• Total Revenue: $144.5 million, up 163% from the prior year period.
• Auto Insurance Revenue: $130 million, up over 200% year over year.
• Home and Renters Insurance Revenue: $14.1 million, up 30% year over year.
• Variable Marketing Margin (VMM): $43.9 million, up approximately 125% from the prior year period; VMM as a percentage of revenue at 30.4%.
• Net Income: $11.6 million, a record level.
• Adjusted EBITDA: $18.8 million, up 45% sequentially.
• Operating Cash Flow: $23.6 million for the third quarter.
• Cash and Cash Equivalents: $82.8 million, up from $60.9 million at the end of the second quarter of 2024.
• Cash Operating Expenses: $25.1 million in Q3, including $500,000 related to office relocations.
• Q4 Revenue Guidance: Expected to be between $131 and $136 million, representing 140% year-over-year growth at the midpoint.
• Q4 VMM Guidance: Expected to be between $38 and $40 million, representing 89% year-over-year growth at the midpoint.
• Q4 Adjusted EBITDA Guidance: Expected to be between $14 and $16 million.

• Warning! GuruFocus has detected 4 Warning Signs with EVER.

Release Date: November 04, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• EverQuote Inc (NASDAQ:EVER) exceeded the high end of its guidance range for revenue, BMM, and adjusted EBITDA, achieving record levels across these financial metrics.
• The company reported a 163% year-over-year increase in total revenue for Q3 2024, driven by stronger enterprise carrier spend.
• EverQuote Inc (NASDAQ:EVER) experienced double-digit growth in its local agent distribution channel, approaching record high revenue levels.
• The home insurance vertical grew by 30% year-over-year, indicating strong performance in this segment.
• The company successfully transitioned to new site platforms and completed a major release of its new agent platform, enhancing development speed and feature rollout capabilities.

Negative Points

• The upcoming FCC rule change related to the Telephone Consumer Protection Act (TCPA) is expected to create short-term unpredictability and headwinds, particularly affecting third-party agents.
• Variable marketing margin (VMM) is expected to face modest downward pressure as a percentage of revenues in the upcoming quarters.
• Recent hurricanes caused temporary pauses in carrier spend in certain regions, although these are not expected to have a lasting impact.
• The transition to 1 to 1 consent is anticipated to result in a lower volume of leads, although these will be monetized at a higher level.
• Despite strong performance, the company anticipates a seasonal sequential decline in revenue from Q3 to Q4, which is typical for the auto vertical.

Q & A Highlights

Q: Could you remind us how much of the business would be exposed to the impact of the new FCC regulation, and is there a way to quantify the impact if it went into effect this year? A: Jayme Mendal, Chief Executive Officer: The new rule affects about 25-30% of our business, specifically the offline leads sold through our agency business. While fewer leads will be sold, the quality of those leads will improve, leading to higher pricing. Joseph Sanborn, Chief Financial Officer: The leads affected are roughly 25% of revenues. We expect a more muted growth from Q4 to Q1 due to the FCC changes, with some pressure on VMM margins initially.

Q: How long will the tailwind from carriers opening up in new states continue before it becomes more about capturing more budget from carrier partners? A: Jayme Mendal, Chief Executive Officer: The recovery has been driven by a limited number of carriers so far. We expect more carriers to reenter the marketplace and expand their footprint into next year. We are more than halfway through the recovery, with significant opportunities still ahead, especially in large states like California.

Q: Can you discuss the new bidding technology and agent platform, and how it interfaces with existing agency management systems? A: Jayme Mendal, Chief Executive Officer: We've simplified our technology platforms to support future scale and feature development. Our new agent platform accelerates feature delivery and integrates with several agency management systems, focusing on delivering our referral product.

Q: Given the cash build on the balance sheet, how is management thinking about the uses of cash moving forward? A: Joseph Sanborn, Chief Financial Officer: We expect cash to continue building as the business is cash flow positive. Potential uses include M&A to accelerate our existing strategy, particularly in the P&C vertical, and to drive additional cash flow and EBITDA.

Q: What are your expectations for VMM margins going forward, and what market conditions would need to change for them to expand? A: Joseph Sanborn, Chief Financial Officer: We expect some modest pressure on VMM margins due to FCC changes, but they should normalize by mid-next year. Our investments in data and technology have helped maintain strong margins, and we aim for a sustainable financial model over time.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.