strategy and the strong secular trends in the industry. Our third quarter results were impressive. Revenue increased 30% year-over-year to record levels while variable marketing margin grew by 36% year-on-year. We reported strong year-over-year growth in our auto insurance business, up 19% and delivered strong growth in our newer vertical with home and life up 210%. Our growth was broad based with eight out of our top 10 carriers, increasing our overall spend on our platform over the past year, and an increasing number of insurance agents in our marketplace. We believe these increases are due to the performance of our referral combined with healthy insurance industry dynamics and success in executing our direct strategy with insurance providers. In Q3, we achieved record variable marketing margin of $12.9 million, a 36% increase from the prior year. Our success was driven by our strategy of expanding direct distribution, driving higher coverage and budget from insurance providers combined with profit growth in newer vertical, progress of provider integration and strong growth in our insurance agency business. This resulted in an increase in revenue per quote request of 38%, which more than offset a 6% decline in quote request versus the prior year, which I will dig in on later in the call. We continue to invest in our four key levers for growth. First, increasing provider coverage; second, deepening provider engagement; third, deepening consumer engagement; and finally, attracting more consumers to our marketplace. Let me speak to the progress we’ve made in the quarter on each of these growth levers. First, in the third quarter, we made progress increasing provider coverage by adding more providers, increasing provider budgets, and expanding the coverage and depth of our marketplace. Adding more providers and expanding their coverage helps us provide more choices for our consumers, generate more referrals and that’s greater monetization and overtime through greater competition in our marketplace options also drive higher pricing. In addition to increasing the number of providers in our marketplace, we worked with current partners to broaden their consumer targeting and current policy holder retention campaign and add coverage for our newer verticals. We continue to grow our carrier call program. We launched a dedicated large agent program to increase coverage from some of the largest, highest performing agents in our marketplace. Finally, we added a number of new partners for our home and life verticals and build the pipeline of new partners for commercial wrenches, which we plan to launch in 2019. As a result of these initiatives to grow our network, our revenues per quote request rose 1% sequentially and an increase 38% over the prior year. Second, we continued deepening our engagement with providers through integrations in smart campaigns. Carrier integrations are a powerful lever to drive more sales for partners, greater monetization, and most importantly even more satisfied consumers. We believe these integrations allow consumers to avoid repetitive data entry and improve consumer satisfaction by providing consumers click-to-quote functionality that will effectively offer consumers real time digital pricing. This increases consumer satisfaction by reducing friction in the buying process and offers the opportunity for us to deepen our relationships and increased conversion rates for providers. For example, in the quarter, one of our partners went from a very modest level of data pre-fill to a full click-to-quote integration. The new interface led to nearly a doubling in the number of consumers who receive quotes, which illustrates how integration can help us reduce friction for the consumer, an increased conversion rate for providers. This quarter, we made progress competing 14 new integrations and further deepening 22 existing integrations. That said, we are dependent on providers IT schedule and as such, believe it will be several years before all of our largest partners are fully integrated. Third, we made progress deepening relationships with consumers through investments in our product and technology. As you know, we are focused on making EverQuote the smartest way to shop for insurance online