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What changed in EverQuote, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of EverQuote, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+375 added−564 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-27)

Top changes in EverQuote, Inc.'s 2023 10-K

375 paragraphs added · 564 removed · 219 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

42 edited+20 added−35 removed18 unchanged
Biggest changeWe offer insurance providers the following key benefits: • Access to a high volume of in-market online consumers • Efficient acquisition of consumers that match providers’ specific criteria • High bind rates for referrals through broad data integration with providers • A flexible advertising channel We derive our revenue from sales of consumer referrals to third-party insurance providers and directly from commissions on sales of policies by our DTC agents.
Biggest changeWe offer insurance providers a number of benefits to enable them to drive profitable growth, such as access to a high volume of insurance shoppers, precise targeting capabilities to ensure they connect with the right prospects, high bind rates for consumer referrals through broad data integration with insurance providers, and a flexible advertising channel. Consumer engagement and benefits.
Information on our website is not part of this Annual Report on Form 10-K or any of our other securities filings unless specifically incorporated herein by reference. In addition, our filings with the SEC may be accessed through the SEC’s Electronic Data Gathering, Analysis and Retrieval system at http://www.sec.gov .
Information on our website is not part of this Annual Report on Form 10-K or any of our other securities filings unless specifically incorporated herein by reference. In addition, our filings with the Securities and Exchange Commission, or SEC, may be accessed through the SEC’s Electronic Data Gathering, Analysis and Retrieval system at http://www.sec.gov .
Proprietary, data-driven technology platform. Our platform efficiently attracts consumers shopping for insurance to our websites and call center, which match them to relevant providers for streamlined quoting. This enables us to maintain high levels of quality control and provide real-time referrals to insurance providers at the moment of the consumer’s purchase intent. Consumer engagement and benefits.
Proprietary, data-driven technology platform. Our platform efficiently attracts consumers shopping for insurance to our websites and call center, which match them to relevant providers for streamlined quoting. This enables us to maintain high levels of quality control and provide real-time referrals to insurance providers at the moment of the consumer’s purchase intent. Insurance provider engagement and benefits.
Our agent marketing focuses on educating agents on how consumer buying behavior is changing and increasingly moving online and how they can better acquire and serve consumers in the digital world through participation in our marketplace. We reach new agents online through email, search, telephone calls, social media, and content marketing and in person at tradeshows and conferences.
Our agent marketing strategy focuses on educating agents on how consumer buying behavior is changing and increasingly moving online and how they can better acquire and serve consumers in the digital world through participation in our marketplace. We reach new agents online through email, telephone calls, social media, content marketing and in person at tradeshows and conferences.
All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law. 10 Table of Contents
All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law. 9 Table of Contents
Because the laws and regulations governing insurance, financial services, privacy, data security and marketing are constantly evolving and striving to keep pace with innovations in technology and media, it is possible that we may need to materially alter the way we conduct some parts of our business activities or be prohibited from conducting such activities altogether at some point in the future.
Because the laws and regulations governing the internet, privacy, data security, marketing, and insurance are constantly evolving and striving to keep pace with innovations in technology and media, it is possible that we may need to materially alter the way we conduct some parts of our business activities or be prohibited from conducting such activities altogether at some point in the future.
We have leveraged our data assets, technology platform and engineering and data science capabilities, along with our growing audience of consumers and network of insurance providers, to expand our platform from the auto insurance market into other markets such as home, life and health insurance. We have the ability to enter new verticals with only a modest increase in headcount.
We have leveraged our data assets, technology platform and engineering and data science capabilities, along with our growing audience of consumers and network of insurance providers, to expand our platform from the auto insurance market into other markets such as home and renters insurance. We have the ability to enter new verticals with only a modest increase in headcount.
Our website and the information contained on, or that can be accessed through, the website will not be deemed to be incorporated by reference in, and are not considered part of, this Annual Report on Form 10-K. Available Information Our Internet address is www.everquote.com.
Our website and the information contained on, or that can be accessed through, the website will not be deemed to be incorporated by reference in, and are not considered part of, this Annual Report on Form 10-K. 8 Table of Contents Available Information Our internet address is www.everquote.com.
The principal purposes of our equity 9 Table of Contents incentive plans are to attract, retain and motivate employees, consultants and directors through the granting of stock-based compensation awards in ways that encourage long-term retention and are aligned with the interests of our stockholders.
The principal purposes of our equity incentive plans are to attract, retain and motivate employees, consultants and directors through the granting of stock-based compensation awards in ways that encourage long-term retention and are aligned with the interests of our stockholders.
Our Growth Strategies We aspire to be the largest online source of insurance policies by using data and technology to make insurance simpler, more affordable and personalized, ultimately reducing cost and risk. Data-driven innovation is at the core of our strategy, culture and operating focus.
Our Growth Strategies We aspire to be the largest online source of insurance policies by using data and technology to make insurance simpler, more affordable and personalized. Data-driven innovation is at the core of our strategy, culture and operating focus.
Industry Overview Insurance is one of the largest segments of the United States economy and is highly fragmented with over 2,500 insurance carriers and over 100,000 insurance agencies, which collectively issued policies representing over $2 trillion in premiums in 2021.
Market Opportunity Insurance is one of the largest segments of the United States economy and is highly fragmented with over 2,500 insurance carriers and over 100,000 insurance agencies, which collectively issued policies representing over $2 trillion in premiums in 2021.
For that reason, our human capital resources objectives include attracting, retaining, developing and motivating a diverse team of highly skilled employees at all levels. We value our employees and provide them with competitive cash compensation as well as opportunities for equity ownership.
Our human capital is integral to our future success. For that reason, our human capital resources objectives include attracting, retaining, developing and motivating a diverse team of highly skilled employees at all levels. We value our employees and provide them with competitive cash compensation as well as opportunities for equity ownership.
Increased quote requests, combined with quote and bind feedback, improve our third-party insurance providers’ advertising and marketing efficiency in our marketplace, resulting in more providers and provider spend. More providers and provider spend enable us to attract more consumers, generating more data. 6 Table of Contents Flexible business model.
Increased quote requests, combined with quote and bind feedback, improve insurance providers’ advertising and marketing efficiency, resulting in more providers and advertising spend in our marketplace. More providers and advertising spend enable us to attract more consumers, generating more data. 5 Table of Contents Flexible business model.
For our current agent customers, we communicate the value of our platform and educate them on its use through our onboarding process, ongoing outreach and account performance reports. Our agency sales team focuses on onboarding new agents.
For our current agent customers, we communicate the value of our platform and educate them on its use through our onboarding process, ongoing outreach and account performance reports. Our agency sales team focuses on onboarding new agents. Our customer success team focuses on agent retention and revenue growth.
Intellectual Property We seek to protect our intellectual property through a combination of copyrights, trademarks, service marks, domain names, trade secret laws, confidentiality procedures and contractual restrictions. We have a number of registered and unregistered trademarks. We own federal registrations for trademarks including EVERQUOTE, as well as multiple pending applications.
See —“Risk factors-Risks related to Laws and Regulation.” Intellectual Property We seek to protect our intellectual property through a combination of copyrights, trademarks, service marks, domain names, trade secret laws, confidentiality procedures and contractual restrictions. We have a number of registered and unregistered trademarks. We own federal registrations for trademarks including EVERQUOTE, as well as multiple pending applications.
We believe that the rise of digital insurance products and shopping experiences will enable more personal, end-to-end shopping experiences, products and services. 5 Table of Contents Our Solution Our results-driven marketplace, powered by our proprietary data and technology platform, matches and connects consumers seeking to purchase insurance with relevant options from our network of insurance providers, including our own DTC agents, saving consumers and providers time and money.
We believe that the rise of digital insurance products and shopping experiences will enable more personal, end-to-end shopping experiences, products and services, resulting in more consumers shopping for insurance online. 4 Table of Contents Our Solution Our results-driven marketplace, powered by our proprietary data and technology platform, matches and connects consumers seeking to purchase insurance with relevant options from our network of insurance providers, saving consumers and providers time and money.
In addition, we may launch new marketing channels to acquire consumers both online and offline. We believe that there is an opportunity to attract substantially more high-intent consumers to our existing insurance offerings and that there are further expansion opportunities in adjacent verticals. Add more insurance providers and increase revenue per provider.
In addition, we may launch new marketing channels to acquire consumers both online and offline. We believe that there is an opportunity to attract substantially more high-intent consumers to our existing insurance offerings and that there are further expansion opportunities in adjacent verticals. Expand our platform.
With our diverse team of analysts, engineers and business development employees, as well as our partnerships with leading third-party insurance providers, and our own DTC agents, we are working to build the largest and most trusted online insurance marketplace in the world.
With our diverse team of analysts, engineers and business development employees, as well as our relationships with leading third-party insurance providers, we are working to build the largest and most trusted online insurance marketplace in the United States.
As our data assets grow, our algorithms become more powerful. We believe our data science capabilities, combining the use of proprietary data assets with scalable machine learning driven automation, give us a significant competitive advantage . Powerful network effects. Our insurance marketplace benefits from significant network effects.
As our data assets grow, our algorithms become more powerful. We believe our data science capabilities, combining the use of proprietary data assets with scalable machine learning driven automation, give us a significant competitive advantage . Scale of distribution capacity.
Conversely, during economic downturns, advertising expenses can be rapidly reduced. We are also able to quickly adjust our advertising expense if we believe the revenue associated with it does not result in incremental profit to the business. Breadth and scale of our distribution.
Conversely, during economic downturns, advertising expenses can be rapidly reduced. We are also able to quickly adjust our advertising expense if we believe the revenue associated with it does not result in incremental profit to the business. Ability to expand with significant operating leverage.
Our carrier marketing initiatives are designed to deliver high-value content on how carriers can increase efficiency in their customer acquisition efforts by capitalizing on the increasing targetability and personalization enabled by our marketplace.
