Ladies and gentlemen, thank you for standing by, and welcome to the EverQuote JMP Fireside Chat. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Ronald Josey at JMP Securities. You may begin.
Great. Thank you, Lindsay, and welcome everybody. I'm Ron Josey. I cover the internet sector here at JMP Securities. I'm happy to have on with us this morning EverQuote's Co-founder and CEO, Seth Birnbaum, and CFO, John Wagner. I'm going to read a few compliance disclosures off first. We're going to start with Brinlea reading a disclosure, then I'll read one, and then we'll get into some questions. Brinlea, I'll hand it off to you.
Good morning, everyone. During the call, we will make statements related to our business that may be considered forward-looking statements under federal securities laws, including statements concerning our financial guidance for the third quarter and full year of 2020, our growth strategy and our plans to execute on our growth strategy, key initiatives, our investments in the business, the growth levers we expect to drive our business, our ability to maintain existing and acquire new customers, our recent acquisition and our interest or ability to acquire other companies, our goals for integrations and our statements regarding our plans and process. Forward-looking statements may be identified with words and phrases such as we expect, we believe, we intend, we anticipate, we plan, may, upcoming, and similar words and phrases. These statements reflect our views only as of today and should not be considered our views as of any subsequent date.
We specifically disclaim our obligation to update or revise these forward-looking statements except as required by law. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For a discussion of material risks and other important factors that could affect our actual results, please refer to those contained under the heading Risk Factors in our most recent quarterly report on Form 10-Q, which is on file with the Securities and Exchange Commission and available on the investor relations section of our website at investor.everquote.com and on the SEC's website at sec.gov. Finally, during the course of today's call, we refer to certain non-GAAP financial measures which we believe are helpful to investors.
Reconciliation of GAAP to non-GAAP measures is available on the investor relations section of our website at investors.everquote. With that, I'll turn it back to Ron. Thanks, guys.
Great. Thanks, Brinlea, and I've got two more from our compliance just to read the disclaimer. JMP Securities currently makes a market in the security of EverQuote Inc., and JMP Securities expects to receive or intends to receive compensation for investment banking services from EverQuote Inc. in the next three months, I guess. One more housekeeping note. We'll open up the call for questions here in a bit, but always feel free to email questions if that's easier, and Lindsay will tell us how to ask over the phone. If it's easier, feel free to email me at rjosuy, R-J-O-S-U-Y, @jmpsecurities.com. Okay, with that, Seth, John, welcome. Thank you for joining the call today. I wanted to start this call off with some word associations, but first off, Seth, how are you? John, how are you?
Great, Ron. Thanks for having us. We keep trucking during these extraordinary times. I appreciate you and everybody joining us from wherever they are in these days. Appreciate it.
Great. We'll get into some more detailed questions, but just to break the ice, word association, Seth, John, first thing that comes to mind, auto and home insurance is ___. If you can just fill in the blank, first thing that comes to mind.
Somewhat complex.
Resilient for sure. Somewhat complex.
Go ahead. You go, Seth. No, I was going to-
I might go first. I would say that it's been resilient largely because it's not discretionary purchases.
Right
continuing to trend strongly, and we'll get into some of those details, and just really beginning to pick up steam in the shift of insurance shopping for sure from offline to online. Now I'll let John go.
I would just add that it is still an area that is, unlike shopping for other things online, is still somewhat complex and consultative in nature, and that's why it does lend itself well to kind of online exploration as well as being supported by offline agents and experts as well as people shop for that.
Right on. Okay. That's a lot of one word, but very helpful for a backdrop. That's going to help save time later on. Okay. Newer products launch, so Direct-to-Consumer, DTC is blank. One word, Seth.
One word. Well, choice.
Okay.
Improved or increasing consumer choice.
Good. Okay.
Ron, I would say if I'm playing by the rules now, I would say I'll give you two words, an exciting opportunity.
Yeah. Great. Okay. Tech integrations are?
Progressing. Well, let me just say this, increasing monetization.
Got it. Okay. Bundling is an opportunity that blank.
Improves customer experience.
Got it. Okay. Now this may be a more fun one. Peloton.
Fantastic product.
Yeah. Okay. John, anything there?
Never been on one.
All right. That's helpful. Yeah. Then last one, and we'll get into some questions here. Just profitability.
Increasing.
Perfect. That's really helpful to just broader understanding and setting the stage here. We have a bunch of questions set up, and I definitely want, again, to get into direct-to-consumer and bundling and the core biz. Seth, I wanted to kick off, we ended the quarter, well, last we heard with 2Q results, QR growth was impacted a little bit with some social unrest. July, I think you said rebounded. Can you talk about what you're seeing sort of thus far, not just in QR growth, but if possible, anything overall in the business, that'd be great.
