10-Q 1 ever-20240331.htm 10-Q 10-Q
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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.

 

 

 


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

 

2


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:

our dependence on revenue from the property and casualty insurance industries, and specifically automotive insurance, and exposure to risks related to those industries;
our dependence on our relationships with insurance providers with no long-term minimum financial commitments;
our reliance on a small number of insurance providers for a significant portion of our revenue;
our dependence on third-party media sources for a significant portion of visitors to our websites and marketplace;
our ability to attract consumers searching for insurance to our websites and marketplace through Internet search engines, display advertising, social media, content-based online advertising and other online sources;
any limitations restricting our ability to market to users or collect and use data derived from user activities;
risks related to cybersecurity incidents or other network disruptions;
risks related to the use of artificial intelligence;
our ability to develop new and enhanced products and services to attract and retain consumers and insurance providers, and to successfully monetize them;
the impact of competition in our industry and innovation by our competitors;
our ability to hire and retain necessary qualified employees to expand our operations;
our ability to stay abreast of and comply with new or modified laws and regulations that currently apply or become applicable to our business, including with respect to the insurance industry, telemarketing restrictions and data privacy requirements;
our ability to protect our intellectual property rights and maintain and build our brand;
our future financial performance, including our expectations regarding our revenue, cost of revenue, variable marketing margin, operating expenses, cash flows and ability to achieve, and maintain, future profitability;
our ability to properly collect, process, store, share, disclose and use consumer information and other data; and
the future trading prices of our Class A common stock.

3


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.

4


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.

5


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.

6


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.

7


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.

8


 

EVERQUOTE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. Nature of the Business and Basis of Presentation

EverQuote, Inc. (the “Company”) was incorporated in the state of Delaware in 2008. Through its internet websites, the Company operates an online marketplace for consumers shopping for auto, home and renters and life insurance. The Company generates revenue primarily by selling consumer referrals to insurance provider customers, consisting of carriers and agents, and indirect distributors in the United States. The Company also generates revenue from commission fees paid by insurance provider customers for insurance policies it sells to consumers.

The Company is subject to a number of risks and uncertainties common to companies in similar industries and stages of development including, but not limited to, rapid technological changes, competition from substitute products and services from larger companies, protection of proprietary technology, customer concentration, patent litigation, the need to obtain additional financing to support growth and dependence on third parties and key individuals.

The accompanying condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. As of the issuance date of these condensed consolidated financial statements, the Company expects that its cash and cash equivalents will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next 12 months from the issuance date of the condensed consolidated financial statements, without considering borrowing availability under the Company’s revolving line of credit.

The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

2. Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The condensed consolidated balance sheet at December 31, 2023 was derived from audited consolidated financial statements but does not include all disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 on file with the SEC. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of March 31, 2024 and results of operations for the three months ended March 31, 2024 and 2023 and cash flows for the three months ended March 31, 2024 and 2023 have been made. The Company’s results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2024 or any other period.

9


Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, revenue recognition and the valuation of accounts and commissions receivables, the expensing and capitalization of website and software development costs, goodwill and acquired intangible assets, the valuation of contingent consideration liabilities, the valuation of stock-based awards and income taxes. The Company bases its estimates on historical experience, known trends and other market-specific or relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, as there are changes in circumstances, facts and experience. Changes in estimates are recorded in periods in which they become known. These estimates may change, as new events occur and additional information is obtained and actual results could differ materially from these estimates.

Concentrations of Credit Risk and of Significant Customers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts and commissions receivable. The Company maintains its cash and cash equivalents at accredited financial institutions. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company sells its consumer referrals to insurance provider customers, consisting of carriers and agents, and indirect distributors in the United States and receives commissions from insurance provider customers for insurance policies sold. For the three months ended March 31, 2024, one customer represented 30% of total revenue. For the three months ended March 31, 2023, two customers represented 34% and 11%, respectively, of total revenue. As of March 31, 2024, one customer accounted for 48% of the total accounts receivable and commissions receivable balance (including current and non-current). As of December 31, 2023, one customer accounted for 42% of the total accounts and commissions receivable balance (including current and non-current).