Our carrier sales and marketing initiatives are designed to deliver high-value content on how carriers can increase efficiency in their customer acquisition efforts by capitalizing on the increasing targetability and personalization enabled by our marketplace. We develop a deep understanding of our carrier customers’ objectives to optimize their campaign performance and grow their budgets in our marketplace.
We plan to grow the number of insurance providers on our platform by demonstrating the value proposition of our marketplace as an efficient, scalable customer acquisition channel and adding new provider-facing features.
To achieve this goal, we intend to continue to grow our business by pursuing the following strategies: Add more insurance providers and increase revenue per provider. We plan to grow the number of insurance providers on our platform by demonstrating the value proposition of our marketplace as an efficient, scalable customer acquisition channel and adding new provider-facing features.
We connect providers to a large volume of high-intent, pre-validated consumer referrals that match the insurers’ specific requirements. The transparency of our marketplace, as well as the campaign management tools we offer, make it easy for insurance carriers and third-party agents to evaluate the performance of their marketing spend on our platform and manage their own return on investment.
The transparency of our marketplace, as well as the campaign management tools we offer, are designed to make it easy for insurance carriers and third-party agents to evaluate the performance of their marketing spend on our platform and manage their own return on investment.
We also compete with offline media, such as television, radio and direct mail. We believe we compete favorably on the basis of the scale and quality of our consumer referrals, our seamless handoff capability, our ability to align consumers with our providers’ preferences and business strategies and the targeting capabilities of our platform.
We believe we compete favorably on the basis of the scale and quality of our consumer referrals, our seamless handoff capability, our ability to align consumers with our providers’ preferences and business strategies and the targeting capabilities of our platform. Competition for consumers. The competition for consumer traffic and advertising space online is broad and diverse.
Our marketplace consists of an extensive network of national and regional carriers as well as technology enabled start-ups. We plan to continue to grow both the number of carriers participating in our marketplace and the level of participation from each carrier. We also receive commissions from our insurance carrier customers for policies sold by our own DTC agents.
Our marketplace consists of an extensive network of national and regional carriers as well as technology-enabled start-ups. Our two largest customers together accounted for 27% of our total revenue for the year ended December 31, 2023. We plan to continue to grow both the number of carriers participating in our marketplace and the level of participation from each carrier.
We focus on building deep relationships and establishing thought leadership among carriers through our presence at industry tradeshows, targeted delivery of whitepapers and other materials, and personal outreach to key decision makers and marketing teams. This team takes a data-driven approach to helping insurance carriers bind more policies with their target consumers at lower cost per sale than other channels.
We focus on building deep relationships and establishing thought leadership among carriers through our presence at industry tradeshows, targeted delivery of whitepapers and other materials, and personal outreach to key decision makers and marketing teams.
In addition, we may selectively look for opportunities to expand into additional non-auto insurance verticals beyond those currently in our marketplace, through either organic development or acquisition. We believe there are additional opportunities to grow our business, such as expanding internationally and launching non-insurance financial service offerings. Technology and Infrastructure Our technology platform combines internally developed, third-party and open-source software.
We plan to expand and deepen our relationships with our insurance provider customers by providing additional products and services to them. In addition, we may selectively look for opportunities to expand into additional verticals beyond those currently in our marketplace, through either organic development or acquisition. Technology and Infrastructure Our technology platform combines internally developed, third-party and open-source software.
In addition, we regularly conduct employee surveys to gauge employee engagement and solicit feedback and enhance our understanding of the views of our employees, work environment and culture. The results from engagement surveys are used to implement programs and processes designed to enhance employee engagement and improve the employee experience. Regulation Our business operates in a heavily regulated industry.
In addition, we regularly conduct employee surveys to gauge employee engagement and solicit feedback and enhance our understanding of the views of our employees, work environment and culture.
Additionally, we engage with consumers offline through non-company branded television campaigns and consumer calls placed directly to a call center operated by us, by one of our verified partners, or by an insurance agent.
We engage with consumers through multiple channels that include our own websites and our third-party publishers’ websites, including verified partners that provide us with quote requests completed by consumers. Additionally, we engage with consumers offline, including through consumer calls placed directly from a call center operated by us, by one of our verified partners, or by a third-party insurance agent.
Our customer success team analyzes account performance and consults with agents to optimize their participation in our marketplace, help them achieve growth and return-on-investment objectives, expand volume and add products. Our Customers Our insurance provider customers include: • Carriers: Insurance carriers write auto, home and renters, life, and/or health insurance policies for consumers either directly and/or through agents.
This team analyzes account performance and consults with agents to optimize their participation in our marketplace, help them achieve growth and return-on-investment objectives, expand volume and add products. Competition We face competition to attract consumers to our websites as well as for insurance provider advertising and marketing spend. Competition for insurance provider advertising and marketing spend.
Various aspects of our business are, may become, or may be viewed by regulators from time to time as subject, directly or indirectly, to U.S. federal, state and foreign laws and regulations. We are affected by laws and regulations that apply to businesses in general and the insurance industry, as well as to businesses operating on the internet.
The results from engagement surveys are used to implement programs and processes designed to enhance employee engagement and improve the employee experience. 7 Table of Contents Regulation Various aspects of our business are, may become, or may be viewed by regulators from time to time as subject, directly or indirectly, to U.S. federal, state, and foreign laws and regulations.
Our DTC agents bind policies for consumers, further streamlining the consumer shopping experience. Our services are free for consumers, and we derive our revenue from sales of consumer referrals to insurance providers and directly from commissions on sales of policies.
Our services are free for consumers, and we derive our revenue from consumer inquires sold as referrals to insurance providers and directly from commissions on sales of policies by our direct to consumer, or DTC, insurance agency. General Developments A substantial majority of the referrals made through our marketplace have historically been for automotive insurance.
We use network, website, service and hardware-level monitoring, coupled with remote-content monitoring, to maintain a high level of uptime and availability for our systems with high-performance delivery. Sales and Marketing Our marketing efforts are designed to increase engagement by both consumers and insurance providers and enhance their awareness of our company.
We use network, website, service and hardware-level monitoring, coupled with remote-content monitoring, to maintain a high level of uptime and availability for our systems with high-performance delivery. Our Customers Our insurance provider customers include insurance carriers and third-party insurance agents. Insurance carriers write auto, home and renters, and life insurance policies for consumers directly and through agents.
To achieve this goal, we intend to continue to grow our business by pursuing the following strategies: Attract more consumers to our marketplace. We plan to expand the number of consumers reaching our marketplace through existing channels by leveraging the superior features and growing data assets of our platform.
In addition, we plan to expand revenue per provider by increasing consumer traffic and quote request volume, adding verticals and innovating advertiser products and services. Attract more consumers to our marketplace. We plan to expand the number of consumers reaching our marketplace through existing channels by leveraging the superior features and growing data assets of our platform.
Our vision is to become the largest online source of insurance policies by using data, technology and knowledgeable advisors to make insurance simpler, more affordable and personalized, ultimately reducing cost and risk.
ITEM 1. BUS INESS Company Overview We operate a leading online marketplace for insurance shopping, connecting consumers with insurance provider customers, which includes both carriers and agents. Our vision is to become the largest online source of insurance policies by using data, technology and knowledgeable advisors to make insurance simpler, more affordable and personalized.
Furthermore, we believe the breadth of the insurance provider options in our marketplace gives us an inherent advantage over single-brand insurance providers with respect to conversion and bind rates for consumers. Competition for insurance provider advertising and marketing spend. We compete for insurance providers’ advertising and marketing spend with other internet sites, performance marketers and online marketing service providers.
Furthermore, we believe the breadth of the insurance provider options in our marketplace gives us an inherent advantage over single-brand insurance providers with respect to conversion and bind rates for consumers. Employees and Human Capital Resources Our company culture is data-driven, entrepreneurial, diverse and innovative. As of January 31, 2024, we had 384 employees, of which 381 were full-time.
While carriers continue to shift advertising dollars online in order to capitalize on the superior marketing characteristics of digital channels, the shift of marketing budgets online continues to lag the shift in consumer behavior. The insurance industry is also beginning to make products easier to buy and sell through digital channels with the integration and digitalization of insurance products.
The insurance industry is also making products easier to buy and sell through digital channels with the integration and digitalization of insurance products.
Market Opportunity The challenges faced in the $171 billion insurance sales, marketing and distribution market create a significant opportunity for companies that can efficiently align consumers and providers.
To capture new policies and retain existing customers, U.S. insurance carriers spent $171 billion in 2021 on marketing and distribution, of which $100 billion related to P&C insurance alone. However, carriers face challenges in this market that create a significant opportunity for companies that can efficiently align consumers and providers.
Additionally, we have built an efficient, consultative sales and customer success organization, which sells our marketplace referrals to insurance carriers and agencies and engages directly with consumers to sell life and health insurance policies. Consumer marketing. Our marketplace acquires consumers through both online and offline marketing efforts.
Over time, we believe we will increase our brand equity and recognition as we serve more ad impressions. Additionally, we have built an efficient, consultative sales and customer success organization, which sells our marketplace referrals to insurance carriers and agencies. Carrier sales and marketing.
Our campaign management team develops a deep understanding of our carrier customers’ objectives to optimize their campaign performance and grow their budgets in our marketplace. Agent sales and marketing. Our agent marketing initiatives are designed to reach, educate and acquire insurance agents not yet participating in our marketplace.
Our team takes a data-driven approach to helping insurance carriers bind more policies with their target consumers at a lower cost per sale than other channels. Agent sales and marketing. Our agent sales and marketing initiatives are designed to reach, educate and acquire insurance agents not yet participating in our marketplace.
