All right, thank you everybody for joining us at the annual Oppenheimer Technology Conference. Great to have Jayme Mendal, CEO of EverQuote, Joseph Sanborn, its CFO. EverQuote's had a great start to the year. I think the stock's more than doubled. Seeing a lot of momentum in the business, which is great to see. So we'll just start out, Jayme. For those on the call unfamiliar with EverQuote, can you just please give us a quick overview on, you know, what it is your company does?
Sure. So EverQuote's a leading online insurance marketplace. We find consumers wherever they are on the internet with some intent to buy insurance, get them to our sites, where we'll gather all the relevant underwriting data that would be required to match and connect a consumer with the right insurance provider or narrow subset of providers for them as a risk. So the value prop to the consumer is, we save them significant time and money in their process of shopping or re-shopping for insurance. And the value proposition to the provider is, we are a large and highly targetable customer acquisition partner at scale. We focus primarily on P&C insurance, with you know the largest vertical we operate in, auto insurance, followed by homeowners.
Got it. And, you reported last week awesome revenue growth. I think VMM dollars were up a lot, I mean, up over 70%. Can you just give us a couple quick highlights on what went on, what you're seeing in the industry and, you know, sort of, you know, progress you're making in the recovery?
Sure. So for those who are a little newer to the story, it's been a fairly tumultuous period in the insurance markets in the U.S., most notably in auto insurance, but also extends to homeowners. And it all stems from a set of issues that sort of transpired during and immediately following COVID. So if you go all the way back to 2021, you know, when COVID hit, cars came off the road, there were very few accidents occurring, and the auto insurance market went through this period of windfall profitability because they were collecting premiums and really had very few claims to pay out.
Well, as cars came back on the road and accident frequency picked back up, you know, the thing that the carriers did not anticipate as you know they were experiencing this, is that the cost to repair and replace vehicles, the loss costs, would come up dramatically due to a lot of the inflation in used car parts, supply chain shortages, bottlenecks, and things like that. And so they swung pretty quickly from a period of windfall profitability to historic losses. And so this took us into 2022, 2023, this period that's referred to in the industry as a hard market. But effectively, the carriers' rates were not high enough relative to the losses they were incurring.
And so every incremental policy they would bring on, there's a high likelihood that that would be an unprofitable policy until they were able to get their rates adjusted to the new loss environment. So the industry went through this period where they were refiling rates. And, you know, you do this state by state, and they were filing higher rates, and then the loss costs would keep rising, and so they'd have to refile rates. And this, this endured for, you know, 2 to 3 years. The industry is still not fully out of it yet but is beginning to turn the corner. While we were in this hard market period, carriers had very little appetite for, for new customers, for, for growth, which is, you know, that's the business that we're in, is supporting customers with their, you know, desire to grow their, their book of business.
Now, as we transition, we're seeing a lot of demand start to return to the market, and that's caused an inflection in our business as we start to see carrier budgets return to more normalized levels. We're still in the process of this normalization and, you know, expect it to sort of extend into 2025. But the pendulum has begun to swing in a pretty meaningful way from a world where carriers were just focused on underwriting and didn't want to grow, to a world where they're getting comfortable with their underwriting profitability and are now eager to grow.
So you mentioned we're still... I mean, this seems like a pretty decent upcycle we're seeing. I know you've been part of a couple, being your history at EverQuote. Can you talk about, like, where you think we are in terms of, like, this upcycle trajectory? I know there's some certain states that even haven't adjusted rates. I think home is still lagging as well. So can you just give the audience, like, an overview on how we should think about the, you know, sort of tailwinds behind you over the next 12-18 months?
Yeah, sure. So there's a couple different sort of dimensions you can look at it by. The first is geographically. As you mentioned, Jed, you know, the industry is regulated state by state, and so rate increases that get filed at the state level get approved at the state level. And different states have a different kind of stance on approving rate increase requests. Some states are more willing to approve them, some states are less willing or require a higher burden. And so where we are now is, it sort of appears like, you know, 80% of the states or more have given, you know, have given carriers the level of rate increases that they require to get back to healthy underwriting and get back to growth.