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents and contingent consideration liabilities are carried at fair value, determined according to the fair value hierarchy described above (see Note 3). The carrying values of the Company’s accounts receivable, accounts payable and accrued expenses and other current liabilities approximate their fair values due to the short-term nature of these assets and liabilities. Commissions receivable are recorded at the estimated constrained lifetime values.

Accounts Receivable

The Company provides credit to customers in the ordinary course of business and believes its credit policies are prudent and reflect industry practices and business risk. The Company monitors economic conditions to identify facts or circumstances that may indicate that its receivables are at risk of collection. The Company provides an allowance against accounts receivable for estimated losses, if any, that may result from a customer’s inability to pay based on the composition of its accounts receivable, current economic conditions, and historical credit loss activity. Amounts determined to be uncollectible are charged or written-off against the allowance. As of March 31, 2024 and December 31, 2023, the Company’s allowance for credit losses was $0.1 million and less than $0.1 million, respectively. During the three months ended March 31, 2024 and 2023, the Company wrote off an insignificant amount of uncollectible accounts.

10


Revenue Recognition

The Company derives its revenue primarily by selling consumer referrals to its insurance provider customers, including insurance carriers, agents and indirect distributors. The Company also generates revenue from commission fees for the sale of policies, primarily in its automotive insurance vertical, and prior to its exit from health in 2023, in its health insurance vertical. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606 Revenue from Contracts with Customers (“ASC 606”), the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

The Company only applies the five-step model to contracts when collectibility of the consideration to which the Company is entitled in exchange for the goods or services it transfers to the customer is determined to be probable. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.

Referral Revenue

The Company recognizes referral revenue when it satisfies its performance obligations by delivering the referrals to its customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those referrals.

Commission Revenue

The Company’s commission revenue consists of the estimated constrained lifetime values (the “constrained LTVs”) of commission payments that the Company expects to receive in its automotive insurance vertical, and prior to its exit from health, that it expected to receive in its health insurance vertical, on the sale of insurance policies to consumers and renewals of such policies. Commission revenue is recognized upon satisfaction of the Company’s performance obligation. The Company considers its performance obligation related to commissions for both the initial policy sale and future renewals of the policy to be satisfied upon submission of the policy application. Therefore, a significant portion of the commission revenue the Company records upon satisfaction of its performance obligation is paid by the Company’s insurance provider customer over a multi-year time frame as policyholders renew and pay the insurance provider for their policies. The current portion of commissions receivable consists of estimated commissions on new policies sold and estimated renewal commissions on policies expected to be renewed within one year, while the non-current portion of commissions receivable are commissions for estimated renewals expected to be renewed beyond one year. Commission revenue represented less than 10% of total revenue in each of the three months ended March 31, 2024 and 2023.

Commission revenue from auto insurance carriers consists of constrained LTVs of commission payments the Company expects to receive for selling an insurance policy based on the effective date of the policy. The Company’s estimate of constrained LTVs is based on an analysis of historical commission payment trends for relevant policies to establish an expected lifetime value and incorporates management’s judgment in interpreting those trends to calculate LTVs and to apply constraints to such LTVs. The most significant factor impacting historical trends is average policy duration.

The Company applies a constraint to its estimated LTVs to only recognize the amount of variable consideration that it believes is probable that it will be entitled to receive and will not be subject to a significant revenue reversal in the future.

To the extent that commission payment trends change or the underlying factors impacting commission payments change, the Company’s estimate of constrained LTVs could be materially impacted. To the extent the Company makes changes to its estimates of constrained LTVs, it recognizes any material impact of the change to commission revenue in the reporting period in which the change is made, including revisions of estimated lifetime commissions either below or in excess of previously estimated constrained LTVs recognized as an adjustment to revenue and the related contract asset. The Company recognizes revenue for new policies by applying the latest estimated constrained LTV for that product.

Disaggregated Revenue

The Company presents disaggregated revenue from contracts with customers by distribution channel, as the distribution channel impacts the nature and amount of the Company’s revenue, and by vertical market segment. The Company’s direct distribution channel consists of insurance carriers and third-party agents. The Company’s indirect distribution channel consists of insurance aggregators and media networks who purchase referrals with the intent to resell. Revenue generated via the Company’s direct distribution channel is generally higher per referral than revenue generated by the Company’s indirect distribution channels and provides the Company with additional insights and data regarding insurance provider demand and referral performance.