Our two largest customers, Progressive Casualty Insurance Company and State Farm Mutual Automobile Insurance Company, together accounted for 32% of our total revenue for the year ended December 31, 2022. • Third-party Agents: Insurance agents deliver auto, home and renters, life, and/or health insurance to consumers on behalf of one or more carriers.
Insurance agents deliver auto, home and renters, and life insurance to consumers on behalf of one or more carriers. As of December 31, 2023, we had approximately 6,500 enrolled insurance agencies on our platform.
Our results-driven marketplace, powered by our proprietary data and technology platform, is reshaping the insurance shopping experience for consumers and improving the way insurance providers attract and connect with consumers shopping for insurance. Finding the right insurance product is often challenging for consumers, who face limited online options, complex, variable and opaque pricing, and myriad coverage configurations.
Our results-driven marketplace, powered by our proprietary data and technology platform, is improving the way insurance providers attract and connect with consumers shopping for insurance. We operate a marketplace to connect insurance providers to a large volume of high-intent, pre-validated consumer referrals that match the insurers’ specific underwriting and profitability requirements.
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ITEM 1. BUS INESS Company Overview EverQuote makes insurance shopping easy, efficient and personal, saving consumers and insurance providers time and money. We operate a leading online marketplace for insurance shopping, connecting consumers with insurance providers. Our mission is to empower insurance shoppers to better protect life’s most important assets—their family, health, property, and future.
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We present consumers with a single starting point for a comprehensive insurance shopping experience where consumers can engage with insurance carriers through multiple channels based on their preferences.
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We present consumers with a single starting point for a comprehensive and cost-effective insurance shopping experience. Our marketplace reduces the time consumers spend searching across multiple sites by delivering broader and more relevant results than consumers may find on their own. In addition to our marketplace, we operate a direct to consumer, or DTC, insurance agency.
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Our marketplace enables consumers to choose to visit an insurance provider’s website to purchase a policy or engage with a carrier or agent by phone or submit their data to insurance providers to receive quotes.
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Insurance providers, which we view as including carriers, our own DTC agents, and third-party agents, operate in a highly competitive and regulated industry and typically specialize in pre-determined subsets of consumers.
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Starting in late 2021 and continuing throughout 2023, the auto insurance industry experienced deteriorating underwriting performance due to a rise in claims, inflation, and inadequate policy premiums. This deteriorated underwriting performance has caused our insurance carrier customers to reduce spending on new customer acquisition, which had a negative impact on the pricing and demand for consumer referrals in our marketplace.
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As a result, not every consumer is a good match for every provider, and some providers can struggle to reach the segments that are most desirable for their business models. Traditional offline and online advertising channels reach broad audiences but lack the fine-grained consumer acquisition capabilities needed for optimally matching consumers to specific insurance products.
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The state of the auto insurance market remains volatile, and while we believe we have started to see some improvement in spending patterns, a recovery could be prolonged by further cost inflation, increased claim severity and frequency, or insufficient policy premium increases. In June 2023, we implemented a workforce reduction plan to improve operating efficiency.
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To capture new policies and retain existing customers, U.S. insurance carriers spent $171 billion in 2021 on marketing and distribution, including $10.5 billion in digital advertising, based on data from S&P Global Market Intelligence, Insider Intelligence, Inc., and our own estimates.
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In order to increase our focus on property and casualty, or P&C, insurance verticals, we also exited our health insurance vertical, an area that would have required significant capital investment and scale to effectively compete amid an increasingly unpredictable regulatory environment.
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We engage with consumers through user-friendly and easy-to-navigate websites that make shopping for insurance easy, cost-effective and more personal. We also connect with consumers who have completed a quote request with one of our verified partners.
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In August 2023, we sold assets related to our health insurance vertical including Eversurance LLC, a former subsidiary of the Company.
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We aim to make the end-to-end shopping experience seamless by enabling consumers to securely share their data with matched providers, accelerating quoting and reducing repetition in the shopping process.
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We aim to make the end-to-end shopping experience for consumers seamless by facilitating delivery of highly relevant insurance product options from a single starting point, reducing time and effort to research and compare insurance product options, and improving the purchase experience to help consumers make better decisions.
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We offer consumers a streamlined and personalized insurance buying experience, providing the following key benefits: • Saving time and money • A single starting point for a comprehensive insurance shopping experience • A results-driven insurance shopping destination efficiently matching consumers with relevant options • Seamless online or offline handoff to quote or bind a policy Insurance provider engagement and benefits.
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Broad participation of top-tier insurance carriers within our marketplace enables consumers to efficiently navigate a range of options and offers that are relevant to their insurance coverage searches. By enabling insurance carriers to apply sophisticated targeting, we facilitate access to the most relevant product options for each respective consumer based on consumer-provided demographics and other relevant characteristics.
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Over the past decade, we have cultivated relationships with a broad range of insurance provider partners and currently have over 100 carriers participating in our marketplace either directly or via our network of approximately 8,000 agents as well as our own DTC agents.
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Our robust distribution network includes approximately 75 insurance carriers and 6,500 agents representing virtually all major and niche P&C carriers operating in the United States. Our distribution network is a significant competitive advantage that allows us to offer consumers a broad array of insurance solutions and enables us to attract a broad spectrum of consumer traffic efficiently.
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We believe that the breadth of our coverage provides a significant benefit to our consumers and is a key competitive advantage, particularly in our largest vertical of auto insurance where significantly all of the top carriers participate in our marketplace. Agent workforce.
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Scale of consumer traffic. We attract large volumes of consumer traffic to our marketplace through both our proprietary owned-and-operated assets as well as traffic we purchase through third-party publishers, including our verified partner network.
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Starting with our acquisitions of Crosspointe Insurance & Financial Services, LLC, which we later renamed Eversurance, and Policy Fuel, LLC and its affiliated entities, or PolicyFuel, we significantly expanded the number of DTC agents on our platform.
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The scale of our combined traffic operations allows us to serve our distribution network with high volumes of consumer traffic across a spectrum of purchasing intent, carrier fit, and lifetime value. Powerful network effects. Our insurance marketplace benefits from significant network effects.
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These agents allow us to directly offer insurance products to consumers, more efficiently serve insurance shoppers with a personalized experience and contribute to our data insight. Ability to expand with significant operating leverage.
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We are focused on further penetrating the large base of more than 100,000 insurance agencies in the United States. 6 Table of Contents Sales and Marketing Our sales and marketing efforts are designed to increase engagement by both insurance providers and consumers and enhance their awareness of our company. Our marketing spend across channels is fundamentally algorithmic and performance based.
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Diversified business model. Our marketplace operates in several insurance markets including auto, home and renters, life and health, which provides an opportunity to diversify our revenue base and expand our potential growth opportunities.
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We compete for insurance providers’ advertising and marketing spend with other internet sites, performance marketers and online marketing service providers. We also compete with offline media, such as television, radio and direct mail.
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Additionally, by operating in several verticals we can lessen our exposure to negative impacts in any one of these markets and through the expansion of our DTC agency offerings, we are able to generate revenue from carrier commissions, primarily from the sales of health and auto policies.
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Our competitors offer various marketplaces, products and services that compete with us.
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In addition, we plan to expand revenue per provider by increasing consumer traffic and quote request volume, adding verticals and innovating advertiser products and services. Despite the high costs, saturation and lower overall conversion rates associated with traditional advertising channels, such as television, radio and billboards, insurance carriers still allocate a significant portion of their advertising budgets towards these channels.
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We are subject to laws and regulations that apply to businesses in general, such as those relating to worker classification, employment, payments, worker confidentiality obligations, consumer protection and taxation.
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We have achieved over $400 million in annual revenue while capturing only a small fraction of insurance marketing spend in aggregate and at an individual provider level. 7 Table of Contents Expand and deepen consumer engagement. We continuously leverage our data assets and growing consumer volume to conduct test-driven product development.
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As an online business, we are also subject to laws and regulations governing the internet, such as those relating to intellectual property ownership and infringement, trade secrets, the distribution of electronic communications, search engines, consumer privacy, and internet tracking technologies, and could be affected by potential changes to laws and regulations that affect the growth, popularity, or use of the internet, including with respect to net neutrality and taxation on the use of the internet or e-commerce transactions.
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We actively innovate with new consumer offerings and enhanced user experience to deepen consumer engagement. Our goal is to provide broader and more meaningful consumer experiences, leading to increased return visits, and higher frequency of interaction, which we believe will result in greater revenue per user.
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Because we work with consumer information and other data and engage in marketing and advertising activities via telephone, email, and text messages, we are also subject to laws and regulations that address privacy, data protection and collection, storing, sharing, use, disclosure, retention, security, protection transfer and other processing of personal information and other data, including the California Consumer Privacy Act, or CCPA, the California Privacy Rights Act, or CPRA, and other state privacy laws, the Controlling the Assault of Non-Solicited Pornography and Marketing Act, or CAN-SPAM Act, and the Telephone Consumer Protection Act of 1991, or TCPA.
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With our DTC agency offerings, we have expanded our opportunity to directly connect with insurance shoppers. We believe that our DTC agency experience enables us to deepen consumer-provider engagement by creating a more personalized and streamlined end-to-end consumer shopping journey, with enhanced product selection and less friction from arrival to policy sale. Enhance our brand awareness.
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The burdens imposed by these and other laws and regulations currently in effect or that may be enacted, or new interpretation of existing laws and regulations, may require us to modify our data processing practices and policies and to incur substantial costs in order to comply.
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We believe we have significant long-term opportunities to increase our brand awareness. Historically, our marketing efforts have been focused on algorithmic consumer acquisition rather than brand marketing. We plan to further expand our marketing channels to drive greater brand recognition and attract a broader consumer audience. Expand our platform.
