A Strong Start with Record …

• Total Revenue: $91.1 million in Q1 2024, with a sequential increase from Q4 2023.

• Auto Insurance Revenue: $77.5 million in Q1 2024, representing about 85% of total revenue.

• Home and Renters Insurance Revenue: $12.7 million in Q1 2024, up 29% from Q4 2023.

• Variable Marketing Margin (VMM): $30.8 million in Q1 2024, up nearly 50% from Q4 2023.

• VMM as Percentage of Revenues: 33.8% in Q1 2024.

• Net Income: Record high of $1.9 million in Q1 2024.

• Adjusted EBITDA: Record $7.6 million in Q1 2024, a 41% improvement year-over-year.

• Operating Cash Flow: $10.4 million in Q1 2024.

• Cash and Cash Equivalents: Ended Q1 2024 with $48.6 million, up from $38 million at the end of Q4 2023.

Release Date: May 06, 2024

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

Positive Points

• EverQuote Inc (NASDAQ:EVER) exceeded first-quarter guidance across all primary financial metrics including total revenue, variable marketing margin (VMM), and adjusted EBITDA.

• Record levels of net income, adjusted EBITDA, and operating cash flow were achieved, demonstrating strong financial health.

• Significant growth in the auto insurance vertical, with revenue increasing by 72% sequentially from the fourth quarter of 2023.

• Home and renters insurance vertical also showed strong performance with a 29% sequential increase in revenue from the previous quarter.

• Strategic investments in technology infrastructure, including a new ML-powered bidding platform, are set to enhance future speed, scale, and feature development.

Negative Points

• Despite overall growth, VMM as a percentage of revenues declined due to a more costly advertising environment.

• The auto insurance industry recovery, while underway, is expected to continue facing unpredictability and challenges in predicting future performance.

• Increased competition in advertising channels has led to higher costs, impacting the variable marketing margin.

• The necessity to increase investments modestly to support future growth might moderate adjusted EBITDA margins in the upcoming periods.

• While the home vertical is growing, the company anticipates that the year-over-year comparison will become more challenging as the year progresses.

Q & A Highlights

Q: Could you provide some perspective on the broad-based recovery in terms of the number of carriers and states involved? A: (Jayme Mendal – CEO) The recovery is broad-based, with improvements in carrier underwriting profitability. All top 10 carriers from Q4 have increased their spend in Q1. There’s a broad base of carriers reactivating campaigns and reopening state footprints. The recovery has been faster than expected, with a significant contribution from one major carrier, but it’s broadly supported across the board.

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Q: How should we think about the shape of revenue recovery through 2024? A: (Jayme Mendal – CEO) The recovery has been front-loaded with a strong start to the year, led by a few carriers expanding quickly. Q2 is expected to return to peak levels seen in early 2023, but the second half of the year might not follow traditional seasonal patterns due to the rapid early recovery and the limited number of states left for carriers to enter.

Q: Can you comment on the role pricing is playing in the early phases of this recovery? A: (Joseph Sanborn – CFO) Pricing has stepped up significantly from Q4 to Q1 and is at healthy levels historically. Stability in higher pricing levels is expected if the auto recovery continues, benefiting from both higher volume and pricing.

Q: What are the incremental investments you are planning to make? A: (Jayme Mendal – CEO) Investments will be targeted in areas like Data Science & AI and extending our advantage with local agents. These investments aim to improve carrier and station performance and develop new products for local agents to deepen relationships.

Q: Could you discuss the growth in the home vertical and its sustainability? A: (Jayme Mendal – CEO) The home vertical saw record revenue in Q1, benefiting from improved underwriting profitability in the homeowners market. Growth is expected to continue throughout the year, although comps will get tougher.

Q: How are you managing the ramp-up in advertising expenses with the improvements in demand? A: (Jayme Mendal – CEO) As demand increases, so does competition in advertising, particularly in vertical-specific channels like paid search. The focus is on maximizing variable marketing margin dollars, even if it means some compression in margin percentages due to higher costs, which are offset by volume and higher pricing.

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

This article first appeared on GuruFocus.