Good morning, everyone. My name is Mayank Tandon, and I'm the FinTech analyst at Needham. I'd like to welcome Joseph Sanborn, the CFO of EverQuote. Joseph, thank you for joining us.
Thank you for the invitation. Happy to be here.
We're going to do a fireside. Let me kick it off with first, because we have maybe some new people to the story in the room, maybe listening on the webcast. If you could just give us a quick overview of the business, and then we can dive into more detailed questions.
Sure. So, thank you for the invitation. It's great to be here again. So EverQuote Insurance Marketplace, we help providers, insurance carriers, and agents find consumers who help to match them with policy. So as consumers go through their shopping process, try to find insurance, we help match them. As you think about the world of insurance relative to sort of other marketplace models, in some ways, insurance is a much more complex matching problem. If you are going to buy a ticket for travel from here to Boston, Delta would sell this ticket to either one of us with insurance at the same price. With insurance, very much based on what is your particular risk profile, what is your history, all those attributes go into pricing. And different, not all carriers want to serve all consumers. So that's the fundamental promise we solve.
We focus on the P&C industry exclusively, which is auto and home, principally. And so that's our business.
Terrific. Joseph, thank you for that. So let's first dive into the sort of big question, which is the insurance landscape. You've gone through 2024. I think we saw a lot of changes, but overall, it was net positive in terms of the carrier spend. So I think it would be great to just hear, in terms of where the sector is today, your anticipation on carrier spending as we move forward into 2025. So maybe just a high level on that.
Sure, sure. So for context, for those who are new to the story, EverQuote was focused on, as I said, the insurance space. Coming out of COVID, the insurance industry had a once-in-a-generational type downturn, which resulted in the carriers pulling back and wanting to acquire consumers because they took a better part of two and a half, three years to get the rates in place so they could actually bring on consumers. What that meant for EverQuote is, carriers used us to grow their business. They didn't want to grow their business. It wasn't great. They sort of pulled back from working with us. As you started to see 2024 happen, you started to really see a changing landscape.
Led initially by the largest direct carrier, came on very strong at the start of the year, and continued, and you seem to see more carriers as we progress through the second half of the year. And what I would say where the industry is at today is you have an industry that is generally healthy. Healthy is measured by a term called combined ratio, what's the underwriting profitability. And generally, they're in the 90s%, low to mid-90s%, which is where they want to be. Some are even in the 80s%. So I think that has been an encouraging dynamic where the industry is broadly getting healthy through the course of 2024. I'd say when you look at the industry, it's important to realize that not all carriers in all states move at the same pace.
So the largest direct carrier has been well ahead of the pack for the first half of 2024. As you got into the second half of 2024, you started to see more carriers come in. And the way I'd categorize it today, it came in in terms of doing customer acquisition, then you've had an expanding sort of state footprint. Where we are today is that some of the largest carriers, I'd say, are well engaged in this and sort of well in getting back into growth mode. From a state perspective, you have a lot of the states open in various levels, some more fully than others. Probably the most notable example of a state not open is California, which is 10%-15% of the market. You also have New Jersey and New York also, although open in a very limited way, is what most carriers would say.
Meaning, although they can acquire consumers if they want, they don't think the underwriting profitability is in place that they want to do it. So that's a bit of the backdrop. And I guess the other group of carriers I would say is there's the captive carriers. And the captive carriers, I think, were ones where they work through local agents who are their almost franchise or franchisee. Those captive carriers were slower to pull back in the downturn. They're taking longer to get on. We're starting to see some encouraging signs there. And then the last, you have some carriers that are still laggards. I mean, one of the largest direct carriers that was active pre-downturn has actually been quite slow in getting back in.
And we think they probably won't come back in based on estimates today of probably the latter part of this year in a meaningful way. So broad-based in terms of number of carriers where they're at, some are further ahead than others. We're seeing more work signs. And then state footprint continuing to expand, California being a notable exception.