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We take a variety of technical and organizational security measures and other measures to protect our data, including data pertaining to our consumers, employees, and business partners. Despite measures we put in place, we may be unable to anticipate or prevent unauthorized access to such data. A substantial majority of the insurance carriers using our platform are P&C insurance carriers.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

76 edited+99 added−270 removed78 unchanged
Biggest changeA dditionally, any failure by us or third parties in our verified partner network on which we rely for quote requests to adhere to or successfully implement appropriate processes and procedures in response to existing regulations and changing regulatory requirements could result in significant legal and monetary liability, including fines and penalties, or damage to our reputation in the marketplace, any of which could have a material adverse effect on our business, financial condition, and results of operations.
Biggest changeAny negative outcomes from such regulatory actions or litigation, including monetary penalties or damages, could have a material adverse effect on our financial condition, results of operation and reputation. We may become subject to litigation, audit or investigation, which could result in financial liability, fines and penalties, restrictions on our operations or reputational damage.
Our use of “open source” software could adversely affect our ability to protect our proprietary software and subject us to possible litigation. We use open source software in connection with our software development. From time to time, companies that use open source software have faced claims challenging the use of open source software and/or compliance with open source license terms.
Our use of “open source” software could adversely affect our ability to protect our proprietary software and subject us to possible litigation. We use open source software in connection with our software development. From time to time, companies that use open source software have faced claims challenging the use of open source software or compliance with open source license terms.
Borrowing under our revolving line of credit or term loan, combined with our other financial obligations and contractual commitments, could have significant adverse consequences, including: • requiring us to dedicate a portion of our cash resources to the payment of interest and principal, reducing money available to fund working capital, capital expenditures, product development and other general corporate purposes; • increasing our vulnerability to adverse changes in general economic, industry and market conditions; • subjecting us to restrictive covenants that may reduce our ability to take certain corporate actions or obtain further debt or equity financing (for example, the covenants in the loan and security agreement for our revolving line of credit include limitations on our ability to incur additional indebtedness and engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses); • limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and • placing us at a competitive disadvantage compared to our competitors that have less debt or better debt servicing options.
Borrowing under our revolving line of credit or otherwise, combined with our other financial obligations and contractual commitments, could have significant adverse consequences, including: • requiring us to dedicate a portion of our cash resources to the payment of interest and principal, reducing money available to fund working capital, capital expenditures, product development and other general corporate purposes; • increasing our vulnerability to adverse changes in general economic, industry and market conditions; • subjecting us to restrictive covenants that may reduce our ability to take certain corporate actions or obtain further debt or equity financing (for example, the covenants in the loan and security agreement for our revolving line of credit include limitations on our ability to incur additional indebtedness and engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses); • limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and • placing us at a competitive disadvantage compared to our competitors that have less debt or better debt servicing options.
Our corporate governance documents include provisions: • providing that directors may be removed by stockholders only for cause and only with a vote of the holders of shares representing a majority of the voting power of all shares that stockholders would be entitled to vote for the election of directors; • limiting the ability of our stockholders to call and bring business before special meetings of stockholders and to take action by written consent in lieu of a meeting; • requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors; 33 Table of Contents • authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our Class A common stock; and • limiting the liability of, and providing indemnification to, our directors and officers.
Our corporate governance documents include provisions: • providing that directors may be removed by stockholders only for cause and only with a vote of the holders of shares representing a majority of the voting power of all shares that stockholders would be entitled to vote for the election of directors; • limiting the ability of our stockholders to call and bring business before special meetings of stockholders and to take action by written consent in lieu of a meeting; • requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors; • authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our Class A common stock; and • limiting the liability of, and providing indemnification to, our directors and officers.
Some of the factors that may cause the market price of our Class A common stock to fluctuate include: • price and volume fluctuations in the overall stock market from time to time; • volatility in the market price and trading volume of comparable companies; 30 Table of Contents • actual or anticipated changes in our earnings or fluctuations in our operating results or in the expectations of securities analysts; • announcements of new service offerings, strategic alliances or significant agreements by us or by our competitors; • loss of key personnel; • litigation involving us or that may be perceived as having an adverse effect on our business; • changes in general economic, industry and market conditions and trends; • investors’ general perception of us; • sales of large blocks of our stock; and • announcements regarding industry consolidation.
Some of the factors that may cause the market price of our Class A common stock to fluctuate include: • price and volume fluctuations in the overall stock market from time to time; • volatility in the market price and trading volume of comparable companies; • actual or anticipated changes in our earnings or fluctuations in our operating results or in the expectations of securities analysts; • announcements of new service offerings, strategic alliances or significant agreements by us or by our competitors; • loss of key personnel; • litigation involving us or that may be perceived as having an adverse effect on our business; • changes in general economic, industry and market conditions and trends; • investors’ general perception of us; • sales of large blocks of our stock; and • announcements regarding industry consolidation.
In many instances, third-party publishers can change the media inventory they make available to us at any time in ways that could impact our results of operations. In addition, third-party publishers may place significant restrictions on our offerings. These restrictions may prohibit advertisements from specific clients or specific industries, or restrict the use of certain creative content or formats.
In many instances, third-party publishers can change the media inventory they make available to us, at any time in ways that could impact our results of operations. In addition, third-party publishers may place significant restrictions on our offerings. These restrictions may prohibit advertisements from specific customers or specific industries or restrict the use of certain creative content or formats.
Under these rules, a company of which more than 50% of the voting power is held by an 32 Table of Contents individual, a group or another company is a “controlled company” and, as such, will be exempt from certain corporate governance requirements, including requirements that: • a majority of the board of directors consist of independent directors; • director nominees be selected or recommended for the board’s selection by independent directors constituting a majority of the independent directors or by a nominations committee with prescribed duties and a written charter and comprised solely of independent directors; and • the board of directors maintain a compensation committee with prescribed duties and a written charter and comprised solely of independent directors.
Under these rules, a company of which more than 50% of the voting power is held by an individual, a group or another company is a “controlled company” and, as such, will be exempt from certain corporate governance requirements, including requirements that: • a majority of the board of directors consist of independent directors; • director nominees be selected or recommended for the board’s selection by independent directors constituting a majority of the independent directors or by a nominations committee with prescribed duties and a written charter and comprised solely of independent directors; and • the board of directors maintain a compensation committee with prescribed duties and a written charter and comprised solely of independent directors.
Moreover, holders of a significant number of shares of our Class A common stock and Class B common stock as of January 31, 2023, have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.
Moreover, holders of a significant number of shares of our Class A common stock and Class B common stock as of January 31, 2024, have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.
If one or more of the search engines or other online sources on which we rely for website traffic were to modify its general methodology for how it displays our advertisements, resulting in fewer consumers clicking through to our websites, our business could suffer.
If one or more of the search engines or other online sources on which we rely for website traffic were to modify its general methodology for how it displays our advertisements, resulting in fewer visitors clicking through to our websites, our business could suffer.
For example, our Class A common stock traded within a range of a high price of $63.44 per share and a low price of $4.05 per share for the period beginning June 28, 2018, our first day of trading on the Nasdaq Global Market, through December 31, 2022.
For example, our Class A common stock traded within a range of a high price of $63.44 per share and a low price of $4.05 per share for the period beginning June 28, 2018, our first day of trading on the Nasdaq Global Market, through December 31, 2023.
Alternatively, if a court were to find the choice of forum provisions contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition and operating results.
Alternatively, if a court were to find the choice of forum provisions contained in our certificate of incorporation to be inapplicable or unenforceable in an 23 Table of Contents action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition and operating results.
We are included in search results as a result of both paid search listings, where we purchase specific search terms that result in the inclusion of our advertisement, and, separately, organic searches that depend upon the content on our sites. Search engines, social media platforms and other online sources often revise their algorithms and introduce new advertising products.
We are included in search results because of both paid search listings, where we purchase specific search terms that result in the inclusion of our advertisement, and, separately, organic searches that depend upon the content on our sites. Search engines, social media platforms and other online sources often revise their algorithms and introduce new advertising products.
If we are unsuccessful in collecting such taxes from our end-customers, we could be held liable for such costs. Such tax assessments, penalties and interest, or future requirements may adversely affect our operating results. For example, we were contacted by a representative from a state tax assessor’s office requesting remittance of uncollected sales taxes.
If we are unsuccessful in collecting such taxes from our end-customers, we could be held liable for such costs. Such tax assessments, penalties and interest, or future requirements may adversely affect our operating results. For example, in 2019, we were contacted by a representative from a state’s tax assessor’s office requesting remittance of uncollected sales taxes.
Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars, or modify the requirements for holding domain names. As a result, we may not be able to acquire or maintain all domain names that use the name EverQuote. We currently operate only in the United States.
Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars, or modify the requirements for holding domain names. As a result, we may not be able to acquire or maintain all domain names that use the name EverQuote. We currently generate revenue only in the United States.
Under our Amended Loan Agreement with Western Alliance Bank, our failure to make payments when due or comply with specified covenants, as well as the occurrence of an event that would 24 Table of Contents reasonably be expected to have a material adverse effect on our business, operations, assets or condition, is an event of default.
Under our Amended Loan Agreement with Western Alliance Bank, our failure to make payments when due or comply with specified covenants, as well as the occurrence of an event that would reasonably be expected to have a material adverse effect on our business, operations, assets or financial condition, is an event of default.
Certain jurisdictions in which we do not collect such taxes may assert that such taxes are applicable, which could result in 29 Table of Contents tax assessments, penalties and interest, to us or our end-customers for the past amounts, and we may be required to collect such taxes in the future.
Certain jurisdictions in which we do not collect such taxes may assert that such taxes are applicable, which could result in tax assessments, penalties and interest, to us or our end-customers for the past amounts, and we may be required to collect such taxes in the future.
Because we have registered 15,949,000 shares of our Class A common stock and Class B common stock that may be issued under our equity incentive plans pursuant to registration statements on Form S-8, any such shares that we issue can be freely sold in the public market upon issuance, subject to the restrictions imposed on our affiliates under Rule 144.
