UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2024

OR

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to .

Commission File Number: 001-38549

EverQuote, Inc.

(Exact name of registrant as specified in its charter)

Delaware	26-3101161
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
210 Broadway Cambridge, Massachusetts	02139
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (855) 522-3444

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange   on which registered
Class A Common Stock, $0.001 Par Value Per Share	EVER	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 8, 2024, the registrant had 29,121,059 shares of Class A common stock, $0.001 par value per share, issued and outstanding and 5,604,278 shares of Class B common stock, $0.001 par value per share, issued and outstanding.

 

 

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Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	4
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
PART II.	OTHER INFORMATION	29
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
Signatures		32

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans, and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “expects,” “might,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “seek,” “would” or “continue,” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition liquidity and results of operations. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023, in our subsequent periodic filings with the Securities and Exchange Commission and elsewhere in this Quarterly Report on Form 10-Q, particularly in Item 1A. Risk Factors. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. While we may elect to update these forward-looking statements at some point in the future, whether as a result of any new information, future events, or otherwise, we have no current intention of doing so except to the extent required by applicable law.

Some of the key factors that could cause actual results to differ include:

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PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

EVERQUOTE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share amounts)

		March 31, 2024				December 31, 2023
Assets
Current assets:
Cash and cash equivalents		$	48,620			$	37,956
Accounts receivable, net			38,286				21,181
Commissions receivable, current portion			3,995				4,349
Prepaid expenses and other current assets			4,783				5,755
Total current assets			95,684				69,241
Property and equipment, net			5,754				5,719
Goodwill			21,501				21,501
Acquired intangible assets, net			4,652				5,188
Operating lease right-of-use assets			1,120				1,617
Commissions receivable, non-current portion			6,661				7,630
Other assets			29				29
Total assets		$	135,401			$	110,925
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable		$	33,069			$	17,202
Accrued expenses and other current liabilities			10,646				8,784
Deferred revenue			1,870				1,872
Operating lease liabilities			1,475				2,090
Total current liabilities			47,060				29,948
Operating lease liabilities, net of current portion			18				70
Total liabilities			47,078				30,018
Commitments and contingencies (Note 8)
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized;     no shares issued and outstanding			—				—
Class A common stock, $0.001 par value; 220,000,000 shares authorized;   29,049,361 shares and 28,574,239 shares issued and outstanding     at March 31, 2024 and December 31, 2023, respectively			29				29
Class B common stock, $0.001 par value; 30,000,000 shares authorized;   5,604,278 shares issued and outstanding at    March 31, 2024 and December 31, 2023			6				6
Additional paid-in capital			299,708				294,191
Accumulated other comprehensive income			21				29
Accumulated deficit			(211,441	)			(213,348	)
Total stockholders' equity			88,323				80,907
Total liabilities and stockholders' equity		$	135,401			$	110,925

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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EVERQUOTE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands, except per share amounts)

 

		Three Months Ended March 31,
		2024				2023
Revenue		$	91,065			$	109,220
Cost and operating expenses:
Cost of revenue			5,041				5,770
Sales and marketing			70,784				90,237
Research and development			6,844				7,927
General and administrative			6,630				7,830
Acquisition-related costs			—				(113	)
Total cost and operating expenses			89,299				111,651
Income (loss) from operations			1,766				(2,431	)
Other income (expense):
Interest income			386				187
Other income, net			41				1
Total other income, net			427				188
Income (loss) before income taxes			2,193				(2,243	)
Income tax expense			(286	)			(286	)
Net income (loss)		$	1,907			$	(2,529	)
Net income (loss) per share:
Basic		$	0.06			$	(0.08	)
Diluted		$	0.05			$	(0.08	)
Weighted average common shares outstanding:
Basic			34,387				32,892
Diluted			35,608				32,892
Comprehensive income (loss):
Net income (loss)		$	1,907			$	(2,529	)
Other comprehensive income (loss):
Foreign currency translation adjustment			(8	)			13
Comprehensive income (loss)		$	1,899			$	(2,516	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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EVERQUOTE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share amounts)

 

																						Accumulated
		Class A								Class B								Additional				Other								Total
		Common Stock								Common Stock								Paid-in				Comprehensive				Accumulated				Stockholders'
		Shares				Amount				Shares				Amount				Capital				Income				Deficit				Equity
Balances at December 31, 2023			28,574,239			$	29				5,604,278			$	6			$	294,191			$	29			$	(213,348	)		$	80,907
Issuance of common stock upon   exercise of stock options			179,566				—				—				—				1,428				—				—				1,428
Net issuance of common stock   upon vesting of restricted   stock units			295,556				—				—				—				(429	)			—				—				(429	)
Stock-based compensation expense			—				—				—				—				4,518				—				—				4,518
Foreign currency translation   adjustment			—				—				—				—				—				(8	)			—				(8	)
Net income			—				—				—				—				—				—				1,907				1,907
Balances at March 31, 2024			29,049,361			$	29				5,604,278			$	6			$	299,708			$	21			$	(211,441	)		$	88,323