Sure, Ron, happy to. July's momentum continued through August. We've seen sequential consumer volume growth as well as year-on-year growth in consumer quote request volume. That's actually been combined with sequential and year-on-year increase in monetization or revenue per quote request, which has also been quite strong. Now, even though we're performing well against some strong prior year comps, we are also growing in excess of our long-term model. We continue to gain share versus the overall shift of the insurance spend online. It's important to remember, for our business, that we're focused on driving both revenue and VMM, and that our marketplace drives top-line growth through volume and monetization, and that monetization is a combination of both provider coverage and pricing. This will play out, I think, in our discussions today around DTC.
As expected, and as we said into Q3, certainly through August, we've seen a more balance between consumer quote request growth as well as expanding monetization or RPQR this quarter. We've also been successful at continuing to drive higher converting traffic, which we expect will further increase our provider coverage and support that recurring revenue we see from carriers as well as the overall efficiency of our advertising spend. Again, for us, what's exciting, while the comps are significantly higher in the back half of the year, the prior year comps, Q3, I think last year was up nearly 80%. We are seeing both a strong increase in consumer volume and monetization through July and August this year.
That balanced combination isn't just driving strong revenue, it's also driving strong variable marketing margin dollar growth and delivering strong unit economics, which is reflected in our VMM percent operating point, which is trending above both Q1 and Q2 of this year through July and August of Q3. We do expect monetization to continue to stay strong, driven by elevated provider demand, progress with integrations, which again, we'll dive into, I'm sure, in the next few questions.
Mm-hmm. Sure.
Through our growth initiatives that we've discussed, like the agent calls and increased targeting services like Smart Campaigns and Enhanced CPC. The team continues to execute well despite a sort of difficult external environment. We're making good progress in both quote requests and monetization, giving us a lot of confidence in our guidance and a strong back half despite not just the external environment, but also elevated ad spend in an election year. Finally, for us, what's exciting is from an investment shareholder perspective, our market data and research indicates that we're really at the early days for both consumer demand and provider budget and coverage with basically a multiple of upside for consumer volume in autos, which, as you know, is sort of our longest tenured vertical, as well as our newer verticals from where we operate today. A lot of upside.
It's going to continue for us to be an execution story and really excited about continued progress we've made since our last call.
Got it. There's a lot to unpack there, and great to see the momentum continue.
Sure.
I think you said July's momentum continues into August. Let's talk about consumer volumes up sequentially and year-over-year. Maybe, can you talk about seasonality and is that something? I feel like 3Q has at least the last several years been up sequentially. Maybe if you could provide just a little more details, just given the magnitude of the comp here on just the QR side of it in terms of, okay, you saw a little bit of dip end of May, early June. You said July and August better. Should it be better anyway sequentially? How should we think about that relative to sort of what we've seen historically?
Sure. Historically, sure, and that's why I think the year-on-year comp is also important. Typically we see, especially in autos, historical seasonality dips a bit in Q2, and then Q3 is stronger and Q4, at least for autos, is more modest. That being said, we have bucked those trends from year to year just based on secular growth and execution in the industry. I think, again, what's exciting for us is we've seen sequential growth in volume and monetization and also year-on-year increase in volume and monetization for July and August.
I'm sorry, year-over-year increase in revenue per quote request as well?
Yes, exactly.
Okay. Just maybe, John, on the guidance, I think the guidance for revenue per quote request was up sequentially. Is that a fair comment? Maybe a little bit better because up sequentially, you didn't necessarily need to grow that year-over-year. Is that a fair comment?
Yeah, I think we gave commentary that the quarter we expected to be kind of a blend between increases in revenue per quote request and as well as volume. I'd say revenue per quote request has continued to expand going through August. I would say, given a little extra time, that's where we're seeing a little strength in the business, revenue per quote request. Some of that increase, you can start to link that to some of the work we've done on integrations as well as the strong carrier backdrop that we're operating in. We are seeing that play through. We have good confidence in the quarter and we're gaining confidence on the year and the out year as well.
That's helpful. I was going to go in and talk about DTC and Crosspointe and bundling. I want to stick on just sort of the core business, if that's okay for now. I guess I'm getting some questions here. We definitely have a guidance range that you provide. Are you updating guidance here or just the trends are continuing to be positive, I think, is that the comment?
Yeah. We gave some view into the quarter at the time we gave guidance that we'd seen good momentum in July. We're just continuing to see that really play out in August.
Okay.
I would say, consistent with that is really we've seen it really on the revenue per quote request side, which we expected, but that trend is a little better than even we expected. That's where we are really on the quarter.
