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EI

EverQuote, Inc. (EVER)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 delivered record revenue ($117.1M), VMM ($36.5M), adjusted EBITDA ($12.9M), and GAAP net income ($6.4M), materially exceeding the high end of Q2 guidance as auto carriers increased spend and reopened state footprints .
  • Sequential acceleration from Q1 2024 as enterprise carrier spend rose sharply; management highlighted continued auto recovery with improving underwriting profitability, while cautioning near‑term unpredictability and a more competitive ad environment pressuring VMM % .
  • Q3 2024 outlook guides revenue to $137–$143M, VMM to $38.5–$41.5M, and adjusted EBITDA to $14–$17M; EBITDA margin expected at or near Q2’s ~11% as investments for TCPA 1‑to‑1 consent readiness continue .
  • Wall Street consensus comparisons via S&P Global were unavailable due to data access limits; anchor analysis on company guidance beats and trajectory commentary [GetEstimates error].

What Went Well and What Went Wrong

  • What Went Well

    • “Operating results once again exceeded the high-end of our guidance range and drove record results for revenue, Variable Marketing Margin, or VMM, and Adjusted EBITDA” (CEO) .
    • Auto recovery broadened; carriers “reactivate campaigns, restore budgets, and reopen their state footprints,” with local agents a “core and differentiated component” of distribution (CEO) .
    • “Record levels of net income and operating cash flow” with expanding operating leverage from disciplined expense management (CFO) .

  • What Went Wrong

    • VMM percentage fell to ~31% amid “more competitive advertising environment” and preparations for upcoming FCC TCPA changes, creating near‑term margin pressure (CFO) .
    • Management still sees “near-term uncertainty” as carrier ramp patterns vary by state and timing; unpredictability persisted intra‑quarter (CFO) .
    • TCPA 1‑to‑1 consent (effective Jan 2025) likely reduces lead volumes in agent channel (25–30% of business), requiring testing and investments; net effect expected to be fewer leads at higher prices (CEO/CFO) .

Financial Results

P&L summary (y/y and q/q context):

MetricQ2 2023Q1 2024Q2 2024
Revenue ($USD Millions)$67.985 $91.065 $117.140
Net Income ($USD Millions)$(13.193) $1.907 $6.402
Diluted EPS ($USD)$(0.40) $0.05 $0.17
Variable Marketing Margin ($USD Millions)$24.653 $30.818 $36.455
Adjusted EBITDA ($USD Millions)$(2.121) $7.588 $12.928

Margins:

Margin MetricQ1 2024Q2 2024
VMM Margin %33.8% 31%
Adjusted EBITDA Margin %8.3% 11%

Segment breakdown:

Revenue by Vertical ($USD Millions)Q2 2023Q1 2024Q2 2024
Automotive$49.744 $77.538 $102.622
Home & Renters$10.723 $12.689 $13.884
Other$7.518 $0.838 $0.634
Total Revenue$67.985 $91.065 $117.140

KPIs:

KPIQ2 2023Q1 2024Q2 2024
Cash from Operations ($USD Millions)$3.348 $10.440 $12.378
Cash & Equivalents (End of Period, $USD Millions)$31.048 $48.620 $60.919
Income (Loss) from Operations ($USD Millions)$(13.370) $1.766 $6.292

Context:

  • Q2 revenue grew 72% y/y and 28%+ q/q, led by enterprise carrier spend (+42% seq) and broadening auto recovery; home grew 29% y/y and 9% q/q .
  • Adjusted EBITDA improved to $12.9M with ~11% margin, reflecting tight cost discipline and operating leverage despite lower VMM % .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance / ActualChange
RevenueQ3 2024N/A (prior qualitative caution re: potential sequential decline in auto) $137.0–$143.0M Raised expectations vs prior caution
Variable Marketing MarginQ3 2024N/A$38.5–$41.5M Maintained around low‑30s %; pressure acknowledged
Adjusted EBITDAQ3 2024N/A$14.0–$17.0M At/near ~11% margin trajectory
RevenueQ2 2024$100.0–$105.0M $117.1M (actual) Beat guidance high end
Variable Marketing MarginQ2 2024$31.0–$33.0M $36.5M (actual) Beat guidance high end
Adjusted EBITDAQ2 2024$7.0–$9.0M $12.9M (actual) Beat guidance high end