Maybe just to step back a little bit, just to give people context, what motivates carriers to go to EverQuote to spend their marketing dollars versus going to other platforms? What is the attraction? What is the ROI, the benefits that they see? And then, of course, let's talk about the consumers as well.
Sure. Great question. So I probably should have covered that in my intro. Obviously, not enough coffee yet, which is, I would say, the carriers work with us because we help them take their marketing spend specifically targeted to the profile consumers they want. So I'll use an analogy for you, which is if carriers try to do general brand spend, they sort of throw a fishing net. They pull in lots of different fish. Some of those fish they want, some of those consumers they've matched for others they do not. With us, they can specifically target the fishing they want. So the equivalent of sort of spearfishing. They go after exactly what they want. And the thing that makes EverQuote able to work with them so well is our data and technology approach. And this has been the key thing since our founding days. We're a Cambridge-based company.
MIT founders started the business with all about how using data and technology to acquire consumers online and help match them with providers. Over time, we've gotten better and better at doing that. And importantly, the data asset we have, we've amassed a very large data asset. And it just continues to get stronger every year as we amass more and more. We're told it's the largest repository of consumer provider matches out there outside of a carrier. So it continues to be this asset. And then we overlay the technology we use. We talk a lot about this in our earnings calls that we read and our public commentary.
But what we try to do is say, how do we take that data asset and use it in a faster way using various technologies like AI to make decisions faster to help route consumers to the right providers in a faster way that better meets their performance targets? And from the consumer viewpoint, it's actually a very easy value prop, which is shopping for insurance is kind of not fun, right? It's pretty tough, right? And this allows you to look at multiple options in an easier way. And that's obviously the real value to consumers.
Is there a way to quantify the ROI to the carrier? And then also in terms of, I think in the past, you've shared some numbers around average savings for consumers. So two questions on that. One is for the carrier, the ROI, maybe any kind of numbers around that, the benefit they see. And then, of course, for the consumers, how much do they actually end up saving when they go to EverQuote?
So I'd say for the carriers, the way carriers think about it is it varies based on the profile of consumers. So all consumers vary differently in how they're valued by carriers. But fundamentally, the way carriers think about this is what is the customer acquisition relative to lifetime value? And if you think about us, we are one of the key costs in that customer acquisition. And so their willingness to spend with us is a direct function of the lifetime value of the consumer we can find. And it's based on us finding the match for that consumer profile they want. And so the feedback we get from carriers, we do all kinds of analytics. We haven't reported out something specifically publicly onto shows, but I'll give you an example by way of feedback from carriers, which is probably more instructive.
A couple of our large carriers actually do scorecards. They actually talk about, hey, how do you work versus others? Some of our captive carriers do this with the local agents, for example. And they say, hey, of all the sources we provide leads to you, who performs well versus others? And they have the ability to do that because they see all the data and analyze it from a point of view of the entire network of captive agents. And we get very high marks on those. And we've consistently gotten very high marks. So that's one. Then I think some of the direct carriers, they also one of the direct carriers talks about sort of the triangle of marketing spend. And we're in the top of the triangle called performance marketing. We can be the most specifically targeted.
And then they say within that top of the triangle, we get very high marks because of the approach we use with our data and tech. So I think that's probably the easiest way to contextualize it. It's hard to put numbers on it specifically, but think about it from carriers. Lifetime value versus customer acquisition, and then their willingness to spend with us because we continue to help them unlock that value, and they continue to spend relative to that. So that's on the carrier side. On the consumer side, consumers shop by same ways. We used to report numbers. We have not updated that in the past few years because it's been too hard to update because it keeps being a very dynamic environment. But it's hundreds of dollars of consumer savings. Some rates have gone up into the thousands/
So, I think it's clearly a service for consumers, one. And two, the savings is real. And if you think about increases in rates, rates have increased since the downturn somewhere between 40% and 50% for the average consumer. Now, some consumers, it's been more than 40%- 50%. It's been doubling, if not more. And so in that environment, what you're seeing with consumer shopping behavior is it's at elevated levels, and we think that will persist because consumers are seeing these high costs and they see these, how do I shop and find an alternative, right?