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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EVERQUOTE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share amounts)

 

																						Accumulated
		Class A								Class B								Additional				Other								Total
		Common Stock								Common Stock								Paid-in				Comprehensive				Accumulated				Stockholders'
		Shares				Amount				Shares				Amount				Capital				Income (Loss)				Deficit				Equity
Balances at December 31, 2022			26,447,880			$	26				6,139,774			$	6			$	269,521			$	(6	)		$	(162,061	)		$	107,486
Issuance of common stock upon    exercise of stock options			45,163				—				—				—				287				—				—				287
Net issuance of common stock   upon vesting of restricted   stock units			327,943				1				—				—				(131	)			—				—				(130	)
Transfer of Class B common stock   to Class A common stock			535,496				—				(535,496	)			—				—				—				—				—
Stock-based compensation expense			—				—				—				—				6,509				—				—				6,509
Foreign currency translation   adjustment			—				—				—				—				—				13				—				13
Net loss			—				—				—				—				—				—				(2,529	)			(2,529	)
Balances at March 31, 2023			27,356,482			$	27				5,604,278			$	6			$	276,186			$	7			$	(164,590	)		$	111,636

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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EVERQUOTE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

		Three Months Ended March 31,
		2024				2023
Cash flows from operating activities:
Net income (loss)		$	1,907			$	(2,529	)
Adjustments to reconcile net income (loss) to net cash provided by (used in)   operating activities:
Depreciation and amortization expense			1,263				1,407
Stock-based compensation expense			4,518				6,509
Change in fair value of contingent consideration liabilities			—				(113	)
Provision for bad debt			18				245
Unrealized foreign currency transaction (gains) losses			(4	)			9
Changes in operating assets and liabilities:
Accounts receivable			(17,123	)			(9,827	)
Prepaid expenses and other current assets			972				1,709
Commissions receivable, current and non-current			1,323				595
Operating lease right-of-use assets			497				688
Other assets			—				36
Accounts payable			15,868				4
Accrued expenses and other current liabilities			1,870				852
Deferred revenue			(2	)			80
Operating lease liabilities			(667	)			(902	)
Net cash provided by (used in) operating activities			10,440				(1,237	)
Cash flows from investing activities:
Acquisition of property and equipment, including costs capitalized    for development of internal-use software			(770	)			(1,007	)
Net cash used in investing activities			(770	)			(1,007	)
Cash flows from financing activities:
Proceeds from exercise of stock options			1,428				287
Tax withholding payments related to net share settlement			(429	)			(130	)
Net cash provided by financing activities			999				157
Effect of exchange rate changes on cash, cash equivalents    and restricted cash			(5	)			5
Net increase (decrease) in cash, cash equivalents and restricted cash			10,664				(2,082	)
Cash, cash equivalents and restricted cash at beginning of period			37,956				30,835
Cash, cash equivalents and restricted cash at end of period		$	48,620			$	28,753
Supplemental disclosure of non-cash investing information:
Acquisition of property and equipment included in accounts payable    and accrued expenses and other current liabilities		$	25			$	67

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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EVERQUOTE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our consolidated financial statements and the related notes and other financial information included in our Annual Report on Form 10-K for the year ended December 31, 2023, on file with the Securities and Exchange Commission. The following discussion and analysis contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below, elsewhere in this Quarterly Report on Form 10-Q, particularly in Item 1A. Risk Factors, and in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023.

We operate a leading online marketplace for insurance shopping, connecting consumers with insurance provider customers, which includes both carriers and agents. Our vision is to become the largest online source of insurance policies by using data, technology and knowledgeable advisors to make insurance simpler, more affordable and personalized. Our results-driven marketplace, powered by our proprietary data and technology platform, is improving the way insurance providers attract and connect with consumers shopping for insurance.

We operate a marketplace to connect insurance providers to a large volume of high-intent, pre-validated consumer referrals that match the insurers’ specific underwriting and profitability requirements. The transparency of our marketplace, as well as the campaign management tools we offer, are designed to make it easy for insurance carriers and third-party agents to evaluate the performance of their marketing spend on our platform and manage their own return on investment. We present consumers with a single starting point for a comprehensive insurance shopping experience where consumers can engage with insurance carriers through multiple channels based on their preferences. Our marketplace enables consumers to choose to visit an insurance provider’s website to purchase a policy or engage with a carrier or agent by phone or submit their data to insurance providers to receive quotes. Our services are free for consumers, and we derive our revenue from consumer inquires sold as referrals to insurance providers and directly from commissions on sales of policies by our direct to consumer, or DTC, insurance agency.

