EverQuote, Inc. Class A Aktie

Thank you. Hello everyone. Thank you for joining us and welcome to the EverQuote Second Quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 and 2. to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Sarah Buda, Vice President of Investor Relations. Please go ahead.

Thank you, good afternoon and welcome to EverQuote's second quarter 2026 earnings report of 2026. Overlooking statements may be identified with words and phrases such as aim, expect, believe, intend, anticipate, plan, will, may, continue, upcoming, and similar words and phrases. These statements reflect our views only as of today and should not be considered our views as subsequent date. We specifically disclaim any obligation to update or revise these forward-looking statements except as required by law. forward looking statements 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 those risks and uncertainties, please refer to our SEC filings, financial measures, which include adjusted EBITDA and adjusted EBITDA margin, variable marketing dollars and variable marketing margin, which we believe are helpful to investors, a reconciliation of gaps to non-GAAP measures was included in the press release we issued after the close of Market Today, which is available on the investor relations section of our website. And with that, I'll now turn the call over to Jamie. Thank you, Sarah, and thank you all for joining us today.

we continue to execute well and deliver strong results. In Q2, we grew revenue 25% year over year to $195.1 million and grew adjusted EBITDA 37% year over year to a record $30.1 million. Importantly, we achieved these results while continuing to advance our strategy, unlock new growth levers and extend our market leadership position. We continue to experience a healthy market backdrop for both auto and homeowners insurance, as carriers remain profitable and hungry for growth. Against this backdrop, carriers are turning to EverQuote as a trusted partner to help them grow policies and force. In Q2, we further broadened carrier demand, including a ramp with one major carrier that returned to the marketplace as expected. We also grew local agent demand for referrals to record high levels while increasing the number of products per agent as we advance our one-stop growth partner strategy with local agents.

Both carrier and agent revenue reached record high levels in the quarter. Additionally, our home vertical continues to perform well, growing 35% year-over-year in Q2, also to record levels. While we execute on behalf of customers, we are also investing to extend our AI leadership position in the market. Our smart campaigns AI bidding solution continues to scale, supporting customers' aggressive customer acquisition goals by helping them deploy marketing budgets more effectively and efficiently. Seven of our top 10 carriers now use smart campaigns, and in Q2, the amount of revenue flowing through the product increased by over 100% versus the same period last year. Also in Q2, we released our agent-facing version of Smart Campaigns to the first cohort of local agents. As Smart Campaigns becomes our customers dominant bidding approach, we are strengthening these relationships by embedding our technology into their core workflows and achieving deeper data integrations all while helping customers achieve their growth goals.

Within our walls, use of AI for everything from coding to automating operational tasks to prototyping products has reached an inflection point as our teams integrate AI into their daily workflows to drive greater productivity and velocity. We are seeing daily active use pervasive across our corporate staff, and within engineering, we are exceeding industry benchmarks with a 25% measured increase in efficiency. On a daily basis, I am impressed by yet another creative, high-value AI-derived output from an EverQuote team member. To name just a few, recent examples include AI agents designed to emulate human shopper personas and identify friction points in our web experiences. as well as upgrades to our AI traffic bidding platform, which put us on a path to increasingly agentic traffic operations. This trend of delivering innovative products at a faster pace will only increase from here. As evidenced by our financial results, our consistent, strong execution on behalf of customers has made us a trusted growth partner of choice for the largest carriers and thousands of local agents. We continue to integrate AI across our operations and our products, and are emerging as an AI leader within our industry.

From this position of strength, we see an opportunity to do more to support customers while unlocking new growth vectors for the business. Initially, we will focus on two areas. One, amplifying visibility with consumers through new products that are purpose-built for AI search and agentic commerce. and two, building AI native growth solutions for carriers and agents, which allow them to derive benefits of AI without having to build and manage as much of the technology in-house. With our rich AI heritage and deep customer relationships, we are uniquely positioned to lead the P&C distribution sector through its transition into the AI era. We look forward to sharing more details of these newer developments in the coming months. I have never been more excited about where we are and where we are going. We have a unique blend of talent, market leadership, ability to innovate, trusted customer relationships, and financial strength.

This positions us to build on recent progress, expand our competitive moat, and create a multi-billion dollar market leader with durable long-term growth. I will now turn the call over to Joseph, who will discuss our financial results and outlook.

Thank you, Jamie, and good afternoon, everyone. Q2 marked another positive quarter for EverQuote with strong revenue and adjusted EBITDA growth. We grew revenue 25% and adjusted EBITDA 37% year-over-year. We also drove record variable marketing dollars, or VMD, and record adjusted EBITDA, while at the same time generating strong cash flow. Now let's turn to the details of the second quarter. Total revenue grew 25% year-over-year to $195.1 million. Revenue from our auto insurance vertical increased to $172.1 million in Q2, up 23% year-over-year.

We continue to benefit from our broad and differentiated distribution with growth across carriers and agents including a large carrier ramping as Jamie mentioned. We also are delivering on the operational plan we've discussed to scale beyond the auto vertical. In Q2, revenue from our home insurance vertical grew 35% to a record $23 million, as we capitalized on strong monetization across high-quality traffic sources and secured increased budget from key keyframes. carriers. VMD increased to 56.9 million in the second quarter, up 25% from the prior year period. Variable marketing margin, or VMM, was 29.2% for the quarter. Turning to operating expenses in the bottom line, in the second quarter, we grew gap net income to $19.2 million, up from $14.7 million in the prior year period. Q2 adjusted EBITDA increased 37% from the prior year period to $30.1 million, representing a 15.4% adjusted EBITDA margin.

Cash operating expenses, which excludes advertising spend in certain non-cash and other charges, were $26.8 million in Q2, up slightly from Q1, as expected. We delivered strong operating cash flow of $24.3 million for the second quarter, with shares totaling $50 million. We are pleased with the results and expect our Board will revisit authorizing a new program later this year as part of our ongoing review of capital allocation. We ended the period with no debt and cash and cash equivalents of 192 million. In summary, our Q2 results reflect continued strong execution. We diversified our revenue across additional carriers in the quarter, further scaled our home vertical, and expanded our AI capabilities to drive innovation for our customers and deliver efficiencies within our own operations. Turning to guidance for the third quarter of 2026.

We expect revenue to be between $198 and $208 million, representing 17% year-over-year growth at the midpoint. We expect VMD to be between 56 and 59 million, representing 15% year-over-year growth at the midpoint. And we expect the gestative EBITDA to be between 28 and 31 million, representing 18% year-over-year growth at the midpoint. Looking to the remainder of the year, we are seeing a healthy environment as carriers focus on growing policies and forests, and as they choose EverQuo to achieve their goals. We are executing well and remain confident in our ability to achieve $1 billion in annual revenues on the timeline we initially communicated to investors last November, while also generating strong cash flow. We expect to reach this goal by first, driving better performance to gain share. Second, obtaining bigger scale as we bring more provider budget and traffic onto our platform.

Third, delivering a broader portfolio of solutions to our clients. And finally, achieving greater operating efficiency through investments in AI automation. As Jamie mentioned, we are increasing our focus on how to build upon our existing success and pursue incremental opportunities to propel our business beyond our $1 billion revenue target by delivering new AI-first products that add incremental value to our customers. Consistent with our prior commentary, we are making targets for our customers. investments in the second half of this year to develop and bring these new solutions to market. Additionally, we are pursuing select strategic commercial partnerships with AI-first companies to complement our own internal product development and capabilities. We look forward to providing further updates as our initiatives progress throughout the year. In conclusion, it was a positive quarter underpinned by strong fundamentals and a focused strategy.

The strength of our ongoing financial performance reflects that our strategy to be a trusted growth partner for P&C insurance providers is working. We are executing amidst a favorable market backdrop as carriers continue to shift spend to digital channels. We are well positioned as an AI beneficiary as we bring both new value to customers and drive incremental efficiencies throughout our business. We remain committed to our previously stated path to $1 billion in annual revenue with strong cash flow generation. and we have built a business with strong underlying fundamentals and a fortress balance sheet that allows us to invest for the long term and capture new growth opportunities while continuing to drive value for our customers and shareholders alike. Jamie and I will now take your questions.

We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the question. the Q&A roster. Your first question comes from Ralph Shakart with William Blair.

Ralph,.

Your line is open. Please go ahead. Great. Good afternoon. Thanks for taking the question. Jeremy, you talked about, you know, the healthy market backdrop and prepared remarks. Maybe just sort of give us an update what you're seeing with the market today versus maybe last quarter or, you know, since the business. has progressed through 2026. And then also- Yep. as you were going through sort of the AI products, you mentioned in the AI bidding part of the prepared remarks that you are sort of leaning in, I guess, with the genetic traffic operations or maybe some automation there. Maybe if you could provide a little bit more color on that and the potential impact to the business or BMD, it'd be great. Thank you.

Sure. Thanks Ralph so as it relates to the to the carrier market. The market remains healthy as it has been throughout the year so far. Get carrier combined ratios in the eighties. For the most part among the major carriers and that's true across auto and now the homeowner segment to. So I would say that the a- carriers remain. Very hungry for growth- if you're If there's one thing that we're starting to feel a bit about to persist into the back part of the year. Then to your second question as it relates to our AI bidding platform, we have automated a lot of our traffic bidding over the years.

We've talked about it many times before. A lot of that was done through the application of machine learning to automate decisions as well as as it relates to bidding for traffic. And now what we're beginning to do is overlay more sort of agentic action on top of the ML bidding that has been occurring for a long time. And so this is now getting into like deeper automation of a lot of the operations. which will historically every time we do something like this, we see the benefit both in the effectiveness effectiveness of the bidding, which would flow through in VMD, but also in the efficiency, because we can sort of manage a larger traffic portfolio with less human intervention needed.

Great. That's helpful. Thanks, Jerry. Thanks, Rob. Your next question comes from Naveed Khan with B. Riley Securities. Please go ahead.

Great, thanks a lot. Couple of questions from me, maybe first on the smart campaign 3.0. I think you were rolling out a beta with the agents. and I'm wondering how that adoption is going and what the performance is for the smart campaigns with the agents. That's one. And then the second question I have is just around, your marketing channel mix in the last quarter. Have you kind of made any changes? or anything that might have countered the trend during the quarter as a result of your marketing changes, if there were any. Thank you.

Sure. So as it relates to smart campaigns, there have been a number of developments over the last quarter. You know, on the carrier side, we're continuing to evolve to our smart campaigns 3.0, which has more features built into it to improve the efficiency of our smart campaigns. of the model uh... but by the bigger change this past quarter was introducing smart campaign to agents for the first time played and they have been able to in the past but the early data that we're getting would suggest a significant convert and rate improvements for the agents who have opted into- to that fund. product so good progress on that front with respect to the marketing mix the The, I guess the change that we've been talking about since the beginning of the year is the ramp of new traffic programs and traffic channels, particularly into some of the more higher funnel areas. So that continues. say there's been any you know change that that that is material or noteworthy over the last quarter but we continue to work to broaden and expand that traffic portfolio particularly these higher funder higher funnel channels Okay, maybe just on the channel sort of topic.

maybe just maybe talk about AI overviews, if that has had any effect, positive, negative, or maybe none in the quarter? Yes, sure. So we have.

We have not experienced any direct effect to our paid search results and And you know what we, but you've got this large source of traffic growing in the LLMs, which to us represents incremental opportunity, because we have never historically invested in or had a significant amount of organic traffic to begin with. So our pay traffic remains healthy and strong. And now we've been making investments over the last year or so to really begin to access the AI search traffic more systematically and there's a number of ways that you can do that one is through more of a traditional sort of content strategy so the answers to the questions that people may pose through the LLMs and The second is through paid advertising, and you have platforms like OpenAI now opening up to paid advertising. And the third is through technical integrations. So we did, you know, we launched our chat GPT app last quarter and it's, you know, it's getting some traffic. But it's the combination of those things and how they work together to meet the needs of the LLMs that ultimately is going to allow us to start to tap into that traffic in a more material way way and could become material over time, particularly as those platforms continue to grow.

Great. Thank you, guys. Thank you. Your next question comes from Maria Ripps with Canaccord Genuity. Please go ahead.

Great. Good afternoon and thanks for taking my questions. So you talked about introducing new solutions in the back half of the year, both on the consumer side and carrier side. Can you maybe help us understand some of the opportunities here? And is it largely around sort of conversion and sort of improving, improving solutions that are within your existing models and and then secondly, maybe is there anything you can you can share in terms of contribution in terms of incremental revenue opportunity here? Sort of how should we think about that? Whether that start should start contributing later this year or next? How sort of how are you thinking about about that?.

Sure. So there's sort of two sides of this. One is more on the consumer or shopper side. One is more on the provider side. I started to get at the consumer side with my response to Nived, but we see an opportunity to really amplify our visibility with consumers through new products that are really purpose-built for AI search and agentic commerce. And so as that begins to grow, obviously a large... of insurance intent exists there. There's a number of ways to access that traffic, which I just referenced, but they all require the build of certain assets that meet the specific needs of the LLMs. And we're making investments in these assets to become a distribution point of choice for the LLMs within our vertical market.

So that's the high level on that one, and we will have more specifics to share in the coming months. But then to go to the other side of the marketplace, as you look at the provider landscape, we operate in a market that is regulated, it's okay. It's nuanced in many respects. And so horizontal solutions, often don't work well for the insurance market. And we believe that within our market, we are really leading the charge with respect to the adoption of AI and understanding that With that, we see an opportunity to do more to support our customers. I think we're developing a suite of offerings which will allow them to derive benefits of AI without having to build and manage as much of the technology in-house. And so, you know, this, the basic idea is rollout products like smart campaigns, which which are consistent with our vision of helping carriers and agents grow, but really with a heightened focus on applying AI to the most relevant and impactful distribution use cases of our customers. And so that could range from marketing.

You mentioned conversion. That would be in scope. Basically, anything within that distribution chain where we feel we can help our customers be more effective. Then Maria, maybe to address your point with regards to.

Yes, how do you think about revenues for these areas? We're very excited about both these areas, right? We think they're going to provide new opportunities to bring consumers in as the traffic landscapes evolve increasingly to working with large language models, even insurance, we think we're very well positioned for that, that happens over time. And we think the providers are really looking for us and are turning to actually coming to us saying, hey, how can you help us grow with new products? So we're excited by these things. In terms of near-term impact, we don't view the revenue as material for this year in these new offerings. We need a period of really testing and innovation and bringing these things to market. And really going, and particularly on the new products products for providers is a period where we're really trying to invest in spending time with them as we bring these products for, say, how do these work for you, doing the innovation. Just similar, the same way we rolled out smart campaigns, we did that with carriers and agents. You'll see a similar profile used here as well as we go to market.

Got it. That's helpful. Thank you both. Thanks, Priya. Thank you. Thank you.

Your next question comes from Gregory Peters with Raymond James. Please go ahead.

Hey, good afternoon. You know, I was curious, listening to your comments about the Smart Campaign, your new chat GPT app and your AI initiatives. how we on the outside can reconcile all of the things of these initiatives which cost money and the fact that, you know, there's stories in the marketplace about how the cost of technology and token usage, et cetera, is going up. So just trying to, you know, marry the two issues together and how it's flowing through your income.

statement. Sure. Thanks, Greg. It's Joseph here. Maybe I'd say is, you know, We're giving you details on something we foreshadowed in the start of this year, so this is very much executing as we thought we would as the year progressed. You know, we said that OpEx in the first half of the year would be relatively flat. Q1 was pretty flat to Q2, and you're seeing in our guidance for Q3 a step up of roughly a million, million and a quarter in OpEx for Q3, and you'll see probably from there, you know, probably half a million more in Q4. Again, very consistently we said at the start of the year, Xoom OpEx is relatively flat and will be a step up in the second half of the year. You know, these investments, we're now sharing the details with you. We've been planning these and working on these for some time, and that's reflected in what we sort of have out there at this point.

And I guess the only thing I'd add is, more broadly, we are also driving efficiency with a lot of the all a lot of the work that we're doing internally, right? And, you know, I think we talked about this last quarter, but we've doubled revenue over the last couple of years while keeping OpEx flat. It is coming up a bit, but we have religion around efficiency. We have good visibility on the token usage and the expenses associated with it. We have controls in place. As that ramps, we are also able to automate and manage expenses elsewhere.

Maybe, Greg, the last thing I'll ask you is just, if you think through what we said at the start of the year, we said, hey, assuming the down margins will rise roughly 100 base points this year, you know, we still are still saying the rise roughly out of base points this year because the OpEx investment we're seeing in the second half is sort of as we expect as we started the year.

And, you know, I was chuckling when I saw your slide on carrier commentary about how they're all excited to grow now. And, you know, considering where they were just a couple of years ago. And as a backdrop, I'm just curious, are you seeing the fact that they're willing to grow? Are you seeing any more, opportunities for, are they willing to pay you more for helping them to grow or, you know, or is it still, you still setting, getting sort of the same amount on a per close basis? There has been, you know, in recent years, there are certain carriers that are really leaning in heavily.

because they're feeling a tremendous amount of pressure to grow. So that's reflected in the pricing within the marketplace. We've seen that come up quite a bit. The other place we see it, Greg, is in their willingness to try new things. As an example, we are, smart campaigns is a good example. I know it's one we often use, but there is a certain amount of data sharing and trust associated with a customer adopting smart campaigns. And we've been working for years to get our customers on that product.

And this year, for the first time, they they are experiencing a lot of pressure grow they are for the first time willing to willing to test it willing to provide the data and the integrations that we need to make it work. And that's been the case with that product it's been the case with a number of other products we've we've brought to market but the carriers are are just a lot more open and and comfortable collaborative in working with us to help them grow than we certainly saw during the harder years of the market.

Thanks for the answers. Thanks, Greg. Your next question comes from Mayank Tandon with Needham. Please go ahead.

Hi, this is Brandon. I'm from MIUNC. Thanks for taking my question. I'm just wondering if you can touch on any other VNN margin impacts in the quarter. Looks like it came in strong. Can you touch on what drove that on the ad spend side and what dynamics you guys are seeing on certain funnels?.

Maybe I'll start out if you want to add on. So I guess I'd say, you know, VMM for the quarter was in the high 20s. And maybe I'd even take a step back and say, on a day-to-day basis, we do not solve for VMM margin. We solve for VMD. What we've seen over time is what correlates with the highest VMD is actually a VMM in the high 20s. And any given quarter can be higher or lower based on things we control or things we don't control at the advertising environment. But generally it's in the high 20s, correlates with highest VMD from our experience. One of the things that I would say that allows us to continue to do that is we continue to get, Jamie talked about smart campaigns, that brings in more data into our marketplaces.

We bring more data into the marketplace that helps us be more efficient with traffic acquisition. That certainly feeds into that as well in our ability to maintain and drive those VMM margins in the high 20s and maintain them there. An additional color?.

that that more or less covers that- you know it is certainly a- a. Can be a little traffic into other channels, as we mentioned earlier. And those channels are not industry-specific channels so they're not subject to the same kind of competitive pressure as, say, you know, insurance search or something like that.

Thanks. Thanks. That's super helpful. And then we're going to touch on capital allocation. Buybacks have been a big part of it recently, but wondering what you guys are seeing in the M&A environment and your thinking around capital allocation at this time.

Sure. So thanks for the question. I guess when we think about capital allocations, there's sort of three things we've talked about. Just to remind folks, one is the opportunity as Fortress balance sheet is critical for our business. We think long term and some of the investments we're making in the time horizons for return. Second is obviously buybacks. We've done about 50, we've done 50 million of buybacks since we did it last August. And the third is on M&A. When we look at M&A, I'd say maybe I'd start with two things.