Great, Joseph. So let me ask you a little bit about the market overall. How big is this market? Because I think you've shared some slides in the past, but maybe you could draw from memory in terms of how big the market is, the penetration rate today. And in other words, what is the overall opportunity for EverQuote to grow from here on long term?
So when you think about the industry we serve, we focus just on the P&C vertical, right? And if you look at the vertical of premium spend, there's a billion-plus premiums. And you look within the product they spend on distribution advertising, that's 100 billion-plus, 10%-12% of their premiums they spend on distribution advertising spend. And if you look within the advertising vertical, it's 10-plus billion. So if you look at where we're at, we're in single-digit% land for where we're spending. And from a growth perspective, I would give you the following dynamics, which is prior to the downturn, you had a variety of analysts who would say 2021, the forward growth was saying, hey, 15%. Why? Insurance is a laggard going online. Relative to almost every other industry, but even broader financial services, insurance was well behind, right? And lots of historical reasons for that.
But that continues to be the case. I think what's happened during COVID is a lot of the world went more online. Insurance did not, right? So it did, but still it didn't have the growth. So you add this thing. You have this tailwind of insurance going online is a laggard. Second is you've had 40%-50% rate increases. So when you think about the dynamic I described of total size of the industry and they spend 10%-12% of their premium dollars on advertising, that's another tailwind for our space. That's the second. And so I think if you look at those two together, that makes us feel like we have a very large market within P&C. And we think that will propel us for quite some time.
Got it. Just focusing on auto, because that is obviously still a large part of your business. You talked about the cycle on the insurance side. What gives you confidence that this is sustainable? Because, again, looking back the last two or three years, we've had a lot of sort of peaks and valleys along the way. But it's been really a much more growth-driven story the last several quarters. But as you go into 2025 and beyond, what gives you that comfort that this can be sustainable growth versus, again, having those ups and downs along the way?
Yeah. We've had a few ups and downs. Yeah. I think we're having more ups now, which is better. A lot more fun. I would say this. When you think about the insurance industry, just a couple of things to bear in mind. The carriers ultimately make their business on managing the profitability, so premiums versus their costs. What they had for a better part of 2021 to 2024 is costs were very volatile and rising, right? And they got rate increases. But what happened in this period is with the inflation and the pressure on costs or cost per claim, they would get rates in place, the costs would keep rising. So they were chasing rate was the term in the industry for the better part of two and a half years. That dynamic has now really started to subside. Why? Because carriers have more stability.
Because the cost, if you look at the key factors that drive auto claims, whether it's the used car index and cost of replacement, cost to repair on auto CPI, medical costs, there's more stability. It's not saying they're low, right? But that isn't what the carriers need. They need stability. So they had relative stability. And you start to see that in a lot of the major indexes. Not true for everyone. Not everything is perfect, but broad stability is key for them. The second is they've gotten a lot of rate increase. They've gotten 45% rate increase, as I mentioned.
You put those two together, that's such a dynamic where they are set up to go into a customer acquisition mode. That's what you started to see occur in 2024. You'll see that continue into 2025, we believe. And the reason we think it's sustainable is the industry is healthy.
At the end of the day, if you're a carrier CEO, you really have two jobs in life, right? One is underwriting profitability to make sure you're making profits to the bottom line. So a lot of them focused on that during the downturn. But the challenge they started having is once they got underwriting profitability in place, they weren't growing. They were even losing share. And so if you want to stay a carrier CEO, you got to maintain the profitability. You got to grow, at least maintain and then start growing share. And that ultimately is the business they're in. And so you started to see that dynamic come in. And actually, when you talk with carrier executives, as we do, you start to see the dynamic of, hey, there's an opportunity. I got to start getting in here because I don't want to be left behind.
And you're starting to see that come in as we progress through 2024. Those two things make this place a lot more sustainable. And then I think the last piece is you're seeing an environment of what have we learned in this period, right? Digital channels work really well for carriers. If anything, they're going to be more targeted coming out of this downturn and what the profile consumer they want. We work very well with that. And put that all together, we think it's an environment that's going to be a lot of sustained growth for the industry.