In 2023 we exited our health insurance vertical, an area that would have required significant capital investment and scale to effectively compete amid an increasingly unpredictable regulatory environment, to increase focus on core verticals, and implemented a workforce reduction plan, or the Reduction Plan, to improve operating efficiency. We refer to the exit of our health insurance vertical and the Reduction Plan as our restructuring, which we completed by September 30, 2023.

In the three months ended March 31, 2024 and 2023, our total revenue was $91.1 million and $109.2 million, respectively, representing a year-over-year decrease of 16.6%. We had net income of $1.9 million for the three months ended March 31, 2024 and a net loss of $2.5 million for the three months ended March 31, 2023, and had $7.6 million and $5.4 million in adjusted EBITDA for the three months ended March 31, 2024 and 2023, respectively. See the section titled “—Non-GAAP Financial Measure” for information regarding our use of adjusted EBITDA and its reconciliation to net income (loss) determined in accordance with generally accepted accounting principles in the United States, or GAAP.

Factors Affecting Our Performance

We believe that our performance and future growth depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below, elsewhere in this Quarterly Report on Form 10-Q, particularly in Item 1A. Risk Factors, and in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023.

Auto insurance industry risk

For the three months ended March 31, 2024 and 2023, we derived 85% and 82%, respectively, of our revenue from auto insurance providers and our financial results depend on the performance of the auto insurance industry. Furthermore, total revenue from our largest auto insurance carrier customer was 30% and 34% of our revenue for the three months ended March 31, 2024 and 2023, respectively. In the last two years, the auto insurance industry has experienced deteriorated underwriting performance due to a rise in claims, inflation, and inadequate policy premiums. This deteriorated underwriting performance caused our insurance carrier customers to reduce spending on new customer acquisition, which had a negative impact on the pricing and demand for consumer referrals in our marketplace throughout 2023. The state of the auto insurance market remains volatile and while we believe we have started to see an improvement in spending patterns in 2024, a full recovery could be prolonged by further cost inflation, increased claim severity and frequency, or insufficient policy premium increases. For example, in January 2023, we saw a major carrier customer return to higher spending patterns, but subsequently reduce customer acquisition spending for the remainder of 2023 due to higher than expected claims losses.

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Expanding consumer traffic

Our success depends in part on the growth of our consumer traffic. We have historically increased consumer traffic to our marketplace by expanding existing advertising channels and adding new channels such as by engaging with consumers through our verified partner network. Over the long term, we plan to increase consumer traffic by leveraging the features and growing the data assets of our platform. However, we have decreased advertising spend in response to lower demand for consumer referrals and we have the ability to further decrease advertising spend in the future when the revenue associated with such consumer traffic does not result in incremental profit to our business. We have also increased the number of quote requests acquired from our verified partner network. While we plan to continue to increase the number of quote requests we acquire from our verified partner network, our profitability will be impacted by our ability to acquire quote requests in significant volume, at prices that are attractive, and that represent high-intent shoppers for which insurance providers will purchase referrals.

Increasing the number of insurance providers and their respective spend in our marketplace

Our success also depends on our ability to retain and grow our insurance provider network. Historically, we have generally expanded both the number of insurance providers and the spend per provider on our platform. In the more recent past, we have experienced a decrease in carrier spend in the automotive insurance vertical as described above.

Regulation

Our revenue and earnings may fluctuate from time to time as a result of changes to federal, state, and industry-based laws and regulations, or changes to standards concerning the enforcement thereof. Our business could be affected directly because we operate websites, conduct telephonic and email marketing, and collect, store, share, and use consumer information and other data. Our business also could be affected indirectly if our customers were to adjust their operations as a result of regulatory changes and enforcement activity. For example, the U.S. Federal Trade Commission recently signaled, in public statements and enforcement actions, a new position regarding the consent requirements under the Telemarketing Sales Rule, while the U.S. Federal Communications Commission has proposed changes to the consent rules under the Telephone Consumer Protection Act of 1991. Although it is unclear how these changes may ultimately be implemented or interpreted, they could have an impact on the market for insurance quote requests, and may require us and our third-party sources to modify our marketing practices and policies. In addition, a number of states have enacted (and others are considering) broad data privacy laws that could affect our business. Although it remains unclear how these new privacy laws may be modified or interpreted, their effects could have an impact on our business, and may require us to modify our data use practices and policies and incur compliance-related costs and expenses.