One is we don't see a need for M&A to achieve our path to a billion dollars in revenue that we talked about on our November call. You know, as we talked about in our preparatory years are now 15 to 27 months, nine months into making the commitment. But we see potentially an opportunity with to accelerate our opportunities in the PNC landscapes. As we look across the market, we think there's a real opportunity for us, and it falls in a couple of few areas I touch on. You touch on, We talked about new products for carriers and agents to help grow their business. M&A could certainly be part of that. How do we bring new areas of care as agents grow? And that could be part of an M&A strategy.

We also look at, we've had really good success with our non-auto vertical of home. How do we continue to keep growing the non-auto verticals? Could be another area for M&A. The third could be around data. data within our marketplace and find new insights that overlay with the data we already have. So those would be some of the areas we'd look at. What I would say more broadly, sort of stepping back a little bit further is, we think it's a market landscape. We are really coming out as a leader in this space, pulling away from the pack. And as we do that, we're seeing more opportunities.

Why are we seeing more opportunities? private company insurtechs that are out there. You have management teams who are passionate about being in this space, but they want to see an opportunity to be part of someone who's doing that. We're having more and more of those conversations. So as we look at using our capital for M&A, obviously a key part of it is talent as well. So we'll see how this unfolds over the coming quarters, but we certainly see it as an flavor first to consider. Thanks, guys. And say, Bravo.

Thank you. Thanks, Brenna. Your next question comes from Jason Crayer with Craig Hallam. Please go ahead.

Hey, thanks guys. I want to go back to VMM. You know, it looks like this is pretty stable for you guys. You called out the new channels that you've been investing in over the last couple of quarters. Can you just give any updates on how those are progressing and are they already building tailwinds to VMM or do you expect that to take a couple more quarters of testing and refining before that starts to drive more tailwind?.

They're progressing as planned. They don't, you know, I think we've said before, we don't expect the new channels to kind of materially impact one way or the other, the kind of medium term VMM operating point, as For instance, it's really not actually even a metric that we manage to. It's kind of an output metric. We're trying to maximize the variable marketing dollars. But the channels are progressing as planned. and. You know our prime objective right now is. Keeping our carriers and agents fed right so growth is is really the name of the game and- in those new channel you know we're able to access some volume that's contributing to growth. And I don't think we would.

You know we're not look to trade off growth for, you know, for that, for any kind of margin at this point. We're just continuing to look for maximum variable marketing dollars and serving the customer need to grow.

I APPRECIATE THAT. I WANTED TO PIVOT TO THE HOME SIDE OF THINGS. I MEAN, IT SEEMS LIKE THAT THAT REMAINS A REALLY ROBUST GROWTH OPPORTUNITY IN THE MARKET. SO MAYBE A LITTLE BIT MORE ON JUST WHAT YOUR ASPIRATIONS ARE FOR GROWING HOME. AND THEN HOW WELL ARE YOU ABLE TO LEVERAGE THE PRODUCT AND THE TECH THAT YOU'VE CREATED ON THE side and deploy that to further scale opportunities at home. Thanks.

Yes. So, yes, we see a really nice opportunity in home. The vertical's been performing very well. It grew, I think, 35% this quarter year on year to record levels. We've long said that we expect home growth to outpace auto growth, just given where it started and given how it is sort of a little bit behind auto in terms of its maturity and its digital evolution. but a lot of the growth to date has been driven by applying a lot of our best practices and our technology and our traffic operations from auto to home. So a lot of that does translate. That being said, I think there are some things we can continue to do to customize that homeowner's buying experience to make it more tailored to the vertical and improve performance in doing so. but if you take a step back i mean the vertical remark it right now is is very healthy the carriers are uh... are quite profitable And we've now got some big carriers paying attention to home, it seems, more than they have in the past, particularly as the auto market gets quite competitive. So, you know, all signs right now point to continued growth in that home vertical.

And maybe Jason, just one other sort of perspective, given the size of the home opportunity. So roughly it's 10% versus 10%, 11% right now, the rest being auto for us. If you look at the broader P&C landscape, it's roughly for every $2 of auto, there's $1 of home. So between 50% and where we are today, we think there's 10%, we think there's a lot of growth opportunity more broadly in the market. Not all home will be home opportunity to be relevant to digital, but we see significant upside in that market opportunity, which allows us to feel very bullish about the investments we're making here and how it will impact us in the medium and longer term to becoming a real growth driver for the business.

That was great. Thank you guys. Thanks Jason. Thank you.

The last question comes from Jed Kelly with Oppenheimer and Co.

Please go ahead. Hey, Greg. Hey, Greg, guys. Good, good quarter. Thanks for getting me in. Quick question. Couple other insurance, like digital insurance marketplaces have talked about carriers doing some tests with them that could have depressed their variable marketing margins, by your performance you didn't see that. But are you seeing the carriers do any testing that could temporarily depress your margins?.

No. No? All right. No, I don't know what more to say. There's nothing, we don't see anything that would have that impact.

Okay, no, that's great. And then just another question for you, no, Google arbitration or the Google settlement. Are you thinking about joining any arbitration for some of the search advertising you've done on Google over the past 10 years?.

So we are aware of the Google arbitration. I think every law firm in the country has probably reached out to us, as well as every investment bank is trying to do products in the area. So we're aware of it. We'll evaluate it as we do other things as well. So really nothing to comment on it, but we're well aware of what's going on out there.

All right, and I guess I'm the last one. Just with the guidance, can you tell us a little bit more Can you just talk about how we should think about, you know, measuring VMM margin versus measuring variable marketing dollars? Obviously, high 20s is a good place to be, but, you know, do you think there'll be opportunities maybe to get more marketing dollars at a lower margin? Just some thought on that. Thanks.

I keep coming back to jet for us as we solve for the maximizing the end dollars and right now with what we're seeing. We sort of see high twenties is will for the M.M. margin. It'll be variability quarter quarter certainly you know we had Q4 of last year we made a conscious choice after three quarters. three quarters in a row of really strong start. We said we made investments in Q4 last year. We consciously brought it down as we tested a lot of new channels. But for us, we view it as we sort of see in the high 20s, you know, is where it will be. But again, I come back to, we don't, it's an output metric.

It's not the way we run the business. We run the business to drive VMD dollars in a sustainable and durable way. So what we don't do is we often, we do not go and chase the VMD dollar. We don't do a sustainable, thought through in terms of, let's just not make the quarter. Let's think about how we're building durability in the model over time.

Thank you. That is the end of the Q&A. I will now pass it back to management for closing remarks.

Thank you. And thanks, everyone, for joining us today. To close out, I just want to thank the EverQuote team for delivering yet another excellent quarter with strong growth, record adjusted EBITDA. We're continuing to execute well against the backdrop of healthy customer demand as we build momentum in both home and in auto. We're making great progress across a number of goals. So we deliver superior performance for our carriers and agents, as we get more value from AI in our operations and in our products, and as we diversify our customer base and deepen our customer relationships. Looking forward to sharing further updates with you in the coming months as we build on this momentum.

This concludes today's call. Thank you for attending. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Hello, everyone. Thank you for joining us, and welcome to EverQuote Q1 2026 Earnings Call. [Operator Instructions]

I will now hand the conference over to Sara Buda with EverQuote Investor Relations.

Thank you. Good afternoon, and welcome to EverQuote's First Quarter 2026 Earnings Call. We will be discussing the results announced in our press release issued today after market close.

With me on the call this afternoon are Jayme Mendal, EverQuote's Chief Executive Officer; and Joseph Sanborn, EverQuote's Chief Financial Officer and Chief Administrative Officer.

During this call, we may make statements related to our business that may be considered forward-looking statements under federal securities laws, including statements considering our financial guidance for the second quarter of 2026. Forward-looking statements may be identified with words and phrases such as aim, expect, believe, intend, anticipate, plan, will, may, continue, 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 any obligation to update or revise these forward-looking statements, except as required by law. Forward-looking statements 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 those risks and uncertainties, please refer to our SEC filings, including our annual report on Form 10-K and our quarterly reports on Form 10-Q on file with the Securities and Exchange Commission and available on the Investor Relations section of our website.

Finally, during the course of today's call, we will refer to certain non-GAAP financial measures, which include adjusted EBITDA, variable marketing dollars and variable marketing margin, which we believe are helpful to investors. A reconciliation of GAAP to non-GAAP measures was included in the press release we issued after the close of market today, which is available on the Investor Relations section of our website.

And with that, I will now turn the call over to Jayme.

Thank you, Sara, and thank you all for joining us today. We delivered excellent results in Q1, exceeding the high end of our guidance range across revenue, VMD and adjusted EBITDA, punctuated by 30% growth in adjusted EBITDA to a record level of $29.3 million. Our strategy is working as planned as we scale our marketplace and deepen provider relationships.

When we went public in 2018, EverQuote committed to growing revenue 20% and expanding profitability, adjusted EBITDA margin by 1 to 2 percentage points per year. For 7 years, we've delivered as promised, resulting in 4x revenue growth and over $100 million of annualized adjusted EBITDA expansion. Through disciplined execution, we have built a strong balance sheet and a highly cash-generative business.

At the end of Q1, while repurchasing shares of our stock under our share repurchase plan, our cash balance is over $178 million with no debt. And for 3 quarters in a row, we have generated annualized adjusted EBITDA levels at or above $100 million.

We will keep driving profitable marketplace growth through focused execution of our strategy and by leveraging AI to drive productivity and accelerate our pace of innovation on behalf of customers. Applying our proprietary data together with AI to support the growth of insurance providers has always been and continues to be foundational to the value we deliver. It has enabled us to become the trusted platform of choice for the country's largest carriers and thousands of local agents to grow their business. We are now continuing to build on this heritage, harnessing Agentic AI capabilities to drive new levels of productivity, innovation and customer performance. We have proven our ability to drive immense productivity gains with tech and AI-enabled automation over time.

In the 3 years from Q1 2023 to Q1 of 2026, we have increased revenue per employee by nearly 3x. We are now significantly ramping the build, deployment and usage of Agentic AI tools across our employee population to further enhance productivity and create additional capacity to invest in long-term growth.

As examples, we are building what we call an AI cockpit for our sales and service teams to dramatically reduce time spent on repetitive tasks. And we added an AI layer on our homegrown site management platform to automate and improve experimentation on our site experience. More importantly, our teams remain hungry to accelerate our pace of innovation and service of improved customer outcomes using newfound capabilities of Agentic AI. Already today, AI benefits our customers in a number of ways. Our AI-powered traffic engine and proprietary data enable us to effectively deploy ad spend in a way that optimally aligns carriers' underwriting preferences, profitability targets and growth goals with the right consumers based on their location, history, demographics and other factors.

Through smart campaigns, we have productized our AI-powered bidding capabilities, improving carriers' ability to optimize return on ad spend in our marketplace, resulting in budget increases and embedding our technology more directly in our clients' workflows.

Moving forward, we are rolling out AI-powered products and features to create value for customers at an accelerating rate. For example, we have begun extending smart campaigns to local agents. We also expect LLM originated traffic to become a growing source across the market broadly. We believe EverQuote can provide carriers and agents with greater access to this traffic as paid advertising opens up and as we invest in content generation and technical integrations with LLM search platforms.

Looking ahead, we maintain a favorable outlook for Q2, reflecting continued strong execution by our team in a growth-oriented carrier environment. We are progressing as planned along our path to build a $1 billion revenue business with an accelerating rate of innovation to support the growth of insurance carriers and agents.

Over the years, we have proven our ability to listen to our customers' needs and rapidly adapt to changes in the environment to support their success and our financial performance. Agentic AI unlocks new opportunities in many sectors, including ours. As a team, we are aligned and focused as we continue to seize this opportunity to expand our product offering, broaden our competitive moat and propel our long-term success.

I will now turn the call over to Joseph, who will discuss our financial results and outlook.

Thank you, Jayme, and good afternoon, everyone. In Q1, we once again delivered impressive financial performance.

Before I walk through the details of our Q1 results and Q2 outlook, let me share some key highlights. We grew total revenue 15% year-on-year and grew adjusted EBITDA 30% year-on-year, while also delivering record adjusted EBITDA and operating cash flow.

Let me take you through the first quarter. Total revenue grew 15% year-over-year to $190.9 million. Revenue from our auto insurance vertical increased to $172.4 million in Q1, up 13% year-over-year as we continue to benefit from our broad and differentiated distribution. Revenue from our home insurance vertical grew 33% to $18.5 million in Q1 as we continue to benefit from strong execution against the operational plan we implemented last spring to bolster this vertical.

Variable marketing dollars, or VMD, increased to a record $55.9 million in the first quarter, up 19% from the prior year period. Variable marketing margin, or VMM, was 29.3% for the quarter, up both sequentially and year-on-year as the new traffic channels we invested in last quarter are starting to show better profitability.

Turning to operating expenses and the bottom line. This quarter, we continue to demonstrate the strong operating leverage of the business. As Jayme said, AI and data have always been cornerstones of our business and have both fueled our operational efficiencies and enhanced our revenue generation. As I said on the last call, we have effectively doubled our revenues over the last 2 years while keeping operating expenses nearly flat. AI is positively impacting our economic model, and we are now at a scale where we expect to continue to drive strong cash flow generation and year-on-year adjusted EBITDA growth even as we invest in the business.

In the first quarter, we grew GAAP net income to $18.7 million, up from $8 million in the prior year period.

Q1 adjusted EBITDA increased 30% from the prior year period to $29.3 million, representing a 15.4% adjusted EBITDA margin.

Cash operating expenses, which excludes advertising spend and certain noncash and other onetime charges were $26.6 million in Q1, up from Q4 as expected. We delivered record operating cash flow of $29.6 million for the first quarter. In Q1, we repurchased approximately 19.9 million of shares under our share repurchase program. We ended the period with no debt and cash and cash equivalents of $178.5 million.

To recap, we are starting the year with positive momentum driven by 2 primary factors. First, we continue to execute well and deliver strong performance for both carriers and agents. And second, we benefit from a strong and broadening overall demand as carriers continue to sit well below their targeted combined ratio and are seeking to grow policies in force.

Turning to guidance for the second quarter of 2026. We expect revenue to be between $185 million and $195 million, representing 21% year-over-year growth at the midpoint. We expect VMD to be between $55 million and $57 million, representing 23% year-over-year growth at the midpoint. And we expect adjusted EBITDA to be between $28 million and $30 million, representing 32% year-over-year growth at the midpoint.

Looking to the remainder of the year, we continue to see a healthy environment as carriers focus on growing policies in force, shift spend to digital channels and rely on EverQuote as a partner of choice. We remain committed to our goal of achieving $1 billion in revenues over the next 2 to 3 years while generating strong cash flow and year-on-year adjusted EBITDA growth. At the same time, we are continuing to build on our AI capabilities by making investments in: one, developing AI-first products that can add incremental value to our customers; two, hiring additional AI talent and upskilling our existing team; and three, driving increasing efficiency by deploying Agentic AI tools across every function in the company.

To summarize at a high level: one, our continued strong financial performance reflects that our focused strategy to be a trusted growth partner for P&C insurance providers is working; two, we are executing amidst a strong market backdrop as carriers continue to shift spend to digital channels and choose EverQuote as a partner to drive customer acquisition and help them gain market share; three, our ongoing growth and positive outlook offers clear evidence that AI is a tailwind for our business; four, we are building on our AI heritage to bring new value to customers and reinforce our position as an AI beneficiary long term; and five, we remain committed to our path to $1 billion in revenue while driving strong cash flow generation and year-on-year adjusted EBITDA growth.

Jayme and I will now take your questions.

[Operator Instructions] Our first question comes from the line of Cory Carpenter with JPMorgan.

I was hoping you all could expand a bit just on what you're seeing out there from the carriers. I know last time we talked a few months ago, we were off -- carriers were a little more measured to start the year, but clearly, you outperformed your initial expectations. So what do you think drove that? And kind of are you still expecting kind of a similar cadence through the year as you described 3 months ago?

Thanks, Cory. So the carrier underwriting environment is healthy, and it seems to be healthy across the board now. We're seeing 80s combined ratios in auto. We're not seeing home at similar levels for multiple quarters now. And so, we're hearing from our customers a tone of growth orientation pretty much across the board. So we have the market back into growth mode. We have all the major carriers now live and participating in the auction. And I don't know if Joseph has anything to add, but that's kind of the sentiment in the market right now.

Yes. Maybe I'll answer your question more specifically with regards to overperformance in Q1. What was -- the upside to the quarter was pretty broad based on the carriers showing more -- did more spend they initially said they would do. But I would highlight that one carrier in particular was more than double what they said they would spend in the back half of Q1. And so that obviously helped us result in overperformance on the revenue side.

As we look beyond Q1, I guess what I would reiterate what Jayme said, we feel good about where we're at. Carriers are in growth mode. They want to grow policies in force. They want to use digital channels, and we feel well positioned to help them do that and partner with them to do that. And so we feel good about the environment we're in.

And then maybe more near-term, obviously, been a lot of focus on just the broader macro uncertainty, oil prices, et cetera, has that come up at all in your conversations with carriers? Or are you thinking about potential that could or could not impact their spend through the year?

With respect to carrier -- recent carrier conversations, it has not come up.

And then I guess how might it impact carriers as we progress through the year? It's always hard to speculate. But what I would say is this, which is carriers have low combined ratios. So to the extent that cost of repair were to increase, they have a lot of ability to absorb higher costs and claims costs given that combined ratios are quite low and continue to be quite low.

The other thing I would say is, if you think about if energy prices should remain high, gas price specifically, one impact you could see is on consumers actually driving less and less miles driven equals less accidents. So it could be a benefit to the carriers potentially in their combined ratio as well on claims costs.

The next question comes from the line of Maria Ripps with Canaccord.

Congrats on the strong quarter. I just wanted to follow-up on the last question. Clearly, growth has been very encouraging here. I guess to what extent should we view first half strength as sort of as incremental versus sort of possible pull forward of the second half activity?

Sure. So as we said, we've been pleased by the -- how the year has started. Q1 is strong and our guide for Q2, obviously, is a continuation of what we're seeing in Q1.

As we look to the second half of the year, I guess I would say this, we have not guided for the second half of the year. We're not going to do that in this call. What we have given you is a view of sort of our path beyond this in the next quarter, we've given you a path to being a $1 billion business in 2 to 3 years, and we still feel very good about that and our path to achieve that. And really, nothing has really changed in our view since our last time we discussed this.

Got it. That's very helpful. And then, I guess, more broadly on LLM traffic, you talked about sort of 3 strategies to capture LLM traffic, which is content integrations and paid ads. Now we've seen a couple of competitors out there sort of actually launching apps within ChatGPT. Sort of what are your thoughts on developing maybe similar app level integrations with AI platforms? And how would that fit with your broader strategy?

Thanks, Maria. Yes, I would put that under the umbrella of technical integrations. And we have built -- we've been sort of testing in these platforms for a while now. We've built several apps. We have not pushed anything to production yet. There's a number of them. There's probably 15-plus apps in the insurance category right now in ChatGPT. They're all quite similar. They kind of just take a web form experience and apply a lightweight conversational front end to it before spinning the consumer back to like a web-based quoting and binding experience. And there's like a lot of friction to actually access these apps. So you've got to prove it or install it, you've got to give it permissions. It's just that there's a lot of friction. And so our sense is very little actual traffic flowing through those at this point.

We're working on something that I think will be more interesting, but still the challenge is always going to be driving traffic into it, and that's where I think the other elements of the strategy will come into play. One is paid advertising, where I think, especially ChatGPT is opening up to paid ads. We're among the largest paid advertisers in insurance. And so as the LLMs open up and become a more sophisticated paid advertising platform, I think that's going to give us an opportunity to drive immediate scale.