Because we have registered 17,578,382 shares of our Class A common stock and Class B common stock that may be issued under our equity incentive plans pursuant to registration statements on Form S-8, any such shares that we issue can be freely sold in the public market upon issuance, subject to the restrictions imposed on our affiliates under Rule 144.
Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. These steps may be inadequate to protect our intellectual property.
Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights, or may be inadequate to protect our intellectual property.
Any failure by us or the third-party vendors on which we rely for telemarketing, email 26 Table of Contents marketing, and other lead generation activities to adhere to or successfully implement appropriate processes and procedures in response to existing regulations and changing regulatory requirements could result in legal and monetary liability, significant fines and penalties, or damage to our reputation in the marketplace, any of which could have a material adverse effect on our business, financial condition, and results of operations.
Any failure by us or the third-party publishers on which we rely for telemarketing, email marketing, and other performance marketing activities to adhere to or successfully implement appropriate processes and procedures in response to existing laws and regulations and changing regulatory requirements could result in legal and monetary liability, significant fines and penalties, or damage to our reputation in the marketplace, any of which could have a material adverse effect on our business, financial condition and results of operations.
If email providers materially limit or halt the delivery of our emails, or if we fail to deliver emails to consumers in a manner compatible with email providers’ email handling or authentication technologies, our ability to contact consumers through email could be significantly restricted.
In the event ESPs materially limit or halt the delivery of our emails, or if we fail to deliver emails to consumers in a manner compatible with ESPs’ email handling or authentication technologies, our ability to contact consumers through email could be significantly restricted.
Any requirement to disclose our proprietary source code or pay damages for breach of contract could be harmful to our business, results of operations or financial condition, and could help our competitors develop services that are similar to or better than ours. Risks Related to Government Regulation Our businesses are heavily regulated.
Any requirement to disclose our proprietary source code or pay damages for breach of contract could be harmful to our business, results of operations or financial condition, and could help our competitors develop services that are similar to or better than ours.
In addition, equity markets in general, and the equities of technology companies in particular, have experienced and may experience in the future, extreme price and volume fluctuations due to, among other factors, the actions of market participants or other actions outside of our control, including general market volatility caused by the COVID-19 pandemic.
In addition, equity markets in general, and the equities of technology companies in particular, have experienced and may experience in the future, extreme price and volume fluctuations due to, among other factors, the actions of market participants or other actions outside of our control.
If a third-party publisher decides not to make its media channel or inventory available to us or decides to demand a higher cost for such inventory, we may not be able to find media inventory from other websites that satisfies our requirements in a timely and cost-effective manner.
If a third-party publisher decides not to make its media channel or inventory available to us, decides to demand a higher revenue share or places significant restrictions on the use of such inventory, we may not be able to find media inventory from other websites that satisfies our requirements in a timely and cost-effective manner.
A substantial majority of the referrals made through our marketplace are for automobile insurance and our financial prospects depend significantly on the larger automotive industry ecosystem. Revenue from automotive insurance providers accounted for 80% of our total revenue for the year ended December 31, 2022 and 79% of our total revenue for the year ended December 31, 2021.
Because a substantial majority of the referrals made through our marketplace are for automotive insurance, our financial prospects depend significantly on the larger automotive industry ecosystem. Revenue from automotive insurance providers accounted for 79% and 80% of our total revenue for 2023 and 2022, respectively.
Competition for their talents is intense, and retaining such individuals can be difficult. The loss of any of our executive officers or key employees could materially adversely affect our ability to execute our business plan and strategy, and we may not be able to find adequate replacements on a timely basis, or at all.
The loss of any of our executive officers or key employees could materially adversely affect our ability to execute our business plan and strategy, and we may not be able to find adequate replacements on a timely basis, or at all.
Our future success depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand, and we may incur significant costs to attract and retain them. Experienced information technology personnel, who are critical to the success of our business, are in particularly high demand.
Our future success depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand, and we may incur significant costs to attract and retain them.
As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders holding shares representing more than 15% of the voting power of our outstanding voting stock from engaging in certain business combinations with us.
As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders holding shares representing more than 15% of the voting power of our outstanding voting stock from engaging in certain business combinations with us, unless the interested stockholder attained such status with the approval of our board of directors or unless the business combination is approved in a prescribed manner.
If insurance providers are not able to acquire their preferred referrals in our marketplace, they may stop buying referrals from us, or may decrease the amount they are willing to spend for referrals. Our agreements with insurance providers are short-term agreements, and insurance providers can stop participating in our marketplace at any time with no notice.
If insurance providers are not able to acquire their preferred referrals in our marketplace, they may stop buying referrals from us or decrease the amount they are willing to spend for referrals. The majority of our insurance provider customers can stop participating in our marketplace or reduce or terminate their marketing spend with us at any time without notice.
Given the limited trading history of our Class A common stock, there is a risk that an active trading market for our shares may not be sustained, which could put downward pressure on the market price of our Class A common stock and thereby affect the ability of our stockholders to sell their shares at attractive prices, at the times that they would like to sell them, or at all.
Given the limited trading volume and market capitalization, there is a risk that an active trading market for our shares may not be sustained, which could put downward pressure on the market price of our Class A common stock and thereby affect the ability of our stockholders to sell their shares at attractive prices, at the times that they would like to sell them, or at all. 20 Table of Contents The market price of our Class A common stock has been and may continue to be volatile, which could result in substantial losses for investors and could subject us to securities class action litigation.
Anti-takeover provisions in our restated certificate of incorporation and our amended and restated bylaws, as well as provisions of Delaware law, might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our Class A common stock.
Upon registration, such shares would be able to be freely sold in the public market. 22 Table of Contents Anti-takeover provisions in our restated certificate of incorporation and our amended and restated bylaws, as well as provisions of Delaware law, might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our Class A common stock .
We accept payments through credit and debit card transactions. For credit and debit card payments, we pay interchange and other fees, which may increase over time. An increase in those fees may require us to increase the prices we charge and would increase our operating expenses, either of which could harm our business, financial condition and results of operations.
An increase in those fees may require us to increase the prices we charge and would increase our operating expenses, either of which could harm our business, financial condition and results of operations.
This concentration of voting power will limit or preclude the ability of other stockholders to influence corporate matters, including the election of directors, amendments of our organizational documents and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.
The dual-class structure of our common stock has the effect of concentrating voting control with the holders of our Class B common stock, which will limit or preclude the ability of other stockholders to influence corporate matters, including the election of directors, amendments of our organizational documents and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.
In addition to our outstanding Class A common stock, as of January 31, 2023, there were 1,506,020 shares of Class A common stock subject to outstanding options, 564,289 shares of either Class A common stock or Class B common stock subject to outstanding options, 2,611,434 shares of Class A common stock subject to outstanding restricted stock unit awards, or RSUs, and an additional 1,542,044 shares of Class A common stock reserved for future issuance under our equity incentive plan.
In addition to our outstanding Class A common stock, as of January 31, 2024, there were 1,896,102 shares of Class A common stock subject to outstanding options, 390,748 shares of either Class A common stock or Class B common stock subject to outstanding options, 2,060,934 shares of Class A common stock subject to outstanding restricted stock unit awards, or RSUs, and an additional 1,816,303 shares of Class A common stock reserved for future issuance under our equity incentive plan.
Although we are not aware of any material information security incidents to date, we have detected common types of attempts to attack our information systems and data using means that have included viruses and phishing.
Although we are not aware of any material information security incidents to date, we have detected common types of attempts to access our information systems and data without authorization, such as phishing.
Patent and other intellectual property litigation may be protracted and expensive, and the results are difficult to predict and may result in significant settlement costs or require us to stop offering some features, or purchase licenses or modify our products and features while we develop non-infringing substitutes, but such licenses may not be available on terms acceptable to us or at all, which would require us to develop alternative intellectual property. 25 Table of Contents Even if these matters do not result in litigation or are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could harm our business, our operating results and our reputation.
Patent and other intellectual property litigation may be protracted and expensive, and the results are difficult to predict and may result in significant settlement costs or require us to stop offering some features, or purchase licenses or modify our products and features while we develop non-infringing substitutes, but such licenses may not be available on terms acceptable to us or at all, which would require us to develop alternative intellectual property.
If our third-party web hosting providers are unable to keep up with our growing capacity needs, our business could be harmed. 18 Table of Contents Any errors, defects, disruptions or other performance or reliability problems with our network operations could cause interruptions in access to our marketplace as well as delays and additional expense in arranging new facilities and services and could harm our reputation, business, operating results and financial condition.
Any errors, defects, disruptions or other performance or reliability problems with our network operations could cause interruptions in access to our marketplace as well as delays and additional expense in arranging new facilities and services and could harm our reputation, business, operating results and financial condition.
In addition, any indebtedness we incur under our current revolving line of credit or term loan will bear interest at a variable rate, which would make us vulnerable to increases in the market rate of interest.
In addition, any indebtedness we incur under our current revolving line of credit will bear interest at a variable rate, which would make us vulnerable to increases in the market rate of interest. If the market rate of interest increases substantially, we would have to pay additional interest, which would reduce cash available for our other business needs.
We depend on key personnel to operate our business, and if we are unable to retain, attract and integrate qualified personnel, our ability to develop and successfully grow our business could be harmed. We believe our success depends on the efforts and talents of our executives and employees.
We rely on the performance of highly skilled personnel to operate our business, and if we are unable to retain, attract, develop and motivate well-qualified employees, our business and results of operations could be harmed. We believe our success depends on the efforts and talents of our executives and employees.
Sales of a significant number of shares of our Class A common stock in the public market could occur at any time. These sales, or the market perception that the holders of a large number of shares intend to sell shares, could reduce the market price of our Class A common stock.