Key Business Metrics

We regularly review a number of metrics, including GAAP operating results and the key metrics listed below, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections, and make operating and strategic decisions. Some of these metrics are non-financial metrics or are financial metrics that are not defined by GAAP.

Adjusted EBITDA

We define Adjusted EBITDA as net income (loss), adjusted to exclude: stock-based compensation expense, depreciation and amortization expense, restructuring and other charges, acquisition-related costs, interest income and income taxes. Adjusted EBITDA is a non-GAAP financial measure that we present in this Quarterly Report on Form 10-Q to supplement the financial information we present on a GAAP basis. We monitor and present Adjusted EBITDA because it is a key measure used by our management and board of directors to understand and evaluate our operating performance, to establish budgets and to develop operational goals for managing our business. Adjusted EBITDA should not be considered in isolation from, or as an alternative to, measures prepared in accordance with GAAP. Adjusted EBITDA should be considered together with other operating and financial performance measures presented in accordance with GAAP. Also, Adjusted EBITDA may not necessarily be comparable to similarly titled measures presented by other companies. For further explanation of the uses and limitations of this measure and a reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure, net income (loss), please see “—Non-GAAP Financial Measure”.

Variable Marketing Margin

We define variable marketing margin, or VMM, as revenue, as reported in our consolidated statements of operations and comprehensive loss, less advertising costs (a component of sales and marketing expense, as reported in our consolidated statements of operations and comprehensive loss). We use VMM to measure the efficiency of individual advertising and consumer acquisition sources and to make trade-off decisions to manage our return on advertising. We do not use VMM as a measure of profitability.

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Key Components of Our Results of Operations

Revenue

We generate our revenue primarily from consumer inquiries sold as referrals to insurance provider customers, consisting of carriers and agents, as well as to indirect distributors. To simplify the quoting process for the consumer and improve performance for the provider, we are able to provide consumer-submitted quote request data along with each referral. We recognize revenue from consumer referrals at the time of delivery. We support three secure consumer referral formats:

We also generate revenue from commissions paid to us by insurance carriers for the sale of policies in our automotive insurance vertical, and prior to our exit from health, in our health insurance vertical. Commission revenue is recognized upon satisfaction of our performance obligation, which we consider to be submission of the policy application to the insurance carrier. We recognize revenue based on our constrained estimate of commission payments we expect to receive over the lifetime of the policies sold, which we refer to as constrained LTVs, of commission payments. Commission revenue represented less than 10% of total revenue for the three months ended March 31, 2024 and 2023.

For the periods presented, our total revenue consisted of revenue generated within our insurance verticals as follows:

 

		Three Months Ended March 31,
		2024				2023
		(in thousands)
Automotive		$	77,538			$	89,699
Home and Renters			12,689				9,456
Other			838				10,065
Total Revenue		$	91,065			$	109,220

 

We expect an overall increase in revenue in 2024 as compared to 2023, including in our automotive and home and renters verticals, as we anticipate increased spending from our carrier partners. We expect revenue from our other insurance verticals to further decrease in 2024 as a result of our exit from the health insurance vertical in 2023.

Cost and Operating Expenses

Our cost and operating expenses consist of cost of revenue, sales and marketing, research and development, general and administrative expenses, restructuring and other charges, and acquisition-related costs.

We allocate certain overhead expenses, such as rent, utilities, office supplies and depreciation and amortization of general office assets, to cost of revenue and operating expense categories based on headcount. As a result, an overhead expense allocation is reflected in cost of revenue and sales and marketing, research and development, and general and administrative expense categories. Personnel-related costs included in cost of revenue and operating expense categories include wages, fringe benefit costs and stock-based compensation expense.

Cost of Revenue

Cost of revenue is comprised primarily of the costs of operating our marketplace and delivering consumer referrals to our customers. These costs consist primarily of technology service costs including hosting, software, data services, and third-party call center costs. In addition, cost of revenue includes depreciation and amortization of our platform technology assets and personnel-related costs.

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Sales and Marketing

Sales and marketing expense consists primarily of advertising and marketing expenditures as well as personnel-related costs for employees engaged in sales, marketing, data analytics and consumer acquisition functions and amortization of sales and marketing-related intangible assets. Advertising expenditures consist of variable costs that are related to attracting consumers to our marketplace, generating consumer quote requests, including the cost of quote requests we acquire from our verified partner network, and promoting our marketplace to carriers and agents. Advertising costs are expensed as incurred. Marketing costs consist primarily of content and creative development, public relations, memberships, and event costs. We expect our sales and marketing expense will increase as we expect increased carrier spend for referrals, which will impact our advertising expenditures, though we expect personnel-related costs to decrease in 2024 from 2023 as a result of the Reduction Plan.