And then we're also making quite a bit of investment in content and a content strategy, specifically as it relates to gaining visibility in the LLMs. And we have a very experienced and capable team focused on this, and we do expect to start to see some impact from their efforts materializing as the year progresses slowly but steadily. So that's kind of the -- that's our assessment right now of the landscape. For us, it will be incremental traffic. Right now, we have no SEO traffic, right? We historically were paid. And so we do expect that as this pool of traffic grows and we tap into it, it will represent incremental traffic for EverQuote.

Our next question comes from the line of Naved Khan with B. Riley Securities.

I think on the last call, you given us a stat that 75% of the carriers were below peak levels. Where does that stand today? How does it look to give us some flavor of where demand could be?

And then the second question I had is just around the buyback. It looks like you finished the authorization that was out. Have you finished that or the plan to kind of deploy additional capital towards more of a share buyback?

Sure. So thanks for the question, Naved, and welcome to our call. So first in terms of carrier demand, the stat we gave sort of percentage of top 25 carriers, around 80% now if not are below peak quarterly spend. I guess I would sort of fine-tune that a bit and remind folks that when you look at our marketplace, in any given quarter, you wouldn't expect all carriers to get back to peak quarterly spend, right? We've had -- as we look at this quarter going into Q2, we're seeing recovery, particularly in one of our top 5 carriers who wasn't on the platform until Q1 and someone was the top 5 carriers prior to the downturn. So as I think about the concentration dynamic and the room for upside. So we're pleased with that.

And then with regards to the buyback, what I would say is, we purchased about 19 -- just under $20 million purchase of shares in Q1. That represents shares purchased to date under the authorization about 7.5% dilution -- 7.5% is offsetting dilution. And as we look at buybacks, we'll obviously continue to be using our buyback plan.

And as we talk about more broadly about capital allocation, I'll repeat what I've said in sort of our prior calls, which is there's sort of 3 uses for capital in our mind. First and foremost is a fortress balance sheet. We believe strongly in the importance of having a strong balance sheet, and we have no debt, and we're going to continue to have that as a hallmark of our capital allocation strategy. Second is buyback plans. As I said, we've done a fair amount of those. We see that as another way to bring value back to shareholders.

And the third, of course, is M&A. And as we think about M&A, we've talked about this in the past, which is we do not see M&A as required to hit our path to $1 billion in revenues. We see that as being an organic strategy. But we see an opportunity in this market to really build a leading player in helping P&C carriers and agents grow their business successfully. And M&A could play a part in helping us accelerate some of the things we'd be naturally building internally, whether that is additional products for carriers and agents, whether it's helping expand into our non-auto verticals, but bring additional sources of traffic or AI talent, all those could be part of our M&A strategy.

The next question comes from the line of Ralph Schackart with William Blair.

Two, if I could, please. First, maybe just switching gears to the consumer side. Can you maybe talk about the shopping levels or sort of some of the search traffic you're seeing given elevated insurance costs? Are you still seeing high intent there?

And then two, Joseph, maybe on VMD, I know you don't guide the full year, but just kind of thinking about the linearity for the balance of the year. Is it reasonable to see that these levels could persist for the remainder of the year? I know you talked about new traffic channels, providing better profitability. Just any more color you could add there would be great.

I'll take the first question, Ralph. So as it relates to shopping activity, we expect it to start to normalize this year as the rate cycle somewhat settled down. And that's what we're seeing. We have continued to see year-on-year growth in our search traffic, but we're seeing some normalization in the overall traffic levels. But that's with a much more competitive advertising environment from the insurers. And so within the marketplace, that normalizing volume is being met by also much higher value per referral going out the door, which has been a favorable dynamic for us.

And as demand continues to grow from the advertisers, we continue to drive growth ourselves beyond what's happening in the ambient environment by launching and scaling some of these new traffic channels and programs, which we've done successfully over the last quarter and we'll continue to do over the course of this year.

So with regards to VMM, I guess I would touch on the thing that I know you know well, Ralph from hearing from us is, we don't run the business day basis to drive VMM, we drive VMD. But we were pleased in Q1 that VMM margin was over 29%. I think it reflected the strategy we talked about in our November call going into the fourth quarter, we had investments in new channels. Those investments in channels paid off and we're driving better -- and they are scaling at a better profitability than they were in Q4 when they initially were scaling. So we're pleased with that.

As we look into the balance of the year, we sort of have this view of sort of high 20s, 27%, 28% kind of tipping to 29%. I think it's important to realize, not only do not run the business day-to-day for VMM margin, there's also of what we control and what we don't control, right? So the advertising cost that we purchase for it's a competitive market for advertising that can ebb and flow quarter-to-quarter. What we control is how we -- the efficiency with how we acquire that advertising and are using our traffic bidding engine to help us acquire that most efficiently.

The context I'd remind you is, when we look at our business, if you go back when we were $250 million, $260 million business in auto, our VMM margin was in the high 20s. Here we are, we're 3x that size and our VMM is in the high 20s. The advertising environment has certainly gotten more competitive. But at the same time, we are actually continuing to drive efficiencies in the business. So we think high 20s is a reasonable place to think about it, 27%, 28%, maybe taking a 29% occasion for the rest of the year.

The next question comes from the line of Jed Kelly with Oppenheimer.

It kind of seems just given the guidance, given the outlook, we've reached a pretty -- I'd call it, maybe stable where like competition around marketing seems pretty stable. If you look at the VMM margins, they're kind of going up. So can you just talk about that environment? And then how should we think about higher gas prices and higher used car prices and higher prices? And just how is that impacting people's ability to shop for insurance?

Sure. Thanks, Chad. So the first question, just to make sure I understood it, was -- Jed, were you asking about the consumer side or what's happening in the sort of on the provider side and the advertising dynamic?

Marketplace, right? Like in your marketplace, it seems that VMM margins are operating back in the high 20s, right? So it seems like you're kind of reaching like a Goldilocks period of where it's like decent stability in terms of traffic acquisition cost for you guys. Is that the right way to look at it when I kind of look at like what some of your other competitors have said and where like VMM margins are going?

I would say we have a very healthy marketplace dynamic right now from our perspective, where demand on the provider side is very strong, and that's kind of across the board, carriers, agents, auto, home. And we've been doing our best to sort of keep pace with the demand by investing in growing our existing traffic channels and sort of launching and scaling new channels and programs. So we're at a relatively stable place right now.

As Joseph mentioned, I mean, it's consistent with our historical levels of VMM. So there's nothing like out of the ordinary about it. But it's just -- it's a healthy marketplace dynamic.

Yes. And I guess the second piece I would say with regards to sort of the environment, I think if I have the question right, Jed, is consumer -- how is consumer shopping behavior given higher gas prices, potentially higher used car price, et cetera. And I guess what I'd say is this is that, shopping levels have been elevated for some time. They're starting to normalize a bit from these elevated levels. I guess when I think about the environment for what does it mean for our business or the macro environment, I'd say, on the one hand, you could say, if there are higher used car prices or higher repair costs, that could impact claims costs for carriers.

That being said, carriers are quite healthy with combined ratios that are still quite low. So the ability to absorb higher claims costs. They have significant cushion, so to speak, to absorb that should they need to. The flip side is with high gas prices is consumers, particularly when you start to get over certain milestone levels, $4 a gallon, you start to see consumers actually driving less when they drive when there's less miles driven, there's less accidents. So it's dynamic in our business where there's these dynamics on an environment we're in right now in the macro environment, consumers maybe actually driving less that benefit carriers. And there's also dynamic where consumers still are shopping because auto insurance is a top 5 expenditure, and they see opportunities to continue to save.

Got it. And I guess I probably asked this every quarter, but obviously, saw the repurchase. You're building up a pretty nice war chest with the cash. Can you just talk about how you think about your capital allocation for acquisitions and some of the opportunities out there?

Sure. So as I mentioned to Naved, so we think about capital allocation is, obviously, fortress balance sheet is critical in our business. We are -- we think that is particularly important for us and something that differentiates us from some of the other companies out there.

Second, buybacks, we did another $20 million in Q1. Buyback is another portion of how we all return back to shareholders. And the third is on M&A. When we think about M&A, what I would say is this, our path to $1 billion remains one where we need no M&A to drive that growth, that's purely organic. That being said, we have a strategy to be -- to really emerge as the leader, helping P&C carriers and agents grow their business. And we think we're well positioned to do that. There might be opportunities to accelerate our strategy by through acquisitions.

Acquisitions could take a couple of forms. They could be additional products for our carrier partners, our agents. We've talked about our product strategy with our agents. We're doing the same thing on the carrier side. We think about verticals, 90% auto, 10% home. We're bullish on home. You might think about other verticals, might we think about technology we could bring in additional data or additional AI talent that could help accelerate some of our AI initiatives. All those are things we consider in our M&A strategy. And we've been spending more time to think about our M&A strategy at this point in 2026, certainly than we were at this point in 2025.

The next question comes from the line of Jason Kreyer with Craig-Hallum.

You've spent the last few years in a hard market premium [indiscernible], right, like a soft [indiscernible].

Jason, you're breaking up. We're having a hard time hearing you.

Any improvement?

That's better.

How about that?

Much better.

Okay. Sorry about that. So just as we transition from a softer market or a harder market to a softer market and you've gone through executing the last couple of quarters. Just curious if there's any learnings as far as how EverQuote competes in a new market and how you've gone through that transition.

I think our strategy generally lends itself well to the transition into new market. I mean we manage very effectively through the hard market. But our stated strategy is to become the one-stop shop for agents and carriers to grow their business. And now when they're in a period where they're really focused on growth, they tend to be more open-minded to embracing and testing new products, new features. And over the last couple of years, we've developed quite a few new products and features that incorporate -- take advantage of our data that apply AI, machine learning to really help agents and carriers grow. And we're starting to see an increasing rate of adoption of some of these products and features because the carriers and the agents really need to grow to hit some aggressive growth targets.

Jayme, that's a good dovetail to my follow-up question. Just on the adoption curve of these AI-enabled solutions. Like do you feel you're now at a critical mass with those products that you brought to market?

Yes, I do. I mean, for us, generally speaking, it's like -- it's an exciting time for us. There's -- I think there's a few companies in our market that are better equipped to benefit from some of the new Agentic AI capabilities than we are. We've been applying AI and our proprietary data to acquire traffic, to streamline insurance shopping to help providers grow for years now. And before it was machine learning and reinforcement learning and more recently, it's some more of the GenAI tools and now Agentic AI tools that are really powerful tools in the toolkit. And we're seeing the carriers and agents, many of them really need our help, and they need our help to access the benefits of these tools much -- probably much sooner than they'd be able to do on their own.

And so this year is definitely marking acceleration in Agentic AI adoption and usage at EverQuote in probably in 2 ways. One is more internal. So that's how we apply it to our operations. And the second is, how we apply it to add value for our customers through our products. But both of those have really, I think, accelerated this year.

Internally, in engineering, we've been using generative AI for years now to improve productivity, largely through copilots. But in the last 6 months, we're now -- the capabilities of Agentic coding have reached a point where we're able to rethink our entire software development life cycle to be Agentic first, and that's going to unlock a lot of gains in our ability to ship more value to customers faster than ever before.

And then beyond engineering, as Joseph was mentioning, we're starting to integrate now AI tools and agents throughout our operations whether that's in our site experience and how we're experimenting on it. We've got tools to streamline debug carrier integrations. We've got applications in legal design, you name it. So operationally, it's really starting to drive increasing productivity.

And then with respect to customers, the adoption has been great. I mean we've talked about smart campaigns quite a bit in the context of carriers. We're continuing to improve the performance of those models and get more adoption with carriers. But we're also extending smart campaigns now to agents for the first time for local agents. We've got a product that's focused on our next-generation proprietary traffic bidding platform, which is introducing more like advanced reinforcement learning into traffic bidding. We talked a bit earlier about LLM-based traffic and AI search engine optimization. So all this stuff is really coming together this year, and we're excited. I mean we're excited to -- for things to begin to really accelerate and the impact, both internally to our productivity as well as for our customers.

We have reached the end of the Q&A session. I will now turn the call back to management for closing remarks.

Thank you. Well, thanks all for joining us. It was an excellent quarter for us, continuing to grow. We produced record adjusted EBITDA, and we're executing. We're executing our strategy, accelerating our marketplace flywheel. We're deepening our customer relationships. And we're really progressing through 2026 from a position of strength. We feel we're really well positioned to further embed AI into both our operations and our products to usher the insurance market into an AI-native future. And we look forward to sharing more along the way. Nice evening.

This concludes today's call. Thank you for attending. You may now disconnect.

Welcome, and thank you for standing by. I would like to inform all participants that this conference call may be recorded and made available to clients of JPMorgan, where the company is presenting any recording may also be posted on the website. Views and opinions expressed by any external speakers on this call are those of the speakers and not of JPMorgan. Part of this conference call may also be reproduced in JPMorgan's Research. If you have any objections, you may disconnect at this time. This call is intended for JPMorgan clients only.

Participants are not permitted on this call and should disconnect now. Unless otherwise permitted by JPMorgan's policy, members of JPMorgan Investment and Corporate Banking are not permitted on this call and should disconnect now. I would now like to turn the call over to Cory Carpenter. You may proceed.

Thank you, Josh. I think I got to -- I got to hear it twice, once on the initial, once on the echo. Hopefully, we're coming through loud and clear. Good morning, everyone. Thanks for joining. Pleased to have EverQuote with us this morning. Joseph Sanborn, the CFO; and then Jayme is likely to join later, the CEO of EverQuote. So Joseph, thanks for being here.

Thank you, Cory. You're loud and clear, and I'm only hearing you once. That's fine for me. Hopefully, you're hearing me clearly as well.

Great. Well, look, the goal of this fireside chat is really a couple of things. We want to provide any clarity first on any outstanding questions that were for earnings or as we kind of get to the quiet period, but also we do want to discuss some of the bigger picture debates and topics such as AI, macro, et cetera.

So we're going to go in a bit of a reverse order this time. We're actually going to start with Joseph and the financials and then from there, we'll kind of go to some of the bigger picture thematic questions around AI, carrier landscape and so forth. So with that backdrop, Joseph, I thought given we have a mixed audience here in terms of familiarity, why don't we start with just a recap of what your key takeaways were from 4Q earnings and then also just 2025 in general?

Sure. So thanks, Cory. And for those of you who are new to the EverQuote story, we are an insurance marketplace. We help insurance carriers and agents in the P&C landscape, which is auto and home insurance, find consumers online to grow their business through digital channels. So that's our mission. We've been at it for several years. And last year was a great year. We had a record year across all metrics.

Just a high-level takeaway, I would say, is revenues grew 38%, adjusted EBITDA dollars grew 62%. So it was a very strong year for us. And as I said, it was a year that was categorized by the following which is, we've had carriers come out of a period of the downturn, auto insurance downturn, the sort of hard market cycle coming out of COVID that sort of troughed in '23. We started to see improvements in '24, and that continued into '25.

So we started in '25, we start to see a dynamic evolve with the carriers, which is carriers are now broadly healthy, and that we saw that play out in the course of '25. And now they're shifting to a mindset of how do they think about growth in a different way. If you look at the insurance industry, the past couple of years have been categorized by how to get back to rate adequacy and underwriting profitability. And as you think about that from the point of view of carrier, that's one of the missions if you're a carrier, how do I get the right rates to get the right profitability.

The second piece is maintaining and growing share. As you've seen this evolution through coming from the downturn, growth in '24 and '25, you're now seeing entering a period where it's referred to as a soft market, and we'll talk more about that. But that's a general backdrop where carriers say, "Hey, we have great rates. We have underwriting profitability that's quite strong. How do we think about growing -- maintaining and growing share"? And that's the dynamic we have as we go into '26.

That is a very favorable dynamic for companies like us because as carriers look to grow, digital channels are very efficient in doing that. So that's a bit of the backdrop for our story. We're excited by 2026 after a great 2025 and see the momentum continuing.

So maybe let's continue on that theme. So I think as you said about year 3 of the recovery, I think one of the questions we get a lot, and we'll get into the numbers after this one. But how much steam -- so again, year 3, the carrier recovery, how much steam is left in the cycle? How do you expect -- you just gave us the last 2 to 3 years. How do you expect the next 2 to 3 years to look for the industry?

Sure. So I think it's important to sort of categorize where the industry is as a whole right now, the carrier. So for those who don't know the insurance landscape, they talk about underwriting profitability measured by this metric called combined ratio. And think of combined ratio as all your costs reduce some revenues, the difference is profitability.

Typically, carriers are in the mid- to high 90s on those metrics. Where are they right now? They're in the mid- to high 80s. So the industry is quite healthy, right? And that is a very favorable backdrop for the industry. And that is because over the past few years, you've seen carriers get rate restoration coming out of the downturn caused by COVID, the carriers struggle to have rate adequacy.

So those of you who are new to insurance, the dynamic with P&C, auto and home insurance is that it's really not a national market. It's all 50 states. And in each of the different states, you have to go through this rate approval process. Some states are much more complicated than others. But -- and often they left the -- its lead times, which can't calls, "Hey, I want to increase rates tomorrow". It can be 6 months plus.

And then if you go into a cycle saying, "I want rates to get to this level" and you get there and you go, "Wow, the costs have risen", which happened for those couple of years, they were chasing rates is the term in the industry. It made the carriers keep having to focus on getting rates. Now they have rate adequacy. Rate adequacy means they have sufficient rates that to cover their costs and have a healthy combined ratio.

The other piece that's going on for the industry is that the cost structure, the underwriting claims costs, when you total a car, when you have a car accident, when you have medical claims, those are relatively stable. And so that combination is what's the key. It's rate adequacy and stability in the costs. And when you put those two together, that provides a favorable backdrop for folks.

As you look -- and that is what's driven a lot of the sort of really strong growth in '24 and '25. Those are off trough levels. So I know if we were doing this call a year ago, folks were saying, "Wow, you're growing at 80% in 2024. Is that going to continue for another year"? And we said, "No, that's not going to continue". But this industry is a very is an industry that's a very favorable backdrop for wanting to grow in digital channels. And so the tailwind on the EverQuote story has been and continues to be insurance is a laggard going online, has been for many years.

Just to give you a reference point, think about digital penetration relative to total advertising and insurance, it's about 1/3 less than broader financial services. Lots of reasons for that, which we can talk about, if you'd like, but we think that's a very favorable backdrop. So then you go into '26, what are we seeing, right? '26, we have this soft market cycle referred to it as. The soft market cycle concept is a good thing for EverQuote. That's a good backdrop. Why?

Because in that environment, carriers are looking to grow and they want to -- but they want to grow share. And so that's a concept that we really think is a favorable backdrop for us because digital channels are effective to do that. And what are the carriers telling us as we enter this year? This will be a growth year for them. They want to engage in growth. The difference -- and this is part of a nuance for those who are new to insurance.

You see well, they've had really strong growth over the past couple of years. How is that different? For the industry, the insurance industry over the past couple of years, that strong growth has been driven by getting rate adequacy, right? This next period of growth is really driven by getting growing policies in force. And that ultimately is the dynamic that leads to why we think it's going to be a favorable environment for us for this year.

Let's stick with that. I think last quarter, 4Q results, there was a big uptick in carrier spend, very strong 4Q above your expectations. I think growth -- still obviously growth to start the year, but you had mentioned carriers taking a bit of a more measured approach to start the year. Could you just talk about that and how you're thinking about the year or how that informs your thoughts on how the year is likely to unfold from carrier demand?

