Ladies and gentlemen, thank you for standing by, and welcome to EverQuote's First Quarter 2020 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I’d now like to hand the conference over to your speaker today, Brinlea Johnson of The Blueshirt Group. Thank you. Please go ahead.

Thank you. Good afternoon, and welcome to EverQuote's first quarter 2020 earnings call. We'll be discussing the results announced in our press release issued today after the market closed. With me on the call this afternoon is 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 statements under federal securities laws, including statements concerning our financial guidance for the second quarter and full year 2020, our growth strategy, our plans to execute on our growth strategy, key initiatives, our investments in the business, the growth levers we expect to drive our business, our ability to maintain existing and acquire new customers, our interest or ability to acquire other companies, our goals for integrations and other statements regarding our plans and prospects. Forward-looking statements may be identified with words and phrases such as we expect, we believe, we intend, we anticipate, we plan, may, upcoming and similar words and phrases. These statements reflect our views only as of today 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. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including uncertainties with respect to the COVID-19 pandemic and the matters discussed under the heading Risk Factors in our most recent annual report on Form 10-K, which is on file with the Securities and Exchange Commission and available on the Investor Relations section of our website at investor.everquote.com and on the SEC's website at sec.gov. Finally, during the course of today's call, we'll refer to certain non-GAAP financial measures, which we believe are helpful to investors. A reconciliation of GAAP to non-GAAP measures was included in the press release we issued after the close of market, which is available on the Investor Relations section of our website at investors.everquote.com. With that let me turn the call over to Seth.

Thank you, Brinlea. Good afternoon and thank you everyone for joining us today. Our company, much like most of the country, has adapted to shelter-in-place brought upon by the COVID-19 pandemic. Our thoughts are with all the individuals and businesses impacted around the world and we extend our heartfelt thanks to all of the healthcare workers, first responders and other essential employees for their selfless effort. Throughout this crisis, we have been and remain dedicated to the safety of our team, our families and partners as well as our broader community. While we are vigilant and cautious during the rapidly shifting market dynamics brought about by COVID-19, we are fortunate that our company is in a strong position. Our online insurance marketplace is demonstrating flexibility and resilience as consumers continue to go online to shop and save on insurance, a nondiscretionary expense for the vast majority of auto, home and health insurance consumers. The insurance industry remains healthy with personal lines insurers showing strong financial performance, resulting in a number of our distribution partners, increasing bids and budgets since shelter-in-place began. Our employees were able to smoothly transition to work from home given that the foundation of our business is our proprietary distributed data platform and extensive use of cloud-based services for our products and systems. Our resilient business model continues to benefit from the network effects and the power of our marketplace for connecting insurance consumers and providers resulting in strong financial performance and we are raising our full year guidance, which Sean will detail shortly. Quickly touching on our first quarter results. We are pleased to report we exceeded expectations across all of our key financial metrics. Year-over-year revenue increased 56% and variable marketing margin, one of the primary metrics for managing our business, was up 72% year-on-year…

Thank you, Seth, and good afternoon everyone. I echo Seth sentiments and wish everyone the best during these unusual times. I'll start by discussing our financial results for the first quarter of 2020, provide some additional explanation as to how COVID-19 is impacting our financial performance and then provide guidance. We are pleased to report strong first quarter 2020 results across all of our key financial metrics, exceeding our revenue, variable marketing margin and adjusted EBITDA guidance provided last quarter. We delivered first quarter revenue of $81.4 million, up 56% year-over-year. We continued to achieve strong growth in our auto insurance vertical and even greater growth in our newer other insurance vertical, which includes home and renters, life, health and commercial insurance. First quarter revenue, in our auto insurance vertical, increased to $67.6 million, a growth rate of 50% year-over-year. First quarter revenue from our other insurance vertical increased to $13.7 million, a growth rate of 90% year-over-year, and this represents 17% of revenue. We delivered first quarter variable marketing margin, or VMM, which we define as revenue less advertising expense of $23.8 million, an increase of 72% year-over-year, which exceeded our guidance provided last quarter. As a percentage of revenue, first quarter VMM expanded to 29.3%, up from 26.5% in Q1 of last year, an increase of nearly 3 percentage points. The VMM expansion, this quarter, resulted from attracting more consumers to our marketplace at lower acquisition costs and with better unit economics. Once again in Q1, our growth was driven by a significant increase in the volume of consumer shopping for insurance on our marketplace. In the first quarter, we delivered an 80% year-over-year increase in consumer quote requests to $7.4 million. As we had anticipated and discussed last call, this substantial increase in the volume of quote…

[Operator Instructions] Your first question comes from Ralph Schackart with William Blair. Your line is open.