Great color. Joseph, let me get this question out of the way since I've gotten this question. You've gotten it probably with the unfortunate LA fires, the implications for obviously home because that's another big part of your business and growing piece, but also the indirect implications on your auto because carriers might obviously have to absorb those losses. And then how do they manage their marketing spend? So sort of a question on both the home and the auto side from the implications of the LA fires.
Sure. So I guess I'd start by saying, obviously, our thoughts and prayers of the folks and impacted down. It's an area I know well and have friends in that area. And it's tragic to see what's happened. If you think about the market of home for us, home is roughly 10% of it is home insurance today. And it's a business that's grown roughly 30% year on year for the past several quarters. The comments we made about the home market prior to the California wildfires was it's a vertical that in some ways has some of the similar issues of auto in that coming out of COVID, prices rose, et cetera. Not quite the same regulatory environment, but generally, you would say it was behind auto and getting corrected.
So the growth we've been experiencing what we've said is we've done very well and we've grown despite an industry that hasn't had 30% growth. Part of it is because we've put some really good management in place on it. Probably it's a relatively small business. Q3 was $14.5 million. So when you think about that, you can sort of navigate to the opportunities. As we've said previously, we think the home market is going to be a really good market for us long term. In the near term, we would not expect to have those continued growth rates. And we said that prior to California. So then when you look at California, what is the impact on that? So I guess I'd say a couple of things on California. First, for us, California is a tiny portion of our business today.
And partly because of what we described in California at the rate environment, it's a single-digit % of our business. And if you look at our home business, the carriers, they're in that market, it's a very small percentage of them. So you look at that and you say, if you're now in a zone where it doesn't directly impact us, I'll just say, geez, there are things that will ripple effect from this. There's sort of been this theory of what with the what-if scenarios. And I'd say a couple of things on that. So in the California market, so there's some pros and cons, I guess. One side you'd say is these wildfires have actually put a spotlight on the sustainability of the current insurance environment in California.
Prior to these fires, it's been. I don't know if people have seen this, but there was a lot of home cancellations, right? A lot of carriers, including some of the largest carriers, pulled out of writing homes and canceled policies in the second half of 2024. And they did that because they said the rates they were getting from the state weren't sustainable. So I think what that has done is I think some carriers have actually pulled back where they might have had exposure. It's benefited them. Unfortunately, there's been impact to individuals. But I think it's highlighted the state regulatory environment as being challenging. And so I think there could be a negative on one side where you say, geez, they have to work this through. The other side is, does this make the California regulatory environment say, hey, what's a more sustainable approach in California?
That's an open question. I think the next question folks have is, can this spread from home to auto, right? And so that's sort of like the, if you think about most carriers who do home also do auto, and auto is the bigger business. And I'd say there's no perfect answer on this, but I would say if you look at the industry, here's a couple of things to bear in mind. The industry is quite healthy, right? Relative to other impacted events, the industry is quite healthy starting the year. So that's first one. If you looked at the reports, they come out with a significant reinsurance in place, all things. They continue to have a lot of reinsurance in place, et cetera. So that will kick in. Third piece to bear in mind is that how carriers operate.
Some carriers, like some of the direct carriers, like the largest direct carrier, operate in a way where if they start the year with an unusually shocked system, they may pull back dramatically to maintain underwriting profitability. Other carriers sort of may take that more in stride because they're not managing a quarterly business. They have mutual companies managing over the course of a year, multiple years, and if you look in California, some of those mutual companies, the captive carriers, they got a lot of underwriting profit, but they're getting stability in their overall company, and they still have to solve California, but they have quite broad stability in their underwriting profit in the company, and so there's always the risk of contagion to auto. Everything I've read so far, it's hard to see that that's going to be a dramatic impact.