Any sales under our universal shelf registration statement, or the market perception that the holders of a large number of shares intend to sell shares, could reduce the market price of our Class A common stock.
If these customers were to reduce their level of purchases from us or discontinue their relationships with us, the loss could have a material adverse effect on our results of operations in both the short and long term.
If either or both of these two customers further reduce their level of purchases from us or discontinue their relationships with us, the loss could have a material adverse effect on our results of operations in both the short and long term We depend on third-party media sources, such as third-party publishers, for a significant portion of our visitors.
If our websites are unavailable when users attempt to access them, or if they do not load as quickly as expected, users may not return as often in the future, or at all.
If our websites are unavailable when users attempt to access them, or if they do not load as quickly as expected, users may not return as often in the future, or at all. The operation of these systems is expensive and complex and we could 14 Table of Contents experience operational failures.
Exclusion from stock indices could make it more difficult, or impossible, for some fund managers to buy our Class A common stock, particularly in the case of index tracking mutual funds and exchange traded funds, which could adversely affect the trading liquidity and market price of our Class A common stock.
Exclusion from stock indices could make it more difficult, or impossible, for some fund managers to buy our Class A common stock, particularly in the case of index tracking mutual funds and exchange traded funds, which could adversely affect the trading liquidity and market price of our Class A common stock. 21 Table of Contents Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions, such as certain transfers to trusts and individual retirement accounts.
Any or all of the issues above could adversely affect our ability to attract new users and increase engagement by existing users, cause existing users to curtail or stop use of our marketplace, cause existing insurance provider customers to cancel their contracts or subject us to governmental or third-party lawsuits, investigations, regulatory fines or other actions or liability, thereby harming our business, results of operations and financial condition.
Any or all of the issues identified above could adversely affect our ability to attract or maintain relationships with customers or third-party publishers and could cause them to cancel their contracts with us or subject us to governmental or third-party lawsuits, investigations, regulatory fines or other actions or liability, thereby harming our business, financial condition, operating results, cash flows and prospects.
For example, in 2022, we experienced decreased auto insurance carrier marketing spend, which we believe was due to challenges in the auto insurance industry. In addition, we may not be able to attract new insurance providers to our marketplace or increase the amount of revenue we earn from insurance providers over time.
In addition, we may not be able to attract new insurance providers to our marketplace or increase the amount of revenue we earn from insurance providers over time.
We also generate a significant amount of revenue from calls made by our internal call centers as well as, in some cases, by third-party publishers’ call centers. We also purchase a portion of our lead data from third-party vendors.
Additionally, we generate inquiries from users that provide a phone number, and a significant amount of revenue comes from calls made by our internal call centers as well as, in some cases, by third-party publishers’ call centers.
In addition, the covenants under our existing debt instruments, the pledge of our assets as collateral and the negative pledge with respect to our intellectual property could limit our ability to obtain additional debt financing. Any of these events could have a material adverse effect on our results of operations or financial condition.
In addition, the covenants under our existing debt instruments, the pledge of our assets as 16 Table of Contents collateral and the negative pledge with respect to our intellectual property could limit our ability to obtain additional debt financing on acceptable terms or at all.
Constrained LTVs are impacted by a number of factors, which include, but are not limited to, carrier mix, policy duration and conversion rates of paying policies.
We recognize commission revenue based on the latest estimated constrained lifetime value, or constrained LTV, for each product. Constrained LTVs are impacted by a number of factors, which include, but are not limited to, carrier mix, policy duration and conversion rates of paying policies.
Our directors, executive officers and holders of more than 10% of our common stock, and their respective affiliates, held in the aggregate approximately 75% of the voting power of our capital stock as of January 31, 2023; and Link Ventures, directly or through a voting agreement pursuant to which Tomas Revesz and the heirs of Seth Birnbaum are obligated to vote on all matters presented to our stockholders all voting capital stock held by them in the manner directed by Link Ventures, together with Cogo Labs, held in the aggregate approximately 73% of the voting power of our capital stock as of that date.
Our directors, executive officers and holders of more than 10% of our common stock, and their respective affiliates, held in the aggregate approximately 72% of the voting power of our capital stock as of January 31, 2024; and Link Ventures, directly or through a voting agreement, together with Cogo Labs, held in the aggregate approximately 71% of the voting power of our capital stock as of that date.
The market price of our Class A common stock has been and may continue to be volatile, which could result in substantial losses for investors and could subject us to securities class action litigation. The market price of our Class A common stock has been and could continue to be subject to significant fluctuations.
The market price of our Class A common stock has been and could continue to be subject to significant fluctuations.
As a result, adverse changes in the constraints we apply or the assumptions we make in computing expected lifetime values, such as increased cancellation rates or lower renewal rates, would harm our business, operating results, financial condition and prospects.
As a result, adverse changes in the assumptions we make or constraints we apply in computing expected lifetime values, such as increased cancellation rates or lower renewal rates, would harm our business, operating results, financial condition and prospects. 15 Table of Contents Additionally, if customer cancellation rates exceed our expectations or renewal rates are less than expected, we may not receive the commission revenue we have projected to receive, despite our having incurred and recorded the cost to sell the policy.
We have $35.0 million available for borrowing under our revolving line of credit and $10.0 million available for borrowing under our term loan, each with Western Alliance Bank, and in the future we could incur indebtedness beyond our revolving line of credit and term loan.
If we were required to draw upon our line of credit, indebtedness could adversely affect our ability to operate our business, financial condition and results of operations. We have $25.0 million available for borrowing under our revolving line of credit with Western Alliance Bank, and in the future we could incur indebtedness beyond our revolving line of credit.
The cost of compliance and the consequences of non-compliance could have a material adverse effect on our business, results of operations and financial condition.
Any of these events could have a material adverse effect on our results of operations or financial condition.
For example, certain email providers, including Google, may categorize our emails as “promotional,” and these emails may be directed to an alternate, and less readily accessible, section of a consumer’s inbox.
Limitations restricting our ability to market to users via telephone calls, text messages and emails by service providers could harm our ability to deliver advertising. For example, if email service providers, or ESPs, categorize our emails as “promotional,” then these emails may be directed to an alternate and less readily accessible section of a consumer’s inbox.
In addition, efforts to comply with new or existing cybersecurity regulations could impose significant costs on our business, which could materially adversely affect our business, financial condition or results of operations. 28 Table of Contents The marketing and sale of Medicare plans are subject to numerous, complex and frequently changing laws, regulations and guidelines, and non-compliance with or changes in laws, regulations and guidelines could harm our business, operating results and financial condition.
The cost of compliance with new or existing regulations could impose significant costs on our business, which could materially adversely affect our business, financial condition or results of operations. 17 Table of Contents We are subject to regulation regarding telemarketing and robotexting marketing campaigns.
Risks Related to Our Class A Common Stock An active trading market for our Class A common stock may not be sustained. Our Class A common stock began trading on the Nasdaq Global Market on June 28, 2018.
Risks Related to Our Class A Common Stock An active trading market for our Class A common stock may not be sustained. In 2023, the average trading volume of our Class A common stock on the Nasdaq Global Market was 381,450 and, as of January 31, 2024, our market capitalization was $432.3 million.
If we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, our business could be materially adversely affected. If we are unable to successfully respond to changes in the market, our business could be harmed.
If we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, our business could be materially adversely affected. Our operating results may be impacted by factors that impact our estimate of the constrained lifetime value of commissions per policy.
Increased adoption of call blocking technology may prevent us from reaching our consumers that have expressed an interest in getting insurance information. Additionally, telephone carriers and communication platforms have themselves placed restrictions on our ability to call or send text messages to our consumers.
Moreover, telephone carriers and communication platforms have themselves placed restrictions on our ability to call or send text messages to our consumers. Increased government regulation may also restrict our ability to call or text consumers.
In addition, if our online display advertisements are no longer effective or are not able to reach certain consumers due to consumers’ use of ad-blocking software, our business could suffer. 11 Table of Contents If one or more of the search engines or other online sources on which we rely for purchased listings or visitor traffic modifies or terminates its relationship with us, our expenses could rise, we could lose consumer traffic to our websites, and a decrease in consumer traffic to our websites, for any reason, could have a material adverse effect on our business, financial condition and results of operations.
If one or more of the search engines or other online sources on which we rely for purchased listings or visitor traffic modifies or terminates its relationship with us, our expenses could rise and we could lose visitor traffic to our websites.
If our carrier customers were to reduce the amounts of or cease providing such subsidies, our insurance agent customers may terminate or reduce the extent of their relationships with us.
This carrier resumed payment of certain subsidies in 2024, but there is no assurance that the carrier will continue to make these or any subsidy payments. If our carrier customers reduce the amounts of or cease providing such subsidies on behalf of their agents, our agent customers may terminate or reduce the extent of their relationships with us.
If the use of our marketplace declines or does not continue to grow, our business and operating results would be harmed. A significant portion of our revenue in recent periods was derived from two customers, and our results of operations could be adversely affected and stockholder value harmed if we lose business from these customers.
If agents decide to terminate or reduce their relationships with us as a result of the elimination in subsidies, or for any reason, our revenue would likely be reduced, which could have a material adverse effect on our business, financial condition, operating results and cash flows. 10 Table of Contents We generated a significant portion of our revenue in recent periods from two customers, and our results of operations could be adversely affected and stockholder value harmed if we continue to lose business from these customers.
Our insurance carrier customers often provide subsidies for the benefit of agents to offset agents’ costs in connection with selling insurance policies from our referrals. Our carrier customers have no obligation to provide such subsidies and may reduce the amount of such subsidies or cease providing them at any time.
Our carrier customers who make subsidy payments to us on behalf of their agents have no obligation to provide such subsidies and may reduce the amount of these subsidies or cease providing them at any time. For example, one of our largest carrier customers discontinued payment of subsidies to us during the fourth quarter of 2023.