Sure. So Q4, you referenced, we had really strong sequential growth in Q4, right? We were up a record from Q3 to Q4, 12%. We ended the year very strong. Typically, just put that in context, for those of you don't know EverQuote, that's usually down by single-digit percent. So the fact we were at that level of increase we were pleased by, it was a record quarter for us. What was notable about it was what drove it was, what drove it.

We guided to being slightly up from Q3 to Q4. So we thought it would be up. We didn't expect it to be that up at the time of our guide. What drove it is in the last part of the quarter, you had a couple of carriers engaged very meaningfully and saying, "Hey, we have very strong underwriting profitability. Let's use some of the budget we have this year to start engaging growth in advance of 2026". Let's try to take -- this whole thing is about getting consumers, getting additional customers, let's start doing that now.

And in some ways, you'd almost say it was a pull forward of some of the growth that would happen in early '26 came into late 2025. One of the two carriers interestingly that really drove that growth, say two things about it. It's gotten some attention from investors that we've said this about our Q4, and I guess the others in the industry haven't. We think one of the reasons those two carriers engaged with us, they said to us, you did really well for us in '25. We want to reward you as we had extra budget. We also knew you'd drive results. So I sort of mentioned that.

But then as I said, one of those two actually said to us is that they were gauging in some strong growth in '25. As they started 2026, they said, we are going to be more measured. We got some growth in late '25. We want to be more measured. It's not that we don't believe in growth. We actually are going to be very -- we're going to grow this business really nicely in '26, we believe. The difference is it's more of a marathon mentality than a sprint mentality.

It's probably the way I'd categorize it, is when you think about maintaining and growing share, that's not the pattern of what we might have seen a few years ago, which is start -- you get new budgets, let's start the year strong and then taper as we progress through the year, maybe up a little bit in Q3 and then taper again. It's about sustainment, right? That's consistent with the soft market cycle dynamic of maintaining and growing share over the period. And so that's the dynamic a bit going into the year.

I think some folks said Q1, we thought you would be stronger than Q4. The sequential increase wasn't as much. I would note that we didn't guide for Q1. Folks like you put some things out there. And I think you sort of used the seasonal pattern that we might have had historically. And what we didn't know at the time was that carriers actually decided to do something a little different. And we saw that in Q4, we've seen this in Q1.

We see this dynamic evolving where we see the seasonal pattern that we might have seen pre-downturn. It was never a perfect seasonal pattern, but it's sort of being changed as the carriers think about growth in a different way. None of it in our mind changes our view on the carriers wanting to grow in 2026, just the exact shape and form of it, may be different.

Right. Well, we can -- it's easy to, I guess, parse the quarters. But at the end of the day, you reiterated your $1 billion revenue target over 2 to 3 years. So I do want to talk about that a bit. Maybe give us the road map to get to that $1 billion revenue. You gave it for the first time, I believe, in 3Q earnings, you reiterated it at 4Q earnings. How do you plan to get there? And then you've kind of given -- you put guardrails on the timing in 2 to 3 years. Like what are the variables in terms of kind of what gets you there faster or make it take a little longer?

Sure. So I think -- and so thanks for bringing it back to that point, which is as people have seen in the start of the year, they go, what does that mean? Do we have a different view on growth? No, nothing has changed in our vision on this business, right? We said in November, as you referenced, a path to $1 billion. First time we said it publicly, we said we'll be a $1 billion revenue business in 2 to 3 years. I would put that -- I would just give you this context when we made that statement publicly.

Like everything we've been doing since -- over the past -- since the change we made in the summer of '20, everything we've said we're going to do, we've actually done, right? So that's been the mindset. And we actually -- before we put something out public, we put a lot of thought on to it internally before we go with it. So that path to $1 billion as we put out in November call, we reiterated in our February call. So in 2 to 3 years, we'll be a $1 billion business. We ended a little under $700 million for 2025.

What exact -- what would those numbers look like just to contextualize it? If it takes 3 years, it'd be a 13% revenue growth. If it takes 2 years, it's like 21%. So I'm not going to tell you if this year is a 13% growth or 21% growth. I think that gives you a sense of the composition of getting to that path to $1 billion. We feel very good about getting to that path to $1 billion. There's three things that drive the path to $1 billion, I would say, when I think about the growth dynamics.

One is how do we continue to get budget from carriers and carriers and agents, right? So on budget -- the budget side, you say, first and foremost, you see this ability to bring budget through what we're doing with smart campaigns, our AI-driven platform for carriers. Instead of trying to participate in our market with their own teams, they turn over their budget to us. Our machines do the bidding on their behalf. That -- today, the majority of our carriers use smart campaigns.

What's interesting about that offering is it not only helps us get more budget from carriers, which is -- but it also has at the end, we deepen the relationship with the carriers by doing it because they're turning over some very sensitive data to us, disposition data, which we have a -- we built a lot of trust over doing this over a decade. That data also is valued to how we inform our traffic operations.

So more budget is a key part. Smart campaigns is part of that on the carrier side. On the agent side of our business, for those of you who don't know EverQuote, we have 6,000 local agents, mostly captive agents. Something we're very proud of. It's taken many years to build because you have to get approval from the captive carriers and actually sell the individual agents. We've been very successful in doing it. Those 6,000 agents, we basically had one product for them a few years ago, online to off-line connections. Today, we've talked about we have 1.4 products.

We have a product strategy. We've added things like digital marketing service to build out their local digital presence. We've added things like voice connection, which increasingly is being powered by AI conversational voice. So that's to bring more -- so more dollars coming from the agent budget to grow. So both of those are key parts of it. Next part, I'd say, on the traffic side, you think about the flywheel as we get more data from the carriers and more budget, how do we build traffic?

We talked about in our Q4, we decided to make some investments in new traffic channels. So we had really strong growth in the first 3 quarters of last year. And what we said to folks is we're going to invest in Q4 in some of these channels. We did that, and the strategy executed exactly as planned. We can get them to talk about more details on the numbers. But we built out new channels such as some social channels, some upper funnel marketing channels, some channels around connected television as well. So all those things have been helping us build up the traffic, second part of our growth.

Third part of our growth is obviously continuing to look at our vertical strategy. So we're strong in auto. Home is a market today that is 10% of our business, 90% is auto roughly. We think in that home dynamic, there's real growth opportunities to grow over a higher rate in the medium term. And there's other verticals within P&C. So that vertical strategy, I think is sort of the third leg of the stool. All of those together, more dollars on distribution helps more traffic coming in to feed the -- to sort of build the flywheel, feed the flywheel and think about vertical expansion as well.

That's super helpful. And as we think about just -- I think the natural next question is, okay, revenue $1 billion, 2, 3 years, what is the margin? What do margins do over that time period? And your margin profile has changed dramatically in the last few years for the better. So how should we think about what margins look like over the next 2 to 3 years? And then where do you see the most opportunity for leverage in the model during that time period?

Sure. So for those who are new to the story, as Cory alluded to, our margins have changed for the better. We were losing money in 2023. So that is not a model we're proud of. I guess we did some real changes in the business in the summer '23. And they really were focused on how do we add value to our carriers and agents for the business. We thought really deeply about it. We exited areas that we thought were -- were not ones we have a right to win long term, and we focused.

And at the same time, it's focusing on how we help carriers and agents grow their business successfully. We did that, and supposed to be an inch deep and a mile wide across a lot of things, we went deeper. Then the second thing is we said, how do we, in turn, manage the business in a way to drive financial performance as we help the carriers and agents grow their business and do that in a very disciplined way. And so that's been a key part of it.

As you look at what that resulted in our EBITDA margins have continued to grow. We got to 11.5% for 2024. We got to 13.7% for 2025. And for this, what we said is assume we'll grow 100 to 150 basis points a year on a path to getting to 20%. We've sort of said for '26, assume it's probably closer to 100 basis points after growing 200 last year. So that's like 14.5%, 14.7% for this year.

Just to translate all those numbers down to like a little more granular, which is, hey, if we grew 13% this year, I'm not saying it's 2 years or 3, let's just say it's a 3-year path, 13%, what would that mean the bottom line? We grew EBITDA margin by 100 basis points to go from like 13.7% to 14.7%, adjusted EBITDA dollars will grow 20%, right? So just to give you a sense ballpark, how would look. Obviously, if we grow faster, you may see EBITDA margin growing faster. Of course, we'll be making incremental investments as well because this is a growth business, and we're focusing a lot on areas around AI and building on our technology and data center.

So that's a little bit how to contextualize it in terms of the growth, but also how it translates into margin. And the last thing I'd hit is cash flow, right? Our EBITDA is very high cash converting. If you look at our 2025, for example, EBITDA and operating cash flow basically the same number, around $95 million.

You kind of set up the next question, which I think is obvious, which is, okay, then what do you do with all that cash? So maybe talk a bit about your capital allocation strategy. You have a repurchase program in place recently. You've talked about M&A before. How are you thinking about deploying the cash flow in the next couple of years?

So there's three things we think about with cash. So first is this idea of a fortress balance sheet. We think that is really important in this business. And we think for investors, I think investors -- long-term investors share our view, which is we're playing this for the long term. So things will happen, let's make sure we have a fortress balance sheet. If you go back a few years, Cory, you know our story, we did not have a fortress balance sheet. So we now have that.

And we have -- at the end of -- at the end of 2025, we had $170 million on the balance sheet. We had no debt as well, right? We have access to lines, but no debt as well. And so we think about cash, we'll take three pieces. One is we'll continue to make sure there's cash on the balance sheet to make sure it's strong to weather whatever storms may happen in life. Second is we also are thinking about how we return capital to shareholders. We had our inaugural repurchase program put in place in August of last year. It was a $50 million program. We did -- last year, we did $21 million of that program.

We've said on our call in late February, we did another $9 million since the start of this year. So we've done $30 million so far that we've announced publicly. We have $20 million remaining on that program. So I think our stock is -- we normally don't talk about our stock valuation. But given the current market, I think I can when you're trading at these low multiples of cash flow, I think we'll be using our buyback program between now and August and the $50 million the remaining $20 million between now and August.

And then the last is M&A, right? When we think about M&A, we think M&A is a real opportunity for us. And as I think you and I have talked about before, I know you and I have talked about before is we've been very focused internally making sure the business is operating really well. Like we know the dials and levers. Our mentality as a management team is we maniacally control what we control because we realize the things we don't control. So let's control those things really well. And we've shown, for example, over the past couple of years as we've more than doubled the business, our operating costs have remained flat.

And I love to make this point, when companies are, hey, we're using AI to drive efficiency, we're going to try to not have our expenses grow too much. We've been doing it for a couple of years, right? But if you look at our operating expenses of $97 million, it's not like they're the same cost. We've dramatically changed things underneath composition of employees, new product offerings. And so that's a key piece I would mention to you. So that's to give you, I guess, a little bit of context as how we think about it on the -- how we -- on efficiency and driving the cash.

And then on M&A, I think that because we've made the business really tight and efficient and we're executing well, now is the time for us to think about how we may use inorganic growth to supplement our organic growth. To be clear, we don't think we need M&A on our path to $1 billion. I think that's not needed. But we see M&A as an opportunity to potentially accelerate our progress within the P&C vertical.

The Insurtech landscape has a lot of private companies that are not going to get to that next stage. And there's some really good teams in there. And those teams could help us -- I talked about the growth areas for us they may help accelerate some of those areas in growth. We also in some of the initiatives we're doing in our tech and data and our AI initiatives, there's some teams to accelerate that as well. We're in a very good spot, not only do we have cash, but over the past year, we started to build more of a discussion with potential private companies. We are realizing they see the potential -- the reason to be part of us.

We are playing to win in this space. And what entrepreneurial teams want, they want to play to win. They want to be part of a place that's going to do that. And so I think that is resonating. And so M&A is something we're going to be disciplined about. We're not rushing to spend money. It's not like it's burning a hole in our pocket. But I think there are some really good opportunities, and you'll see us watch those over the course. You'll see us talk about more, I think, as we go over the course of 2026 and 2027.

Makes sense. I think both of our firms like to talk about fortress balance sheet. So we have something in common.

Jayme does it perhaps a little better than I do, given he is...

So let's -- you referenced this earlier, some of the new traffic channel acquisition that you did this quarter. I actually want to zoom out before that, though, just for those maybe less familiar. What are your sources of traffic? Where is your traffic coming from? And then maybe do talk a bit more about some of these newer initiatives and what that kind of means for your variable marketing margins as well?

Sure. So for those new to EverQuote, so the model for us is we get -- we're performance marketing. So it's all about paid traffic for us. We look across the landscape, the traffic landscape. Google is certainly part of our spend on customer acquisition, been similar sort of in the -- always -- I'll preempt the question because you'll ask it, sort of in the low to mid-20s for a number of years and continues to be. We also have a broad number of partnerships as well we work with. But it's pretty broad across the landscape. It's all about performance marketing.

And for us, it's always interesting for new investors, they certainly go, hey, best auto insurance, they will get EverQuote coming up because often for us, it's driven by performance. So carriers may think about brand spend and they want to associate with best auto insurance. For us, it's all about performance, getting the profile of consumers that the carriers want. We built up this repository of data on how providers and consumers match for over a decade. That informs how we think about performance marketing.

And so as we've added new channels, it's been all about how do we go where consumers are. Like if we look at some of the new channels we've talked about, at the start of this call, we emphasized in the latter half of 2025, some of those channels like social, connected television, those were things we actually looked at upper funnel marketing, things we looked at prior to the downturn. The scale wasn't there to make them work in our mind. And then as we went into the downturn, it didn't make sense to scale them.

We're going to the markets now, we're seeing this as much more of an opportunity for us because the market -- those traffic channels are more vibrant. So we think that is a really good backdrop for us. And we're in this spot where that performance marketing DNA fits really well where the carriers are in their journey, right? It's a soft market cycle. It's about how do you acquire consumers that specifically fit your profile. And so one of the things about our space for those who are new is like our biggest competitor on advertising dollars is actually the carriers themselves doing general brand spend.

It's kind of a funny thing about our business and people go, how does that work? And so -- like some of the most sophisticated carriers are our largest customers. Why do they work with you? And sort of the analogy I give is if you're a large digital carriers, uses digital acquisition through us, they think versus doing it directly, you're casting a large net, like the fishing net. You pull in lots of different fish. You may or may not have a match for that consumer because insurance is very different than, say, travel.

Like if you are flying to California, Delta have to sell the ticket out of one of us, right? In insurance, it's all about the exact profile of consumer that fits the profile of the carrier. And interestingly, that can change because it's all 50 states. Sometimes they want to acquire you. And other times, they go, we have too many queries in California, we need to go for someone else in like the Southeast United States, and they change their mix.

And so we think about the net approach of fishing for some of the carriers, we're like a spear fisher. We have to be very precise, and that fits really well, I think, with some of these new channels we've added on.

I can tell you, when we moved to California, no one wanted a query, certainly on the home side of things.

Fair enough. We did talk about that. And I guess we did talk about VMM margins, I should address that for you, which is -- so when we think about the business, a lot of times, people like to think about VMM margins in business. And I want to orient folks, we run the business really for VMD first and foremost, like what's the approach in the VMD curve that maximizes those VMD dollars. It's not about just getting -- you can get revenues with very low margins. Some of our competitors do that. That's not our business. It's how do you maximize VMD. That's our goal because that ultimately maximizes cash flow, right?

That's the goal because you cover expenses and you bring some of the bottom line and you invest in others. And so when we think about that VMM margin, it's not like we try to manage it quarter-to-quarter perfectly, right? Sometimes we go up and down. Why does it go up and down? There's two things that impact the VMM margin. So just for folks who are new revenues less advertising dollars is VMD dollars, VMD dollars divided by revenue is VMM.

What informs that? One is a commodity cost of something called advertising, right? It's a raw material for our business. We don't control the advertising costs in the environment. These things can ebb and flow based on what's going on in the seasons of the year can change it. Other dynamics as well, the carriers themselves bidding. But at our VMM margin at the highest level, if you go back to sort of 2023 in the auto business, we were basically in the high 20s in VMM margin. We were about $260 million, $270 million business in auto insurance.

Today, we're 3x the size of that, almost 3x the size, and our VMM is basically in the high 20s. Some quarters a little higher, sometimes a little lower. Q4 is a little bit lower by design because we're leaning into new channels. But in general, this is sort of a highish 20s kind of business in VM. But it's -- again, it's not how we manage. We manage it first and foremost for VMD dollars.

And hello, Jayme. I see Jayme has joined. Thanks for joining. We've gone through a lot of financial questions. We've kind of -- actually, we were literally just about to shift to some of the more macro thematic AI type stuff. So obviously, either of you feel free to address, but good timing on joining. I would say, look, I kind of want to get to a few topics that we get a lot of questions on. And I think this is a good time to address.

So one is how does ever -- and Joseph and I talked about where we are in the carrier cycle and all that. But I think one question we get is how does EverQuote perform when carriers are lowering rates, right? I think investors are seeing rates kind of actually start to come down for the first time in a long time. And I think the fear is, oh, no, are carriers kind of going from peak margins to margin compression? Is that bad? Is that bad for EverQuote?

So maybe just talk a bit about, a, I guess, are you seeing the lower rates in the market? And then b, how would you -- how would you expect that to impact you guys?

Yes. So I mean, typically, when you're entering now like the soft cycle, the soft market part of the cycle, the carriers are looking to grow. So the good news is the underwriting profitability is very healthy across the board. And when we get into this sort of zone, all the carriers are just completely fixated on growth. And the way that -- there's sort of two levers to pull, broadly speaking. One is to lower rates to be more competitive in the market. The other is to lean in on advertising to be more sort of aggressive in the market.

And we're finding that carriers are -- they're pulling both levers, right? So on the one hand, we benefit from the increase in advertising spend, and it's a very direct benefit. But as they start to lower rates, their premiums come down and as they're managing advertising as a percent of premium, you could start to see some compression there. But the sort of counterweight is their conversion rates go up.

So we haven't seen any compression in pricing from our perspective. And as long as sort of the conversion math holds, we historically benefit a lot more from the increase in advertising than we do from the lowering in rates, which has been quite modest so far.

And maybe just to add on to the rate dynamic, which is it all depends where they are relative to the combined ratio. So if -- because we're sort of in the early part of a soft market cycle, they've spent past couple years getting great rest profitability, they're leaning into growth, as Jayme said. You see the where when combined ratios are in the mid- to high 80s versus the mid- to high 90s, there's a lot of ability to compete more aggressively on price and at the same time, lean into digital channels to try to acquire those consumers through more attractive pricing. And again, these soft market cycles are not quick cycles. They tend to be 3-, 4-, 5-year cycles and are relatively early in the cycle.

So one stat that you guys have given in the last couple of quarters that surprises me, I don't know, maybe I'm the only one, but is that 75% of carriers are still spending below their peak levels. And that's kind of with the backdrop of, right, premiums are, I don't know, 40%, 50% higher than they were kind of back when we were at prior peak levels. So I think the question on that is, a, why? Why is that? And then what do carriers need to see to really change that and to get that, I guess, percentage down?

Maybe I'll start and then Jayme, if you want to add on. So I would say just to give you some insight on the stat, right? So it's -- you would never expect all our carriers to be a peak spend a quarter. Why? Because it's a competitive marketplace and they're competing against other carriers. So carriers come and go in a quarter on an aggregate basis because of what they're doing in all 50 states, the aggregated view can change, right?

The thing that's interesting on the stat as well is that carriers are trying to lean in to be more aggressive, but you're also seeing other carriers lean in to be relatively more aggressive. And so when you think about the dynamic, I want to get back into growth and guys like I want to get back in the growth even more than you. So that's a little bit of the dynamic that informs when you think about that stat. And so I think you are seeing this -- I think what it really represents to us is there's a broadening out of carriers showing interest and wanting to be in growth. We feel it's pretty broad right now.