Research and Development

Research and development expense consists primarily of personnel-related costs for software development and product management. We have focused our research and development efforts on improving ease of use and functionality of our existing marketplace platform and developing new offerings and internal tools. We primarily expense research and development costs. Direct development costs related to software enhancements that add functionality are capitalized and amortized as a component of cost of revenue. We expect that research and development expense will remain relatively flat in 2024 as compared to 2023.

General and Administrative

General and administrative expense consists of personnel-related costs and related expenses for executive, finance, legal, human resources, technical support and administrative personnel as well as the costs associated with professional fees for external legal, accounting and other consulting services, insurance premiums and payment processing and billing costs. We expect that general and administrative expense will decrease in 2024 from 2023, partially as a result of the Reduction Plan.

Other Income (Expense)

Other income (expense) consists of interest income and other income (expense). Interest income consists of interest earned on invested cash balances. Other income (expense) consists of miscellaneous income (expense) unrelated to our core operations.

Non-GAAP Financial Measure

To supplement our consolidated financial statements presented in accordance with GAAP and to provide investors with additional information regarding our financial results, we present in this Quarterly Report on Form 10-Q adjusted EBITDA as a non-GAAP financial measure. Adjusted EBITDA is not based on any standardized methodology prescribed by GAAP and is not necessarily comparable to similarly titled measures presented by other companies.

Adjusted EBITDA. We define adjusted EBITDA as our net income (loss), excluding the impact of stock-based compensation expense, depreciation and amortization expense, restructuring and other charges, acquisition-related costs, interest income and income taxes. The most directly comparable GAAP measure to adjusted EBITDA is net income (loss). We monitor and present in this Quarterly Report on Form 10-Q adjusted EBITDA because it is a key measure used by our management and board of directors to understand and evaluate our operating performance, to establish budgets and to develop operational goals for managing our business. In particular, we believe that excluding the impact of these items in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core operating performance.

We use adjusted EBITDA to evaluate our operating performance and trends and make planning decisions. We believe adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in the calculation of adjusted EBITDA. Accordingly, we believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects.

Adjusted EBITDA is not prepared in accordance with GAAP and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of adjusted EBITDA rather than net income (loss), which is the most directly comparable financial measure calculated and presented in accordance with GAAP. Some of these limitations are:

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In addition, other companies may use other measures to evaluate their performance, all of which could reduce the usefulness of adjusted EBITDA as a tool for comparison.

The following table reconciles adjusted EBITDA to net income (loss), the most directly comparable financial measures calculated and presented in accordance with GAAP.

Reconciliation of Net Income (Loss) to Adjusted EBITDA:

 

		Three Months Ended March 31,
		2024				2023
		(in thousands)
Net income (loss)		$	1,907			$	(2,529	)
Stock-based compensation			4,518				6,509
Depreciation and amortization			1,263				1,407
Acquisition-related costs			—				(113	)
Interest income			(386	)			(187	)
Income tax expense			286				286
Adjusted EBITDA		$	7,588			$	5,373

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Results of Operations

Comparison of the Three Months Ended March 31, 2024 and 2023

The following tables set forth our results of operations for the periods shown:

 

		Three Months Ended March 31,
		2024				2023
		(in thousands)
Statement of Operations Data:
Revenue(1)		$	91,065			$	109,220
Cost and operating expenses(2):
Cost of revenue			5,041				5,770
Sales and marketing			70,784				90,237
Research and development			6,844				7,927
General and administrative			6,630				7,830
Acquisition-related costs			—				(113	)
Total cost and operating expenses			89,299				111,651
Income (loss) from operations			1,766				(2,431	)
Other income (expense):
Interest income			386				187
Other income, net			41				1
Total other income, net			427				188
Income (loss) before income taxes			2,193				(2,243	)
Income tax expense			(286	)			(286	)
Net income (loss)		$	1,907			$	(2,529	)
Other Financial and Operational Data:
Variable marketing margin		$	30,818			$	35,593
Adjusted EBITDA(3)		$	7,588			$	5,373

 

(1)  Comprised of revenue from the following distribution channels:

 

		Three Months Ended March 31,
		2024				2023
Direct channels			80	%			86	%
Indirect channels			20	%			14	%
			100	%			100	%

 

(2) Includes stock-based compensation expense as follows:

 

		Three Months Ended March 31,
		2024				2023
		(in thousands)
Cost of revenue		$	36			$	54
Sales and marketing			1,594				2,273
Research and development			1,312				2,374
General and administrative			1,576				1,808
		$	4,518			$	6,509

(3) See “—Non-GAAP Financial Measure” for information regarding our use of adjusted EBITDA as a non-GAAP financial measure and a reconciliation of adjusted EBITDA to its comparable GAAP financial measure.