It's definitely something we'll watch closely. I think what's more likely to happen is on the home side, you'll see more caution there, and as again, we kind of were expecting home to moderate a bit in the near term anyway, but it could maybe emphasize that a bit more.
Okay. Thank you so much for that. Let me jump over to another big question that's been sort of the overhang on the stock for the last several quarters: the FCC TCPA rules that are expected to come into effect at the end of January. So maybe just for everyone, just contextualize that, the implications of that near term, long term, and how do you sort of navigate that effect?
Sure. For those who aren't familiar with the regulatory, the TCPA, the Telephone Consumer Protection Act relates to calls to consumers. And the policy change that's gone in place. It was the FCC is the regulatory body that oversees it. They made a change in interpretation of the rule in November of 2023, saying we want consumers to have one-to-one consent versus what we have one-to-many consent now. What that means is you're coming through our marketplace, you're looking at options to be connected to providers. And as you connect to those providers, you have to opt in to get. You can't check one and say, I'm going to take all. You have to actually opt into the specific ones you want. You can't pre-select that they're already going to go there, right? That's the change, right?
And so what is the impact to our business from that? Rules of the internet are, if you ask a consumer to check more boxes, you will lose some consumers. So the volume of consumers we expect to come down, right, from that change. Flip side is rule of the internet is as consumers continue to be asked to check, do more things than they do them, they're higher intent, right? And if higher intent consumers tend to be higher quality, higher monetizing. So what we've described this as is that we see this world where it's going to the regulatory change is going to take place in January 25th of this year. We started doing a lot of preparation for it last year. We've talked about it quite extensively. We've been really ahead of the industry on this topic and talking about it.
And the effect will be that we'll have a lower volume of consumers coming through. We think lead pricing will come up. This impacts our agent business. So it's about 25% of our business primarily. And you'll have some adjustment where you have lower volume, but higher pricing. And it probably won't be perfect, but we think it will take a course of Q1 and Q2 to stay to normalize. And the reason it's you say, why is it going to take so long? Fundamentally, it's dealing with agents and how agents will adapt to pricing. So one of the things we've been doing is we're just not hoping these things will work. We've been doing focus group with agents since the summer of last year. We also, we're fortunate that most of our agents are captive agents.
90%+ are the State Farm, the Allstate, the Farmers agents. So we actually can talk to the carriers about how they're going to approach the issue. And that informs how we think about it. So when we look at all that, we say, this will work through, but you're still talking about individual agents making buying decisions. And that's where the wild card is about how fast it takes to stabilize. But we do expect it will stabilize over the course of the first part of this year. Financial impact, we've quantified, and I'm not going to change the table, but what we've said in the past, which is typically from Q4 to Q1, our revenue growth is double-digit growth, sequentially up from Q4 to Q1. We expect a more muted growth starting this year.
Most analysts have modeled that in the single-digit percentage, including yourself, Q4 to Q1, and that's sort of what we've said. We'll have a more muted start to the year, driven by this factor, and then the next factor that people think about is what does this do to your VMM margin percentage, which is revenues less advertising, it's called variable marketing margin, so what's that percentage impact, and that's been right around 30-ish%. We expect it to come into the high 20s. We've been mentioning that in our calls. We think you'll come into the high 20s. We don't think we'll go into the mid-20s, except our competitors did last quarter, but we think it'll be sort of in that high 20s, and it will moderate, it will get back to sort of that 30%, give or take, in the middle of this year.
We think that's probably the impact. We do think, stepping back from all this, say a lot of change, two wild cards on it. One is the regulatory environment could change with the incoming administration. Hard to predict what will happen. I don't have that type of crystal ball. But there is less of a regulatory emphasis. Could there be some changes in this? That's a possibility. Could one of the courts, some of the other regulatory matters right now that are coming up, some of the courts are actually putting stays in place to give more time for the new administration? We'll see how that plays out. But that's one piece. The other piece we would say is this change is actually ultimately good for the industry. Consumers will have a better experience. Carriers will have better consumers coming to them and better buying performance.