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2023, Q1 2024)Current Period (Q2 2024)Trend
Auto recovery and carrier spendEarly signs of sustainable recovery; enterprise spend +50% seq in Q4; carriers reactivating campaigns in 2024 Broad‑based recovery; underwriting profitability improving; carriers reopened footprints and increased budgets intra‑quarter Strengthening; broader participation; still unpredictable near‑term
Advertising environment & VMMFavorable ad costs supported record VMM % in late 2023; Q1 VMM % ~33.8% More competitive ad environment; VMM % ~31%; testing back into channels Competitive pressure; managed via bidding tech
Local agent networkStrategy to deepen independent agent penetration; subsidies returning selectively Differentiator; agent business growing y/y and seq; product enhancements for quality Positive momentum; strategic focus
Home & renters vertical2023 +28% y/y; Q1 2024 record home revenue Q2 another record; carriers’ home underwriting still challenged; expect recovery over time Resilient execution; cyclical recovery pending
TCPA (FCC 1‑to‑1 consent)Not highlightedRule effective Jan 27, 2025; impacts agent leads (25–30% of business); fewer but higher quality leads; preparing operationally Policy shift; near‑term testing; long‑term quality tailwind
AI/ML & bidding technologyEmphasis on proprietary bidding and data moat; margin normalization 30–35% over time Continued investment in ML bidding platform; data advantage to improve conversion and monetization Ongoing platform leverage

Management Commentary

  • CEO: “Operating results once again exceeded the high-end of our guidance range and drove record results for revenue, Variable Marketing Margin, or VMM, and Adjusted EBITDA… The auto insurance recovery continues to progress” .
  • CFO: “We produced a record level of net income as well as a record level of adjusted EBITDA and operating cash flow… expanding operating leverage as we scale and drive top line growth” .
  • On TCPA: “1‑to‑1 consent… will improve the quality of the lead product… agents will be willing to pay more… net‑net, slightly fewer leads but at higher prices” (CEO) .
  • On margins: “We expect adjusted EBITDA margins to remain at or near Q2 levels” (CFO) .

Q&A Highlights

  • Q3 outlook vs prior caution: Management updated from prior qualitative caution about potential sequential decline in auto revenue to a significantly higher Q3 revenue guide ($137–$143M), acknowledging intra‑quarter favorable developments and continued unpredictability (CFO/CEO) .
  • VMM margin dynamics: Competitive advertising and FCC preparations are driving lower VMM %, but long‑term improvements expected from bidding technology; Q2 landed ~31% vs Q1 ~34% (CFO) .
  • Agents as differentiator: Local agent network performance strong; investments in products and quality; subsidies selectively returning, bolstering agent demand (CEO) .
  • State rate adequacy: California likely 2025 for adequate rates; New York showing movement; timing affects ramp breadth (CFO) .
  • Carrier mix and share: Majority of carriers in early/mid stages of recovery; data suggests share gains with some major partners (CEO) .

Estimates Context

  • We attempted to pull S&P Global consensus for Q2 2024 EPS and revenue, and for Q3 2024 forward estimates, but access was unavailable due to SPGI daily limit constraints; therefore, comparisons to Wall Street consensus are not included [GetEstimates error].
  • Implication: Focus comparisons on company guidance and actuals; the outsized beat vs company guidance in Q2 suggests estimates are likely to be revised upward, especially for revenue and EBITDA given Q3 guidance ranges .

Key Takeaways for Investors

  • Q2 was a decisive inflection: record topline and profitability with strong operating cash flow, reflecting structurally improved operating leverage; near‑term margin % headwinds are more a mix shift than a demand issue .
  • Auto recovery is broadening but remains uneven; management’s higher Q3 guide indicates confidence, yet intra‑quarter adjustments and cat season introduce volatility—position sizing should account for this path dependency .
  • Agent channel faces TCPA transition; expect 2024 H2 investments and testing to temper VMM %, but 2025 quality/pricing tailwinds could strengthen monetization and competitive moat .
  • Bidding technology and data advantage are central to sustaining margin dollars and conversion, offsetting ad competitiveness; watch for further ML/AI deployment updates .
  • Home & renters continues to execute despite macro underwriting pressure; upside as carriers regain confidence in homeowners lines over time .
  • With Q2 beats vs guidance and robust Q3 outlook, sell‑side estimates likely need upward revisions for revenue and EBITDA, supporting a positive narrative into year‑end despite margin % moderation .
  • Trading: Near term skew is positive on improving auto trends and Q3 guide; monitor cat losses, state rate approvals (e.g., CA), and FCC rule preparations as catalysts for volatility .

Additional Documents Reviewed

  • Earnings press releases and 8‑Ks for Q1 and Q2 2024 with full financials and reconciliations .
  • Q2 2024 call transcript (prepared remarks and full Q&A) .
  • Q4 2023 and Q1 2024 call transcripts for trend analysis .
  • Other Q2‑period press releases (earnings date announcement 7/17; investor conferences 8/7) .