If the market rate of interest increases substantially, we would have to pay additional interest, which would reduce cash available for our other business needs. We intend to satisfy any future debt service obligations with our existing cash and cash equivalents.
We intend to satisfy any future debt service obligations with our existing cash and cash equivalents.
As a result, we have no assurances that these customers will continue to purchase from us at their historical levels or at all.
Revenue from our two largest insurance carrier customers was 27% and 32% in the aggregate of our revenue for the years ended December 31, 2023 and 2022, respectively. We have no assurances that these carrier customers will continue to purchase from us at their historical levels or at all.
Any decline in the supply of media available through these third-party publishers’ websites or increase in the price of this media could cause our revenue to decline or our cost to reach visitors to increase. A significant portion of our revenue is attributable to visitor traffic originating from third-party publishers (including strategic partners).
Any decline in the supply of media available through these third-party publishers for any reason, or increase in their prices could cause our revenue to decline or our cost to attract visitors to increase and our business and financial results may be harmed.
In addition, if we are placed on “spam” lists or lists of entities that have been involved in sending unwanted, unsolicited emails, our operating results and financial condition could be substantially harmed. A significant portion of our revenue is derived from insurance providers acquiring referrals on an auction basis.
In addition, if we are placed on “spam” lists or lists of entities that have been involved in sending unwanted, unsolicited emails, or if internet service providers prioritize or provide superior access to our competitors’ content, our business and results of operations may be adversely affected.
Our success depends on our ability to attract online consumers to our websites or marketplace and convert those consumers into referrals that we can sell to our insurance provider customers. We depend, in part, on search engines, display advertising, social media, email, content-based online advertising and other online sources for our website traffic.
We rely on internet search engines, display advertising, social media, content-based online advertising and other online sources to attract visitors to our website.
Any adverse impact on our conversion rates could cause a material and adverse effect on our business, operating results, financial condition and prospects. 15 Table of Contents Our business is dependent on our obtaining a large quantity of high-intent consumer referrals in a cost-effective manner.
Any of these potential risks could result in a material and adverse effect on our business, financial condition, operating results, cash flows and prospects.
A substantial majority of our revenue is derived from sales of consumer referrals to insurance providers, including both insurance carriers and agents. Our relationships with insurance providers are dependent on our ability to deliver quality referrals at attractive volumes and prices.
We also generate revenue from carriers that make subsidy payments to us to offset their agents’ costs in buying referrals. Our relationships with those customers are dependent on our ability to deliver quality referrals at attractive volumes and prices.
As a result, we cannot guarantee that insurance providers will continue to work with us, or, if they do, the number of referrals they will purchase from us, the price they will pay per referral or their total spend with us.
Furthermore, our agreements with these customers do not require them to spend any minimum amount. As a result, we cannot guarantee that insurance providers will continue to work with us, or, if they do, what their advertising volume, pricing or total spend will be with us. For example, we experienced significantly decreased insurance provider marketing spend in 2023.
We may not be able to compete successfully for high-quality referrals against our current or future competitors, some of whom have significantly greater financial, technical, marketing and other resources than we do.
Many of our current and potential competitors also have other competitive advantages over us, such as longer operating histories, greater brand recognition, larger or more diverse client bases, greater access to web traffic more generally, and significantly greater financial, technical and marketing resources. As a result, we may not be able to compete successfully.
As our business expands, we may be subject to intellectual property claims against us with increasing frequency, scope and magnitude.
Even if these matters do not result in litigation or are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could harm our business, our operating results and our reputation. 19 Table of Contents As our business expands, we may be subject to intellectual property claims against us with increasing frequency, scope and magnitude.
We depend on search engines, display advertising, social media, email, content-based online advertising and other online sources to attract consumers to our websites or marketplace, and if we are unable to cost-effectively attract consumers and convert them into referrals that we can sell to our insurance provider customers, our business and financial results may be harmed.
If we are unable to acquire media inventory that meets our customers’ performance, price and quality requirements, our revenue would decline or our operating costs would increase. We depend on internet search engines, display advertising, social media, online advertising and other sources to attract visitors to our website or marketplace, or to our third-party publishers’ websites.
If we are unable to maintain or enhance consumer awareness of our brand cost-effectively, our business, results of operations and financial condition could be materially adversely affected.
Additionally, if the content, analyses, or recommendations that AI applications assist in producing are or are alleged to be deficient, inaccurate or biased, our business, financial condition and results of operations may be adversely affected.
If insurance providers stop purchasing consumer referrals from us or decrease the amount they are willing to spend per referral, or if we are unable to establish and maintain new relationships with insurance providers, our business, results of operations and financial condition could be materially adversely affected.
We depend on relationships with insurance provider customers with no long-term minimum financial commitments. A reduction in spend by our customers, a loss of customers, lower advertising yields, or our inability to establish and maintain new relationships with insurance providers could materially harm our business, results of operations and financial condition.
The CCPA requires covered companies to provide new disclosure to consumers about such companies’ data collection, use and sharing practices, provides such consumers a new right to opt-out of certain sales or transfers of personal information, and provides consumers with a new cause of action for certain data breaches.
The CCPA requires covered businesses to, among other things, provide disclosures to California residents about their data collection, use, sharing and processing practices and, with limited business exceptions, the CCPA affords such individuals various rights with respect to their personal information, including to request deletion of personal information collected about them and to opt-out of certain personal information selling and sharing practices.
In addition, a finding that we have failed to comply with applicable laws and regulations could have a material adverse effect on our business, results of operations and financial condition by exposing us to negative publicity and reputational damage or by harming our customer or employee relationships.
Violations or alleged violations of laws and regulations, or any such obligations, by us, our third-party publishers, our customers or our third-party service providers on which we rely to process personal information on our behalf, could result in enforcement actions, litigation, damages, fines, criminal prosecution, unfavorable publicity, and restrictions on our ability to operate, any of which could have a material adverse effect on our business, financial condition and results of operations.
Removed
Risks Related to Our Business and Industry Our business is dependent on our relationships with insurance providers with no long-term contractual commitments.
Added
Risks Related to Our Business and Industry Our business is highly subject to business cycles and risks related to the property and casualty insurance industries, and specifically automotive insurance. Adverse conditions in the insurance markets, as well as the general economy, could have a material adverse effect on our business, financial condition, and results of operations.
Removed
If we are unable to maintain existing relationships with insurance providers in our marketplace, or are unable to add new insurance providers, we may be unable to offer our consumers the shopping experience they expect. This deficiency could reduce consumers’ confidence in our services, making us less popular with consumers.
Added
Market cycles in the automotive insurance industry have been, and are expected to continue to be, unpredictable due to a variety of adverse conditions in the insurance industry that have been widely reported, such as deteriorating underwriting performance, a rise in claims, inflation, and inadequate policy premiums.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. P ROPERTIES Our principal executive offices are located in Cambridge, Massachusetts, where we lease approximately 32,000 square feet of space pursuant to a lease that expires in September 2024.
Biggest changeITEM 2. P ROPERTIES Our principal executive offices are located in Cambridge, Massachusetts, where we lease approximately 32,000 square feet of space pursuant to a lease that expires in September 2024, a portion of which we have subleased. We also lease approximately 10,000 square feet of office space in Austin, Texas pursuant to a lease that expires in April 2025.
The offices in Indiana and Texas are used in connection with our DTC agency. We believe that our current facilities are adequate to meet our immediate needs.
We believe that our current facilities are adequate to meet our immediate needs.
Removed
We also lease approximately 13,000 square feet of office space in Evansville, Indiana pursuant to a lease that expires in August 2030, approximately 10,000 square feet of office space in Austin, Texas pursuant to a lease that expires in April 2025, and approximately 10,000 square feet of office space in San Antonio, Texas pursuant to a lease that expires in September 2023.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEG AL PROCEEDINGS Information with respect to legal proceedings and this item is included in Note 13 of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 35 Table of Contents PAR T II
Biggest changeITEM 3. LEG AL PROCEEDINGS Information with respect to legal proceedings and this item is included in Note 13 of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference. 24 Table of Contents ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PAR T II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 35 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 36 Item 6. Reserved 37 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 38 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 50 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 25 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 25 Item 6. Reserved 26 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 40 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSet forth below is a line graph, for the period from June 28, 2018 (the first date on which shares of our Class A common stock were publicly traded) through December 31, 2022, comparing the cumulative total stockholder return of $100 invested (assuming that all dividends were reinvested) in (1) our Class A common stock, (2) all companies listed on the Nasdaq Composite Index and (3) the Research Development Group, or RDG, Internet Composite Index.
Biggest changeSet forth below is a line graph, for the five-year period from December 31, 2018 through December 31, 2023, comparing the cumulative total stockholder return of $100 invested (assuming that all dividends were reinvested) in (1) our Class A common stock, (2) all companies listed on the Nasdaq Composite Index and (3) the Research Development Group, or RDG, Internet Composite Index.
In addition, our revolving credit facility contains covenants that could restrict our ability to pay cash dividends. 36 Table of Contents Stock Performance Graph The following performance graph shall not be deemed "filed" for purposes of Section 18 of the Exchange Act or incorporated by reference into any filings under the Securities Act or the Exchange Act, except as otherwise expressly set forth by specific reference in such filing.
In addition, our revolving credit facility contains covenants that could restrict our ability to pay cash dividends. 25 Table of Contents Stock Performance Graph The following performance graph shall not be deemed "filed" for purposes of Section 18 of the Exchange Act or incorporated by reference into any filings under the Securities Act or the Exchange Act, except as otherwise expressly set forth by specific reference in such filing.
Issuer Purchases of Equity Securities We did not purchase any of our registered equity securities during the period from October 1, 2022 to December 31, 2022. Dividends We have never declared or paid cash dividends on our capital stock.