11


Total revenue is 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

%

 

Total revenue is comprised of revenue from the following insurance verticals (in thousands):

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Automotive

 

$

77,538

 

 

$

89,699

 

Home and Renters

 

 

12,689

 

 

 

9,456

 

Other

 

 

838

 

 

 

10,065

 

Total Revenue

 

$

91,065

 

 

$

109,220

 

The Company has elected to apply the practical expedient in ASC 606 to expense incremental direct costs of obtaining a contract, consisting of sales commissions, as incurred as the expected period of benefit of the sales commissions is one year or less. At March 31, 2024 and December 31, 2023, the Company had not capitalized any costs to obtain any of its contracts.

Deferred Revenue

Amounts received for referrals prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the accompanying consolidated balance sheets. Amounts expected to be recognized as revenue within 12 months of the balance sheet date are classified as current deferred revenue. Deferred revenue was $1.9 million as of December 31, 2023. During the three months ended March 31, 2024, the Company recognized revenue of $1.2 million that was included in the contract liability balance (deferred revenue) at December 31, 2023. The Company recognizes revenue from deferred revenue by first allocating from the beginning deferred revenue balance to the extent that the beginning deferred revenue balance exceeds the revenue to be recognized. Amounts collected during the period are added to the deferred revenue balance.

Commissions Receivable

Commissions receivable are contract assets that represent estimated variable consideration for commissions to be received from insurance carriers for performance obligations that have been satisfied. The current portion of commissions receivable are estimated commissions expected to be received within one year, while the non-current portion of commissions receivable are expected to be received beyond one year.

The Company assesses impairment for uncollectible consideration when information available indicates it is probable that an asset has been impaired. There were no impairments recorded during the three months ended March 31, 2024 or 2023. While the Company is exposed to credit losses due to the non-payment by insurance carriers, it considers the risk of this to be remote.

Advertising Expense

Advertising expense consists of variable costs that are related to attracting consumers to the Company’s marketplace and generating consumer quote requests, including through its verified partner network, and promoting its marketplace to insurance carriers and agents. The Company expenses advertising costs as incurred and such costs are included in sales and marketing expense in the accompanying consolidated statements of operations and comprehensive income (loss). During the three months ended March 31, 2024 and 2023, advertising expense totaled $60.2 million and $73.6 million, respectively.

Recently Adopted Accounting Pronouncements

In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (Topic 820), which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The guidance also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The guidance includes disclosure requirements including the fair value of equity securities subject to contractual sale restrictions included in the balance sheet, the nature and remaining duration of the restriction and circumstances that could cause a lapse in the restriction. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, with early adoption permitted. The amendments in this update are to be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. The Company adopted this guidance as of January 1, 2024, and the adoption did not have a material impact on its consolidated financial statements.

12


Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently assessing the impact of the adoption of this guidance on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently assessing the impact of the adoption of this guidance on its consolidated financial statements.

3. Fair Value of Financial Instruments

The following tables present the Company’s fair value hierarchy for assets that are measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 (in thousands):

 

 

Fair Value Measurements at March 31, 2024 Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

3,251

 

 

$

 

 

$

 

 

$

3,251

 

 

 

 

Fair Value Measurements at December 31, 2023 Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

3,210

 

 

$

 

 

$

 

 

$

3,210

 

There were no transfers into or out of Level 3 during the three months ended March 31, 2024 or 2023.

Money market funds were valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy.

Contingent consideration liabilities are valued by the Company using significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The Company uses a Monte Carlo simulation model in its estimates of the fair value of the contingent consideration related to the 2021 acquisition of Policy Fuel, LLC and its affiliated entities ("PolicyFuel"). The most significant assumptions and estimates utilized in the model include forecasted revenue (an acquisition specific input) and the market value of the Company’s Class A common stock (an observable input). Other assumptions utilized in the model include equity volatility, revenue volatility and discount rate. The Company assesses these assumptions and estimates on a quarterly basis as additional data impacting the assumptions is obtained. Changes in the fair value of contingent consideration related to updated assumptions and estimates are recognized as acquisition-related costs within the consolidated statements of operations and comprehensive income (loss). The decrease in fair value of the contingent consideration liabilities of $0.1 million during the three months ended March 31, 2023 was primarily due to a change in estimate of forecasted revenue. The fair value of the contingent consideration liabilities was zero at both March 31, 2024 and December 31, 2023.