We've mentioned there's one large national carrier just really coming on the platform now this year, who was a top 3 carrier for us prior to the downturn. But if you look broadly that you see this dynamic of that stat represents, we think there's a lot of room to grow. But I don't expect we're going to get to a quarter where they're all at peak quarterly spend. I'd be very surprised. You're going to see the stat still be -- seem relatively high because carriers will come and go in a quarter on an aggregate basis based on what they're doing in each of the 50 markets they're operating in.

That makes sense. We do get asked a lot about the competitive landscape. I know you guys don't like to talk about the competitive landscape much. So I think the way I'd frame the question, but I think it's interesting because, right, I mean, for a couple of years, like everyone was growing 80% to 100% in the space. Now I think we're starting to see a bit of differentiation given just where we are in the cycle.

So I think what would be helpful is just from your perspective, what's kind of what differentiates EverQuote? What's your kind of unique value prop? And like what are carriers in particular value from EverQuote that maybe they can't get from somewhere else?

Yes. So there are a few things. First, as you compare us to some of the other public comps, EverQuote is the only pure-play P&C focused player in the space. So we've made a decision a few years ago to really try and go deeper within P&C and win this market with our customers by investing in product, the data and kind of now starting to package more kind of AI-oriented features to really dramatically deepen the relationships with the customers.

We are the only -- I would say we are -- they look at us as more of a performance marketing sort of data and tech powered performance marketing partner. We do a lot of our own programmatic traffic acquisition, whereas some of the others are more like just platforms connecting publishers with partners. And I think that's enabled us to start to actually build some like deeper relationships with these carriers as we start to expand into new product offerings with them.

On the distribution side, I think the big difference is we have started to introduce a lot of these smart bidding products that allow us to take on the bidding activity on behalf of the carriers. And in doing so, materially increase performance when carriers turn over the keys in bidding to us. So again, I think the decision to go deep has allowed us to start to roll out products and features at an accelerated rate to start to expand the nature of the relationships.

And then the last piece that's different about us is the agent network that we have. So we have the largest local agent network of anyone in the space. We've had that for some time. But over the last few years, we've really begun to invest more heavily and again, broadening out the product suite there. Our goal is to become this one-stop shop for all insurance agents to grow their agencies. And that started by selling them leads, which was the core product.

But now we've started to build a lot of features and products around that core product of leads, including like telephony services, digital marketing suite. And we're beginning to introduce more and more to consolidate agent spend. And that has worked quite well for us. And so I think we're particularly uniquely positioned with some of these large captive carriers -- captive agent carriers like the Allstates and the State Farms and the farmers of the world as we roll out more marketing solutions for their local agents.

All right. So we're 39 minutes in, and we're just now going to touch on AI. So we did say to be fair at the beginning that we were going to go in a bit of a reverse order. I want to come at it from two angles. One, just how you're leveraging it internally, but then I think maybe we'll come back to that. Let's start with -- look, there's just a lot of noise on AI around every company that we cover. And one of the challenges is deciding what's a real risk, what's not, how to think about things.

So I think it would be really helpful really to hear from you, how do you expect AI to change the way consumers shop for insurance, which is your core to your business, of course? And then what does that mean? Like what type of opportunities does that present? What type of risk does that present for you guys?

Yes. So I'd sort of begin with how they start their search. And maybe separate how they start their search and how they actually complete their search, right? And I'll start with actually the latter piece first. Insurance is a category that is regulated. It's very opaque in that there's no pricing transparency offered by the carriers. In fact, they really try to guard their prices for reasons related to avoiding adverse selection and so on and so forth.

And so insurance often gets lumped into like a sort of price comparison future that everybody expects to come next year, next year, next year. And thus far, the carriers have been very effective at resisting this sort of price comparison experience. You contrast that with a category like travel or something like that, where prices are available, rates are available for flights and hotels publicly via API.

So I think in some of those categories, you're probably likely -- there's like a more clear path to seeing a version of our future where there's like a lot more agentic shopping for those types of products. In insurance, I think there's quite a few sort of obstacles to getting to a good experience. And I'm not so sure that the carriers will support it.

Now if you move to the top of the funnel, I do think where do people start looking for insurance and what kind of -- and how do they gather information, I do think that will continue to evolve as it is for everything. And we're looking at a lot of the LLMs as a large opportunity to begin to acquire more organic traffic that historically we've not accessed, right? We were largely paid programmatic shop. So for us, there's a number of different ways that we can start to access that traffic.

One is through basically a content strategy that's purpose-built for the LLMs. And that will start to get you showing in some of the organic conversational results that they're showing. The second is through building apps and/or integrations with like the ChatGPTs of the world, which we're working on. And then the third is through advertising. I think one or more of these, OpenAI has already started, will begin to open up for paid programmatic advertising over time.

So we think there's like a nice opportunity for us to tap into these platforms as a traffic source. And then we think it will be a while before there's significant disruption to the actual buying process. And I think in the middle, there's an opportunity for a player to emerge as the conduit kind of between the LLMs and insurance distribution. It's a very fragmented, very opaque and complex space where not only are prices opaque, but you have this distribution system set up with local agents, captive agents, direct carriers. And we think we're uniquely positioned to begin to build the technology that serves as somewhat of the interface between insurance distribution and these platforms.

I think that was very thorough. I actually don't have a follow-up question to the AI question, but I do want to ask, I guess, from the other side of it, which is how are you guys leveraging AI internally? Just how big of an opportunity or how big of an impact do you think it could have on your business more from an internal operations perspective?

Yes. I mean I think it's going to be huge. This is like -- this is in our DNA, right? I mean we've been deploying. Before generative AI, there was machine learning and reinforcement learning. And that's embedded throughout our marketplace in terms of how we bid for traffic, how we help carriers sort of bid for traffic, how we do routing and matching. And over the years, we've been able to pull a lot of cost out of the business while improving the performance by rendering so many decisions in the marketplace to an automated state through machine learning and reinforcement learning, and that continues.

Now you're getting into this world of generative AI, which at first, really the use cases were somewhat limited. There was AI voice that we've started to use to replace some sort of call center operations. There's Copilots that our engineers were using to increase their productivity from a software development standpoint. But now with the introduction -- with like some of the recent progress and like the most recent models that have been released by Claude and like Claude Code, we're beginning to move from like Copilot-assisted coding to fully agentic coding.

And so I think software engineering as a whole is going to change. I mean, it is in the process of changing dramatically for everyone and certainly for EverQuote. And we're going to get to a place where we have like -- we see step function improvements in our engineering productivity, not like 20% better, but it's like 5 to 10x the amount of products and features being released at a given moment in time, which is super exciting.

And now as the sort of agents begin to roll out, you could start to see a future where not just -- there's not just automation in engineering, but like it is now possible to automate so much of the operations of the business, whether that's by deploying agents or agent-generated software. And I think this is a year where we're going to see like a really accelerated and significant transformation of how we work to dramatically increase the productivity of the workforce. That's super cool.

Yes. Super interesting. All right. Well, let's shift to AI to home renters. I don't know how to make that an easy transition. So Joe, do you want to hit on that, and then we'll kind of wrap it up. I know thanks you've been generous for your time. We'll wrap it up kind of with a high-level question, I think, for both of you, hopefully, to address. So -- but I do want to touch on home renters. So Joseph mentioned earlier, it's about 10% of the business. What's the opportunity? What are you going after? How do you think about kind of -- how should we think about your plans in this market and how significant it could be over time?

Sure. So I'll start out and maybe feel free to add on, which is, see, just high level, home is roughly 10% of the business for us today, 90% auto. Look at the property and casualty space. Home is roughly half the size of auto. So between 10% and 50%, we think there's a lot of room to grow, and we're excited about that. We had 20% growth in home last year year-on-year. Actually, Q4 was actually higher. But I'd say the home market is one had some similarities to auto coming out of COVID, some things disruption, supply chains, labor costs, et cetera. You saw the carriers prioritize getting rate adequacies in the auto market.

You're seeing them in 2025 doing that in the home market. And I think that has been -- we saw that continue to benefit as we progress through the year. And we look in the medium term, home will be a faster grower for us than auto. So we're very bullish on home. And then you say, what are some of the specific things we need to do to make -- to sort of do that. So one, I think, has obviously been doing it sort of with our -- the execution focus internally, put a really good leader in charge of it.

And then obviously, when you think about home, the end-to-end experience thinking that through, there are some differences from auto. That's one. We've also made change in how we think about the landscape of distribution a lot of carriers do both home and auto, but not all carriers do home and auto. Some carriers do home in a way that may be a bigger opportunity for us. So how do we sort of discern exactly what carriers need to lean into that, particularly with our agent network. We have 6,000 local agents in our captive network.

That is actually a really important part of the home story because you think about buying a home, largest purchase for pretty much everyone when they do it. When you often want to have an experience, we actually connect to a human to make that final decision and get advice. So how do we think about product refinement and connecting the traffic that's more finally focused on home to the agents. That's another piece of it. And so I think of that idea of management, the idea of fine-tuning the product areas and then obviously, the overall backdrop, we think, is favorable. So we're bullish on home as we look to continue to grow the business and go between 10% and 15%. We'll see where we land, but I think there's a lot of upside for us.

All right. Closing question, but I'll let maybe both of you address it separately. What are you most excited about over the next 2 to 3 years? And what do you think the biggest misperception is about the company? Maybe, Jayme, you go first and Joseph, if you have separate views, feel free to share.

I mean I think the biggest misperception is that the business is sort of susceptible to overnight disruption. I think that's reflected in our share price. The reality is we're not a software business. I'd say 80%, 90% of the value of EverQuote comes in the data that's packaged with technology, deployed through this performance marketing engine that has a really complex distribution network attached to it. And it's not something that can just be replicated or created overnight.

And then you look at, well, is insurance shopping in general going to transform overnight? And I think for all the reasons I mentioned earlier, our expectation is that no, it won't happen overnight. It will certainly evolve over time, and EverQuote is probably in pole position to help be an integral part of that evolution. And we are -- we've always been a somewhat AI-native company even before AI was the thing everyone was talking about.

We've automated the whole business using machine learning and reinforcement learning. And now as we get into this agentic AI era, I mean, the whole organization is leaning in and truly embracing it. And so I think the misperception put simply is that, we think probably there's a lot of people out there who think EverQuote will be an AI victim, and we would contend that EverQuote will be an AI beneficiary.

So the thing I would add to that is that the other thing I think investors are missing, which is we're doing all of that, and we have a business we're balancing growth and profitability with real cash flow generation. I think when you're trading at roughly, I think, 3x your model for this year on cash flow, I think investors really aren't getting the durability of that cash flow. I believe it would imply a terminal value that's like 0 in 3 years, whatever.

So I think this -- we have this backdrop to build a really big business in a very large market. And we are playing with -- in this AI landscape, I think we are well positioned to continue to drive a lot of growth and innovation for our customers to help them win, but in turn, continue to make our business just a dramatically different business and drive more and more efficiency. And just given the discipline with how we control what we can control, we know how to adapt to a changing environment.

What this team has proven to what we've proven to investors is whatever you throw at us, throw a lot of stuff has been thrown at us in the past 3 years. We adapt. We know how to make money. We have to take advantage of opportunity to help our customers succeed and in turn, drive results for our shareholders. And so that is things that is missing. And hopefully, people will start to appreciate that more, Cory, as we're out there talking to folks and you're sharing our story with them.

Yes. Well, Jayme, Joseph, thanks for joining. Investors on the line, feel free to reach out. I think it's going to be posted as a replay. So whenever you get to it, feel free to reach out if you want to chat. I'm around. I know EverQuote is probably going into a quiet period any day now, but feel happy to chat between now and 1Q earnings on my end.

Thanks, Cory.

Thank you, Cory.

Thank you for joining today's call, ladies and gentlemen. You may now disconnect. Please have a great day.

Thank you.

Thank you.

Thank you.

Ladies and gentlemen, thank you for standing by. My name is Abbe, and I'll be your conference operator today. At this time, I would like to welcome everyone to the EverQuote Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] Thank you and I would now like to turn the conference over to Brinlea Johnson with The Blueshirt Group. You may begin.

Thank you. Good afternoon, and welcome to EverQuote's Fourth Quarter and Full Year 2025 Earnings Call. We'll be discussing the results announced in our press release issued today after the market close. With me on the call this afternoon are Jayme Mendal, EverQuote's Chief Executive Officer; and Joseph Sanborn, EverQuote's Chief Financial Officer and Chief Administrative Officer.

During the call, we will make statements related to our business that may be considered forward-looking statements under federal securities laws, including statements considering our financial guidance for the first quarter of 2026. Forward-looking statements may be identified with words and phrases such as expect, believe, intend, anticipate, 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 any obligation to update or revise these forward-looking statements, except as required by law.

Forward-looking statements 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 those risks and uncertainties, please refer to our SEC filings, including our annual report on Form 10-K and our quarterly reports on Form 10-Q on file with the Securities and Exchange Commission and available on the Investor Relations section of our website.

Finally, during the course of today's call, we will refer to certain non-GAAP financial measures, which we believe are helpful to investors. A reconciliation of GAAP to non-GAAP measures was included in the press release we issued after the close of market today, which is available on the Investor Relations section of our website.

And with that, I'll turn it over to Jayme.

Thank you, Brinlea, and thank you all for joining us today. 2025 was a phenomenal year for EverQuote, and we're excited about our position entering 2026. We grew revenue by 38% in 2025, making material progress toward our vision of becoming the #1 growth partner to P&C insurance providers. We delivered this growth by scaling our marketplace, launching new products, further integrating AI into our operations and deepening provider relationships, all of which accelerated our evolution to a growth solutions partner to our customers.

More impressively, we delivered this growth with increasing operating leverage. We grew adjusted EBITDA by 62% as we continue to generate efficiency throughout our operations through the use of AI and other technologies. Thanks to the team's strong execution, we exited 2025 with record financial performance across all our key financial metrics, a highly capital-efficient operation and a strong balance sheet. We entered 2026 from a position of strength and with a stable and healthy P&C insurance market.

Consumer shopping levels remain elevated following rate increases in recent years. Carrier underwriting is profitable and our carrier conversations about 2026 have centered around growth. This backdrop supports a confident outlook for 2026.

Since going public in 2018, EverQuote management has established a 7-year track record of delivering against our commitments while navigating an always dynamic set of market conditions. We now reiterate our next commitment, which is to achieve $1 billion of revenue while continuing to expand the cash generation of our marketplace. We will do this amidst continued dynamism in the market, this time brought on by the rapid acceleration of the capabilities of AI.

We believe that we are well positioned to lead and benefit from this shift. Applying data and technology to insurance shopping to remove friction for consumers and deliver growth to providers has been deeply ingrained in our DNA since our founding. We have amassed a one-of-a-kind data moat from our hundreds of millions of historical insurance shopping events, each of which contributes proprietary data that can be used in many ways to create enhanced digital and AI native experiences.

In recent years, we have applied AI to automate our traffic bidding. We have rolled out products like smart campaigns, our AI provider bidding solution. We have deployed AI voice into our call center operations, and we have begun adopting Gen AI throughout our operations to drive efficiency. All of these advances have contributed to our growing operating leverage, punctuated by last year's 62% growth in adjusted EBITDA and a more than doubling of our revenue since 2023 despite nearly 0 increase in our operating expenses.

In 2026, EverQuote will accelerate our evolution towards an AI-first future. Within our operations, we will further accelerate our engineering team's path to more fulsome agentic coding and adoption of AI tools and agents throughout our operations to drive further operating efficiency. For our customers, we will roll out new products and features that combine our unique data with newfound capabilities of generative AI to accelerate their ability to derive value from this technology. We look forward to sharing more about some exciting features we are developing later this year.

I want to thank and congratulate the EverQuote team for delivering results in 2025 that exceeded expectations. As we progress into 2026, we will build on this momentum and are taking steps that redefine EverQuote and insurance distribution for the age of AI.

I'll now turn the call over to Joseph to discuss our financial results.

Thank you, Jayme, and thank you all for joining. Today, I will be discussing our financial results for the fourth quarter and full year 2025 as well as our guidance for the first quarter of 2026. We delivered strong results in Q4, exceeding our prior guidance across all metrics and closed out a record year, which we achieved total revenue growth of 38% year-over-year to $692.5 million and adjusted EBITDA expansion of 62% year-over-year to $94.6 million.

Total revenues in the fourth quarter grew 32% year-over-year to a record $195.3 million. Revenue growth was primarily driven by stronger carrier spend, which was up 39% year-over-year. Revenue from our auto insurance vertical increased to $179.9 million in Q4, up over 32% year-over-year. Full year auto insurance revenue grew 41% year-over-year to $629.8 million. Revenue from our home insurance vertical increased to $15.4 million in Q4, up 37% year-over-year. Full year home insurance revenue grew 20% to $62.7 million.

As we mentioned last quarter, our strong revenue growth through the first 9 months of 2025 gave us the opportunity to invest more in existing and new traffic lines during the fourth quarter to support future growth. The strategy worked. And as expected, these investments put temporary pressure on variable marketing dollars or VMD and variable marketing margin or VMM during the period, which in turn impacted our Q4 adjusted EBITDA and associated margin. Fourth quarter VMD was $49.3 million, an increase of 12% from the prior year period, representing a 25.3% VMM. For the full year, VMD grew 24% to $191.9 million, representing a 27.7% VMM.

Turning to operating expenses and the bottom line. As we scale and drive top line growth, we continue to expand operating leverage in our business through the use of AI, other technologies and disciplined expense management. While other technology companies are describing their plans to make AI investments to deliver incremental efficiency, we have been on this path at EverQuote for over 2 years.

In the fourth quarter, we grew GAAP net income to $57.8 million, up from $12.3 million in the prior year period. GAAP net income this quarter included a one-time non-cash tax benefit of $38.4 million, primarily driven by the release of the valuation allowance against our deferred tax assets. Full year 2025 GAAP net income increased to $99.3 million compared to $32.2 million for 2024. Without the impact of these deferred tax benefits, we would have reported net income in Q4 and full year 2025 of $19.3 million and $60.9 million, representing a year-on-year increase of 57% and 89%, respectively.

Q4 adjusted EBITDA increased 32% from the prior year period to $25.1 million, representing a 12.8% adjusted EBITDA margin. Adjusted EBITDA for the full year increased 62% to $94.6 million, representing an adjusted EBITDA margin of 13.7%, an increase of approximately 200 basis points over 2024. Cash operating expenses, which excludes advertising spend and certain non-cash and other one-time charges, were $24.3 million in Q4, down modestly from Q3.

For full year 2025, we also continue to drive strong operating leverage in our model with total cash operating expenses of approximately $97 million being effectively flat year-over-year. At the same time, our steadfast commitment to drive increasing efficiencies through automation in our core operations enable us to shift significant additional investment through 2025 into areas that drive future growth, such as AI capabilities, new products and data science. As Jayme mentioned, since 2023, we have more than doubled revenues while keeping operating expenses essentially flat.

We delivered strong operating cash flow of $27 million for the fourth quarter and $95.4 million for the full year 2025. We ended the period with no debt and cash and cash equivalents of $171.4 million. As a reminder, we implemented a $50 million share repurchase program last July. To date, we have repurchased approximately $30 million of shares, including approximately $9 million since the start of 2026.

We are pleased with our outperformance in the fourth quarter as we benefited from carriers who are well below their targeted combined ratios for the year and accelerated spend, deciding to not delay additional new customer acquisition until 2026. As a result of this dynamic, Q4 revenues were up a record 12% sequentially, meaningfully breaking with our previous seasonal pattern in which revenues declined sequentially on average in mid-single-digit percentage from Q3 to Q4.