There's still a handful of states, you know, most notably some of the big ones, states like California, like New York, which really haven't gotten fully corrected in it from a rate standpoint. And those are states that we sort of expect to come back online for the carriers in 2025. So, you know, there's probably some amount of recovery that's just, you know, not accounted for yet that will come from those states. So that's one lens you could look at it from. The other is just carrier by carrier. So as carriers began to make, you know, corrections and file for rate increases and adjust their expenses and everything, you know, some carriers moved faster and got back to healthy underwriting faster than others.
So we've got, you know, a very small handful of carriers, who I would characterize as being almost fully recovered, with the exception of those few states, and they're kind of back to historical spending patterns, in terms of their footprint, in terms of their demand and how they're approaching the marketplace anyways. And then, you know, the rest of the carriers exist on some spectrum, where they're sort of partially recovered or stepping back into the market. And, you know, there is this tail of carrier spend that we expect to kind of move into the marketplace over the back part of this year and into next year, coming from the carriers that weren't as quick to react.
We're seeing a decent amount of your competitors also benefiting from the upcycle, right? I think they're all showing- very healthy growth rates. So when investors are looking like, "Okay, how..." You know, when we're trying to assess your comps, like, can you talk about how you look at the competitive environment, what you benchmark to, what you think is important in terms of, A, EverQuote's outperforming the market, they're seeing healthy share gains, they're gaining more carrier budget? Just talk about those key drivers.
Sure, Joe. Go ahead, Joseph.
Sure. Sure, so I guess when we think about the market right now, we've, you know, we've talked about this a bit when we were doing our work last year on our restructuring, which was coming out of that, we said, "We want to be set up to really not just do well." We believe everyone will do well with recovery. We want to be positioned to sort of accelerate ahead. And you see what we're now seeing in the course of this year, which is, you know, the industry is starting to see recovery broadly, and we are benefiting as an industry. With regards to EverQuote specifically, we're really pleased with our progress. You see us doing things such as we're really accelerating our operating leverage.
It's coming through to really driving very strong margins, I think that's, you know, both on the Adjusted EBITDA and the net income basis. So we think we're driving returns at levels that are, you know, very favorable relative to the peers. Then we look at how we're performing in the industry in terms of solving our customers' pain points, the carriers and the agents, and we feel very good about how we're helping them come out and position themselves for growth as we go through this rebound. You know, I think one of the things we talk about sometimes, the industry is always asking about where we would share.
I guess our simple way of viewing it and sharing, we've said this for at the end of last year and start of this year, is it's really hard to measure share on in this context right now, which you're going through such dramatic change. We believe we're really well positioned to win in this game long term. What we did in the downturn was not set ourselves just to do well in this period like others. We really want to propel ourselves ahead. That's what we're starting to. We believe we're setting ourselves up to do that. Our focus on P&C exclusively, we think, is a real advantage.
It's allowing us to go deeper in doing what we do really well, which is using our data and technology in the marketplace to help providers, carriers, and agents, you know, help grow the business and do it profitably. So we're very pleased by our progress, and the feedback we get from our clients is, you know, very positive about in terms of how we're performing relative to peers. You know, and as we think over the next several quarters and time ahead, we feel well positioned to emerge in this, even stronger as a leader in the space.
I've always been taught in this business, you know, you kind of look at variable marketing dollar growth- versus overall dollars. You know, the margins can, the VMM margins can move around, but, you know, if you can get... You know, you're supposed to market to the last profitable incremental gross profit dollar, right? To give your carriers more value. So can you just explain to, like, the audience, how we should view your variable marketing dollar growth, especially in this upcycle, and what to expect, and then how do margins look more in, like, a normalized period?