Okay. That's very helpful. Seth and John, you mentioned quite a bit just what are things that are driving this improvement really throughout the year, but here specifically in the shorter term or at least more recent history. Integration was one that was mentioned several times, and we've been tracking that, and I think in 2Q, the comment was 66% of partners are now deeply integrated. Any insights on conversion rates, maybe carrier receptivity of just these deep integrations that have now been learned? We're, call it nine months, eight months into this, 66% penetrated. Tell us about what you've learned and how the carriers are adapting.
Sure. Our data indicates that for a deeply integrated partner, we will expect to see, call it if you want, monetization improve anywhere from 5%-10%. What's just as important, you're also improving that customer experience, we have seen certainly onsite conversion rate trend upwards over time as well. One of the more exciting things we have to report, Ron, probably the first time we've shared it, is we've consistently focused on deep integrations, obviously by carrier volume, by the higher volume of referrals we're making to particular partners. As a result, what we're seeing now is roughly 80% of our referrals by volume are going to carriers via deep integration and getting that incremental lift in conversion rate, and thus monetization and bid rate. If that conversion rate flows through, you'd expect to see a proportional increase in RPQR.
Again, we believe that's what's contributing that 80% referral by volume, that are roughly 80% that are going out through these deep integrations, are contributing to that strong RPQR, that continued strength in monetization.
Got it. We're seeing better conversion as a deeply integrated. Talk about the hurdles historically you've been seeing with integration. I'm assuming you're well on your way of getting that 100% bogey that you talked about earlier in the year. Are there any barriers to getting that 100%? Now that you have full-on data saying how things are going with integration, is there tech, anything that could sort of interrupt this progress?
No. For us, it's just a matter of timing, and it's a foregone conclusion. These are IT projects. Again, because of our scale, I think over time it does become a competitive moat because literally every provider we work with is either integrating with us or wants to, and that's relatively rare. I don't know that there's many companies that are getting this level of depth and breadth of integration. We do have some smaller carriers who are stragglers, but they want to do it, and it's literally about just giving them the tech support, the engineering, and integration support to get it done. What we have achieved is that 80% by volume.
By sequencing and prioritizing the larger referral volume partners, and making sure we shepherd them through the process, we basically have been able to maximize the benefit to customers and the benefit to EverQuote to cover us over time. Maximally, if you will.
Got it. Okay. That's very helpful. We'll come back to integrations.
Just so you know, every carrier, Ron, every single carrier on the platform wants to do it, working through it, and it is in our queue and plan to execute against.
Yeah. It makes a lot of intuitive sense and great to see the progress here. Let's see. We'll come back to carriers and definitely quote requests and whatnot as we go on. I wanted to make sure that we touch earlier on in this call, if you will, on just the Direct-to-Consumer opportunity and Crosspointe. Specifically, maybe talk to us higher level about why EverQuote is focused on D2C, and then secondly, on the acquisition, what are you getting with Crosspointe? I know it's on the health side, but why does an acquisition make sense versus building up organically, which is what I think the team has done with life. Maybe just talk bigger picture, what is a D2C opportunity now that Crosspointe is closed, insights on what the business is and how you view it going forward.
Sure. I sort of feel like I have to cue a little bit to word association. Ultimately for us, DTC is about consumer choice. We bring all these consumers we attract, and we have a ton of technology and expertise to do that, to attract consumers to our marketplace. We don't have enough products for them to choose them. Basically, it compresses monetization because they're not able to purchase a policy through us. There's a benefit to the consumer from DTC insofar as for certain segments like health and such as life, you can actually increase choice by being appointed directly with carriers, and then you can still provide, by the way, a bulk of our agents will remain, and we expect to remain partnered agents, contracting agents. Won't be employees of EverQuote. They'll still be IAs and partners through our marketplace.
We still will be an asset-light data and tech company. By increasing product selection for the DTC, think of it, Ron, as it's just putting products into our shelves for folks who are already coming through and increasing provider participation, we actually drive a better customer experience. There's more selection, more choice, higher probability of the consumer being able to buy a policy. We drive higher monetization. I'll give you a couple of data highlights on this.
Okay
that I think are just incredibly exciting for the initiative. In the vertical segments where we have DTC, we by nature support this very same integration you were talking about. We support full click-to-quote or bind or policy purchase, both online or offline, in these DTC experiences. What we've seen in our life data, which you've mentioned we built out organically, is a 3x increase, so a three times increase in RPQR, for the segments that the DTC life products basically represent. When we have a consumer that matches to one of these DTC products, we derive 3x RPQR essentially from the DTC experience versus just the referral experience. We do expect similar performance via our integration of Crosspointe. The acquisition includes, for example, direct relationships, which is what Crosspointe had built over years.