We think that ultimately benefits us. And we believe that some other competitors will not do as well in these changes. We have been really on the forefront about thinking about regulatory changes in the industry. We've benefited as a company. We started talking about this since in January of last year. And we even started talking about it publicly last summer. Many of our companies out there in our space have not talked about it much at all. Our view was we owe it to investors to be straight with you about what we're seeing, help you understand how we're managing it. And ultimately, compliance benefits the larger players over time. So we are building that muscle and we think we'll come out stronger and the industry will be better as a whole.
That's very helpful context. Joseph, so do you think you'll have a little bit more clarity by the time you report your fourth quarter results, which would be, I think, end of February, early March, a little bit more sort of clarity on the implications?
So we'll be about 30 days into it then. So just to give you, the cutover is January 25th. We've been doing cutovers of traffic and experiments going back to Q3 and Q4. And that's actually accelerated, obviously, in Q1 as we cut over. Pretty much all the carriers have been cutting over now. Our expectation will have some insights, but it'll be 30 days. So it'll be limited. As I said, it'll probably take sort of 90 to 120, 150 days to normalize. And the reason it's probably taking longer is because you're dealing with agents with buying decisions. Perhaps we're wrong and agents will make decisions faster. But what we find historically is it was small business owners, the decision-making processes are not what they say they will do and what actually happens, it can be a timing difference.
Because they may say, hey, I really don't want to pay higher prices, then all of a sudden I go, well, I started the year, I want to grow, and I got an incentive from my captive carrier to grow and they'll jump on it faster. Others may say, geez, let me go more cautiously. I want to think how the year starts out, so those are all those factors, but I think whatever insights we have, we will share, and what I've said in prior appearances, I think by our May earnings call, we'll have a very good view of what's happened, but we'll obviously share insights along the way as we have them.
In the interest of time, I'll move over to the financials a little bit, which you already touched on. But obviously, you're not going to change your guidance, which you've already provided. And we'll get the update later in the quarter. But I wanted to just get a sense of how do you think about the long-term drivers of the business in terms of growth, profitability? What does a steady-state business look like if you look at a crystal ball longer term?
Sure, sure. So maybe I will touch on Q4 briefly, which is we gave our guidance in our earnings call in November. And I'd say we reiterate that guidance at this point. And so that's at least to touch on for Q4 for you. So think about the long-term model. We view this as a business that will grow on average, high teens, 20% level over time. But with the view being that that's the revenue basis. But it's coupling that with expanding and growing profitability. One of the big changes we've made as a company over the past 18 months has been how do we focus on driving shareholder value as measured by cash flow, right? EBITDA converting to cash flow. It's been a fundamental shift in how we've talked about the story and running the business. You looked at what we've done on cash flow margins.
We ended 2023 with a negative EBITDA margin. We went to 8% EBITDA margins in Q1. We went to 11% in Q2. We actually said we'd expect 11% for the rest of the year. We actually had 13% in Q3 because of overperformance, just because of how we're managing expenses. We had overperformance that flowed to the bottom line. Q4 guide implies over around 11%. What we've said looking at this year, assume it's around 11%. Probably the start of this year, maybe a little bit lower with the headwinds of FCC, probably exit the year a little bit higher. We will be making investments to grow the business and the outcomes. I think that's important, particularly in technology, but this is a model where you're seeing us really emphasizing balancing growth and expanding EBITDA margins with the idea that we have growing profitability over time.
And importantly, what you've seen with us is that EBITDA that you're seeing in the business is actually converting to free cash flow, right? It is basically 100% conversion, give or take, working capital in a 30-day period. Very different than the EverQuote of 2023, we were in DTCA business. So it's all about driving cash flow. The other piece I would say on it, we've also had metrics that we've never talked about prior to this year, which is net income. We actually had just under $11.6 million of net income in the quarter Q3. So we're really in this focus. We're really trying to build long-term value to that measure. So I think for public investors, it's all about a story of growth and profitability, where we have a strong emphasis on as a big market, chance to grow, high teens, 20%, expanding margins over time.