Sure. So what you saw in Q2, obviously, was, sorry, in Q2, was very strong records across the business. If you listened to our call and look at our comment, our press release following the earnings call last week, we had record revenue, VMD, adjusted EBITDA and net income, and importantly, cash flow. So all of those things were record levels, and EBITDA margin. So we feel like we had a really strong quarter on several dimensions. With regards to VMD specifically, I mean, I'll talk about VMD was up almost 50%, year-over-year, so obviously really strong growth. We're pleased with that. And the VMM margin was around 31%. And maybe just to sort of double-click on VMM margin, we get a lot of questions on it, and so maybe I'll just give you some context.
You know, the normalized VMM margin for us in Marketplace, putting aside our DTC operations, which we largely have exited between the health exit last year and our more limited narrow focus on P&C, you know, was around 29%-30%, starting in 2023. As we said this year, we said, "Hey, we'll probably normalize a low 30." So 30%-31% was the messaging we gave to folks at the start of this year. And we said that we had these really strong VMM margins at the end of 2023, reflecting that there was a very depressed advertising environment. We benefited by trying to drive... We were able to drive very high margins.
The way to think about what's normalized here, as you point, we're looking at driving VMD dollars, and as we look at the VMM margin, we see that there's an opportunity to be 30%+. Well, the thing we noted is that, as we look to the second half of this year, we've moderated that guidance from where we were at the start of the year, reflecting that we're going to dip into the high 20s, we believe. If you look at our guide implies 28%-29% below in the high point. And really, what that was reflecting is two things: One is a much more competitive advertising environment. As this industry restarts, and it's accelerating the recovery faster than any of us expected, you have some costs on some of the traffic side that are higher.
We think those will start to normalize, and you'll see that margin go up. The second thing we've talked to is some of the changes we're gonna make to prepare for the upcoming FCC changes in start of next year, and making sure we're well prepared for that is, you know, we think is really important for the industry, and we think we're leading that. Part of the result of that is that you have some downward pressure in the near term in some of the testing results. We basically effectively are paying for the same traffic cost, we're not getting the same monetization as you look to this one-to-one conversion testing we've been doing.
So those are the two things that are bringing it down, and we've said, "Hey, through the rest of this year, expect it'll be more, more likely to be in the, the high twenties as opposed to the low thirties." We'll think that will continue through the, you know, first part of next year and start to normalize, and we're back in the, the low thirties. And, you know, coming, coming through normalizing, I think one of the things that will continue to drive long-term benefit for us is the investments we've talked about in the past with you, Jed, around our bidding technologies, things we're doing to really drive our data advantage and really use that to drive incremental improvements in our traffic operations and better performance.
All right, so you mentioned two things that I want to follow up.
Sure.
The first is the FCC, the TCPA. You know, what's going on there? And, you know, I think you're the first one to call it out of the companies I cover. You know, is this detrimental to the business? I won't say detrimental, but just the impact and how do you manage it with your carriers, and making sure they're prepared and everything.
Sure. Jayme, why don't you start a little context- and then I can give more on financials.
Sure. So just to give everyone a little more context on what the rule is and sort of like how it affects the business, let's take it first from the consumer lens. So the FCC issued this new rule. The rule goes into effect in late January of next year, so that's, you know, that's what we're preparing for. And the rule relates to the TCPA, the Telephone Consumer Protection Act, which, you know, stipulates what kind of consent is required to be collected for certain types of kind of outbound telephonic activity to consumers.
So when a consumer comes through the site today, not just our site, but you know, any site, they will effectively click a button, and there's some text under that button which allows the site operator to collect consent for telephonic outreach to that consumer using certain types of technologies. And today, what happens is that consumer clicks the button once, and the text allows the, uh, you know, the party to multiple parties to basically collect consent with one click of a button. Now, we would refer to that as one-to-many consent. So as we work to interpret the new rule that's coming out, I think what the industry is coalescing around is an interpretation that says we're moving from a world of one-to-many consent to one-to-one consent.