These carrier relationships do take time, as we demonstrated.
in the model, where we knew we had 19 of the top 20, but that took us years to develop. The acquisition of Crosspointe and the integration includes direct relationships with UnitedHealthcare, Anthem, and Humana, and essentially expands our direct health carrier coverage by more than 10X. Again, in our life vertical, we saw RPQR expand dramatically for the direct-to-consumer agency segments we're serving. We do expect, and we believe that the Crosspointe integration will give us that same monetization improvement in the health vertical. We think that we're very well-positioned with an improved experience, higher RPQR going into open enrollment, and we will also diversify and grow the company's revenues by accessing the commission, another access point for that $130 billion of commission that is a component of our TAM.
This is very helpful as we get more information. Maybe, Seth, if you can logistically just walk us through how this might work. I love the comment around we don't have enough product to choose from DTC, I guess, helps to bridge that gap. I thought this might be more for underserved or unserved folks, but maybe talk about just the logistics of how this might work if you're from a consumer perspective.
Sure. A consumer comes in, and I'll use maybe the simplest example from healthcare. A consumer comes in looking for Medicare supplemental or similar. A consumer comes in looking for a simplified issue, final expense product or a guaranteed term. Those are both life insurance products that have lower face value, great products, a lot of consumer demand, and essentially, we will be able to connect the consumer with agents in our platform who represent the product. We'll be able to quote and in some cases bind online or offline with that agent assist, and those partner agents connect with us seamlessly. That is, the consumer is handed off through an EverQuote interface. They have all the product training to provide to represent those Medicare or life products, and they can close those products basically in our platform, and we will derive the commission revenue.
We will still partner by and large with agents to do this, sort of what we're calling an on-demand agency network, but we will have very tight integration with the product. We'll be able to quote and perhaps bind online. The offline handoff to the agent will be seamless. They'll be well versed in the product to assist customers to complete that purchase. Yes, ultimately, we're covering segments like life simplified issue, guaranteed issue products that are very underserved in a lot of markets.
Got it. Okay. That's very helpful. Then on Crosspointe, by the way, we'll open this up to questions here shortly. I think maybe Lindsay, can you remind everyone how to ask a question? Is it star one? Seth, we'll get back into the flow here in a second. I just realized I don't think we gave instructions first.
Certainly. As a reminder, ladies and gentlemen, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Again, that is star one on your telephone to ask a question.
Great. We'll break for questions in a second. Just as a quick follow-up, Seth. Very helpful to understand the consumer flow a little bit more. Talk about Crosspointe, if you will. Now that the acquisition's closed, why Crosspointe? Maybe talk about just the headcount here. The feedback we get all the time is this a pivot on asset light versus not? Just talk a little bit more about why the acquisition and how you see it playing out.
Well, first of all, it's a data-driven agency. They cover a broad range of health care products. We had, I would say, We were able to successfully drive health traffic in our last OEP, and we saw again that we had a lot of underserved or what we'd call sort of non-served segments of our health traffic, and Crosspointe's breadth of product coverage was really dramatic. That's how come they're bringing so many carriers to bear as we connect them up in our marketplace. That 10X expansion of health care coverage was really dramatic. The other thing is they're high integrity. They have good cultural fit, data-driven, they are tenacious. They largely built their agency bootstrapped, and we fully expect to remain asset-light. One of the nice things is the DTC initiative we built out in life supports largely IA and partner agents.
We expect to have more independent agents, independent contractors on the platform over time as it scales than employees. It's a tech and data platform that enables that flow of, hey, you're a particular type of consumer that matches with these specific products. Let's hand you off seamlessly to a partnered agent, even if it's under EverQuote's agency of record, even if it's under our appointments. The agents can really come in, and we can increase that provider inclusion. We're not pivoting the model or transitioning to thousands of employee agents. It really is using the technology, and we believe we can actually bring that same platform we're using in life agency to bear on the health agents as we scale Crosspointe. What they really did was pull forward our access to great products, industry know-how. They're incredibly high integrity representatives for the healthcare industry.
We knew them because they were a long-term customer of ours, built that relationship over time. I think ultimately that cultural fit, that resonance between data-driven, tenacious, bootstrapping team plugged into our marketplace platform with our traffic accelerating that revenue per quote request, allowing us to build these more integrated experiences in health with full integration to purchase a policy and create that agency support with all the carrier appointments, I think will be a game changer, at least will significantly accelerate our healthcare vertical. It was a really nice fit. Everything they did, we didn't do, vice versa. Finally, I do want to emphasize, Ron, because it's important, we fully expect to be asset-light and use the same sort of on-demand agency technology that we used in life insurance to scale the health vertical, not just add employees.
That's really helpful. Maybe one last comment and we'll move on and open the floor to questions. Did you expect more acquisitions like Crosspointe as you go through different verticals, or is this something, let's see this and then figure it out as we move on?