Turning to 2026. We continue to operate in a favorable industry environment. Our carrier partners are indicating that 2026 will be a growth year in which they will compete more aggressively for profitable policy growth after a 2-plus year focus on rate restoration and underwriting margin recovery. We expect this growth to be measured.

Following carriers' record level of investment in new customer acquisition in Q4, we are seeing carriers take a more disciplined approach to Q1 marketing spend as they begin a new budget year and seek to position themselves to have greater flexibility as the year unfolds. This contrasts with our historical seasonal patterns which we would have customarily see a sequential step-up into Q1 as carriers will look to aggressively start a new year by quickly deploying budget and then consider tapering spend as they progress through the year based on their underwriting profitability.

Now turning to guidance for the first quarter of 2026. We expect revenue to be between $175 million and $185 million. We expect VND to be between $49 million and $52 million, and we expect adjusted EBITDA to be between $23.5 million and $26.5 million.

Entering 2026, we believe that we are well positioned to operate in a dynamic environment fueled by a rapidly evolving AI landscape. From our experience in serving insurance providers over the past few years, our battle-hardened team has honed its ability to quickly adapt our operations to changes in the environment with a clear-eyed view towards identifying opportunities that will both enable us to better serve our customers and drive strong financial performance.

As Jayme shared in his remarks, we have recognized and embraced AI capabilities that allow us to more aggressively adapt our operations and investment approach to create opportunities for EverQuote to deliver long-term sustainable growth. We look forward to sharing more with you on our achievements over the course of the year.

In summary, our record 2025 performance reflects our steadfast commitment to strong execution and a clear growth strategy. As we look at the remainder of this year and beyond, we are focused on our goal of creating a $1 billion revenue business over the next 2 to 3 years by being the leading growth partner for P&C insurance providers and doing so in a manner that will generate expanding levels of profitability and free cash flow.

Jayme and I will now take your questions.

[Operator Instructions] And our first question comes from the line of Maria Ripps with Canaccord Genuity.

I know you're not providing full year guidance at this time, but maybe any directional color you could share in terms of the growth trajectory throughout the year based on conversations sort of with your carrier partners? I guess how should investors think about sort of growth normalizing from this projected Q1 levels?

Sure. Thanks, Maria, for the question. Just want to make sure everyone can hear us okay. You're broken up a bit, Maria. Operator can hear us okay, excellent.

Can I repeat my question?

I think the question, Maria, just to make sure I had it was, outlook for full year 2026 based on the Q1 guide, can we give some insight on the rest of the year, even though we're not giving annual guidance, correct? Perfect. So thank you, Maria. I'll start with our carrier partners are indicating that 2026 will be a growth year for them broadly. And their focus in this growth year is really about competing for profitable policy growth. This is after sort of a 2-plus year period where they were focused on getting rate adequacy and getting underwriting margins to be sustainable.

As we think about how they're looking at this period, we're seeing it as a disciplined approach to starting Q1 in part reflecting a really strong Q4. We had this very strong Q4 dynamic where we -- we were up sequentially 12% a record level. So coming into Q1, they're coming in with a view we're going to grow. And as we progress through the rest of the year, I can touch more in Q1 questions if you have them. But for the rest of the year, I would refer you to what we talked about in our November call, which is our path to $1 billion in revenues. It remains unchanged in our approach. We'll be a $1 billion company in revenues in 2 to 3 years.

And as we think about what that implies for growth rates, if we did that in 3 years, that would say it'd be a 13% top line growth. If we did that in 2 years, it'd be 20%, 21% top line growth. So I think that would be the first data point I'd point to you. Obviously, some years will be higher, some years will be lower in terms of revenue growth. Then when you think about EBITDA going down further down in the P&L, we've said in our November call that EBITDA margins and our path to $1 billion will go between 100 and 150 basis points. We're reiterating that view there'll be between 100 and 150 basis points. And consistent with what we said in the November call for 2026, we think they'll be closer to 100 basis points, reflecting that in 2025, we had 200 basis points of improvement.

Probably the last insight I'd give you on this year is if you think about that top line growth and that -- what that implies for EBITDA dollar growth, it implies at least 20% EBITDA dollar growth for 2026. And I think you'll see that on our path to $1 billion along the way each year.

Got it. That's very helpful. And then can you maybe share a little bit more color around your traffic investments in Q4 and particularly anything you can share about AI-related search and the quality of that traffic? And clearly, these investments benefited Q4, but do you anticipate any of those benefits spilling over into Q1 and 2026?

Yes. I'm sorry, Maria, you're coming in a little choppy for us, but I think was the question about expectations for traffic coming from AI search going in 2026?

Yes. Can you hear me now? Can you hear me okay?

Yes. I hear you better now.

I was just wondering if you could talk about your traffic investments in Q4 more broadly. And then specifically as it relates to AI-related search, sort of, is there anything you can share about the sort of quality of that traffic? And then as we think about sort of Q1 and going forward, do you anticipate any benefits from these investments in Q4 to sort of flow through into Q1 and into 2026?

Yes. Okay. So broadly, we mentioned in the previous call that we are making investments and expanding into or underpenetrated traffic channels, particularly sort of higher funnel traffic channels. And we're investing in some of these new traffic programs kind of going from late last year into early this year. What we have experienced is more or less what we expected, which is we were able to drive some significant scale through some of these channels in Q4. As Joseph referenced, it came -- any time we're standing up a new traffic program or channel, it does -- you have to kind of burn it in. And so it takes some time to get to the steady-state margin profile.

And now in Q1, you're starting to see the margins sort of normalize back to more of a steady-state level. But this will be a process as we step into more channels over the course of the year. So our goal is to continue growing quote request volume and traffic to meet our customers' demand. And one of the key vectors to do that is to launch and scale up incremental channels of traffic and incremental programs. So that's going to plan.

Then I think you asked to sort of double-click specifically into any insight around some of the AI search traffic. And what I can share there is we are -- we're actively talking to and building into a big LLM chatbot platforms, and we do expect to start to see traffic grow from those platforms in 2026. There's a number of different ways that you can sort of integrate or start to receive traffic from them. One is through content, getting picked up in their training runs through kind of new version of SEO. Two is through like technical integrations with them or building apps in those platforms. And third, now we're starting to see them open up to testing paid advertising.

So we are positioning to begin to access traffic across all 3 of those. We have, on the content front, the benefit of not having had an SEO program, a legacy program in the past. So all of that, we're approaching with a clean sheet from first principles, and we're going to start to build into that content program in a way that is tailored to and customized for the way that these LLMs want to absorb information. Number two, as I mentioned, we're beginning to sort of talk to and build into some of the LLM chatbots where I think the user experience will be more important, and we'll be able to rely on some of our proprietary data and distribution relationships to create some really cool and differentiated user experiences.

And then the third piece is programmatic advertising, right? So there are a few companies out there who are more effective at programmatic advertising for insurance. And certainly, as these platforms open up to paid advertising, we'll be first in line to participate. So I hope that answered your question.

And our next question comes from the line of Cory Carpenter with JPMorgan.

Jayme, maybe one for you and one for Joseph. Hoping for you, Jayme, just an update. In the last few quarters, you've talked a lot more about these new products and becoming a holistic suite. So maybe an update on where you're at and the progress you've made with the AI bidding and some of the smart campaign and subscription products that are in earlier initiative stage for you guys.

And Joseph, for you, I think the question people are trying to square this afternoon is, I think hear loud and clear the confidence of the $1 billion over 2 to 3 years and kind of those 13% to 21% guardrails. The 1Q guide implies, if I'm doing my math right, 8% growth. So I guess the question is, what's giving you confidence in that growth reaccelerating over the next year or 2?

Sure. Thanks, Cory. So as it relates to broadening the suite and evolving from a lead gen provider to more of a growth solutions provider to customers, we made significant progress last year. You referenced Smart Campaigns, which is one of the products that has gotten the most attention. And that really expanded to the bulk of our carrier customers over the course of the last couple of years. And this year is the year where we're going to start to roll it out to local agents. So we've got a different version for agents. We're also going to begin to cut it across different referral types and vertical markets. So for our calls product and for our home vertical. So we'll see continued development as it relates to Smart Campaigns.

And then we're investing in improving the performance, so the models themselves by adding new features like auction competitiveness and beginning to introduce more reinforcement learning into the model. So Smart Campaigns has been sort of a big step forward for the way that providers bid into our auctions and get performance from us. And by the end of this year, I think we'll have many agents on it, too. We also have really widespread adoption across our distribution.

And then where we're focused on extending the product offering beyond that most acutely is with the local agents, right? The vision with the local agents is to evolve from a lead vendor to the one-stop growth partner for them by developing and rolling out value-added features and products on and around our core lead offering. And in doing so, accessing more of their growth budget and really starting to expand the ways that we help agents grow. So that's come a long way, too.

I think we've stepped up once again from the last time we reported this number. We've now got 40% of agents using more than one of our products across leads, calls, telephony and digital solutions. So that strategy is more or less going as planned, and we're continuing to make significant inroads both with carriers and with the local agents.

So I'll take the second part of your question, Cory. So -- and thank you. I guess in terms of the path to $1 billion, maybe I'd take some high-level points, and then I'll go into a little bit of sort of dynamics around what's going on in Q1 versus Q4 and in the context for the year.

So our path to the $1 billion remains the same as we've articulated before. It comes across 3 areas principally. One is on the distribution side, the idea that we're going to get more carrier budget and pricing as we improve performance.

And that's principally being driven by our AI products. As Jayme talked about SmartCampaigns, key part of why our carrier is coming to us, we're helping them drive better performance.

Today, SmartCampaigns is used by a majority of our carriers. We think you will see more and more budget coming through SmartCampaigns over time. The second is we get more agents to get more share of their marketing budgets more broadly. We've talked about in the past how we're moving from a sort of being a one-product company, agents now being a multiproduct strategy with agents.

At this point, we're at sort of 1.4 products per agent relative to where we were 18 months ago, it was much closer to 1. So we'll continue to make progress there.

Third is traffic expanding into new -- more traffic channels. We made some investments in Q4. We feel good about how those are progressing. Jayme talked a little bit about how AI search will change our landscape, and we feel that will also benefit us as well, and we're well positioned to take advantage of that.

And then lastly, I look at verticals. Today, as you look at our marketplace, we're roughly 90% auto, 10% home. If you think about the insurance landscape for P&C, home is roughly 50% of the size of auto. So we see a real opportunity between 10% and 50% to grow this over time at a faster rate. And we think in the medium-term horizon, you'll actually see home growing at a faster rate than auto.

And just to remind you on the home piece, home was a vertical that had some of the same dynamics of auto coming out of COVID was further behind the recovery. We saw some nice growth last year at 20% growth year-on-year.

And again, we feel bullish about that. So those are, I guess, the path to the $1 billion that we continue to feel bullish about. I guess the comments in terms of what's going on in Q1, maybe I could double-click on that and give you a little context on the seasonal pattern.

I think one of the dynamics we have emerging in the business is potentially a new seasonal pattern. We've had -- based in the past 2 quarters. We had a Q4 dynamic where we had a record sequential increase from Q3 to Q4 of 12%. To put that in context, our seasonal pattern on average from Q3 to Q4 is usually down low single digits.

So we're up 12% on record. I think some carriers took Q4 as an opportunity when they were -- had very favorable combined ratios to sort of invest in growth last year and they pulled some of the Q1 into Q4. Then you look at the start of this year, we see growth coming across where carriers are clearly indicating to us they want to grow.

And we've had -- broadly out there having carriers tell us that. I think what they are also telling us is they're going to do it in a measured way throughout the year to make sure they maintain flexibility as the year unfolds. When you put those dynamics together, different dynamic in Q4, different dynamic in Q1, we are actually encouraged by how carriers will be unfolding.

We could see a change from what we used to see, which was carriers would start out of the gates really hot in Q1, then you have tapering throughout the year and some volatility. We think it could be a more sustained view from carriers as we look into 2026.

Probably the last data point I'd give you in terms of the seasonal pattern, we're not giving guidance for the year. But as I look at Q1, typically, Q1 would be down to Q2. What we would suggest is probably a reasonable place to think about Q2 is sort of flattish -- and sort of flattish levels of revenues, VMD adjusted EBITDA versus Q1. So that would imply a much higher growth in Q2 than Q1, north of the -- taking 3 years to get to a path to $1 billion. I think it will be a 15%, 16% growth.

And our next question comes from the line of Ralph Schackart with William Blair.

First one for Jayme. There's obviously a lot of concern in the market at least currently on how AI agents can disrupt some models. But just kind of curious how you see AI agents sort of progressing within sort of your platform and maybe more broadly within the P&C market?

And then maybe on the VMD for Joseph, it seems like the margin has sort of bounced back or at least guided to in Q1. How should we think about that margin as it progresses through the year?

Thanks, Ralph. Yes. So on the agentic AI piece, I think I would start here. I think there is some broad-based probably misunderstanding about how exposed our business is and whether we're more likely to benefit or be challenged by the development of AI agent capabilities.

Yes, I think I'd start by pointing out that we're not a software business, right? We're a data-powered 2-sided marketplace. And so the software layer of our stack is, say, 20% of the value. So much more of the value is in our proprietary data, our traffic engine, our distribution relationships, which, by the way, with regulated entities and how we integrate all these things into a complex system whose sole purpose is to be the dominant industry-specific performance marketing platform.

So that is not something that we believe can be replicated by LLMs or AI agents without a lot of human involvement. Now I will acknowledge, of course, that shopping for everything will evolve. And in insurance specifically, there are some factors, which will cause it to evolve differently than other categories. First and foremost, it's very opaque.

So rates for many of the best insurance products are not readily available or accessible through public APIs. And in fact, carriers go to great lengths, as you know, to prevent their rates from being accessed anywhere outside of their own quoting funnel.

So can LLMs or agents help at the top of the funnel? Yes. But I would say what we've seen so far and what we've been able to kind of do ourselves so far is a far cry from a transformative experience.

I think what's out there in the market today, basically taking a web experience and applying a very lightweight conversational front end to it before spinning the consumer back into a fairly common web-based quoting or binding experience. So there's not much depth to it just yet. Now over time, I do think that these agents will enable more transformative change. So I want to be clear about that.

And I also think it's likely that EverQuote will be in the driver's seat of bringing that to fruition. We've got the distribution relationships to access rates. We have the data to make consumer experiences more seamless. And we've got the technology chops to build the app or experience of the future, and we will, right?

So these are things that we're actively working on and sort of building with. So for right now, like today, can these AI agents make our -- can it help us by making our marketplace operations and performance more efficient?

Absolutely, and they are. And can they start to improve how customers compare insurance options in a way that's more user-friendly? Yes, they can.

And so this is all underway, but it's precisely what we're focused on this year is really harnessing the power of agentic AI to drive better results for our customers and for the business.

And then to turn to your question on the VMM margin sort of context for the year. So just in context, we were over 25% in Q4, very much in line with what we said in our last call, which is we had a really strong start to the year in 2025, the first 3 quarters.

So we consciously made a choice to invest in new channels in Q4, brought us down to around 25% as expected. The strategy worked. As we look to Q1, you're sort of seeing us coming back to a guide that shows -- probably in the high 20s, with 28% is at the midpoint, again, very much in line with what we expect and what we said would happen.

If you look at where we were last year and the overall year, we were just under 28%. So when I think about the rest of this year, I'd say high 20s is where we expect to be. It will bounce around certainly quarter-to-quarter. Why will it bounce around? Two reasons.

One is we do not run the business on a day-to-day basis to drive VMM margin. We run the business on a day-to-day basis to drive VMD. That's first. Second is the -- what do we control and not control in determining our VMD and VMM. We do not control advertising costs. What we do control is the efficiency with how we acquire advertising.

So on advertising costs, Certainly, quarter-to-quarter, month-to-month, there can be pressures on advertising costs that drives those up or down, and we take advantage of those where we can.

But we obviously are buying that as our sort of a raw material for our business. The last thing I'd say about our efficiency and how we buy things, reference point I've given actually we did our roadshow in December, Ralph, I remember was helpful, was if you looked at our business back in 2023, where our business was $260 million auto insurance business, $270 million auto insurance business.

That had a VMM in the high 20s. Today, the business is almost 3x that size. We have a VMM still in the high 20s. Certainly, the advertising environment has gotten significantly more competitive in that time period. There's no question about that. I think we have been able to maintain it because the investments we've made in our technology, our AI traffic platforms to take advantage of our data, the efficiency with how we acquire that advertising is the thing we do control and we do that well.

And our next question comes from the line of Mayank Tandon with Needham.

I was just curious in terms of the potential upside case to 1Q. And then if we assume the base case for 2026, even though Joseph, you're not giving guidance is, say, low teens growth based on your $1 billion revenue target in 3 years.

What is the potential bull case to that? What I'm curious is California, a potential positive catalyst that could drive upside? I think last quarter, Jayme, you had mentioned that 20 of the top 25 carriers were still below peak spending levels. Is that something that could also be a potential upside case? So just curious in terms of what the catalyst might be that could drive faster growth than what you're currently maybe modeling or at least indicating to TheStreet?

Sure. Thanks, Mayank. So again, the range I would say is what we said in the November call, still a path to $1 billion in 2 to 3 years. That remains our goal for top line growth.

Mathematically, that implies if it takes 2 years, it's 20%. To do it in 3 years, it's 13%, just to give you the context of the numbers. What could drive it to the higher in the year versus lower in the year?

Probably a couple of things I'd point to. So first is you have one large national carrier who's really coming back online with us this year. That was a carrier that was a top 3 carrier for us prior to the downturn.

We think that carrier could be certainly an important dynamic in our marketplace to be beneficial. How exactly that plays out, how quickly, how slowly, a lot remains to be seen, but I think that certainly is one key dynamic.

If you look at the state footprint, we have states coming back broadly. California is one we saw some progress in 2025. There is some room for incremental progress in 2025, certainly -- excuse me in 2026. But we had some progress in '25. But I think some more there I referenced. The other dynamic I'd mention is when you look at where is auto -- where is insurance going online relative to other industries.

Insurance remains a laggard going online. With everything that has happened through the past few years, can't lose sight of the key tailwind for our businesses. Insurance remains an area that has gone online much more slowly than other areas.

Lots of different stats you can look out there. But one of the ones I like to look at is relative to financial services, about 1/3 fewer folks get insurance today online than versus broader financial services.

So there's opportunity for insurance to grow. How fast that may grow and catch up with others, that also could bring it higher or lower within a given year. Those are probably the 3 key ones I'd point to.

Very helpful. And then, Joseph, I think you like this question, so I'll ask you in terms of capital allocation, you're flushed with cash, a good problem to have. So you talked about the buyback program, but does this also potentially open up maybe more appetite for M&A? Or how else would you be able to leverage the cash on hand?

Sure. So thank you, Mayank. I appreciate the question. So I guess I'd start with just we expect to continue to generate meaningful cash flow from operations, and we have a high cash conversion from adjusted EBITDA to operating cash flow, subject to normal working capital in the quarter.

But in Q4, cash conversion was around 100% -- and as we ended Q4 with almost $171 million in cash, up from $146 million in Q3, the difference being the same as our EBITDA for the quarter.

When we think about cash, we think about 3 things. So first, we think about having a strong balance sheet. We think a strong balance sheet is critical. We have no debt. We have access to up to $85 million, but we have no debt today. We have a fortress balance sheet, and we want to make sure we continue to have that.