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Revenue

		Three Months Ended March 31,								Change
		2024				2023				Amount				%
		(dollars in thousands)
Revenue		$	91,065			$	109,220			$	(18,155	)			-16.6	%

Revenue decreased by $18.2 million from $109.2 million for the three months ended March 31, 2023 to $91.1 million for the three months ended March 31, 2024. The decrease in revenue was due to a decrease of $12.2 million in revenue from our automotive insurance vertical and a decrease of $9.2 million in our other insurance verticals, partially offset by an increase in revenue from our home and renters insurance vertical of $3.2 million. The decrease in revenue from our automotive insurance vertical was primarily due to a decrease in carrier spend for referrals of $9.8 million, including a decrease in subsidies from one of our carrier customers, and a decrease in commission revenue of $2.4 million. The decrease in revenue from our other insurance verticals was primarily due to a decrease in commission revenue of $7.2 million and a decrease in carrier spend for referrals of $2.1 million, both due primarily to our exit from health insurance.

Cost of Revenue

 

		Three Months Ended March 31,								Change
		2024				2023				Amount				%
		(dollars in thousands)
Cost of revenue		$	5,041			$	5,770			$	(729	)			-12.6	%
Percentage of revenue			5.5	%			5.3	%

Cost of revenue decreased by $0.7 million from $5.8 million for the three months ended March 31, 2023 to $5.0 million for the three months ended March 31, 2024. Cost of revenue decreased primarily due to a decrease in third-party call center costs of $0.4 million due primarily to a decrease in calls related to our health insurance vertical. Personnel-related costs also decreased by $0.1 million, primarily as a result of the Reduction Plan. Depreciation, hosting costs and lead verification costs also decreased by $0.1 million each, primarily as a result of the Reduction Plan.

Sales and Marketing

 

		Three Months Ended March 31,								Change
		2024				2023				Amount				%
		(dollars in thousands)
Sales and marketing expense		$	70,784			$	90,237			$	(19,453	)			-21.6	%
Percentage of revenue			77.7	%			82.6	%

Sales and marketing expense decreased by $19.5 million from $90.2 million for the three months ended March 31, 2023 to $70.8 million for the three months ended March 31, 2024. The decrease in sales and marketing expense was primarily due to a decrease in advertising costs of $13.4 million due to a decrease in carrier spend and a decrease in personnel-related costs of $5.2 million, primarily in our DTC agency. Personnel-related costs included stock-based compensation expense of $1.6 million and $2.3 million for the three months ended March 31, 2024 and 2023, respectively. Technology services and agent license fees also decreased by $0.4 million and $0.3 million, respectively, for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, due primarily to our exit from the health insurance vertical and the reduction in personnel.

Research and Development

		Three Months Ended March 31,								Change
		2024				2023				Amount				%
		(dollars in thousands)
Research and development expense		$	6,844			$	7,927			$	(1,083	)			-13.7	%
Percentage of revenue			7.5	%			7.3	%

 

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Research and development expense decreased by $1.1 million from $7.9 million for the three months ended March 31, 2023 to $6.8 million for the three months ended March 31, 2024. The decrease in research and development expense was due to a decrease in personnel-related costs primarily due to a decrease in stock-based compensation expense. Personnel-related costs included stock-based compensation expense of $1.3 million and $2.4 million for the three months ended March 31, 2024 and 2023, respectively.

General and Administrative

		Three Months Ended March 31,								Change
		2024				2023				Amount				%
		(dollars in thousands)
General and administrative expense		$	6,630			$	7,830			$	(1,200	)			-15.3	%
Percentage of revenue			7.3	%			7.2	%

General and administrative expenses decreased by $1.2 million from $7.8 million for the three months ended March 31, 2023 to $6.6 million for the three months ended March 31, 2024. The decrease in general and administrative expenses was primarily due to a decrease in personnel-related costs of $0.5 million and decreases in legal fees of $0.3 million and bad debt expense of $0.2 million.

Acquisition-related

Acquisition-related costs for the three months ended March 31, 2023 solely consisted of the change in fair value of our contingent consideration liabilities recorded as the result of our 2021 acquisition of PolicyFuel. We recorded a credit to acquisition-related costs for the three months ended March 31, 2023 of $0.1 million, related to the decrease in the fair value of our contingent consideration liability.

Other Income (Expense)

Interest income increased by $0.2 million in the three months ended March 31, 2024 compared to the three months ended March 31, 2023 due to an increase in interest earned on our cash balances. Other income (expense), net was not significant for any periods presented.