by offering consumers the best digital experience for insurance. Technology is moving quickly and with insurance at the intersection of IoT, AI, and Big Data, we expect many consumers in carriers will be moving from buying and selling insurance to using newly evolved digital tools to price, collect and manage their risk. EverQuote, can and plan to play a major role in this transition. In particular EverDrive our social safe driving app is a cutting edge smartphone app that helps consumers monitor and improve their driving. We believe it is a useful tool to help our providers grow their businesses with attractive safe drivers and will allow providers to reward drivers by giving substantial discounts for safe driving behavior. By integrating the driving data from the EverDrive app, consumers can save money through premium discounts of up to 50%, helping our partners focus their marketing to attract these high value safety oriented consumers and also help to improve consumer’s driving habits. In the quarter, we rolled out EverDrive’s first carrier partnership and EverDrive users bought their first policies via EverDrive partner safe driving discount. EverDrive partner offers are now live in five states. In 2019, we expect to expand the new states add more carriers and offer new features to EverDrive users such as an in-app policy purchases. While we’re excited to see the first policy purchases via EverDrive this quarter, it’s still very early days and we will keep you updated on the product as we expand our pilot program to a broader launch over the coming year. Our fourth and final growth lever is driving more consumers to our market place. And this quarter our progress as increasing volume was offset by a number of challenges, which emerged in our traffic. As reported in our last call, in the second quarter we intentionally moderated quote request volume growth to better optimize pricing and margin. In Q3, we began to accelerate and grow our advertising campaign to grow consumer traffic for our auto vertical, and while we were successful in growing volume sequentially quarter-on-quarter, we encountered several challenges across the traffic, which kept the pace of growth below our internal targets. We saw incremental ad impression that did not result in incremental visits and conversions, which we believe is indicative accretive fatigue and a need per refresh advertising creative. We also saw evolving policies on social media that required adjustments through our creative and as a result, Facebook discontinued our old ad, while we updated our bids for display advertising and search, we also did not see consumer volume increase at the expected pace. To counter these challenges, we accelerated and improved our creative development process, acquiring new expertise, and shifting resources from other projects to creative development. We successfully relaunched Facebook with new ad and expect to continue to expand this campaign. We implemented new bidding strategies and technologies to help us respond more quickly to traffic ship and have seen increasing volume of consumer arrival from both display and search advertising. We accelerated the pace of our product workloads, development and testing to improve the efficiency of all of our channels. While Q4 has started soft in October, in recent weeks, we’ve seen both sequential and year-over-year volume increases, while holding cost per quote lack in Q4 at higher volumes versus the prior quarter. We believe we’ve turned the corner on traffic road and are gaining volume efficiently per our target. At the same time, we’ve seen some pricing compression in our options, while we are actively adjusting our traffic positions to recapture margin dollars, We’re updating our full year 2018 guidance to reflect this trend in reduced margin. While, we’re obviously disappointed that we’re lowering our VMM guidance for the year, we remain bullish about our long-term outlook and financial models. Furthermore, we remain committed to achieving our goal of adjusted EBITDA break even in 2019, and I would expect to update you on that during our next earnings call. With that, let me turn to John for a brief review of our third quarter financial, and then we will take your questions.