As I said, 11-ish% this year, but you'll see us continue to grow that towards 20-ish% on EBITDA margins and importantly, converting to free cash flow.
I know it's not a pure software business in a subscription type business model, but can EverQuote be a Rule of 40 company? I mean, it seems like you have the underlying factors to get there.
I think the rule of the general concept of Rule of 40, I think does have applicability to us. There's a slightly different margin profile in it. But you're in that zone as it rules of 35-40, which is true of probably most software businesses now. They're probably mostly Rule of 30 even now is considered good. So I think we're doing very well throughout those periods. I think we'll continue to do well. And I think when you think about the industry, we've had a lot of volatility over the past few years. But put that in context. If you were here with a bunch of carrier CEOs rather than Mayank and myself, they would say, I've been in this industry 40 years. This is a once-in-a-generation downturn. They've never experienced such a thing, right? Generally, the carriers are much more predictable in how they play.
They didn't have long-term committed contracts, but how they want to run their business grows, there was a lot of predictability in how they thought about it. And that gives a backdrop. We see this business. We see the ability to grow it over time, but also have increasing confidence in the stability of it and the sustainability of it. And part of that is how we've oriented the business. By focusing just on P&C after the changes we made in our 2023 summer realignment, we said, how do we help our customers win long-term? How do we solve their pain points? We focused just on P&C and we said, let's go deeper with all the technology and data and technology and data assets we have. Let's go deeper in helping carriers and agents win.
If we help them win by doing things others aren't doing, they'll pay us for that. We'll manage the business well. We'll give a good return for investors, make the team happy, and we'll just keep it going. That's how we think about it.
Maybe last question for me, and then we'll open it up to the audience. Balance sheet-wise, how do you feel? And then just in general, capital allocation, M&A initiatives, what is sort of on the agenda?
So it's great to have this question this year because a year ago, people worried if we had enough cash. So now we had $80, $82, $83 million of cash at the end of Q3. And you look at that cash, we're basically adding the equivalent of EBITDA to the balance sheet every quarter. So when you look at that for us, we're in a spot where we don't need cash to run the current business. So what will we do with that cash? I'd say a couple of things. One is we've talked about M&A as a possibility. When we think about M&A in this business, this is an industry where you're seeing a lot of changes take place.
We're in an environment where with a broader InsurTech, we have seen a lot of InsurTech players who have good concepts, but they're not going to get to the next level. Those could be interesting opportunities for us where it could accelerate some of the things we're trying to do. But again, I think it's important to think about the approach to M&A if we were going to do it, which is it's very much within the fairway, one standard deviation. I was a former M&A banker, as you know, for 25 years. This is not, let's go into new spaces, new verticals. We're going to stay focused on P&C, seek acquisitions that may allow us to accelerate what we want to do organically. We don't think we need acquisitions to meet our growth targets, but it could be an opportunity we want to expand our leadership faster.
And one of the things that is emerging is, and we've seen this just inbound interest in being part of EverQuote, some of these smaller InsurTechs who had some very talented teams, as we were emerging more and more as a stronger company, they want to be part of us. And so we're getting a lot of inbound interest. And so we'll think about that, but it's going to be governed by, does it fit the strategy? And importantly, does it drive cash flow? Does it fit our financial model as well? And of course, does it help our customers win? So that'll be the dynamic. That's this one piece we use. The other piece we've thought about is buybacks. Will buybacks factor in? I guess what we see conceptually is buybacks could be another tool that we'd think about over time.
I think one of the things we're obviously conscious of with buybacks is floating the public market for small cap stock versus if it's undervalued, sending the right signal with buybacks. That's something we'd think about as well, so I think those are two key options for us, but it's nice to be able to talk about what we're going to do with cash, but whether we have enough cash, which was a year ago.
Big change from 12 months ago.
A big change.
With that, I think we have a few minutes here. Any questions from the audience?
Correct.
I'm sorry.
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I think the reason they come to us is the ability to acquire consumers efficiently. I think that's the primary thing.