I think we're going to be very consistent. What's important for us is that we are confident we can achieve our long-term business model growth through organic, and M&A will continue or we'll look to it to accelerate our opportunities. From that perspective, again, Crosspointe was perfect in so far as it takes N amount of years to build these deep relationships with health carriers. They've built them, and now together we can scale the health vertical in the marketplace. We're not going to give, again, any specific detail on what our plans are. We will stay disciplined. We'll learn as much as we can through this acquisition and work on making it as successful as possible. We will look to M&A to accelerate our growth levers. We'll look for traffic or consumer demand, deepening consumer provider engagement. Certainly, Crosspointe helped us doing that.
Distribution, expanding distribution, which Crosspointe also did. Certainly hit two of our three levers, and we will continue to look for M&A opportunities to accelerate any one of those three levers, for sure.
Got it. Okay. That's very helpful. Lindsay, are there any questions on the line?
We do have a question from the line of Andrew Boone.
Hey, Seth. Hope you're doing well. This is Andrew at JMP. I just had a question just in terms of you guys talked about 80% of volumes now having deep integration. I'm just hoping to kind of isolate autos as we think through that. Can you talk about kind of the monetization level on autos specifically and kind of how that's trended to help us better understand kind of the benefit of increased integrations kind of on the platform? Does that make sense?
Sure. Yeah.
Behind that question is that the mix shift to newer verticals, I'm assuming, would be a headwind to monetization. If I just think about autos particularly, does that monetization provide kind of better transparency into the benefit of integrations?
Yeah. We tend not to break out by vertical, but I will give some color. Hi, Andrew. Thanks, obviously, for joining, and doing great. Appreciate the question. Hope you're well. Let me answer it. I think if we just open up that aperture and think about variable marketing margin, those are the unit economics that reflects both the efficiency or the advertising efficiency of the marketplace, but also monetization. Autos is running at a higher VMM percentage, not just dollar volume, but percentage than our newer verticals. We do expect our newer verticals through both monetization and improvement in product experience, conversion rate, more products as we've seen with the Crosspointe acquisition to drive our RPQR revenue per quote request up. Through the levers of growth, we do expect the newer, non-auto verticals to continue to make progress.
Now, I will also say this, autos is not yet at our terminal margin of 40%, and we have some of our Call them longer-tenured new verticals, like home and life are coming up that curve of expanding the MM% as they grow. We're very encouraged by the progress of autos, and it builds confidence in that 40% long-term variable marketing margin over time.
That's great. Thank you, Seth. Lindsay, are there any other questions or should we continue?
We do have another question from the line of Frederick Shepherd with Philadelphia Financial. Your line is now open.
Hey, guys. Thanks for taking my question. Trends seem to be going in the right direction. Could you maybe talk a little bit more about ad spend trends on the carrier side during parts of the cycle where pricing is decreasing? Are carriers like Progressive spending more in an effort to grow? Be interested to hear your thoughts there.
Hi, Eric. Thanks for the question. What we've seen is provider demand is exceptionally strong, and particularly in auto and home, and that's driven by lower losses or very good profitability, typically, at least in terms of our conversion rates. When with reduced driving, especially the carriers have seen much lower underwriting losses and much higher profitability, and that keeps them leaned in on demand side. That is another contributing factor for the strong monetization. By the way, we do expect that certainly to continue into next year at this point.
Okay.
That's great, Seth.
Sorry.
Go ahead, Fred
quick question, and I don't know if you can answer this or not, but a number of auto insurance carriers have offered rebates to their customers. I think in Q2, a number of customers maybe hadn't received those rebates yet or weren't aware that they were getting refunds. Have you seen any trends in consumer shopping in Q3 now that these refunds have either fully earned through?
Fred, I think we dropped out. Hello?
I can still hear you, Seth. Fred, are you still on?
Yeah. Can you hear me?
Sorry, Fred.
Yes. I was just wondering about any trends you're seeing from consumer shopping given the refunds or rebates that the auto carriers have given.
Nothing in particular that we could draw a line to in terms of the rebates. One of the important aspects of our marketplace, Fred, is that we see revenue both on a net new shopper or a switching shopper as well as renewal shoppers. We haven't seen anything either in our marketplace or in the advertising landscape. We have seen sort of strong sequential growth in consumer demand. I don't know if any of that is related to the rebates. Typically, when the large carriers do things like rebates, which, from our view, approximate a marketing program or a retention program, it increases consumer demand on balance. Same with advertising on TV, tends to drive up shopping demand.
Perfect. Thanks.
With that, I think if there's any other questions, please feel free to hit star one. I'll continue here as we potentially load up the queue with more. Seth, maybe another question on the core business. I think you mentioned several levers of growth last quarter. One of them is just attracting more customers to EverQuote, and clearly, we just got the update that QR is up sequentially and year-over-year as I guess we would've expected. Just talk about how are you attracting more customers to the marketplace? Any insight on the plans here to this core lever of growth?