Thank you, Seth, and good afternoon everyone. I will start by discussing our third quarter financial results with additional commentary and highlights for the quarter, and then provide fourth quarter and full year 2018 guidance. As Seth mentioned, we are pleased to report total revenue of $41.7 million up 30% year-over-year and higher than our revenue guidance we provided last quarter. Revenue from our auto insurance vertical grew 19% year-over-year to $35.9 million, an acceleration from last quarter 17% year-over-year growth rate. We continue to be excited about the growth of our home and life insurance vertical. Were revenue increased 210% year-over-year to $5.8 million. 92% of our revenue in the quarter came from our direct channel, which we define as insurance carriers and agents that purchased directly through our platform. Our strong revenue growth in the quarter was the result of a 38% increase in average revenue per quote requests over the prior year’s period. The improvement in revenue per quote request to an average of $13.72 was driven by continued increases in insurance provider referral bids [ph]. Total quote, requests in the quarter declined 6% year-over-year to $3 million, due to the constraint of increasing cost per quote request, which limits our ability to grow traffic with incremental variable marketing margin. Within the verticals, home and life’s revenue growth was due to increases in both quote request volume and revenue per quote requests. Within the auto vertical, we’ve experienced an increase in revenue per quote request, but a significant decrease in the volume of quote request. In the quarter, we continue to manage traffic and distribution in our marketplace to our financial objective of increasing variable marketing margin dollars. Variable marketing margin or VMM was $12.9 million for 30.8% in the third quarter, an increase of $3.4 million or 36% compared to the prior year period, and an improvement of 1.2 points in margin percentage. We define VMM as revenue as the cost to attract consumers to our marketplace to online advertising. The increase in VMM was due to the prior mentioned 38% improvement in revenue per quote request offset by 36% increase in the cost per quote request reflecting a more competitive landscape for consumer traffic. Turning to the bottom line, adjusted EBITDA in the third quarter was a loss of $1 million on the high end of our guidance range. Adjusted EBITDA excludes stock-based compensation of $2.6 million, which increased significantly over the second quarter primarily due to the size and valuation associated with our employee equity grants, granted at the time of our IPO. Due to the amortizing nature of our stock-based compensation this expense in Q3 is representative of what we expect for stock-based compensation expense in Q4 and beyond with additional expense for new awards. Given this stock-based compensation expense, our net loss for the quarter was $3.8 million or $0.15 per share based on $24.6 million weighted average shares outstanding. We ended the quarter with $38.7 million in cash. Cash activity during the quarter included the close of our IPO net proceeds of $48.6 million and the repayment of $7 million under our line of credit, which remains open with no balance. Cash flow used in operation in the third quarter was $5 million compared to $2.1 million used in operations in the prior year. The increase in cash used in operations was primarily due to working capital requirements as several larger carriers paid us just after quarter end. Given the nature of our large carrier relationships the timing of payments just before or after a period end can have a large impact on operating cash flow. By comparison, we closed this October with over $40 million in cash and accounts receivable of less than $19 million. Now, turning to guidance. As Seth stated, after we deliberately slowed quote request volumes in Q2, we began targeting quote requests growth again in Q3. As part of this process, we face challenges in growing volumes and those trends have continued into Q4. We are now more aggressively rebuilding our track positions in Q4 by increasing quote request volume, even with weaker monetization as compared to Q3. Revenue per quote request is still a historically strong levels, but at this point in the quarter, we have seen a decline from Q3 levels. So the cost per quote requests has also declined in the early portion of Q4, which partially offsets the effect of lower monetization this has been to a lesser degree. This combination of lower revenue per quote request and only moderately lower cost per quote request means that we expect sharply lower of variable marketing margin and dollars in Q4. Rebuilding and addressing our traffic acquisition challenges in the near term will allow us to continue to focus on achieving our maximum variable marketing dollar operating point in future. As we’ve noted before, we have adopted a line of sight approach to guidance. This means we guide based on what we’re seeing in the business at the time the guidance is provided. This can be challenging in a quarter like Q4 were seasonality plays a large role, but generally only in the second half of the quarter, but which we’ve estimated the impact. In addition, given the trends we’re seeing in Q4 and the changes we are adopting, we are optimistic that we may see improvements within the quarter, but we’re not factoring this into our line of sight guidance. We don’t consider our guidance to be conservative or aggressive, but rather to be judicious. With that as context, we are providing the following guidance for the fourth quarter. We expect revenue to be between $37.4 million and $39 million. We expect variable marketing margin to be between $8.6 million and $9.4 million, and we expect adjusted EBITA to be a loss of between $4.5 million and $4.9 million. And for the full year 2018, we’re maintaining our previous full year revenue guidance $161 million to $162.6 million. We have reduced our full year variable marketing margin guidance to be between $46 million and $46.8 million, and we expect an adjusted EBITDA loss of between $6.5 million and $6.9 million. We believe our guidance reductions are necessary for Q4, but we are maintaining our long-term target model of 20% plus revenue growth with expanding VMM and adjusted EBITA in 2019. In summary, as a result of current trends, we’re prudently adjusting our full year margin and profitability guidance. We are pleased with our third quarter results, excited about our future opportunities and we’ll continue to focus on driving growth. With that, we’ll hand it back to the operator for questions.