Great. Good evening and thanks for taking the question and I glad to hear that everyone is doing well in the businesses as well. Seth, maybe go back to some of the comments you made about with the unfortunate COVID situation that the dollar laggard to the shift of budgets online to insurance maybe benefiting from the unfortunate situation now. Any perspective you could share more color about your expectation of that shift in 2020 and perhaps in the 2021 and going forward. And then John, just on Q2 guidance, I know you had talked about some demand reduction being seasonal. I know Q1 is a big renewal cycle quarter for you in the industry. Just curious, as we think about the guide, was there any sort of pull through in Q1 or just some perhaps conservatism when you set the guide or some of that sort of paused activity? Any more color on that would be helpful. Thank you.

Sure. So, maybe two examples. What we've seen in the near-term, Ralph, and we believe will carry certainly for the near-term for a year or so is incremental profitability from the providers, from the carriers, specifically the P&C insurers will lead them to lean in. That's sort of we're confident and we're comfortable that they'll lean in on the back of incremental profitability. We have seen certain carriers actually open up entire states that were sort of bid down or had their budgets moderated because of loss ratios and those have obviously the loss ratios have reversed out and they've turned on entire geo. So we'd expect that kind of throttle open position from the carriers to benefit us and sort of increments up the online marketing spend for the near-term, which again is a year to two years from our perspective. The second kind of sign that I think would give you some color on it is we've seen agents, insurance agents, essentially increment up their online budgets with us. Specifically, we've now seen it in the past six weeks. The highest level of demand from our agent base in our platform than we've seen in our entire history. So, again, we believe that bodes well for the immediate term for the next year or two and it's significantly above where we expected it to be, certainly in the times of pressure, but it's above even the sort of normal range we would have expected for Q1 and flowing into Q – into the beginning of the quarter. So optimistic that these kinds of demands from both agents and carriers persists as we move forward and it is in fact the pulling forward or acceleration of the shift to digital.

And Ralph, with regard to the guidance, I'll give you a little color. The methodology that we use this quarter is the same as past methodologies, this idea of providing high confidence scenarios and high confidence guidance. We probably did widen the scenarios a little bit this quarter when we thought about those different scenarios, but in general we're proud and happy that we can produce guidance that at the midpoint for VMD is a 45% growth rate for Q2 on revenue still in Q2 a strong growth at 41%. So, we think of it as strong guidance and it has been colored by part of what we're seeing already in Q2, which is really a testament to the resiliency of the model. And so even a testament to the resilience that we can provide quarter and full year guidance because the model really has been fairly consistent. So it's surprisingly consistent in terms of the guidance methodology as compared to prior quarters.

Great. Thank you, Seth. Thanks, John.

Thanks, Ralph.

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

Thank you. Good evening. Congrats Seth and John. I'm looking for too many beaten race quarter, so we'll take this one. So, a great job. First question would be, Seth and John, in terms of just the trends in the market one would think that with drivers driving less and then the carriers offering all kinds of discounts and rebates, but would have seen a sharper decline in maybe consumer traffic, but you haven't seen that yet. Is that partly reflected now in the Q2 guidance in terms of maybe slower trends on the consumer traffic front?

So, hi, Mayank. This is Seth. Thanks again and we're excited as well by the progress. So yes, what we've seen even with I'd say modest moderation in consumer demand, that's outweighed by two other factors that we've seen early on. One is some increasing demand from the provider side of the business in the form of increased bids, increased budgets from agents and carriers. The other way we are seeing is reduced costs in several of our large online marketing channels such as display or social, where there's still very strong consumer demand volume and the ad costs have gone down because folks in the travel industry and the e-commerce industry has exited. So those two trends kind of wash out any moderation in consumer demand for us at these times and so flow right into the guide.