Income Tax Expense

We recorded income tax expense of $0.3 million in each of the three months ended March 31, 2024 and 2023. We maintain a valuation allowance on our overall net deferred tax asset as it is deemed more likely than not the net deferred tax asset will not be realized.

Variable Marketing Margin

 

		Three Months Ended March 31,								Change
		2024				2023				Amount				%
		(dollars in thousands)
Revenue		$	91,065			$	109,220			$	(18,155	)			-16.6	%
Less: total advertising expense (a component of sales and marketing expense)			60,247				73,627
Variable marketing margin		$	30,818			$	35,593			$	(4,775	)			-13.4	%
Percentage of revenue			33.8	%			32.6	%

The decrease in variable marketing margin in the three and three months ended March 31, 2024 was due primarily to decreased carrier spend.

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Liquidity and Capital Resources

As of March 31, 2024, our principal sources of liquidity were cash and cash equivalents of $48.6 million and up to $25.0 million of availability under our revolving line of credit pursuant to the 2023 Amended Loan Agreement (defined as the Amended and Restated Loan and Security Agreement, dated as of August 7, 2020 between us and Western Alliance Bank, as Lender, or the 2020 Loan Agreement, as amended by the Loan and Security Modification Agreement dated as of July 15, 2022, or the 2022 Loan Amendment, as amended by the Loan and Security Modification Agreement dated as of August 1, 2023, or the 2023 Consent and Release, as amended by the Loan and Security Modification Agreement, dated as of on August 7, 2023, or the 2023 Loan Amendment).

Pursuant to the 2023 Amended Loan Agreement, borrowings under the revolving line of credit cannot exceed 85% of eligible accounts receivable balances, bear interest at the greater of 7.0% or the prime rate as published in The Wall Street Journal and mature on July 15, 2025. In an event of default, as defined in the 2023 Amended Loan Agreement, and until such event is no longer continuing, the annual interest rate to be charged would be the annual rate otherwise applicable to borrowings under the 2023 Amended Loan Agreement plus 5.00%.

Borrowings are collateralized by substantially all of our assets and property. Under the 2023 Amended Loan Agreement, we have agreed to certain affirmative and negative covenants to which we will remain subject until maturity. The covenants include limitations on our ability to incur additional indebtedness and engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses. In addition, under the 2023 Amended Loan Agreement and through the maturity date, we are required to maintain a minimum Adjusted Quick Ratio of 1.10 to 1.00 defined as the ratio of (1) the sum of unrestricted cash and cash equivalents held at the Lender plus (y) net accounts receivable reflected on our balance sheet to (2) current liabilities, including all borrowings outstanding under the 2023 Amended Loan Agreement, but excluding the current portion of deferred revenue (in each case determined in accordance with GAAP). At any time the Adjusted Quick Ratio is less than 1.30 to 1.00 the Lender shall have the ability to use our cash receipts to repay outstanding obligations until such time as the Adjusted Quick Ratio is equal to or greater than 1.30 to 1.00 for two consecutive months. As of March 31, 2024, we were in compliance with these covenants and we had no amounts outstanding under the revolving line of credit.

Since our inception, we have incurred operating losses on an annual basis and may continue to incur losses in the foreseeable future. We believe our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next 12 months, without considering the borrowing availability under our revolving line of credit. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our revenue, the timing and extent of spending on business initiatives, purchases of capital equipment to support our growth, sales and marketing activities, impact to our business from our restructuring, expansion of our business through acquisitions or our investments in complementary offerings, technologies or businesses, market acceptance of our platform and overall economic conditions. If we do not achieve our revenue goals as planned, we believe that we can reduce our operating costs. If we need additional funds and are unable to obtain funding on a timely basis, we may need to significantly curtail our operations in an effort to provide sufficient funds to continue our operations, which could adversely affect our business prospects.

Cash Flows

The following table shows a summary of our cash flows for the three months ended March 31, 2024 and 2023:

 

		Three Months Ended March 31,
		2024				2023
		(in thousands)
Net cash provided by (used in) operating activities		$	10,440			$	(1,237	)
Net cash used in investing activities			(770	)			(1,007	)
Net cash provided by financing activities			999				157
Effect of exchange rate changes on cash, cash equivalents   and restricted cash			(5	)			5
Net increase (decrease) in cash, cash equivalents and restricted cash		$	10,664			$	(2,082	)

 

 

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Net cash provided by (used in) operating activities