[Operator Instructions ] Your first question comes from the line of Douglas Anmuth with JP Morgan. Your line is open.

Thanks for taking the questions. I just wanted to dig a little deeper into the 3Q traffic challenges. So just want to be clear that that these were not related to what you saw in 2Q and the 2Q is fully discretionary, and just that the ad fatigue and social policies developed later, so if you could talk about that. And then what’s been the approach in terms of relaunching on Facebook, I’m also curious if you’ve seen any Google algorithm related issues in 3Q as some other companies have. And then just what kind of visibility do you feel like you have looking out over a couple quarters? Thank you.

Sure. Thanks. Thanks, Doug. This is Seth. So let me just take Q2 question first. In Q2, we intentionally moderated quote request volume in auto, because what we have found is that there is a relationship between quote request volume and monetization. If you continue to ramp volume into constrain monetization, you actually compressed pricing. And that’s one of the things we actually may be seeing in Q4 as we’ve regrown or lean back in, especially in November and seeing successes in terms of growing auto insurance quote request volume. So that was quite intentional and it’s the maximized VMD in any given time period. When we lean back in and I’ll address specifically Facebook, we think and it’s largely driven by pressure. They’re under a microscope, especially around the election, but they have to update their creative policies. So when we changed our ads, we were required to run ads that didn’t have any numbers, comparable – comparative numbers in them. So we changed the ad, relaunched the campaign, and now that scaling. So that’s the – that’s anecdotally what we did to relaunch, Facebook and that’s just on autos and we plan obviously to launch Facebook any new verticals and that was just part of our normal scaling planning. As far as search actually that we’ve just updated bidding strategies and we never really saw any sort of compression of unit costs. Now again, you may be referring to organic search with Google updates. We’re largely paid searches, you know, and we didn’t see any impact from any algorithm changes. And in fact, once updated our bidding in Q4 has seen search and even display as we refresh creatives grow very quickly. We also believe that there may have been some impact, especially to display from the elections. It was a very sort of busy election season as soon as the elections were over, we saw an incremental surge of display volume.

Doug, going to the question about visibility into the quarter and into future quarters. As you know, in terms of the quarter we are in, we’re always looking at revenue, and VMM trends on a day by day basis, and we’re trending those forward and that’s a good part of what we based guidance on. As we look out further, our view kind of into future quarters is derived from feedback from both our traffic teams and our distribution teams kind of bringing that – bringing together a forecast both from the sales side as well as from the traffic side and marrying those two pieces together. And that’s really how we look out for say 2019 and beyond when we do our budgeting and exercise.

Okay. Thank you both.

Your next question comes from Nath Schindler with Bank of America Merrill Lynch. Your line is open.

Yes. Hi Guys. One, can you – two questions? One, how is a LendingTree’s acquisition of QuoteWizard is effecting a pricing of quotes in the market or has there been any effect or do you anticipate any effect in the near to medium term? Secondly, given the seasonality in Q4, how much of the business usually occurs in October back when you were seeing these challenges before the holiday starts?

So, let me answer the first question. How is LendingTree’s acquisition of QuoteWizard is effecting quote request pricing now or in the medium term, now not at all, and in the near term we can envision a model where it does. As far as the second question, October is traditionally stronger, but actually what we’ve seen in the trending that strengthening into November, and it’s early days, traffic has turned around, some of that traffic increase may have leading in part to some pricing compression though historically Q4 is seasonally lower, and we also saw in early October some modest – we believe the moderate impact from the hurricanes, which closed some carriers down or the bidding down in the south of the United States. It also cause one of our call centers, six partners to close down those obviously restored after the storm. So there may have been some moderate impact from that as well that that shows in pricing. Those of course have returned to leave, those partners have turned back on post storm.

Great. Thank you.

Your next question comes from Ron Josey with JMP. Your line is open.

Great. Thanks for taking the question. Two, please. Seth, I think you mentioned some pricing compression in the auction and just want to understand that this is because of the traffic decline or is there something else here perhaps lower ROIs. And then, on the tech integration you mentioned 14 new in 22 expanded with one fully integrated. Can you just talk about, I think you mentioned it was dependent on providers IT scheduled going forward, so maybe just talk to the timeline or how you’re helping the providers sort of improve their IT to sort of make the handoffs better? Thank you.

Sure. Hi, Ron. Carriers calibrate their bids in our options based on their businesses. They’ll do so time from time and there is also some seasonality to provide our budget, especially towards the end of the year. And then finally, growing traffic, less about traffic performance that our partners and more about budget capacity as it hits the network may actually does push down or may push down on revenue per quote request. And again, we believe it’s early in Q4, but we believe that’s what we’re seeing. As far as your question in terms of integrations, I’m actually going to hand it off to Tomas Revesz, our CTO who’s on the call here with us and let him answer the question you had with regards to integration.