And Mayank, you'll remember that Q2 is traditionally a time where we see a quarter that is usually flat to slightly down. That's just the normal trend, especially within auto. I'd say what's different this quarter than other Q2s is we are seeing a little bit of sequential increase in monetization revenue per quote request as well as that we’ll tick up in VMM operating point as well. So, a little bit better margin this quarter as well.

That’s helpful color.

So we're excited about the op – yes, we're excited about the operating momentum, Mayank. And I would say one last thing with regards to the rebates or the pricing that we're seeing from the carriers, again, it's our belief and understanding that essentially the reduction in losses will stay ahead of any of these rebates or prices. So, in fact, there'll be realizing incremental profitability and some of the benefits for our provider partners and us will be incremental marketing lean in or demand.

Right, that makes sense. So, thank you for that. Just one quick follow up in terms of the non-auto. Could you maybe parse that a little bit more in terms of what trends you saw between healthcare, home and life and some of the other verticals and maybe your expectations for the remaining of the year as these newer verticals ramp? Thank you.

So again, sort of the secular dominant trend we expect just given that those verticals are relatively new and even smaller than autos as we continue to see them grow. From an operating momentum perspective, we haven't seen much, if any difference at all, in the non-autos verticals and we expect them to continue to grow more quickly than autos through the year. But that having been said, we do sort of keep an eye on commercial. Now happily for us, small commercial insurance is exceptionally tiny. It's probably very, very small amount of revenue. So it's not very material for us, but we'll be thoughtful about how we invest in terms of head count on small commercial, just given that you're likely to see some disruption in the small business market no matter what anybody does or says.

Great. Thank you so much.

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

Hey, thanks guys. Congrats on the performance, just a couple of questions. One on – can you just remind us, when you think about Q2 and the rest of the year, like how do you factor in consumers shopping for new cars and associated insurance versus sort of switchers? I think a couple of years ago you had talked about how some of the European markets have a lot more switching behavior and one of the things that could help you in the U.S. was sort of picked up. So just want to kind of ask that question and then I also wanted to ask specifically on the health vertical, can you just remind us, sort of where we are in the arc of that rollout, what are some of the important milestones on the calendar ahead and just wondering if you have to do anything additional to the product sort of as we get through the year here, like what are some of the key things you're working on? Thanks a lot.

Sure. So, recall. Hi Michael, thank you again, thanks for joining us and I appreciate the kind comments. You recalled we don't have much of any connective tissue with car shopping, 98%, 97% vast majority of the consumer demand is renewals is folk shopping to look for discounts, coverage, perhaps they've had a claim. So again, there's very little to no connective tissue for us with car shopping. In addition, switching obviously may be a net positive for us, but we're not reliant on it in our market. If a consumer comes through and finds out, Hey, I'm with a great provider and renewing with them is a good match, that's perfectly fine by us, there's a number of carriers and agents who in fact I think the vast majority I believe, run some kind of retention campaign with us to retain consumers, which we support for both the consumer and the provider. So again, we don't expect much impact at all from – any changes to car shopping or switching behavior, which is part of what's resilience about our marketplace model for insurance, right. So that's a benefit for us as well as our partners and customers. On the healthcare side, I mean it's just going to be continued investment in engineering and data head count, recall that, as we scale these verticals they're able to leverage the investments we've made in data, platforms, product systems. So it's a very high leverage activity scaling in the health vertical from an operating leverage perspective, but we will continue and do continue to add head count and talent, particularly tech talent to the healthcare vertical team.

Okay. Thanks so much.

Thanks Michael.

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

Great. Thanks for taking the question. Echoing the comments glad everybody is safe and sound and operating very well. So I wanted to ask just following-up on the comments around the moderation in consumer shopping, I just want to make sure I understand the dynamics here, you know 2Q seasonally is a little bit lower than 1Q. So with this moderation in line with what was expected to a certain extent, has it sort of stabilized off here? Would be question number one. And then as we think about the insurance carriers and the give backs and everything, but they're also advertising less. And so I'm wondering if you're seeing any impact from lower ad spend by the carriers on demand for insurance and renewals overall? And then lastly, John, can you just give us an update, we're thinking about overall M&A strategy with the dislocation in the markets, are there any change there, any that you might be thinking about as you think about being strategic to grow the business overall. Thank you.