Sure. We expect to continue to expand in some of our sort of longer-tenured marketing channels. You think of things like search, display, marketing, retargeting. We also have plans to expand in social, which is still relatively modest for overall, but a huge upside opportunity. Ditto for things like not just content marketing, but referrals via things like a logged-in user experience also will increase visits, certainly, and quote requests in the marketplace, and I'm sure we'll get to that, Ron. There's even an opportunity for things like targeted TV, OTT, targeted direct TV, which we really have just begun to scratch the surface. Finally, I believe we're very modest in terms of the opportunity for media partnerships, insurance-adjacent partnerships. These are partners like Quicken or Liberty Tax.
There's just a ton because, and we don't talk about it a lot, but because we've invested in really broad provider coverage, which is good for the consumer in the form of choice, and which DTC increases even further by bringing net new products to our marketplace shelves. Because we've invested so heavily in broad provider participation and being a marketplace of choice, not just for consumers but for providers, it gives us the strength to create these insurance shopping experiences for partners. We really do feel that expanding our media and partnership program is another growth lever. Really, from my perspective, and we've said it a bunch of times, we believe there's a multiple of growth left in the tank in terms of expanding quote requests and consumer volume in our marketplace.
Those are just maybe sort of five of the marketing channels that are.
Sure
relatively modest still in our marketplace and that we expect to grow over time.
Got it. Okay. That's very helpful. I did just get an email question. It had some issues actually in the webcast. The question was around your partner with Progressive. I think spend from Progressive was down sequentially in the last quarter. Any insights on that? Was that seasonality or any insights as to why Progressive spend was down sequentially would be helpful.
Sure. Progressive usually bounces between, I think, the 20%-24% mark. Remember, in our marketplace, we have very broad, not just carrier participation, but we have over 8,000 insurance agencies who are in our platform sourcing consumers. Just based on the competitiveness of bids, how the auction plays out, we do expect that share to fluctuate. For us, having that very deep and diverse array of carrier partnerships is the strength of the marketplace. Again, it's well within the historical pattern of Progressive, and they continue to be a wonderful partner.
Got it.
Ron, maybe worth just mentioning also that Progressive participates with us on the auto side. Q2 is a seasonally weaker quarter for auto, which we did see play out. Progressive decreasing share going from Q1 to Q2 would be in line with that since they don't participate in some of the other verticals, and those other verticals also had outsized growth during Q2. Largely consistent with that.
Got it. That is helpful. Thank you, John. Thank you, Seth. On maybe similar in line with that question, Seth, can you talk about your relationship with agents onto the platform and agency relationships? I think in 2Q, agency accounted for about a little bit more than a third, maybe just under 40% of total revenue. Just talk about how that has progressed, how you think about that longer term. As we think about the TAM, we've been attacking or EverQuote's been attacking the advertising side, but the commission side is something interesting as well. Just talk about the investments and the progress here from the agents and agency side. That would be helpful.
I think during word association, John actually kicked off with a lot, it's not just true of autos. A lot of insurance shopping, even though it starts online, I think 70%, 80%, especially if you include other verticals outside of auto, well over 90%, 95% of it still closes offline or with some assist from an agent. We really do see them as a critical part of the distribution landscape and have made significant investments. I rattled off some of the stats, we saw very strong demand from the agents in our marketplace in Q2 as of the last call. We do expect continued strong demand from agents. We now have more than 8,000 agents on the platform, in terms of TAM, the ability to add sort of third-party agencies, there's 100,000 third or more than 100,000 third-party agencies in the U.S.
We expect strong growth in the agency component of our marketplace. I believe we could triple it from where we're at today in terms of the scale of that, and that it also increases not just sort of raw revenue, but the coverage that consumers get. Now, when you layer on things like the on-demand agents, the partnered agents, or the IA, independent agents, and the contractor agents that can come in through our direct-to-consumer agency experiences, we see just a ton of upside in the agency sides of our marketplace and an enduring role for agents in the distribution of insurance moving forward. I think the comparison to travel is not accurate, and the demise of insurance agents is probably a little bit overstated. Those investments not just strengthen our consumer experience, right? Because agents bring more product choice.
They drive increasing our RPQR either through referral pricing or incremental coverage. They do drive a lot of the experience. The number one reason folks say they need to speak to an agent is they just lack the expertise to make a policy decision or what are my coverages. Really providing that connective tissue between the internet and agents isn't just critical for the agents themselves. It's also important for consumer experience.
Would you say, and by the way, if you can comment, I think you hired a new head of agency sales and customer success back in June, in addition to some other new hires you've had recently. Just do you think, I think you made a comment, this could triple from now, and you also talked about 100,000 more agencies. Is it growth from agencies or agents, both? How can we think about that?