The second is the share buyback program. We announced our inaugural share buyback program last summer. It has a 1-year duration. It was a $50 million program. We used $30 million of that to date has been purchased, including $9 million since the start of this year.

And we'll continue to be opportunistic in using the rest of that $20 million between now and that program's expiration in the summer, and we'll continue to evaluate options to extend that program in future periods.

And then third, we'll continue to look at selectively at acquisitions. As we've talked about, we do not believe we need M&A on our path to $1 billion. Our path to $1 billion in revenue can be achieved entirely through organic growth. However, we do think there's an opportunity to potentially accelerate organic growth and importantly, accelerate our strategy to be the leading growth provider to P&C carriers and agents and M&A could play a part in that.

And so as we talked about last year, we're spending more time thinking about that this year and being more thoughtful about it, and that could be a third use of cash as well.

And our next question comes from the line of Zach Cummins with B. Riley Securities.

So I'll do one for Jayme and then one for Joseph. So Jayme, I think you touched on this a little bit earlier with your commentary, but can you give us a sense if you've seen any meaningful changes in the traffic that's coming on to your platform since we've seen more of an emergence with these large LLM platforms?

Any sort of shift in terms of channels or where you're focusing your attention from a traffic standpoint? And the second one, maybe for Joseph. As you think about just the early conversations you're having with carriers, I mean, as you set baseline expectations for this year, are you anticipating kind of a broadening of contribution that you see from your carrier base this year? Or what's the right way to think about kind of contribution across the key carrier partners?

Sure. So I'll start. I'd say we felt no material impact -- direct impact or mix shift as a result of the growth of some of the AI search platforms. In fact, overall volume has remained at historically high levels, and that was true throughout the course of last year.

And even search volume remains at historically high levels. So we haven't been impacted there. Recall, we have -- I think the primary point of impact has been in organic traffic or SEO originated traffic, which was really never part of our mix.

So in that regard, we've not really experienced any direct kind of effects from it. So that being said, we do see it as a growth opportunity moving forward, as I sort of mentioned and kind of spoke to in detail answering Maria's question. So I think we'll start to originate a meaningful amount of traffic from these platforms in 2026 through a combination of content, technical integrations and paid advertising.

And it will become a channel of substance for us in 2026. At the same time, we're continuing to expand the traffic portfolio in other ways, primarily through some of these higher funnel channels. These are things like social video and so on and so forth. For those, we've been kind of working on an evolved digital experience that's more compatible with these channels, and that continues to be an area of investment going into this year.

Maybe answer -- address your question with regards to how we think about the carrier base and the broadening of it. Maybe I'll give you a few data points that may help you as we think about this year. As we look at Q4, 75% of our top 25 carriers in Q4 were below their peak quarterly spend on the platform.

So I'll give you that one stat. That shows to us there's ample room to grow for carriers. Obviously, not all carriers spend at the same quarter every time. So you'd expect that to ebb and flow. But again, 75% were not at peak quarterly spend in Q4.

So that's one data point I'd give you in terms of composition. The other one to give you in terms of composition is in Q4, you had our top 4 carriers in Q4 were also our top 4 carriers in Q3.

They had some movements in their relative share percentage in the quarters, but that fact did hold true from Q3 to Q4. And then what you saw in Q4 is that the -- from 4, sort of 5 through 10, you had some movement around as you had competition within those carriers more meaningfully.

As we look into Q1, I think there's a potential for some carriers to have more competition movement around. Why do we think that? We think that because what is driving carriers right now. It's all about profitable policy growth.

That contrasts what we saw over the past few years where carriers were focused on getting rate adequacy and underwriting profitability. They were less focused on maintaining share.

As you see this sort of soft market cycle evolve, you see them increasingly focused on how can we competitively grow, how can we more aggressively grow policies in force and do it in a profitable way. We think that plays really well to digital channels. We also think it creates a dynamic where there could be more competition between the carriers and some movement around in those positions within our marketplace.

And related to that also, we have another national carrier coming on who was not involved in the marketplace last year. We think that will also create a competitive dynamic as well, which I think will result in some movement around as we progress through the period of Q1 and into the rest of the year.

And again, we think that's good for the marketplace, creates a more dynamic and healthy marketplace. We have more carriers competing for profitable policy growth and digital channels like we provide are, we do that very effectively.

And our next question comes from the line of Jed Kelly with Oppenheimer.

I guess just these LLMs, they're commanding a ton of the market's attention. I guess, historically, we've always seen the carriers not want to put their quotes on third-party sites.

And that would imply to me that, I guess, aggregators like yourself should benefit into these new LLMs if the carriers aren't going to want to put their rates on LLM. Is that the right way to think about it? And then I have a follow-up.

Yes, Jed, we share that perspective. And so -- I think I referenced that earlier. The carriers are very protective of their rates. They have gone to great lengths over the years to resist any kind of traditional rate comparison experience in the U.S. insurance market.

And that position has not changed. You can't find examples of rate comparisons out there, but those experiences typically only show rates for maybe 30%, 40% of the available product, and you're missing some of the best product, Progressive Direct or so on and so forth.

And so that dynamic is not likely to be any different in the -- just with the technology shift, which continues to -- which creates an opportunity for players like us who have unique access to carrier distribution, whether that's in the form of a rate or in the form of connecting someone with a local agent or with -- in the form of bridging them over to directly land on a quoting experience with the carrier.

It is this complexity and kind of this like different and really dynamic distribution landscape that someone like us can organize on behalf of any given LLM that wants to connect their consumers with insurance distribution.

So we think there is a role to play, and there's an opportunity to really carve out a material role in that. And we feel really well positioned, right? Like you've got to remember, like our whole company was built on the ability to kind of marry our data with technology to connect consumers with insurance distribution.

And now 15 years on, we've built this data asset from hundreds of millions of historical insurance shopping events, each of which gives us some proprietary data that we can use to streamline, optimize and innovate digital and AI native experiences. So we feel like we're in a really good position to go on offense here, and we're looking forward to this next chapter.

And then I guess just as a follow-up to that, if AI -- if the carriers implement AI and that makes them more profitable, assuming the profitability it costs them to underwrite a policy goes up, won't that make them want to lean more into channels that can drive them traffic?

Yes. I think that's likely. And I mean, look, it's going to happen. It's just a question of when. I mean we've been deploying AI throughout our business over the last couple of years through our traffic bidding, through SmartCampaigns, through our operations, most notably in like engineering where AI coding tools have really become like a productivity multiplier. Call center operations, right? We're seeing AI voice in real time, take on more and more customer interactions in an insurance funnel.

So I think it's an inevitability that these insurance carriers will find material cost savings, which will improve their combined ratios, which will give them more capacity to spend in marketing.

And again, this is an area where I think our strength is we are a trusted partner to these carriers. So not only could we be the beneficiary on the marketing side, but we think there's a broader opportunity to step into helping these carriers get leverage from AI faster and more effectively than they might be able to do on their own, whether that's through productizing some of the things that we can do like we've done with SmartCampaigns or otherwise embedding teams with the carriers to help them sort out their own AI strategy.

But we feel lucky to have access to the carriers, to the talent. Our Chairman, Dave Blundin, he's like a prominent figure on the leading edge of AI. He's been very involved in helping us shape our AI strategy and access some top AI talent. So we see this as like a really interesting space, where the carriers are going to need help, and we are -- we're the trusted partner to help them.

And our next question comes from the line of Mitchell Rubin from Raymond James.

Congratulations on the quarter and the year. In the prepared remarks, you mentioned carriers taking a more disciplined approach in the first quarter of '26 from the record levels observed in the fourth quarter. Is the pullback broad-based across carriers or concentrated among specific relationships?

Sure. Yes, I would say when I think about carriers across Q1, there are multiple carriers who we have this dynamic with. I think some have -- I think the idea of discipline is a theme we're seeing across carriers. I think why is it, right?

We're seeing carriers who are pivoting from a period of getting rate adequacy restoring rates and getting underwriting profitability to getting into a period now where they are -- want to aggressively compete for profitable policy growth.

They're also recognizing at least what we're seeing and hearing in our discussion, which is the dynamic is changing. The normal pattern seems to be changing for them. And that, I think, reflects as they think ahead for the year, they want to have flexibility.

So as opposed to the old pattern of start the year, new budget, let's go crazy and then we'll sort of see how the year progresses. They're being very thoughtful at how they do things throughout the year. And so we're seeing that with multiple carriers. Some more so than others, but again, multiple carriers, I think, would be what we're seeing.

Thank you for the additional detail there. Could you provide some more color on the tax -- the deferred tax benefit recorded in the quarter? And what criterias met that led to the valuation allowance release?

Sure. So with regards to the tax valuation release, this is mentioned in our -- my prepared remarks. The full year and Q4 tax benefit were the same, approximately $38 million. The benefit was primarily driven by the release of our valuation allowance against our deferred tax assets.

And think about it very similar as we had NOLs that we -- now that we're becoming a profitable company, we have the ability to use those NOLs and requires a change in recognition. It effectively view this as this was a noncash charge. And so it's important to note, it's a noncash and onetime charge.

But it does reflect this dynamic of now that we have sustained profitability, they're now on our balance sheet, and we're we able to use them as we're making more money. And what I would say on these as well is we are not the first to have this experience. You may have had other companies in our space have had the same issue as well. So it's a common issue across our space.

That concludes our question-and-answer session. I will now turn the conference back over to management for closing remarks.

Thank you, and thanks all for joining. Just to recap, we had a phenomenal year in 2025 with records across all our key financial metrics, and we're carrying that momentum into 2026 with a healthy insurance market that's hungry for growth.

As a team with a long-standing track record of using our proprietary data and technology to drive profitable growth, we see the recent acceleration in AI capabilities as a huge opportunity for EverQuote moving forward.

We feel very well positioned going into 2026, and we're going to become the company that leads insurance distribution into a more AI-native future. Look forward to updating everyone as the year progresses.

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.

Ladies and gentlemen, thank you for standing by. My name is Colby, and I'll be your conference operator today. At this time, I would like to welcome you to the EverQuote Q3 2025 Earnings Call. [Operator Instructions]

I'll now turn the call over to Brinlea Johnson.

Thank you. Good afternoon, and welcome to EverQuote's third quarter 2025 earnings call. We'll be discussing the results announced in our press release issued today after the market close. With me on the call this afternoon are Jayme Mendal, EverQuote's Chief Executive Officer; and Joseph Sanborn, EverQuote's Chief Financial Officer.

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 fourth quarter of 2025. Forward-looking statements may be identified with words and phrases such as expect, believe, intend, anticipate, 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 any obligation to update or revise these forward-looking statements, except as required by law.

Forward-looking statements are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For discussion of those risks and uncertainties, please refer to our SEC filings, including our annual report on Form 10-K and our quarterly reports on Form 10-Q on file with the Securities and Exchange Commission and available on the Investor Relations section of our website.

Finally, during the course of today's call, we will refer to certain non-GAAP financial measures, which we believe are helpful to investors. A reconciliation of GAAP to non-GAAP measures was included in the press release we issued after the close of market today, which is available on the Investor Relations section of our website.

And with that, I'll turn it over to Jayme.

Thank you, Brinlea, and thank you all for joining us today. We achieved record top and bottom line performance in Q3. Our team continues to help carriers and agents drive profitable policy growth amidst a healthy underwriting environment. We're making steady progress toward our vision of becoming the #1 growth partner to P&C insurance providers by delivering: one, better performing referrals; two, bigger traffic scale; and three, a broader suite of products and services.

As we innovate new products, release features and further embed AI into our marketplace, we are fast evolving from a lead gen vendor to a growth solutions partner for our customers. We continue to partner more closely with carriers and differentiate our marketplace through Smart Campaigns, our AI bidding product. In Q3, we launched Smart Campaigns 3.0, which leverages our latest model to deliver better performance than our 2.0 version. For example, a customer who recently migrated from 2.0 to 3.0 saw a 7% improvement in ad spend efficiency, an early indication that the new model is materially improved.

When customers adopt Smart Campaigns and experience these types of performance improvements, they often shift more budget to EverQuote. As we secure more budget, we also gain more data and as a consequence of our AI-driven systems can further improve campaign performance. As evidence of this flywheel working, in Q3, we were notified by a major national carrier that we have become their #1 customer acquisition partner in our channel for the first time.

Turning to our local agent customers. We continue making progress in our evolution from a lead vendor to a one-stop growth partner as we roll out and gain adoption of additional products and services to help agents grow. As of October, over 35% of our local agent customers are using more than one of EverQuote's 4 agent products, which demonstrates broadening adoption, but also ample room for continued growth through product expansion within our existing customer base.

Our consumer acquisition teams continued executing well in Q3 despite elevated competitive pressure in the insurance advertising landscape. In Q4, we have begun to ramp investments in scaling new traffic channels and programs to support future growth. Since our IPO in 2018, EverQuote has committed to growing 20% and expanding adjusted EBITDA margin by 100 to 150 basis points per year on average.

Over the 6-year period through 2024, we delivered as promised with a 21% revenue CAGR and an average of over 200 basis points of margin improvement per year. As we approach the end of the year, we have confidence that we will deliver once again in 2025. And now we have set our sights on reaching $1 billion of annual revenue in the next 2 to 3 years while transforming into a multiproduct, AI-powered profitable growth solutions provider for carriers and agents.

Consistent with our track record of saying what we will do and doing what we say, we look forward to updating you on our progress as we drive full steam ahead into 2026.

I'll now turn the call over to Joseph to discuss our financial results.

Thank you, Jayme, and thank you all for joining. Today, I will be discussing our financial results for the third quarter of 2025 as well as our guidance for the fourth quarter of this year. We delivered record results in the third quarter, achieving new quarterly highs for revenue, variable marketing dollars of VMD, adjusted EBITDA and net income. In addition, we continue to enhance our operating performance and drove expanding levels of profitability as reflected by our record adjusted EBITDA margin.

Total revenues in the third quarter grew 20% year-over-year to a record $173.9 million. Revenue growth was primarily driven by stronger enterprise carrier spend, which was up over 27% from the comparable period last year. Revenue from our auto insurance vertical increased to $157.6 million in Q3, up over 21% year-over-year. Revenue from our home and renters insurance vertical increased to $16.3 million in Q3, up 15% year-over-year.

VMD increased to a record $50.1 million in the third quarter, up 14% from the prior year period. Variable Marketing Margin, or VMM, was 28.8% for the quarter.

Turning to operating expenses and the bottom line. As we scale and drive top line growth, we continue to expand operating leverage in our business through disciplined expense management and by utilizing AI and other technology investments to deliver incremental efficiency.

In the third quarter, we grew net income to a record $18.9 million, up from $11.6 million in the prior year period. Q3 adjusted EBITDA increased to a record $25.1 million, representing a 33% increase year-over-year and significantly outpacing the strong revenue growth we achieved during the same period. Adjusted EBITDA margin expanded to 14.4%. Cash operating expenses, which excludes advertising spend and certain noncash and other onetime charges, were $25.1 million in Q3.

As expected, this was up from the previous quarter by approximately $1.5 million for planned investments in our AI and technology capabilities, but effectively flat on a year-over-year basis. We reported operating cash flow of $19.8 million for the third quarter. To note, temporary timing differences in working capital impacted our cash conversion from adjusted EBITDA compared to prior quarters.

During the quarter, we repurchased 900,000 shares of our Class A common stock for $21 million from Link Ventures, which is an entity affiliated with funds advised by David Blunden, EverQuote's Chairman and Co-Founder. We believe this was an accretive use of capital, which enabled us to efficiently execute a portion of our recently announced $50 million share buyback program. This transaction approach reduced shares outstanding by 2% in a manner that did not adversely impact liquidity in EverQuote's public float. This repurchase reiterates our confidence in EverQuote's ability to generate long-term sustainable growth and free cash flow while maintaining a strong balance sheet.

We ended the period with no debt and cash and cash equivalents of $146 million. We continue to operate in a favorable environment where carriers are broadly enjoying healthy underwriting margins and consumer shopping activity remains elevated. We expect these conditions to persist for the foreseeable future. Of note, approximately 80% of our top 25 historical carrier partners were below peak quarterly spend in our marketplace in Q3, reflecting ample room for additional growth.

Now turning to guidance for the fourth quarter of 2025. We expect revenue to be between $174 million and $180 million, representing 20% year-over-year growth at the midpoint. We expect VMD to be between $46 million and $48 million, representing 7% year-over-year growth at the midpoint. And we expect adjusted EBITDA to be between $21 million and $23 million, representing 16% year-over-year growth at the midpoint.

As we continue to deliver better-than-expected revenue, we are taking the opportunity to invest in existing and new traffic lines in Q4. While these traffic investments will further build our competitive differentiation and better position EverQuote for long-term growth, they are expected to put some pressure on VMM and VMD in the period, which in turn impacts Q4 adjusted EBITDA and associated margin.

Based on the midpoint of our guidance for Q4, we're expecting full year 2025 annual growth in revenues of approximately 35% and annual growth in adjusted EBITDA of over 55%, reflecting our strong operating leverage. It is also worth noting that the midpoint of our Q4 revenue guide in combination with Q3 results implies top line growth of 20% for the second half of 2025 compared to prior record revenues in the second half of 2024.

In summary, our performance year-to-date reflects our steadfast commitment to strong execution and a clear strategy. As we look ahead to 2026 and beyond, we remain focused on our goal of creating a $1 billion revenue business by being a leading growth partner for P&C insurance and delivering on our long-term target of achieving average annual revenue growth of 20% with 20% adjusted EBITDA margins, a Rule of 40 company.

We believe that our clear strategy and the strength of our team and operating model will position EverQuote to deliver continued growth and expanding profitability. Jayme and I will now take your questions.

[Operator Instructions] Your first question comes from the line of Maria Ripps.

Congrats on the strong quarter here. Just first, just thinking about the sort of broader industry backdrop. As you pointed out, carrier profitability has been strong and some investors have been asking whether, sort of, carriers are approaching peak margins. Can you please share your view on the sustainability of current profitability levels and what that means for customer acquisition spend?

Sure. Thanks, Maria. So yes, carrier underwriting is back to like a very healthy and steady state level. Acquisition spend tends to lag the profitability a bit. And so, we still see quite a bit of room to go in terms of the advertising spend keeping pace with the profitability trends. We still got -- at least we've got one major carrier, national carrier that's in the process of reactivating in Q4. We still got 80% of our top 25 partners below their historical high watermark of spend and still certain state carrier combinations that are kind of working their way through.

So the good news is these soft market cycles tend to last 5-plus years, and we think we're in the very early stages of it. So we do see some opportunity for continued strengthening as the balance of the carriers catch up in terms of their advertising spend with respect to where their underwriting profitability is now.

Got it. That's very helpful. And then you've talked about sort of elevated investments in AI capabilities, technologies of data assets here in the second half of the year. To the extent you can talk about this, what are some sort of key platform features or innovations that investors should expect in 2026?

Yes. So some of our most significant investment has been in our Smart Campaigns product. That's our machine learning-based carrier bidding product. We've been getting broader adoption of that product over the course of the last year or 2, and we've been investing in improving model accuracy and adding features to those models. And all the results that we've seen so far as customers adopt Smart Campaigns and then as we upgrade to newer versions is that they drive meaningful performance in carrier improvement -- and sorry, carrier -- meaningful improvement in carrier performance.

So as that happens, the net effect is the carrier will allocate more budget in our direction relative to alternatives and it helps kind of propel this flywheel of better performance, better pricing, more traffic, more data, and that helps us drive more performance. So that's the area we've been most focused on. We do expect to extend some of the AI bidding products to local agents as we turn the corner into next year, and that's an area we've been focused on.