Great, thank you again. Thanks for the kind comments, Ron. It's good to hear from you as well. No, this is not particularly atypical from what we see as a seasonal traffic patterns in the insurance market's going shifting from Q1 to Q2, as did over advertiser demand. So one thing to think about in terms of what we've seen Ron and is particularly interesting, a lot of the large personal lines, the auto and home carriers are massive advertisers on things like sports on TV. They're the perhaps the top one, two or three spot or all of them for football and baseball, and basketball. And so as these providers sort of have that channels no longer available to them, what we've seen is actually increased not just demand from those providers, but we then have increased capacity to advertise ourselves in the online channel to bring in incremental consumers, because we've seen some fade in things like display and social display marketing campaign costs. So we have capacity to increase consumer demand or bid into the consumer demand. At the same time, as providers are actually seeking to grow the online channel, especially with the absence of some of the big offline channels for them. And again, recall that we run the business for variable marketing margin. So one of the aspects of our business model being an online insurance marketplace is we have this flexibility and resilience. If we can decrease ad costs while maintaining volume, while increasing the revenue we're seeing from providers, variable marketing margin can grow. And in fact, that's what we believe we're seeing as we head into Q2.

So Ron, on the M&A side, you'll remember that this business has been growing completely organically until now. And we have in the last couple of quarters started to build out kind of that M&A muscle in order to be able to look at opportunities, at least opportunistically. I would say we're starting to get a little more disciplined around that. And to your point, this certainly is a timing which we think, not just in the near future, but over a number of quarters here we may see some opportunities that wouldn't have been present without the COVID-19 and what it might do in terms of rippling through smaller businesses. So we do think it could present some opportunities for us in an avenue that we have not explored yet.

Got it. Thank you very much.

Thanks, Ron.

[Operator Instructions] Our next question comes from Jed Kelly from Oppenheimer. Your line is open.

Great. Thanks for taking my question. Just given the current dynamic in terms of some of the advertising campaigns you're starting to run, can you talk about the ability sort of to stimulate demand at some of the campaigns, given that consumers now are tightening their budgets?

Sure. I mean, again I want to emphasize we still see a typical operations in the consumer demand side of our business. And what that means Jed is that, as advertising costs and these are some very big channels, these are great ways to reach consumers who might be looking for discounts or renewals or price shopping especially now. So again, the resident demand will be there because folks are going to be seeking incremental ways to save money, that's the belt tightening we referred to in the call. But as folks do that, remember our ad costs in some of these channels will be reduced because there's simply less competition. And I don't mean infra insurance, I mean things like e-commerce, travel there's other verticals who are basically paused out of the online landscape. And that enables us to lean in to the resident consumer demand that's out there and market our services to consumers to save money and shop for insurance.

And then, just given what's going on in the technology sector in Boston, there is going to be quite a bit of tech talent maybe looking to get to a platform that's a little more insulated from this. So can you just talk about where you kind of see your capital structure and then how you want to sort of be aggressive in hiring like tech talent?

Well, maybe I'll let Wag take the cap structure question. I'll just talk about the tech talent. We've seen Jed, perhaps the biggest tailwind we've had in tech recruiting since we started the company. We had this past quarter, the most successful quarter we've had in recruiting engineers and data analysts and that's the add to an already great team, that's fully committed and developing. But in terms of hiring, for us it's been a very successful period, we do to your point to expect that to continue the business operations and momentum in the business we believe remains strong. So we're in a position to continue hiring great tech talent. And that tail tailwind was certainly observable through Q1 and up until very recently, I'll let a Wag – John comment on the capital structure here.

Jed, when you say capital structure, you're meaning particularly with regard to hiring because there is an aspect that says, the stock, the company has continued to perform well through this period of time and it does position the company as a kind of stable, consistent grower, even in the Boston market. So we are seeing some of the other Boston technology companies that have been really aggressive high flyers and that we've competed with for talent, some of those are contracting, not hiring. So even when you look at kind of the capital – even when you look at our stock performance, I think it reflects the fact the business has continued to perform well. And then certainly as one, that's kind of one of the leg of the stool in terms of compensation, the equity that we're able to attract folks with is real. And it has performed consistently, so I think we're starting to get benefit from that and starting to compete very well in the Boston market with some of the larger ones in town.