Both.
Okay.
You can think about it, the way we're talking about it internally, and I'm happy to share, is you think of increasing agencies, the spend per agency, and now with the Direct-to-Consumer, this on-demand platform, the increase of partnered agents or independent agents who can just come directly into the EverQuote platform and get the consumers, the tech, the integrations, and the products all available, and they can just press the button and start selling.
Got it. The new hire here with, I think it was Mike Connolly, just talk about how.
Mike Connolly out of Carter, yeah.
Yeah. Got it.
He's fantastic. At the risk of sort of ringing the bell too much, you can see the agency team in general. There's another leader at the company, Nik Sharma. Nik Sharma and Mike and the entire agency team is just working their butts off not just to grow the business, but to enhance our products, to make it easier for agents to sell and connect with online consumers. They've just done great work, really the entire team. They're looking at things like, for example, calls to agents. Instead of connecting with the consumer via a lead-based referral, the consumer can click or the agent can click and get connected to a live consumer relatively seamlessly, and that's part of our Agency Calls program. I would shout out another leader.
We brought a very senior leader out of Amazon to build up our internal or our organic life agency technology platform, and that's what we're referring to as the on-demand agency. They bring the independent and partner agents one at a time into the platform. That's not only going gangbusters, but we're really bullish on what that team is doing to bring in products, bring in agents, and attach them to the marketplace in a way that's good for consumers, it's definitely good for the carriers who participate, and it's very good for our business growth.
Got it. That's very helpful. As we wrap up here, wind down, of course, if there's any questions, we'll get to them. Feel free to go in the queue, star one. I did want to talk about bundling. I think coming out of the 2Q call, there were some really interesting levers of growth here. Talk about what a logged-in experience could do for consumers and just the opportunity around bundling products. Thinking about bigger picture, the vision here, what a logged-in experience looks like, and again, what could that mean for someone like myself or anyone who's looking for autos and all of a sudden ends up with home and autos and life and everything else?
Sure. Maybe we'll start with the vision, and then we'll wind through bundling.
Sure
Back to logged-in users. To quote you, Ron, there's a lot to unpack there. Our vision, obviously, is to be an insurance store. That EverQuote's logged-in user experience is going to be an important element of the site experience, of the mobile experience to help shoppers purchase policies from different companies, check their coverages, renew, find replacements, and in the case of some of these newer policies, check plan usage. We expect that over time, these experiences are going to unify a shopper's data for the shopper securely to basically enable them to come to EverQuote, just like it's an insurance store for both, not just consumers, but also insurance partners. For us, that bundling creates an opportunity for customers to get better coverage and get you your discounts, get you better prices, and also create that affinity.
Say, "Hey, I came to EverQuote, I found a bundled option. I got my 10% off, and now here's a logged-in user experience consistent with that bundle that lets me manage the policy." There's also an opportunity to manage multiple lines. You'd have auto and home with us, and health and life with us. That's really a step, both bundling and the logged-in user experience to sort of renew service, pick up new ancillary products is that first step in creating that true insurance store that we want to be.
That makes a lot of sense.
I can give you-
Yeah
Because you always ask, how are we doing with it? So far, since we've launched bundling, we've delivered nearly 50,000 bundled consumer referrals via these experiences that literally just launched. I think it was the last call we talked about it. The bundling for us, what does it do for the company from a shareholder perspective? It fuels our flywheel. It increases our RPQR because these are typically more valuable customers. It enables us to invest in more consumer acquisition, which drives up, obviously, volume. It also lets us reduce CPQR through ad spend, because you're coming back in to shop or come back in through a logged-in experience.
By pairing bundled consumers with a more complete complement of providers that have bundled products, you can basically better compete or enable the providers to better compete for that bundled high-affinity consumer in the marketplace, which further drives our PQR. It really does help power our flywheel, both bundling and logged-in user experience.
Got it. Yep. That's helpful. That's expected to launch sometime in 4Q?
Yes. Our first consumer logged-in experience will launch in Q4 in our health vertical, and that'll include.
Okay
the integration of the Crosspointe product suites and a wide range of carrier relationships. It'll really start with enabling the shoppers to review and access their healthcare policy purchase information and renew or add ancillary products, and it'll all be secure, personalized, logged-in user experience. Ultimately, we want to create that single source or wallet for all consumer policies.
Got it. Okay. I got two more questions on email, and we'll be wrapping this up soon enough, I think. One was, if there's any impact or insights on how newer insurance companies like Lemonade, which are just very AI and chatbot specific, has any sort of impact to EverQuote. Maybe I'll see if there's a question on the queue. If not, I got an email with it. One is Lemonade's impact on EverQuote.