13


4. Goodwill and Acquired Intangible Assets

Goodwill is not amortized, but instead is reviewed for impairment at least annually or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. The Company considers its business to be one reporting unit for purposes of performing its goodwill impairment analysis. To date, the Company has had no impairments to goodwill.

There were no changes to goodwill for the three months ended March 31, 2024.

Acquired intangible assets consisted of the following (in thousands):

 

 

 

 

 

March 31, 2024

 

 

 

Weighted Average Useful Life

 

 

Gross Amount

 

 

Accumulated
Amortization

 

 

Carrying Value

 

 

 

(in years)

 

 

 

 

 

 

 

 

 

 

Customer relationships

 

 

9.0

 

 

$

6,600

 

 

$

(2,148

)

 

$

4,452

 

Developed technology

 

 

3.0

 

 

 

1,700

 

 

 

(1,500

)

 

 

200

 

 

 

 

 

$

8,300

 

 

$

(3,648

)

 

$

4,652

 

 

 

 

 

 

 

December 31, 2023

 

 

 

Weighted Average Useful Life

 

 

Gross Amount

 

 

Accumulated Amortization

 

 

Carrying Value

 

 

 

(in years)

 

 

 

 

 

 

 

 

 

 

Customer relationships

 

 

9.0

 

 

$

6,600

 

 

$

(1,748

)

 

$

4,852

 

Developed technology

 

 

3.0

 

 

 

1,700

 

 

 

(1,364

)

 

 

336

 

Other identifiable intangible assets

 

 

2.0

 

 

 

300

 

 

 

(300

)

 

 

 

 

 

 

 

 

$

8,600

 

 

$

(3,412

)

 

$

5,188

 

During the three months ended March 31, 2024, the Company updated its estimate of the remaining useful life of customer relationships from 6.6 years to 5 years. Amortization expense will be recognized over the revised remaining useful life. Future amortization expense of the remaining intangible assets as of March 31, 2024 is expected to be as follows (in thousands):

 

Year Ending December 31,

 

 

 

2024 (remaining nine months)

 

$

1,400

 

2025

 

 

1,126

 

2026

 

 

970

 

2027

 

 

970

 

2028

 

 

186

 

 

$

4,652

 

 

5. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Accrued employee compensation and benefits

 

$

5,352

 

 

$

5,188

 

Accrued advertising expenses

 

 

3,800

 

 

 

2,285

 

Other current liabilities

 

 

1,494

 

 

1,311

 

 

$

10,646

 

$

8,784

 

 

Accrued employee compensation and benefits included a restructuring liability of $0.4 million at December 31, 2023 that was fully paid by March 31, 2024.

14


6. Loan and Security Agreement

The Company has availability to borrow up to $25.0 million under its 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 the Company and Western Alliance Bank (the "Lender"), as amended by the Loan and Security Modification Agreement dated as of July 15, 2022, as amended by the Loan and Security Modification Agreement dated as of August 1, 2023, as amended by the Loan and Security Modification Agreement, dated as of August 7, 2023).

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 the Company's assets and property. Under the 2023 Amended Loan Agreement, the Company has agreed to certain affirmative and negative covenants to which it will remain subject until maturity. The covenants include limitations on its 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, the Company is 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 the Company's 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 the Company's 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 and December 31, 2023, the Company was in compliance with these covenants and had no amounts outstanding under the revolving line of credit.

7. Stock-Based Compensation

2008 and 2018 Plans

The Company has outstanding awards under its 2008 Stock Incentive Plan, as amended (the “2008 Plan”), but is no longer granting awards under this plan. Shares of common stock issued upon exercise of stock options granted prior to September 8, 2017 will be issued as either Class A common stock or Class B common stock. Shares of common stock issued upon exercise of stock options granted after September 8, 2017 will be issued as Class A common stock.