And so the key difference, the key distinction there, is that now when the consumer comes through, it's not just, you know, click one button and collect consent for multiple parties, but now you'll need to collect consent for one party at a time. And so there's multiple ways you could do this, and Joseph alluded to some of the testing we're doing around, you know, these different approaches. But a simple way to sort of think about or visualize it is like a checkbox per provider, right? So, okay, check, I want to hear from... you know, get a quote from State Farm. Check, I want to get a quote from Allstate. And each one of those actions can, you know, constitutes one-to-one consent for the outreach.
So to put this into context and turn from EverQuote's point of view, you know, this really doesn't so much affect our digital business, it's largely unaffected. What it, what it affects is the leads business, where there's telephonic outreach, you know, going out to the consumer. So let's call it 25%-30% of the business that's sort of affected in any way by, by this rule. And the net effect from our point of view, based on a lot of the testing that we've done, is, on the one hand, the number of leads available to be sold to providers will, will come down because you lose some amount of opt-in from the consumers. But at the same time, those consumers who do opt in are likely to convert at much higher rates.
You'll pick up a lot of performance on the back end, and so you'll have fewer leads that perform better. The expectation that we've set with carriers, and they largely, you know, have embraced, is that there will be some pricing changes commensurate with the performance improvements. So from a long-term, from a strategic point of view, I think we view this as a very healthy thing for the industry. I think it's just more provides more transparency to the consumer. It will allow us to create a better product for agents. The experience is kind of better end-to-end for everybody involved. Now the work being done is really to just kind of manage our way through from the current, you know, state of consent collection to the future state.
You know, we're working very closely with carriers, with agents, with, you know, with everybody that needs to be involved, to to get through this as seamlessly as possible. Now, does this benefit the score of the, the agents or the captive agents working for the larger carriers with the larger brand name? Because now the consumer has to choose, and how does that impact your business? Yeah, I think to an extent, it will favor the, the agents that represent a well-known brand because, you know, that, that brand will, like, induce some incrementally, you know, higher opt-in rate. You know, the reality is the vast majority of our agent business represents, is, you know, is represented by those brands.
So there's not a whole lot of, you know, like, independent agent distribution that we, you know, that will be all that negatively affected. But I think your assumption is likely correct, that you'll get you'll get sort of a, an incremental edge will go to the well-known brands.
... And I wanna come back to your AI bidding strategy, but just one more follow-up, and I wanna tie what's going on with the FCC into, like, your vertical integration strategy, 'cause, I know that's sort of an important part of your business and the story, too. So how does that tie in with what you're doing on your agency business and your- becoming more vertically integrated?
Yeah, it's a good question. I think it all fits together really nicely, right? Because what will happen is, you know, as the number of leads available to be sold comes down a bit, the carriers and the agents themselves are still as hungry as ever for growth, particularly right now, as we're coming through the next phase of the cycle. And so we're engaged in lots of conversations with carriers, with agents, about other ways we can support their growth needs, which is perfectly in line with our strategy, right? Our strategy, as it relates to the agents, is to become more of a one-stop growth shop for these local insurance agents that provides them not only with leads, but other products and services that basically help them grow.
And so what we're finding is, even in anticipation of the impact of this rule, there's a lot of interest and demand for some of the other, you know, services, some of the other things that we've been talking to agents and carriers about for quite some time now. So I think it, if anything, it will accelerate kind of, like, the course of our strategy and, and really help us just get more deeply embedded with these agents sooner than we otherwise might have.
Got it. And then, Joseph, you mentioned the AI bidding strategy. Can you... or the bidding strategy. Two things: can you talk about, you know, the benefit of AI? And then, can you kind of give us some incremental progress that you're seeing, like how it's supporting the business versus maybe, like, where the bidding was a couple of years ago? I think you had a very good cycle in, like, 2018 to 2019. Like, can you talk about some of the puts and takes and where your bidding's ultimately, ultimately improving?
Sure. So, Jayme, do you want to start?