Hi, Ron, thanks for your question. In terms of how we facilitate this for our partners. We have a dedicated integrations team, which we added earlier this year, four people strong and that’s made a tremendous difference to the pace with which we’ve been able to complete integrations that are in process. The rate that which carriers get around a prioritizing their IT queues and engaging with us to start these processes and complete them is something we have a little bit less control over. They tend to have amongst projects like ours, many others, both internal, as well as with other outside platforms and party. And we are certainly one of the larger or higher priority items when they get around the budgeting and scheduling for these projects, but we typically tend to fall into their annual planning cycles, and larger scale prioritization activity. So there’s, there’s not much more we can do, but justify through the value of the potential improvement in performance of engaging in these integrations and then working with them to get them scheduled. We expect to see a few of these get underway each quarter and will of course update you as we complete more of them.

Got it. Thank you.

Your next question comes from Michael Graham with Canaccord. Your line is open.

Thank you. I just wanted to go back to Facebook for a second, if I could. Just maybe you could give us a little more color in terms of, how different the new ads are from the old ones that were you had to take the rate comparisons out and maybe just talk a little bit about the process for reframing those ads like how long it takes and you mentioned you were – you were back on Facebook now, but I guess maybe the results aren’t – where you want them to be. So I’m just wondering if you could hypothesize as to why that is. And then as a follow-up, I just wonder if you could give us an update on the EverDrive? Thanks

Well, let me – let’s take them a little out of order. I’m going to answer your second question and your first and let some Tomas take EverDrive. On regard to the second question, typically when we relaunched campaigns, there’s a period of scaling. We actually believe that the opportunity for Facebook as much larger than it was even before those ads were paused and so we’re really bullish and optimistic that we grow the social media channel and grow our campaigns over time, a much larger than they were have been the fundamental creative process is just want to have taking some more marketing skills oriented both at the company and really expressing our matching and savings messages in the ads that we place on Facebook. So it’s more aligned with our brand message to consumers and obviously we’ve relaunched those. And again, there’s always a period of time, Michael, where we rebuild campaigns and optimize for our economics and then go out and discover new audiences and expand them. And again, very bullish and optimistic to social media becomes a much larger channel than it’s been before over time. And Tomas, you want to take EverDrive?

Yes. In terms of EverDrive, tremendously excited with your accomplishments of this past quarter. We launched our pilot on schedule with partnerships, which were announced earlier in the quarter. We’ve, seen some great results so far in line with many of our expectations though very early days in terms of our learnings. So we’re very excited to completed the first sales through the partnership and platform, and expect to continue to augment both of those over time. It is early days in the insurance industry at large for Telematics enabled insurance product, as well as for relationships like the ones that we are pioneering. So we’re, early in the process, multi-year process to grow this to the part of the industry, so very excited with our leadership position in the progress thus far.

Okay. Thank you guys.

Your next question comes from Jason Helfstein with Oppenheimer. Your line is open.

Thanks. So, maybe help us understanding, the reiteration of the 20% VMM growth next year, is that you’re going off of data you are seeing in November. Just kind of help us understand your kind of comfort in that. And then any color around revenue mix amongst your top clients, did it change or top providers to change meaningfully versus the second quarter? Thanks.

So, Jason, I take the first part of that. And maybe I’ll start with kind of what we were seeing in Q4, what we’ve seen today to give you a little bit plan. Going into the quarter, we saw volumes that were often a time as net points out that is seasonally a strong period in the beginning of the quarter for fourth quarter is actually strong, it is the back end that is the weaker part of that. But going into that and recognizing those trends, we then leaned in on traffic positions and began rebuilding some of those traffic positions, and what we’ve seen now, quarter-to-date is growth within quote request volumes, but at the same time as we’ve been leaning in, we’ve also seen deterioration in revenue per quote request. So in the order of magnitude of about 10% off on revenue per quote request so far this quarter, and then low single digit reductions in the cost per quote request. So as we kind of look forward, we now believe that we’ve rebuilt these traffic positions, we are seeing growth within traffic and as we now have the opportunity to tune to VMD Max again, we believe then we will regain our former operating positions that’s our expectation at this point. At a high level, Jason and we, we’ve talked a bit about it and we’re committed to it. Profitability for EverQuote is a managed outcome, and we’re going to be very disciplined with how we expand or make any investments beyond what we’re doing to grow the business and be very judicious into 2019 to make sure that we hit adjusted EBITDA break even in 2019.