Operating activities provided $10.4 million in cash during the three months ended March 31, 2024, primarily resulting from our net income of $1.9 million, net cash provided by changes in our operating assets and liabilities of $2.7 million and net non-cash charges of $5.8 million. Net cash provided by changes in our operating assets and liabilities consisted primarily of a $17.7 million increase in accounts payable and accrued expenses and other current liabilities and a $1.3 million and $1.0 million decrease in commissions receivable and prepaid expenses and other current assets, respectively, partially offset by an increase in accounts receivable of $17.1 million. Operating activities used $1.2 million during the three months ended March 31, 2023, primarily resulting from our net loss of $2.5 million and net cash used by changes in our operating assets and liabilities of $6.8 million, partially offset by net non-cash charges of $8.1 million. Net cash used by changes in our operating assets and liabilities consisted primarily of a $9.8 million increase in accounts receivable, partially offset by decreases of $1.7 million in prepaid expenses and other current assets and $0.6 million in commissions receivable and an increase in accounts payable and accrued expenses and other current liabilities of $0.9 million.

Changes in accounts receivable, accounts payable and accrued expenses and other current liabilities were generally due to changes in our business and timing of customer and vendor invoicing and payments. Collection of commissions receivable depends upon the timing of our receipt of commission payments from insurance carriers. A significant portion of our commissions receivable is classified as long-term.

Net cash used in investing activities

Net cash used in investing activities was $0.8 million and $1.0 million for the three months ended March 31, 2024 and 2023, respectively. Net cash used in investing activities for three months ended March 31, 2024 and 2023 included the acquisition of property and equipment, which included the capitalization of certain software development costs. During the three months ended March 31, 2024 and 2023, we capitalized $0.8 million and $0.9 million, respectively, of software development costs.

Net cash provided by financing activities

During the three months ended March 31, 2024 and 2023, net cash provided by financing activities was $1.0 million and $0.2 million, respectively. Net cash provided by financing activities during the three months ended March 31, 2024 and 2023 consisted of proceeds received from the exercise of common stock options, partially offset by tax withholding payments relating to net share settlements.

Contractual Obligations and Commitments

In April 2024, we entered into two agreements to lease office space in Cambridge, Massachusetts through December 2027 for payments totaling $3.2 million through 2027. There have been no other material changes to the contractual obligations reported in our Annual Report on Form 10-K for the year ended December 31, 2023.

Critical Accounting Policies and Significant Judgments and Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

There have been no material changes to our critical accounting policies from those disclosed in our financial statements and the related notes and other financial information included in our Annual Report on Form 10-K for the year ended December 31, 2023, on file with the Securities and Exchange Commission. For further disclosure, refer to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual Report on Form 10-K.

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Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We have a credit agreement that provides us with credit at a floating rate of interest. As of March 31, 2024, we had no outstanding borrowings under our revolving line of credit and therefore no material exposure to fluctuations in interest rates.

We contract with vendors in foreign countries and we have foreign subsidiaries. As such, we have exposure to adverse changes in exchange rates of foreign currencies associated with our foreign transactions and our foreign subsidiaries. We believe this exposure to be immaterial. We do not hedge against this exposure to fluctuations in exchange rates.

 

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

Information with respect to legal proceedings and this item is included in Note 8 of the Notes to the Unaudited Condensed Consolidated Financial Statements contained in Part I, Item I of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Item 1A. Risk Factors.

In addition to risks and uncertainties in the ordinary course of business that are common to all businesses, important factors that are specific to our industry and company could have a material and adverse impact on our business, financial condition, results of operations and cash flows. You should carefully consider the risk factors set forth in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023 and in our subsequent periodic filings with the Securities and Exchange Commission. There has been no material change from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2023.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Recent Sales of Unregistered Equity Securities

There were no shares of equity securities sold or issued, or options granted, by us during the three months ended March 31, 2024 that were not registered under the Securities Act, and that were not previously reported in a Current Report on Form 8-K.

Issuer Purchases of Equity Securities

We did not purchase any of our registered equity securities during the period from January 1, 2024 to March 31, 2024.

Item 5. Other Information.

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Item 6. Exhibits.

 

Exhibit Number		Description
10.1#		Offer Letter, dated as of June 16, 2023, by and between the Registrant and Joseph Sanborn
10.2#		Offer Letter, dated as of June 16, 2023, by and between the Registrant and Jon Ayotte
31.1		Certification of Chief Executive Officer of the Registrant Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer of the Registrant Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1†		Certification of Chief Executive Officer of the Registrant Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2†		Certification of Chief Financial Officer of the Registrant Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH		Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

# Indicates management contract or compensation plan.

 

† The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of EverQuote, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		EVERQUOTE, INC.
Date: May 6, 2024		By:	/s/ Jayme Mendal
			Jayme Mendal Chief Executive Officer and President (Principal Executive Officer)
Date: May 6, 2024		By:	/s/ Joseph Sanborn
			Joseph Sanborn Chief Financial Officer and Treasurer (Principal Financial Officer)

 

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