Yeah, I can, I can, I can kick us off here. So, you know, our—the vast majority of our traffic is paid traffic, and we're, you know, we're out there programmatically placing bids for consumer eyeballs, you know, wherever they are on the internet, with some intent to buy insurance. And in that context, you know, one of the most important sort of capabilities that we have developed over the years is this automated bidding capabilities. Now, this goes back to the early days of, of EverQuote. You know, we began not, not so much as an insurance company, a lot more as, like, a data and tech company that happened to be pointed at the insurance vertical. And so the sort of data and the integration of, of data and technology has been in our DNA since, since our earliest days.
Over the last few years, we've made some pretty big investments in improving the precision, the accuracy, the effectiveness of all of our traffic bidding by effectively rendering it all to AI, specifically to machine learning. And now the vast majority of our traffic bidding is run by machine learning models, and those models are, you know, trained on proprietary data that takes inputs about the consumer, about the distribution, so our providers. It takes inputs about the competitive auctions in which we participate, and it infers all kinds of values about the consumer, their likelihood to convert different providers, and is able to then back out a profit-maximizing bid for EverQuote.
This gives us the tools we need to kind of manage the business day to day, month to month, and it's been a big part of how we kind of optimized our way through the Hard Market cycle over the last couple of years. So our bidding technology is as, you know, as strong as it's ever been. I think we continue to feed more data into it. We continue to layer on, you know, new models and retrain models and just increase its sort of precision and accuracy over time.
Got it. And then just, you know, I know last year you kind of right-sized the cost structure. Can you just talk about, now with the business growing again, everything's humming along, how we should think about incremental investments going forward, you know, the company's approach and, you know, just, just where we are on the fixed cost base on, on where you are?
Sure, happy to. So just a little context for those who aren't familiar. So, last June, we did a significant change in the cost structure. We had a 30% reduction in the workforce, 20% reduction in the cost structure, and importantly, the Adjusted EBITDA became a really good proxy for cash flow. So we really simplified the... And it was all done by focus on simplifying the business and focusing on where we think we can win long term, which is the P&C work. So that's the backdrop. As with this at the time, we said to investors we were gonna do, accomplish two things.
This has been last summer we started saying this and into the fall, which is we were gonna get back to pre-downturn margins, which were 5.5%-6%, and we were gonna start getting back to cash flow positive. And we said we'd do both of those in the course of the first part of 2024. So we actually well ahead of schedule on doing that, we actually did in Q1 in both regards. You know, the simplification we've done has really resulted in a really nice cash conversion as well in the business. Adjusted EBITDA is a really good proxy for operating cash flow, just subject to the normal working capital things you have, you know, week to week or month to month. But if you look at what we've made, the progress we've made is we've brought the business back.
We've been very disciplined on adding expenses, and the result is, as we're getting strong recovery, we're actually benefiting that from a lot... The operating leverage is expanding, and more dollars are dropping to the bottom line. The impact of that from a financial viewpoint is you're seeing our Adjusted EBITDA margins hitting record levels. You know, we're at a little over 8.25% in Q1, so well above where we ever were pre-downturn. You saw us in Q2 actually at 11%. You know, for folks who have been watching our story, 11% was ahead of where we thought we'd be at the start of Q2, really resulted as we had strong performance in the business continue through the second half as carriers added sort of spend with very little notice.
A lot of that flowed through from VMD straight to the bottom line, adding Adjusted EBITDA, reflecting just how we're managing expenses. And we've sort of said, assume that 11% sort of, you know, given how we've had 1,100 basis points of improvement in our EBITDA margins this year, I'm not sure many companies can say that. I think we've sort of said, "Hey, assume these margins are sort of where we'll operate the business this for the rest of this year." And sort of into next year, assume that's where we'll, you know, is a good starting point for now to think about next year, just given how much performance we've had. You know, when we think about how we're going to do investment, I'd point to a couple things.
If you look at the cash operating expenses, which is very simplistically excludes advertising expense, excludes the non-cash charges, you're seeing that in the Our guidance applies $24.5 million for Q3, up, up from like, you know, $23.7 million in Q2, so modest expansion. And really reflecting those investments going in the key areas we think are really going to help drive the business long term, right? You know, notably areas around technology, the areas we've done to, you know, simplify and streamline the platforms, make them more scalable, and the, the investments we're making, the bidding technologies, AI and, and areas as well. And I also call on my comments that are developing new products for providers.