And then on top clients, any color? Top providers?

Not a lot of shifting around, I think not only quite stable, but we’re really pleased that now 92% of our revenue comes direct from carriers and agents in our network.

You next question comes from Ralph Schackart with William Blair. Your line is open.

Hi Guys. This is Kevin on for Ralph. I think you mentioned creative fatigue as perhaps explaining some of the traffic issues you saw during the quarter. Can you talk about some of the changes you made internally to your creative development process as a result and perhaps how you expect that to evolve going forward? Thanks.

Yes. Again, once we basically integrated the creative development or the development of new creative right into traffic teams, so display has dedicated resource that now is taking our marketing messages in spinning up new savings, creative, a new creatives across the map. We’ve also created a regular, a weekly process of checking in new creative and testing new creative macro themes each week, and so we think that this is a much more robust process. We’re seeing a lot of wins from it and, again, we were very – we believe that we’ve addressed the problem and we’re optimistic at works over the long term.

Thanks.

Your next question comes from Aaron Kessler with Raymond James. Your line is open.

Great. Thanks guys. A couple of questions. First you mentioned, I think in the note that even in the top 10 increased spend, I’m just curious on the two that didn’t, if there was anything specific to those companies to more macro or where are they shifting budgets there and just on the creative ad side that you talked about sounds like there’s been some copycats and also you guys see that as well, but just your thoughts, you’ve seen competitors use similar strategies to you guys on maybe a bit more than display advertising? Thank you.

Yes. So I’m going to – on the eight to 10 top providers growing budget year-on-year. The other two, I don’t think there’s any information in there, it’s just an auction and they’re consistent. Tomas, did you want to address it on second one?

Yes. In terms of creative fatigue, and what we see out in the wild, that’s definitely a potential factor, I think the balance of resources internally towards iterating more quickly on generating net new creative – net new creative concepts to keep up and outpace that tendency that there is for others to see and to mimic is certainly something that we’re taking more seriously and increasing the focus and the rate at which we’re keeping our sneakers on and staying ahead of those trends.

Ultimately Aaron [ph], it also – you also have to consider conversion rate and monetization for monetizations delivered by our expanding distribution network is very strong and getting stronger things like conversion rate wins as we evolve the consumer experience and integrations providers also boost that monetization advantage. So that brings that comes to bear almost regardless of creatives, but taken – so this Aaron, sorry about that – taken together, we think there’s an enduring competitive advantage.

Got it. Okay. Thank you.

Your next question comes from Mayank Tandon with Needham and company. Your line is open.

Thank you. Good evening. John, you mentioned the targeted sort of say about the EBITD breakeven, I just want to make sure that equates to still at 20% type top line growth for 2019, are you still thinking of the VMM margin expanding about 30 bps per year, obviously offer lower base in 2018 given your current guidance?

Yes. We are fairly confident and optimistic about what we’re seeing within the quarter will not – will be mostly within the quarter and that we’re going to return to kind of previously stated long term model. So yes, we are saying that we are going to target EBITDA break even – adjusted EBITDA break even next year. We expect top line growth 20% plus and we will be operating at VMD Max over the longer period.

Got it. And then the related question would be – in terms of your expansion of new products, I think you’ve called out renters and commercial insurance for 2019 and other products down the road. Does this hiccup to call it that does that in any way change your game plan on launching new products and the level of investment required to actually launch them?

No, we plan to launch commercial renters next year, Mayank as planned. This is growing things. Certainly we’re not happy about it. We know what to do about it to fix it. It’s a challenging quarter, we’re going to get through it, but you’ve met us, we’ve talked to you one on one and we’re really very bullish on building a big business here. And so again, we think these are challenges that we can work through this quarter. We will focus on making sure next year they don’t recur, but again, it’s a long term process of building up our business, our teams of maturing our processes and we’re really focused on that and we’re excited about building for the future. So that’s it for us.

Thank you.

There are no further questions at this time. I will now turn the call back over to the presenters for closing remarks.

I just want to thank everybody on the call and look forward to seeing you in the one-on-ones organic conferences on the road ultimately as we work through these operating items. And thanks again.

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