The Company’s 2018 Equity Incentive Plan (the “2018 Plan” and, together with the 2008 Plan, the “Plans”) provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other stock-based awards. The number of shares initially reserved for issuance under the 2018 Plan is the sum of 2,149,480 shares of Class A common stock, plus the number of shares (up to 5,028,832 shares) equal to the sum of (i) the 583,056 shares of Class A common stock and Class B common stock that were available for grant under the 2008 Plan upon the effectiveness of the 2018 Plan and (ii) the number of shares of Class A common stock and Class B common stock subject to outstanding awards under the 2008 Plan that expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right (subject, in the case of incentive stock options, to any limitations of the Internal Revenue Code). The number of shares of Class A common stock that may be issued under the 2018 Plan will automatically increase on the first day of each fiscal year until, and including, the fiscal year ending December 31, 2028, equal to the lowest of (i) 2,500,000 shares of Class A common stock; (ii) 5% of the sum of the number of shares of Class A common stock and Class B common stock outstanding on the first day of such fiscal year; and (iii) an amount determined by the Company’s board of directors. The shares of common stock underlying any awards that are forfeited, canceled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, repurchased or are otherwise terminated by the Company under the 2018 Plan will be added back to the shares of common stock available for issuance under the 2018 Plan. The number of authorized shares reserved for issuance under the 2018 Plan was increased by 1,708,925 shares effective as of January 1, 2024 in accordance with the provisions of the 2018 Plan described above. As of March 31, 2024, 3,049,855 shares remained available for future grant under the 2018 Plan.

Options and restricted stock units (“RSUs”) granted under the Plans vest over periods determined by the board of directors. Options granted under the Plans expire no later than ten years from the date of the grant. The exercise price for stock options granted is not less than the fair value of common shares based on quoted market prices. Certain of the Company’s RSUs are net settled by withholding shares of the Company’s Class A common stock to cover statutory income taxes.

During the three months ended March 31, 2024, the Company granted 486,923 service-based RSUs with an aggregate grant date fair value of $7.6 million and 327,075 performance-based RSUs with an aggregate grant date fair value of $5.1 million under the 2018 Plan.

15


Inducement Grants

In connection with the acquisition of PolicyFuel in 2021, the Company granted service- and service- and performance-based RSUs to newly hired employees. The RSUs were approved by the Company’s board of directors and were granted as an inducement material to the new employees entering into employment with the Company in accordance with Nasdaq Rule 5635(c)(4) (the “Inducement Awards”). The Inducement Awards were granted outside of the 2018 Plan.

Stock-Based Compensation

The Company recorded stock-based compensation expense in the following expense categories of its consolidated statements of operations and comprehensive loss (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

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

 

As of March 31, 2024, unrecognized compensation expense for RSUs and option awards was $26.8 million, which is expected to be recognized over a weighted average period of 2.1 years.

8. Commitments and Contingencies

Leases

The Company leases office space under various non-cancelable operating leases. There have been no material changes to the Company’s leases during the three months ended March 31, 2024. For additional information, please read Note 12, Leases, to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

In April 2024, the Company entered into a new lease arrangement for office space in Cambridge, Massachusetts (see Note 12).

Indemnification Agreements

In the normal course of business, the Company may provide indemnification of varying scope and terms to third parties and enters into commitments and guarantees (“Agreements”) under which it may be required to make payments. The duration of these Agreements varies, and in certain cases, is indefinite. Furthermore, many of these Agreements do not limit the Company’s maximum potential payment exposure.

In addition, the Company has entered into indemnification agreements with members of its board of directors and executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers.

Through March 31, 2024, the Company has not incurred any material costs as a result of such indemnifications. The Company does not believe that the outcome of any claims under indemnification arrangements will have a material effect on its financial position, results of operations or cash flows, and it has not accrued any liabilities related to such obligations in its consolidated financial statements as of March 31, 2024 and December 31, 2023.

Legal Proceedings and Other Contingencies

The Company is from time to time subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of its business. While the outcome of these claims cannot be predicted with certainty, management does not believe that the outcome of any of these legal matters will have a material adverse effect on the Company’s consolidated results of operations or financial condition.