You know, on the agent side, we've talked about the opportunity we have with that business, we think to help do more - help customers, whether it's carriers or agents, grow more profitably over time. And we think there's incremental products we can add beyond the clicks we do for carriers and the leads we do principally for agents, that we continue to build upon that and help serve our clients and try to help grow. So that's a, a little bit of how we're doing it. And then as you look to next year on OpEx, we haven't talked a lot about next year yet, beyond saying the EBITDA margins we've achieved in Q2, you know, I think it's safe to say we see those continuing to next year.
You know, we're not forecasting a lot of expansion now, reflecting that we do believe it's important that we make investments in the business, particularly as we come out of this cycle. We've been very disciplined. We'll continue to be disciplined about how we add dollars. You know, just the, there's a whole orientation talking about every... We make significant dollar investments. What's the ROI? What's the approach? We have a very, I think, thoughtful approach to investment now as a company. But we believe it's important. This is a growth company, right? We are a business. We believe it's supposed to drive strong growth on the top line, but also balance that with strong cash flow on the bottom line, and part of that will be making investments next year that have little benefit for 2025, really help 2026 and 2027 and beyond.
I guess too, when I look at your business, right, EBITDA as a percentage of VMM dollars or VMM-
Yep. Sure.
Trending in that mid-30%, I think it's like 34% year to date. I think past the best the company's ever done is 18%.
Right. That's another way-
So what you're doing is clearly working. Is that kind of the right way to look at it, is, you know, well, we're doing 11% margins, but you could actually make a point, "Hey, we get a better upcycle than we're thinking," margins could go down. But when you look at variable marketing dollars as a percentage of EBITDA as a percentage of variable marketing dollars, they could still go up.
So it's surely you're talking about a way we... You know, we don't talk about a lot externally with investors who aren't as knowledgeable of the VMM dynamics as you are, Jed. But certainly looking at the EBITDA dollars relative to VMM and not just revenue is something we do as well, and I would note, we are making very good progress there as well. And it was a, that's another record we had in Q2. So, I would agree with that point. I think for us is, we believe we- this is a business we continue to drive VMD dollars. We think you'll continue to see over time Adjusted EBITDA margin improvements. You know, our long-term goal is 20%+. How do you get there? As you're driving little VMD dollars, you're still getting leverage on the operating expenses, and I think we'll continue to get that. You know, one of the things that... A notable shift we did after our strategic realignment last June was we're really focusing increasingly on a more asset-light business model, which is really back to the roots of what we went public. As we were a Cambridge-based technology company, we're still a Cambridge-based technology company. The diversification we did into sort of, you know, first-party agency, we pulled back from that, as I said, and dramatically exited health. That really reflects that we are, at our core, where our core success is we take technology and analyze data and help drive better performance for our provider partners.
As you think about those type of investments, those are ones that tend to lead, can be higher operating leverage than heavy people-intensive businesses. I think that's what you're seeing manifest, whichever metric you look at, whether it's Adjusted EBITDA margins, Adjusted EBITDA, Adjusted EBITDA dollars relative to VMD. I think that's why we see long-term seems to be 20%+. Obviously, yeah, we won't get there overnight, but we do see a lot of operating leverage potential in the model to continue.
It looks like this year's gonna be a pretty healthy free cash flow year.
Yeah.
I think you ended cash over, well, $61 million.
Correct. Yep.
You know, looks like I'm not going to put numbers out there, because you don't get full year guidance, but it looks like you're trending to about $75 million. So can you just talk about capital, how you look at the capital structure of the business, capital allocation, and then more importantly, I think when you look at insurance marketing, I think it's a huge market, right? $27 billion, maybe I'm low. Still fragmented among the online marketplaces. So you can talk about like M&A or consolidation, or how should we look at the overall market too?