I've also spoken a bit about conversational voice. We have managed to introduce AI voice into our call workflows, and that's achieving good levels of performance. And that's really beginning to allow us to interact more with customers through sort of AI modalities, which we expect to extend from that voice modality down funnel and into others over time.

Your next question comes from the line of Zach Cummins with B. Riley Securities.

Congrats on the strong performance here in Q3. Jayme or Joseph, both of you could probably comment on this. But can you give me a little more insight into kind of the incremental investments that you're making into new channels in Q4? Is there any way to break out kind of the anticipated impact that you're seeing to VMM in Q4 as a result of these channels? Just trying to get a sense of what's the best way to think about VMM over the next couple of quarters.

Sure. Why don't I start and then I'll let Joseph expand on it. So the channels, there's a handful of channels that we have -- most of which we have been active in, in the past, but have subsided through the hard market and now we're in the process of rebuilding. These are some of the -- characterize them as higher funnel channels. So that could be social, video, display, connected TV, things like that.

And typically, when you launch new campaigns in these channels, it takes a while to kind of get the right creative, the right bidding strategy in place. And for that period of time, when you're just the early stages of optimizing those campaigns, they tend to run at lower, in some cases, even negative margin. And so that's kind of how it flows through into the financials.

The other sort of category that we're focused on is AI search. Historically, we've not done much SEO traffic here at EverQuote for better or worse. Today, I'd say that it's kind of a positive thing because we haven't been -- there's been nothing to sort of disrupt as the organic search results have changed. And so we view the AI search as kind of a clean sheet for us, and we're making some investments in beginning to build out our presence in those platforms.

With regards to -- so just turning to the numbers on VMM. If you look at the midpoint of our guide, it's sort of close to 27% on VMM margin. We were closer to 28.8% in Q3, comparable in Q2. So when I think about the impact in the quarter, it's probably a couple of hundred basis points of investment you're doing in new traffic channels on the VMM line. So just to give you a context. And I get is how we think about VMM, in general, we still think it's going to be in the high 20s over time. It will fluctuate quarter-to-quarter based on what's going on in the broader market.

I think it's important to call out, when you think about VMM margin, 2 factors. One is, it reflects the advertising environment we do not control. We do not control what the advertising environment broadly. What we do control is how we apply our models and our technology to be efficient in going after that advertising dollar. Zach, you and I have talked about this in the past, but just for context, if you look at our VMM margin being in the high 20s, go back to 2023 when our business was much smaller. The VMM margin in auto was in the high 20s, and we're $250 million, $275 million business.

The fact we're 2.5x bigger now in scale, and we're having the same margin speaks to, yes, there is certainly a more competitive advertising environment and more folks going after it, but our bidding technology is working. We're getting more efficient, and that's driving results. So we'll continue to make those investments this quarter, and you'll see those benefits as we progress into 2026 and beyond.

Understood. And just my one follow-up question is just the broader appetite that you're seeing from your carrier partners to ramp up budgets? I thought it was interesting to hear that 80% of your top 25 still isn't at peak spend. So just curious what you're hearing from some of these partners and how they're thinking about deploying budgets as we move into 2026.

Sure. So maybe I'll start with where we are now in Q4. So typically, we have a seasonally down Q4, if you go on the average of seasonality for the past 7 years. Typically, Q3 to Q4 is down sort of 4%, 5% dip. We're actually showing that we're actually expecting a quarter that's up at the midpoint, actually up in the full range of our guidance. So I think that reflects that we see carriers seeing really healthy underwriting margins that we've been talking about throughout this year.

As we progress through the year, some of the uncertainty has been replaced by greater certainty, whether it be the impact of tariffs on underwriting costs, whether it be the cat environment. As we've gone further into the year, they're feeling stronger, and we're seeing that result in what we're seeing today, which is them define the normal seasonal pattern and really engaging to continued customer acquisition.

As you look to next year, as Jayme touched on, the backdrop remains very strong for carriers. We see an environment where the health will continue on the underwriting margins for everything we're seeing and hearing from our carrier partners. As Jayme mentioned, often the health of the carriers, it becomes before you actually see the spend pick up as fully. So I think there's continued growth you'll see from carriers into next year. And you match that on the consumer side, where we have consumers continuing to shop for alternatives. And that's a really good combination for us.

Your next question comes from the line of Jason Kreyer with Craig-Hallum.

So we're hearing a lot more from carriers that are pursuing kind of strategies that would have rebating to consumers. So I'm just curious what your take is on that, if there's any impact, if that kind of takes away from budget that historically could go into performance marketing or if that has any impact on what you guys could potentially absorb from carriers?

We've been -- we have not heard anything about that in our sort of interactions with carriers. I think it's a representative of the broader underwriting environment, which, again, is quite healthy, meaning the carriers are quite profitable. And so, rebates are one way they can sort of approach that depending on what problem they're trying to solve. But I would say the overarching problem that most carriers right now are trying to solve is growth. And that's all they talk to us about, and that's reflected in how they're kind of leaning into the marketplace broadly right now.

Appreciate it. And then so last year, as we got into this time of the year, we saw somewhat of a budget flush from carriers. You had pointed out the attractive profitability metrics. Is that predicated on guide? Or I'm just curious what you are assuming in the balance of Q4 here, what's baked into the guide?

Yes. So for the guide for Q4 is obviously assuming carriers define the normal seasonal pattern being down from Q3 to Q4. So that what the underlying basis for that is the carriers are seeing sort of pulling forward investment into this quarter. I won't use the term you used. I'll say they were pulling forward growth investment into Q4 customer acquisition from -- and I think that's clearly happening, and that's reflected in our guide.

And Joseph, that like year-end budget flush doesn't -- isn't really having much of an impact to VMM, like that's not a component of the sequential pressure?

So I guess when you look -- when you look at the VMB line, all other things equal, Q4 -- if you have an environment where you're defying the seasonal pattern on revenues being higher than the norm, that can put some pressure on advertising costs, particularly in Q4 on some traffic here as we have broader competition from retail and holidays. So there can be some impact in VMM in this quarter from that. But I'd say that's relative to what we described earlier, that's more modest than our investments in the new traffic channels. I think theoretically, it has some impact in Q4.

But I guess when I still come back to the carriers and their budgets for the period, I think we go into this saying they feel very bullish and they're reflecting that. I think relative to last year at this time, I think they're coming into this quarter seeing with a greater sense of clarity on how the year is progressing. They're quite healthy. As they progress through the year, the uncertainty they may have seen, whether it's from tariffs affecting underwriting costs or uncertainty over the cat environment, those uncertainties have been replaced by clarity. As they've gotten those, they're able to lean in early in Q4, and we're reflecting that in our guide.

Your next question comes from Ralph Schackart with William Blair.

On the call today, Jayme, you talked quite a bit about transforming the model from lead generation vendor to a multiproduct provider, which obviously would be a pretty important strategic shift. Just any more color you can provide without disclosing exact products for competitive reasons. But just conceptually, just trying to figure out where you're focused on product innovation. And then can you maybe sort of talk about the evolution of this change in the model? And would you be, I guess, sort of moving away from a transactional model or sort of like entertaining new revenue model in the future? Any help on that would be great.

Yes. Thanks. Yes. So I mean, we have strong large relationships with all the big carriers and thousands of local agents. And those relationships have been built and are predicated predominantly on the sort of referral, right, the click or the lead that we're selling to the carrier or the agent. And our sense is that the carriers and the agents, we can deliver them a lot more value by wrapping sort of value-add technology, data services around that core referral product.

So in the case of a carrier, the example we've talked about is giving them bidding services through Smart Campaigns, is AI-enabled bidding solution. There are other services that -- on the carrier side, will not mention at this time. On the agent side, again, the vision is to really evolve to become their one-stop shop for all things growth. So agents spend money on leads to generate growth, but there are a lot of other things that they spend money on, whether it's telephony services or calls or digital services.

And we've now built out a much more robust product suite that allows us to solve for the vast majority of agents' needs as it relates to growing their local agency. So the idea is build these deeper relationships, which add a lot more value. They're built on mutual trust, more data sharing and they're built on top of some of our distinct advantages in the data that we have and the technology that we're able to build around that data just to ultimately deliver more performance for the agent, for the carrier and also allow them to consolidate to have fewer vendors to deal with.

So that's like the thrust of the strategy. As it relates to the commercial model, Ralph, I think over time, the answer is yes. And we started doing this with the local agents, like we do have, albeit relatively modest relative to the scale of EverQuote, but we do have a nice chunk of recurring subscription revenue that is building with the local agents as we execute on this strategy. And so, I do think there's opportunities to begin to think about evolving the commercial model over time. But the most important thing to us right now is to get the products right, to get them adopted, to prove the value and then we build from there.

Your next question comes from the line of Mayank Tandon, Needham & Company.

Congrats, Jayme and Joseph on the quarter. Jayme, I wanted to touch on the $1 billion revenue target. Is that an organic target? Or would you also factor in M&A to get to that level? Because when I think about what Joseph said, the 20% growth model, then that would get you close to $1 billion in actually 2, 2.5 years. So just curious on sort of what are the underlying drivers behind that target and whether it's organic or does it include potential M&A?

Yes. So we have a plan to achieve that goal organically. And I'll let Joseph expand on how we think about M&A in this context. But when I talk about our path to $1 billion, it's an organic path, and we've got the road map. On the distribution side, it's really about just executing the playbook, which is improving the performance for carriers and agents through use of our AI products like Smart Campaigns in order to get more budget and more favorable pricing.

We can take that budget, that pricing and push it downstream back into traffic to increase our traffic share. But at the same time, we're going to be expanding into more traffic channels, as we've talked about earlier already. So accessing more traffic and winning more of it. And then we've got a lot of room to continue growing in our non-auto verticals, specifically in home and as we start to consider other P&C verticals that might make sense under that umbrella. So that's more or less the ingredients of the path to $1 billion, and we think we can get there organically in the time frame that I suggested.

Let me look at the math, I think you kind of got there is -- [ Mike ] just for those who weren't doing the math quickly, here you know that implies it took 3 years to be sort of mid- to high teens would be the growth rate. If it took 2 years, it'd be sort of low 20s in terms of business revenue growth rate. So I think that gives you a sense of how we frame it, like we feel bullish on our ability to get here through organic means. Do we see an opportunity to potentially supplement that through M&A?

Yes, we see that opportunity as well. In our minds, M&A comes back to the same criteria we've discussed previously with folks is we view it as accelerating our strategy to win in P&C being the #1 growth partner to carriers and agents in this vertical. And we think there could be opportunities to do that. We do by no means see those as necessary to achieve that $1 billion goal.

Got it. That's super helpful. And then also just turning to margins. I think Joseph, you said 100 to 150 bps is the target model. I know that's not guidance. But just as I think about that, is that going to come from eventually maybe a little bit of an improvement in B&M when some of these maybe advertising pressures abate? Or would it be more heavily weighted towards operating leverage in the model?

So I think when I look at EBITDA, I just give some context, right? So 2023, we had none, right? 2024, we went to 11.6%. I think we brought a lot of operating leverage into the model and really focused where we were spending on our investments in technology, the things that give us greater leverage. If you look at 2025 and the midpoint of our guide implies we're actually going to gain over 200 basis points at the midpoint from 2024, sort of 13.6% whatever. So I think you're seeing us at a pretty significant clip over the past few years.

As we look to next year, we always say 100 to 150 basis points on average. I'd probably say we're targeting towards the lower end of that for next year as we think about EBITDA. But I also would say that our EBITDA, we view it as continue to be high cash converting. So that EBITDA will be a very high cash conversion into operating cash flow in the period, just subject to normal working capital.

And then in terms of margins, I would say we still sort of -- we continue to see VMM in the high 20s. I think it's important to give some context on this, which is, it is a market where there's things we control and there's things we don't control. We don't control the broad advertising environment where we buy advertising. So if there's more demand in that market or less demand in that market that can impact advertising costs in the period.

What we do control is the investments we make in our bidding technology and how we use that technology to more efficiently acquire traffic and drive that to our carriers and agents. And so when I think about the business, I'd say we still think high 20s. It will fluctuate quarter-to-quarter based on various things going on in the market and also the investments we're making. But again, on the operating expense -- and then on the operating expense side, we certainly will see a step-up from Q4 to Q1 as we customarily do. And we'll continue to be making investments in our technology areas around AI and other areas, our data assets that we think will build.

We're playing investments to win. We're not just trying to do this to drive 20% growth and get to the EBITDA margin overnight. We are going to do it in a way that's setting us up to really succeed in this market long term and really be the premier growth partner to carriers and agents in the long term.

Your next question comes from Jed Kelly with Oppenheimer.

Just on investing in some of the newer traffic channels, how much of this is at your discretion doing this versus some of your competitors that are probably also operating at low 20% margins. And I imagine they're doing this to drive more traffic to carriers to get more budget. So can you just talk about how much of your discrepancy versus potentially responding to competitors?

We -- it's entirely in our discretion, right? I mean we are making like investments that are very much consistent with our long-term strategy. And we think these are investments that will help us achieve that $1 billion goal, grow at 20%, get to that 20% adjusted EBITDA margin over time. So this is all very consistent with our long-term strategy. We don't -- we have -- I mean, we don't pay super close attention to how our competitors' margins or ad costs are moving around over time, right? Like we have our financial plan, and we've got a pretty good track record of achieving that plan.

I can appreciate that others may choose to make certain trade-offs at various points in time. But we've had a pretty consistent track record just kind of executing our plan and staying heads down. And getting into these channels will be important for us to achieve that plan because the demand from the carriers and agents is definitely there right now. And we've got to be able to continue growing volume to meet that demand.

And then just as a follow-up, how should we view your OpEx and sort of your longer-term goals as a percentage of VMM, I guess, because one could argue your VMM is actually your true revenue, right? So how should we look at that?

Yes. I guess, yes, I appreciate you made that comment before. I continue to look like EBITDA margins in a traditional sense relative to revenues, adjusted EBITDA margins. And so they were 11.6% in '24. At the midpoint of our guide puts some mid 13.5% this quarter, so a couple of hundred basis improvement from last year. And we'll add another 100 basis points as our target for next year. And we'll continue to that 100 to 150 basis points every year and thereafter. So I think that's how we think about it.

And of course, as VMD scales, of course, our -- the thing we are doing is some dollars will go to the bottom line to drive incremental adjusted EBITDA and some dollars in a given quarter will go to investment. Those investments be it principally in technology areas and particularly around AI and leveraging our data assets to help us build a longer term -- to position us for longer-term growth and competitive differentiation. And that remains our strategy, and that's how we're approaching it.

And that means OpEx, you'll see those investments as we build through next year. But just as we've done this year, we've managed very carefully in terms of as we add incremental investments, you've seen us -- we said at the start of this year, they would add 100, 150 basis points in adjusted EBITDA. We added actually 200 basis points. If you look at the midpoint of our guide that is achieved. And so I think we're very good at saying what we're going to do and then execute against that and then delivering those results.

Your next question comes from the line of Cory Carpenter with JPMorgan.

I had 2 financial questions. Just on the traffic investments, how long do you expect those to impact VMM margins? And do you ultimately expect them to run at parity with your other channels? That's the first question. And the second question, a lot of talk around the 20% growth target. Maybe just ask directly, is that something you think is achievable next year given the tougher comp?

Yes. So I'll take the first one. I mean the investments, typically, when we're ramping up a new channel or a new traffic program, it's 1 to 2 quarters where we're launching, we're optimizing and we're scaling. At which point, I do think that we would -- these channels would kind of blend in at comparable -- at VMM levels to our existing traffic portfolio. So we don't view this as a long term -- these channels as weighing down VMM in the long term. But there's a bit of a start-up cost that you incur when we start launching into some of the new channels.

And then in terms of our -- how we think about top line growth, there's some context, right? As we look at -- obviously, as you point out, we've had some tougher comps relatively speaking is given the very strong growth we've had '24 into '25 as auto recovery has progressed. What we mentioned in our prepared remarks is in the second half of '25, we've had 20% year-on-year growth relative to the second half of '24, which was a record prior to this year -- second half of this year. So I think you're seeing us continuing to do well as the levels start to normalize.

And then we talked about our 2- to 3-year goal of getting to $1 billion in revenue. So I'm not going to tell you on this call if we're going to get exactly 20% next year or not. But I think as we look at it, we feel very good about averaging 20% over time and importantly, getting to that $1 billion goal in 2 to 3 years, top line growth organically.

Our final question comes from Mitch Rubin with Raymond James.

This is Mitch on behalf of Greg Peters. So I was wondering if you could provide us with an update on the progress of California with carrier participation and how much impact a full panel of carriers would be?

Yes. So California has been sort of steadily kind of ramping carrier by carrier, segment by segment. And so it's -- there is meaningful spend in the state now. I think it's like a top 3 to 5 state in Q3. Of course, it is the largest state. So it's still just -- it's not quite proportional to its potential scale yet. So we view California as having still some room to grow. It's a little hard to dimensionalize that, but we think there could be still some meaningful upside left in California as we progress into next year. And we would hope to get California back to kind of a steady-state environment sometime in 2026.

Great. So my follow-up is you guys have done a great job of managing on advertisement costs. Where is there any room for improvement? Where is most of the incremental leverage going to come from investments in technology?

So I think the way we look at the business on is we're always looking to drive efficiency in the business, right? How do we simplify, how do we be more efficient in the business. And as we've talked about in some of our prior calls, and I think it's been one thing that's been ingrained in us as a management team is how do we think about how we spend our dollars in a way that we're getting the right return for shareholders. It's having gone through the period we did. It's sort of a silver lining in that period. So that has continued.

And we're continuing to see ways that we bring more efficiency in the business. So for example, this year, headcount is up roughly 10% if I look into Q3 where we landed, but operating costs are basically the same. That reflects we are driving efficiency. We're changing the composition of the team. We're also using technology to make the team more efficient and get more productivity through the team.

As we look ahead to next year, we're not seeing a lot of significant increase in headcount, but we are seeing continued investment in AI areas and including technologies that help the team leverage AI more efficiently. And so that's where I think you'll continue to see us doing that. And that will be driving, I think, a lot of leverage for us and efficiency going forward.

Yes. Just to give maybe a couple of examples, right? Like where our AI bidding technology has really allowed us to do a lot more with our traffic operations teams where we've effectively automated a huge amount of work that used to be manual. Now we've turned that and through Smart Campaigns out to our carriers and our carrier-facing teams now have to do a lot less manual campaign management on behalf of carriers.

So all of our bidding automation has been a huge unlock in terms of efficiency. Within our engineering organization, we've got broad adoption now of Copilots for engineering. In some cases, we have teams that are writing code like they're just inferencing code as the primary way of writing code. So we're getting some real benefit in our engineering organization. What else? We've talked about our voice agents, right. So our call center operations, we've now begun to introduce voice agents into that to reduce some of the reliance on human call center operators.

So it's really at every sort of within every function of the business, we are finding ways to drive efficiency. And we are, in fact, going function by function to sort of systematically identify activities that can be automated using GenAI or just good old-fashioned software. And that is a process that will continue all through next year.

I appreciate the color. Congratulations on the great path.

Go ahead, operator.

And with no further questions in queue, I'd like to turn the conference back over to management for closing remarks. Thank you.

Thank you. And thank you all for joining. The state of the business is strong. It's getting stronger as we continue to produce record performance quarter after quarter. We are accelerating right now our innovation of new products, features, traffic data, AI capabilities.

And as we do, we're transforming from a lead gen vendor to a growth solutions partner for our customers. We are very energized to continue growing towards our $1 billion revenue goal as we build EverQuote into the lean growth partner for P&C insurance providers. Thanks all for joining today.

This concludes today's conference call. You may now disconnect.