Thank you.

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

Great. Congrats on the quarter and then just a couple of questions. First, we've got some of the questions from a few investors, kind of how important is new auto purchases as the percentage of the business on how do you maybe adjust the slower car sales right now ? And obviously as rates have been declining, maybe just talk about have you seen ad rate start to tick back up in April? Or kind of what's been the recent trend there? Thank you.

Yes, net of seasonal sort of regular seasonal patterns, consumer demand remains – we see consumer demand remaining and has remained strong in Q2 and I would say that, incrementally there is likely, again we believe to be some shopping as people really do need savings and are looking to basically tighten their belts at this time. I would say this as far as being connected to car sales, some small fraction. Again this is truly like a just an estimate, it's single digit percentage of vast majority of our consumer demand are folks who already have insurance and are shopping or already have a car and don't have insurance and need to get it on the road. So there's little to no connective tissue between car shopping and auto insurance shopping.

It's often intuitive to think of those two things together, car shopping and insurance shopping. But if you think back to your last vehicle, usually when you're purchasing a car, you're focused on just transferring your insurance. It's later when you get the renewal in the mail that you think about actually shopping the price when it goes up or else you're answering just a fraud based call to shop for insurance. All the providers usually have shop with us and you'll save money in their messaging. So that is much more of the catalyst for someone to coming to EverQuote to shop for insurance. It's generally about saving money on coverage or getting the right coverage and much less connected with the new auto sale.

With regards to consumer demand beyond the typical seasonality, perhaps what's most dramatic in the advertising landscape is the not big online non-insurance advertisers, e-commerce, travel auto, where the actual auto car sales have largely exited the online market. So we have seen and expect to continue to see reduced costs for things like display and social display, which are large marketing channels for us, Aaron. So ultimately we can lean in on those channels either for volume or more primarily for us, variable marketing margin. And that's reflected in our guidance.

Yes. Great, thank you.

Your next question comes from Doug Anmuth from JPMorgan. Your line is open. Q – Dae Lee: Hey this is Dae on for Doug. Thank you for taking our questions. The first one is corporate cost acceleration in 1Q, I was just wondering if you can talk a little bit about the drivers behind that growth, any particular channels that may be working well for you? And has that changed early in 2Q and how should we think about the trajectory of quote requests growth as we go through 2020 and comps get tougher? And then in terms of lower pricing that you're seeing in the traffic acquisition channel, are you factoring any of your competitors or non-insurance competitors coming back into these advertising channels in second quarter?

So, yes, let's break it up. So let's start with Q1, Dae. So in Q1 we drove incremental volume and/or incremental variable marketing margin in literally every one of our major marketing channels, search, display, social, partnerships, re-engagement, remarketing, retargeting, that entire bucket of re-engaging consumers, literally across the spectrum of our traffic operations we saw either an increased volume and/or increased variable marketing margin through incremental volume or cost reduction. That has largely continued into Q2, there is incremental opportunities in display and social. Now you will recall Q2 is seasonally, typically a lower volume period of the year for us. And so we're seeing that naturally, but underlying that, the cost for display and social, which as you know are big advertising channels for non-insurance competitors, folks like travel and e-commerce have gone down substantially. And we'd expect those to continue certainly through Q2 and perhaps through the end of the year for the near-term and until the market really begins to turn on. All of that having been said, I would say we've been thoughtful about the ins and outs around advertising costs as we project out.

Yes. And I think certainly within the year, you have a very different story in terms of comps in the second half of the year. I think, we've said before, that as we look out the growth numbers will get harder in the back half of the year. We're confident we can continue to maintain growth along at least at long-term growth level of 20% and do that while increasing profitability and also expanding variable marketing dollars. So that's really what we've reflected in the full-year guidance, where all were just expanding VMD dollars as well as adjusted EBITDA increasing both of those in the back end. Q – Dae Lee: Okay. Thank you.

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

Thank you so much. So, we delivered a strong quarter capitalizing on the insurance shift online. We remain vigilant during this current market environment and we feel very, very fortunate that our company is in a strong position and believe we've set the stage for future growth and profitability. I want to thank you all. Thank you all for joining us today. I thank you sincerely for all your support. Stay safe and be well. Thanks so much.

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