Sure. So maybe just the first point to make it clear to folks, so a little over $60 million, $61 million almost on at the end of Q2. Adjusted EBITDA became as a good proxy for cash flow. So if you look at our adjusted EBITDA, was 12.9 a quarter, pretty close to the amount of cash flow we added to the balance sheet, you know, starting the quarter versus ending. You know, we think that'll continue. So if you look at our guide of $14 million-$17 million in Q3, you'll see, you know, similar—you'll see similar cash add to the existing balance. And so we do see this opportunity to continue to build cash. As we've talked about before, we don't need cash to run the business.
It's a very working capital-efficient business. You know, carriers pay on, you know, very favorable terms on, and very consistently. Our agent business is largely a credit card business, so we have a really nice working capital model. As we see over time, you know, with cash, I'd say first, our cash balance, although we feel very good about our cash balance, I by no means say it's a large cash balance. You know, it's relative to last year, it feels large to us, but we're in the context of overall, we're cognizant of it is a, it is good and improving. It does opens up opportunities for us to look at M&A more selectively. You know, what we've talked about in M&A is we will look at M&A selectively.
It's really, but it's really going to be a more disciplined approach to M&A than what you might have seen us done in the past. In the past, we did our acquisition in 2020, and we moved into the health vertical, and we actually added first-party agents. So I'd say when I used to be an M&A banker, I'd say that's two or three standard deviations away from your core strategy. I think if you look at M&A today, for us, it's very much focused. We believe we can win long term in the P&C vertical. As to your point, it's a very large market. There are opportunities where we might accelerate our organic efforts through M&A. But again, it's important even when we look at those opportunities, they're going to be evaluated just like we look at significant investments internally.
Are they going to drive top-line growth? Are they going to drive incremental cash flow? And what's the time period in which that will all happen? So we do see the opportunity. You know, the other dynamic that I believe works to our advantage is we have a private insurtech market where some really nice companies were created, part of them to gain incremental capital, given some of what's happened in those markets, and that created opportunities for us. So we think the timing could come together where there's good opportunities. We have incremental cash, and we have good opportunities as we progress through the year and look to next year, and so we'll be mindful of those. But again, we'll be very disciplined in doing it. This is not. We do not believe we need M&A to grow long term.
We feel very good about the cards we have dealt to us and how we can build a really good business, but there's opportunities to maybe accelerate that, and we will look at those.
Got it. And then when you just look at the business, I think, you know, I think since going public, it's probably your second, then the year second cycle we're, we're in, right? Like, it's been, insurance has been pretty cyclical. Like, is there any way you or anything like you look at the business or look at, like, the insurance marketing, which kind of gives you- gives investors, like, more comfort in terms of the longer-term predictability of this business, of this business model?
Well, maybe I'll talk about the market opportunity to start with, right? So for those of us who've seen this, watched our start for a while, pre-downturn, which started in the summer 2021, we reviewed, insurance industry as a whole was viewed as a laggard going online relative to travel, broader financial service, et cetera. Fast-forward to now, that's still true. Insurance is viewed as a laggard going online. But what has happened in the intervening time period is you've had rate increases from the carriers, you know, 30, 40+% broadly across the industry in that period. And generally, the industry spends 10%-15% on marketing dollars. And so you see that, you know, an industry that was early in 2021 still feels quite early now in 2024.
But as the benefit of significant rate increases and as they start to normalize their operating models, you'll start to see more and more dollars flow into marketing. And we think we're well positioned, given we are the most efficient source of marketing with digital channels. And so that makes us feel really good about the opportunity for us to build the business long term.
Yeah, the other thing I'd add, Jed, well, maybe two things I'll add. One is the nature of this cycle was, like, truly historic. And you know, you go back to 2017, 2018, kind of the last hard market cycle we saw, and in those years, you know, we had one year where growth slowed. It slowed to a trickle, but I think we grew through it, right? And then we kind of continued on our longer-term growth trajectory. This particular cycle, if you talk to anybody who's been inside of an insurance carrier for, you know, several decades, of which there are, there are many people like that, every single one will tell you, the industry has never seen a hard market cycle remotely close to what we just went through.