16


9. Retirement Plan

The Company has established a defined-contribution plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). The 401(k) Plan covers all employees who meet defined minimum age and service requirements, and allows participants to defer a portion of their annual compensation on a pre-tax basis. As currently established, the Company is not required to make any contributions to the 401(k) Plan. The Company contributed $0.2 million during each of the three months ended March 31, 2024 and 2023.

10. Related Party Transactions

The Company has, in the ordinary course of business, entered into arrangements with other companies who have shareholders in common with the Company. Pursuant to these arrangements, related-party affiliates receive payments for providing website visitor referrals. During the three months ended March 31, 2024 and 2023, the Company recorded expense of $2.3 million and $1.8 million, respectively, related to these arrangements. During the three months ended March 31, 2024 and 2023, the Company paid $1.0 million and $1.8 million, respectively, related to these arrangements. As of March 31, 2024, and December 31, 2023, amounts due to related-party affiliates totaled $1.6 million and $0.3 million, respectively, which were included in accounts payable on the condensed consolidated balance sheets.

11. Net Income (Loss) per Share

Basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding for the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of outstanding stock options and unvested restricted stock units. For periods in which the Company reports a net loss, diluted net loss per common share is the same as basic net loss per common share, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

The Company has two classes of common stock outstanding: Class A common stock and Class B common stock. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. Each share of Class B common stock is convertible into one share of Class A common stock at the option of the holder at any time. The Company allocates undistributed earnings attributable to common stock between the common stock classes on a one-to-one basis when computing net income (loss) per share. As a result, basic and diluted net income (loss) per share of Class A common stock and Class B common stock are equivalent.

A reconciliation of the numerators and the denominators of the basic and dilutive net income (loss) per common share computations are as follows (in thousands, except per share amounts):

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Numerator:

 

 

 

 

 

 

Net income (loss)

 

$

1,907

 

 

$

(2,529

)

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

Weighted average basic common shares outstanding

 

 

34,387

 

 

 

32,892

 

Effect of dilutive securities:

 

 

 

 

 

 

Options to purchase common stock

 

 

523

 

 

 

 

Restricted stock units

 

 

698

 

 

 

 

Weighted average dilutive common shares outstanding

 

 

35,608

 

 

 

32,892

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

Basic

 

$

0.06

 

 

$

(0.08

)

Diluted

 

$

0.05

 

 

$

(0.08

)

 

17


The Company excluded the following potential common shares, presented based on weighted average shares outstanding during the periods, from the computation of diluted net income (loss) per share because including them would have had an anti-dilutive effect (in thousands):

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Options to purchase common stock

 

 

419

 

 

 

1,909

 

Restricted stock units

 

 

410

 

 

 

2,560

 

 

 

829

 

 

 

4,469

 

The tables above do not include shares of Class A common stock issuable upon settlement of contingent consideration for the Company’s 2021 acquisition of PolicyFuel or performance-based awards for which the performance goal had not been met as of period end.

12. Subsequent Events

In April 2024, the Company entered into two agreements to lease office space in Cambridge, Massachusetts through December 2027 for payments totaling $3.2 million through 2027.

18


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.

19


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.

20


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:

Clicks: An online-to-online referral, with a handoff of the consumer to the provider’s website.
Data: An online-to-offline referral, with quote request data transmitted to the provider for follow-up.
Calls: An online-to-offline referral for outbound calls and an offline-to-offline referral for inbound calls, with the consumer and provider connected by phone.

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.

21


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:

adjusted EBITDA excludes stock-based compensation expense as it has recently been, and will continue to be for the foreseeable future, a significant recurring non-cash expense for our business;
adjusted EBITDA excludes depreciation and amortization expense and, although this is a non-cash expense, the assets being depreciated and amortized may have to be replaced in the future;

22


adjusted EBITDA excludes restructuring and other charges that affect cash available to us;
adjusted EBITDA excludes acquisition-related costs that affect cash available to us and the change in fair value of non-cash contingent consideration;
adjusted EBITDA does not reflect the cash received from interest income on our investments, which affects the cash available to us;
adjusted EBITDA does not reflect income taxes that affect cash available to us; and
the expenses and other items that we exclude in our calculation of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from adjusted EBITDA when they report their operating results.

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

 

$