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Correct.
Yeah.
That's correct. And so maybe just to the mind of a carrier, right? So how carriers work, there's sort of two concepts they work with. One is the concept of sort of budgets, which is they have a certain amount of budget to spend, and they try to put that with the provider who gives them the best return on the consumers they want to get. There's another concept that some of the larger direct carriers use, which is they're almost uncapped budgets, right? And they will take as many as a consumer that we can give them that fits their given profile at that given moment, both underwriting attributes, states, and all that. And they work in an uncapped way. So they'll almost take as much as they can get of the profile we can provide. And so some carriers work in that way.
So those are the two ways they think about their spend with us. And I think ultimately what drives them to work with us is, can we help them more effectively acquire consumers than others can? And we've shown time and time again, that's what our secret sauce is. And we continue to build upon that with the investments we've been making in our bidding technologies and we've talked about.
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So.
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Sure, so good question there, so let me unpack it a bit, which is, so first, what drove carriers to pull back spend was underwriting profitability suffered, right? What drove underwriting profit suffered was two things, right? First is cost spiked on cost of, so used car prices you referred to spiked, and the reason it increased dramatically, and the reason that matters is carriers use used car prices when they total a car, so they say used car prices, they look to, so used car prices spiked when you totaled a car from an accident, those costs went up significantly, and that happened coming out of COVID when you didn't have new cars available, used car prices went up, the other piece is sort of cost of an accident on repairs.
So you had a period where supply chains not being available, you couldn't get parts in, cost of repairs went up dramatically. Those two examples were ones where the cost went up to a level they didn't expect. And so they effectively got squeezed, underwriting profitability disappeared. So they had to get rates in place. The challenge was, as they got rates in place, the cost kept rising. So now you're in a world where they have generally stability. So you'd say, what would happen in a world of stability if all of a sudden your costs fell, right? They have higher rates in place, costs fall, used car prices go down significantly for whatever reason. One of the things they could do is that that actually increases underwriting profitability. And then they'd go into, how do I use that money?
These carriers are focused, as I said, on a couple of things. Underwriting profitability, they want to maintain and grow share. That could be an opportunity to say, hey, I should lean into spending more on customer acquisition, and you look through the last time there was a shock to the system, obviously nowhere near the magnitude of this back in 2017, you had this dynamic, which is over a six- to nine-month period. We actually had our record year coming out of that because carriers had exactly the dynamic you described, which they got new rates in place to deal with. This was texting while driving back in 2016, 2017. You got new rates in place to cover it. Some changes happened in the cost environment. They actually had a windfall in terms of additional dollars to invest, and they put that into customer acquisition.
So if you put that, if you look about 2025, the bull case would be carriers actually see costs fall, now they have higher rates and they invest in it further. And that would be sort of some more bullish outlook for this year. Okay. I think we have time for one last question.
Yes.
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Sure. So when you think about a consumer, so the answer is yes. So bundling does impact our business, right? Clearly. And so when a carrier thinks about pricing of a consumer, lots of factors come into it. One of the factors is obviously driving history and all those types of things. But the other thing is, what's the profile consumer? Do they have a single car? Do they have two cars and a house? Two cars and a house are going to be a much more valuable consumer. They will pay far more for those consumers than the non-standard auto driver, right? So they're much more valuable. So we benefit the bundling that they try to do, we benefit because they pay a lot more to acquire the consumer that could represent that profile.
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So that's interesting you should say that. Some carriers have actually been using a strategy about home to auto in some markets during this period where the auto rates may not be in place. Home has, although there's a regulatory environment, there's somewhat it's a different drivers on it. And in some states, you did see carriers trying to do home to auto. And in that case, when we knew those states, what we may benefit is that home consumer may be relatively more valuable and they would bid more aggressively and would benefit that way. But there are those dynamics take place. We benefit because we ultimately see the value that the carriers see and so we can monetize accordingly. And the exact way we monetize may vary by state or profile.
I think we're out of time. So Joseph.