It's truly kind of a once-in-a-generation-type cycle, historically speaking, and it was all due to these crazy kind of series of events that are all linked back to, like, the world shutting down as part of, you know, as part of COVID. So I think it, you know, while it is reasonable to expect that there will, you know, in perpetuity, be some amount of like, you know, like cyclicality in the insurance market, I don't think it is reasonable to expect that what we just went through will repeat every, you know, X years. I think it was really kind of an outlier event, as far as, you know, all the industry experts would believe.
Then the second piece is, you know, I think what Joseph was alluding to when, when you were speaking to our strategy earlier, is that we are, by making this conscious choice to go deep within the P&C vertical, right? And we're not going to play in health insurance, we're not going to play in financial services. We're like, we're really focused on going deep within P&C and delivering more value to our existing customers within P&C to help them grow. That's agents, that's carriers. I think that in doing so, we will develop new products, new services, kind of stickier relationships with them, that over time will make us a bit less exposed to, lead gen as a category, you know, within marketing as being a bit more, perhaps, like, volatile...
I think over time, we'll start to kind of begin to diversify a bit away from, from that, deepen these relationships, and in doing so, be a bit less exposed to some of the ups and downs of the industry going forward.
Does that work with carriers potentially giving you bindable rates, or is there something like, I know they don't, they've never historically wanted to, but-
Yeah, I don't think it's necessarily about bindable rates. Like, I think there's a number of value-add products and services that are, to use Joseph's terminology, like, one degree of separation away from, one standard deviation away from our core product offering of digital clicks, digital leads, that either kind of wrap around the leads or the click product and/or sit, you know, directly adjacent to it, that I think gets you there. And, you know, we'll be talking more about these kinds of things as they continue to develop.
All right. Well, we're coming up at the last couple minutes here. Jayme, anything you wanna leave us with that you're most exciting about, or something we haven't touched on, you know, just in this conversation? Which, if you look at the growth and the way the company's bounced back, it's pretty impressive. They're gonna generate record VMD dollars this year, record EBITDA, and, you know, still early in an up cycle. So anything you wanna leave investors with during this discussion?
No, I mean, I think you're, you know, you're teeing it up nicely, right? We've done a lot of hard work over the last couple of years to realign the business to be more streamlined, more focused, more capital efficient, in anticipation of this carrier recovery occurring. We're now partly through that auto carrier recovery, and we're seeing the benefits of the actions that we've taken play through in the financial performance, with, you know, really record numbers across, you know, almost all the metrics that we track. And that's with some continued recovery still, you know, relatively sort of visible out in the near to medium-term horizon as we go into next year.
So I think from an operational standpoint and a performance, you know, standpoint, we feel really good about some of the actions we've taken and how it's set us up to get where we are now and, you know, what is yet to come. Then I would add on, I would sort of layer on, we have a team that has gone through a really kind of difficult period together. And, you know, those of us that have kind of made it out the other side are truly kind of, like, hardened. We've been executing really, really well against some really, really challenging circumstances, and we've got a team that's just, like, is sort of primed to continue to execute well moving forward.
And then the last piece I'd add is, you know, we've come through our annual strategy refresh process, and in line with some of the decisions we made last year, we're sort of doubling down on our point of view that there's real value in going deep within P&C. We've validated that the market size is gonna support, you know, the near-term growth that we aspire to over the next, you know, three, four, five years, without much limitation. And so it's really a question now of going deeper with our customers in this vertical market, executing well, which, for all the reasons I mentioned, I think we're really well positioned to do. So it's an exciting time for EverQuote, and we're excited about where we're at.
You know, we appreciate all the support you've given us and our, our investors have given us as we've worked through some tough times over the last few years.
Well, if you look at the stock, it's, it's been a pretty exciting year so far, so hopefully it continues. Joseph, Jayme, wanna thank you both for attending, and, thanks, everybody, and have a great day.
Thanks, Joe.
Thank you.