Maybe sort of breaking it up. Companies like Lemonade is a partner, and a great partner, and a growing partner of ours. Another one that's, I think, coming up is the autos version called Root. They really represent, for us, net new budget. They have the capabilities to do deep configurations. They typically have products for a specific segment of a good product fit for a segment of the population. These aren't huge, scaled-up, super broad product companies. For us, it's basically net new, great customers in the marketplace with all the capabilities to do these deep or even integrations to quote and bind what we want to do for the consumer. They're wonderful partners. I think on balance, as more come into the market, and this is something that we want to be very explicit, we are not a carrier.
We are not becoming a big insurance provider. We really want to be that insurance store, that interface for the Lemonade and the Root, and they're just fantastic. For us, it's a net positive increasing budget, good integrated partners that will drive revenue per quote request, and great product selection for our customers. The other part of this, from my perspective, is they're cool, right? They're building really innovative new insurance experiences. Even if today it only serves a small segment of the population, right? USAA, which is a big insurance company, great products for military families, just announced that by 2023, their entire claims process will be sort of touchless, digital, quicker for customers.
It's not just the insurtechs you just mentioned, but I think for us, the sort of innovation in insurance customer experience from acquisition through claims is just going to be great, and it will drive more budget into our marketplace, richer experiences through our marketplace, and long-term, a fantastic trend. We are huge fans of these partners.
Got it. That's very helpful. As we wrap up here, Lindsay, any other questions in the queue? Otherwise, we'll have maybe one or two left.
There are no questions in queue at this time.
Okay. Maybe two questions, and we'll wrap it up and give it back to you, Seth. John, bigger picture, as we think about EverQuote is now EBITDA profitable. You have about $40 million post-Crosspointe plus a warehouse, or at least I think a revolver. Just how do you think about M&A and uses of cash going forward into the business, John?
Yeah. First, our organic plans, really because as you say, we're now operating on an Adjusted EBITDA positive basis, and Adjusted EBITDA is a pretty good proxy for cash flow. Our organic plans really don't have any other cash requirements to them. I think if you look at, and that obviously leaves the balance sheet then really as a tool for M&A. If you look at how we approach M&A, it's very much by focusing on our organic growth levers and asking the questions, is there ways that we can accelerate or jumpstart any of those organic levers? I think actually with Crosspointe, you saw a really good example of that, right? You saw us have an organic opportunity within Life that we developed internally, and we've been developing and investing in that.
We talk about the fact that we see leverage in the business, but some of those dollars go back into investing for growth. Our efforts around Life DTC agency is a good example of that. We started making those investments in the business organically and starting to scale those efforts. When you look instead at Crosspointe, that's an example of something that we identified, a company that was a great cultural fit, could give us a really significant jumpstart into something that we wanted to do on our own anyways. I think that's around the color that you should look to us to be able to complete in the future. Things that are not inconsistent with our organic growth levers, but give us some sort of a bit of a jumpstart or an advantage to entering a new vertical, a new traffic area, something like that.
Got it. That's great. Seth, as we wrap it up here, any final thoughts? I did get one email come in here just now from a client just asking, can you just repeat some of the traffic trends that you're seeing and then the ability to acquire customers that meet carrier and agent quality thresholds? Was sort of a two-part question. Seth, if you want to sort of wrap it up as we reach to the hour, that would be very helpful.
Sure. Ron, I assume the question refers to the trends that we're seeing in the business.
Yes
or overall market trends. Yeah. The trends in the business is we've seen both sequential and year-on-year increase in quote request volume and strong growth in the verticals, as well as strong progress in unit economics. Variable marketing margin percentage and variable marketing margin dollars are up over both Q1 and Q2 this year for July and August. Strong trends in the business continue.
Got it. This person might have come on late, and you also said comments on RPQR being better as well.
Yes. I thought it was just traffic, but yeah. Monetization-
Yeah. I did, yeah.
is up sequentially. Typically when you have sequential increase in monetization, I'm not sure if we've also said that it's year-over-year, but now we're also seeing in the July and August data monetization or RPQRs also up year-over-year for July and August.
That's helpful. Great. Well, with that, Seth, any last comments or anything as we wrap this up?
No, Ron, you're always a pleasure. It's been a blast. We could've done it for another hour, but I understand even you have limits. I do want to thank everybody for joining us during these extraordinary times. We really appreciate not just you and everyone at JMP, but the investors who are along for this incredible ride as insurance moves online, and we're just happy to be part of leading the charge. Thanks to everybody.
Perfect. Well, Seth, John, thank you. Brinley, thank you very much for the time, and looking forward to catching up soon. Have a great day. Stay safe, of course.
Likewise.
Thanks again. Okay. Bye, everyone.
Thanks.
This concludes today's conference call. You may now disconnect.