Issuer Purchases of Equity Securities We did not purchase any of our registered equity securities during the period from October 1, 2023 to December 31, 2023. Dividends We have never declared or paid cash dividends on our capital stock.
Recent Sales of Unregistered Equity Securities There were no shares of equity securities sold or issued, or options granted, by us during the year ended December 31, 2022 that were not registered under the Securities Act of 1933, as amended, or the Securities Act, and that were not previously reported in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.
Recent Sales of Unregistered Equity Securities There were no shares of equity securities sold or issued, or options granted, by us during the year ended December 31, 2023 that were not registered under the Securities Act, and that were not previously reported in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.
Holders of Our Common Stock As of January 31, 2023, there were approximately 16 holders of record of shares of our Class A common stock and 5 holders of record of shares of our Class B common stock. These amounts do not include stockholders for whom shares are held in “nominee” or “street” name.
Holders of Our Common Stock As of January 31, 2024, there were approximately 12 holders of record of shares of our Class A common stock and 3 holders of record of shares of our Class B common stock. These amounts do not include stockholders for whom shares are held in “nominee” or “street” name.
Removed
Securities Authorized for Issuance Under Equity Compensation Plans Information about our equity compensation plans will be included in our definitive proxy statement to be filed with the SEC with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeReconciliation of Net Loss to Adjusted EBITDA: Year Ended December 31, 2022 2021 2020 (in thousands) Net loss $ (24,416 ) $ (19,434 ) $ (11,202 ) Stock-based compensation 28,986 30,020 24,179 Depreciation and amortization 5,848 5,072 3,350 Acquisition-related costs (4,135 ) 1,065 2,258 Severance under a plan — 440 — Interest income (349 ) (37 ) (189 ) Benefit from income taxes — (2,510 ) — Adjusted EBITDA $ 5,934 $ 14,616 $ 18,396 Results of Operations The following tables set forth our results of operations for the periods shown: Year Ended December 31, 2022 2021 2020 (in thousands) Statement of Operations Data: Revenue(1) $ 404,127 $ 418,515 $ 346,935 Cost and operating expenses(2): Cost of revenue 23,980 23,949 21,373 Sales and marketing 349,255 354,990 284,880 Research and development 31,713 35,732 29,662 General and administrative 28,102 24,703 20,444 Acquisition-related costs (4,135 ) 1,065 2,258 Total cost and operating expenses 428,915 440,439 358,617 Loss from operations (24,788 ) (21,924 ) (11,682 ) Other income (expense): Interest income 349 37 189 Other income (expense), net 23 (57 ) 291 Total other income (expense), net 372 (20 ) 480 Loss before income taxes (24,416 ) (21,944 ) (11,202 ) Benefit from income taxes — 2,510 — Net loss $ (24,416 ) $ (19,434 ) $ (11,202 ) Other Financial and Operational Data: Variable marketing margin $ 128,258 $ 129,553 $ 108,642 Adjusted EBITDA(3) $ 5,934 $ 14,616 $ 18,396 (1) Comprised of revenue from the following distribution channels: Year Ended December 31, 2022 2021 2020 Direct channels 86 % 90 % 92 % Indirect channels 14 % 10 % 8 % 100 % 100 % 100 % 43 Table of Contents (2) Includes stock-based compensation expense as follows: Year Ended December 31, 2022 2021 2020 (in thousands) Cost of revenue $ 281 $ 363 $ 361 Sales and marketing 11,018 12,405 10,246 Research and development 10,328 9,551 7,751 General and administrative 7,359 7,701 5,821 $ 28,986 $ 30,020 $ 24,179 (3) See “—Non-GAAP Financial Measure” for information regarding our use of adjusted EBITDA as a non-GAAP financial measure and a reconciliation of adjusted EBITDA to its comparable GAAP financial measure.
Biggest changeReconciliation of Net Loss to Adjusted EBITDA: Year Ended December 31, 2023 2022 2021 (in thousands) Net loss $ (51,287 ) $ (24,416 ) $ (19,434 ) Stock-based compensation 22,808 28,986 30,020 Depreciation and amortization 6,196 5,848 5,072 Restructuring and other charges 23,568 — — Acquisition-related costs (150 ) (4,135 ) 1,065 Severance under a plan — — 440 Interest income (1,251 ) (349 ) (37 ) Income taxes 577 — (2,510 ) Adjusted EBITDA $ 461 $ 5,934 $ 14,616 32 Table of Contents Results of Operations The following tables set forth our results of operations for the periods shown: Year Ended December 31, 2023 2022 2021 (in thousands) Statement of Operations Data: Revenue(1) $ 287,921 $ 404,127 $ 418,515 Cost and operating expenses(2): Cost of revenue 22,455 23,980 23,949 Sales and marketing 240,131 349,255 354,990 Research and development 27,591 31,713 35,732 General and administrative 26,301 28,102 24,703 Restructuring and other charges 23,568 — — Acquisition-related costs (150 ) (4,135 ) 1,065 Total cost and operating expenses 339,896 428,915 440,439 Loss from operations (51,975 ) (24,788 ) (21,924 ) Other income (expense): Interest income 1,251 349 37 Other income (expense), net 14 23 (57 ) Total other income (expense), net 1,265 372 (20 ) Loss before income taxes (50,710 ) (24,416 ) (21,944 ) Income tax (expense) benefit (577 ) — 2,510 Net loss $ (51,287 ) $ (24,416 ) $ (19,434 ) Other Financial and Operational Data: Variable marketing margin $ 100,282 $ 128,258 $ 129,553 Adjusted EBITDA(3) $ 461 $ 5,934 $ 14,616 (1) Comprised of revenue from the following distribution channels: Year Ended December 31, 2023 2022 2021 Direct channels 81 % 86 % 90 % Indirect channels 19 % 14 % 10 % 100 % 100 % 100 % (2) Includes stock-based compensation expense as follows: Year Ended December 31, 2023 2022 2021 (in thousands) Cost of revenue $ 219 $ 281 $ 363 Sales and marketing 8,667 11,018 12,405 Research and development 8,053 10,328 9,551 General and administrative 5,869 7,359 7,701 Restructuring and other charges 1,288 — — $ 24,096 $ 28,986 $ 30,020 33 Table of Contents (3) See “—Non-GAAP Financial Measure” for information regarding our use of adjusted EBITDA as a non-GAAP financial measure and a reconciliation of adjusted EBITDA to its comparable GAAP financial measure.
While our significant accounting policies are described in more detail in Note 2 to our audited consolidated financial statements, appearing in Part II of Item 8 of this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
While our significant accounting policies are described in more detail in Note 2 to our audited consolidated financial statements, appearing in Part II, Item 8 of this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
In an event of default, as defined in the Amended Loan Agreement, and until such event is no longer continuing, the annual interest rate to be charged would be the annual rate otherwise applicable to borrowings under the Amended Loan Agreement plus 5.00%. Borrowings are collateralized by substantially all of our assets and property.
In an event of default, as defined in the 2023 Amended Loan Agreement, and until such event is no longer continuing, the annual interest rate to be charged would be the annual rate otherwise applicable to borrowings under the 2023 Amended Loan Agreement plus 5.00%. Borrowings are collateralized by substantially all of our assets and property.
Income Taxes We generated taxable income during the year ended December 31, 2022 related primarily to capitalized research and development costs due to the new requirement to capitalize research and development costs under Section 174 of the Internal Revenue Code of 1986.
We generated taxable income during the year ended December 31, 2022 related primarily to capitalized research and development costs due to the new requirement to capitalize research and development costs under Section 174 of the Internal Revenue Code of 1986.
We apply a constraint to estimated LTVs to only recognize the amount of variable consideration that we believe is probable that we will be entitled to receive and will not be subject to a significant revenue reversal in the future.
We apply a constraint to our estimated LTVs to only recognize the amount of variable consideration that we believe is probable that we will be entitled to receive and will not be subject to a significant revenue reversal in the future.
In addition, other companies may use other measures to evaluate their performance, all of which could reduce the usefulness of adjusted EBITDA as a tool for comparison. 42 Table of Contents The following table reconciles adjusted EBITDA to net income (loss), the most directly comparable financial measures calculated and presented in accordance with GAAP.
In addition, other companies may use other measures to evaluate their performance, all of which could reduce the usefulness of adjusted EBITDA as a tool for comparison. The following table reconciles adjusted EBITDA to net income (loss), the most directly comparable financial measures calculated and presented in accordance with GAAP.
Under the Amended Loan Agreement, we agreed to affirmative and negative covenants to which we will remain subject until maturity. The covenants include limitations on our ability to incur additional indebtedness and engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses.
Under the 2023 Amended Loan Agreement, we have agreed to certain affirmative and negative covenants to which we will remain subject until maturity. The covenants include limitations on our ability to incur additional indebtedness and engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses.
Goodwill is not amortized, but rather is tested for impairment annually, or more frequently if facts and circumstances warrant a review, such as significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets.
Goodwill is not amortized, but rather is tested for impairment annually in the fourth quarter, or more frequently if facts and circumstances warrant a review, such as significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets.
Commission revenue is recognized upon satisfaction of our performance obligation, which we consider to be submission of the policy application to the insurance carrier. We recognize revenue based on our constrained estimate of commission payments we expect to receive over the lifetime of the policies sold, which we refer to as constrained lifetime values, or constrained LTVs, of commission payments.
Commission revenue is recognized upon satisfaction of our performance obligation, which we consider to be submission of the policy application to the insurance carrier. We recognize revenue based on our constrained estimate of commission payments we expect to receive over the lifetime of the policies sold, which we refer to as constrained LTVs, of commission payments.
We only apply the five-step model to contracts when collectability of the consideration to which we are entitled in exchange for the goods or services we transfer to the customer is determined to be probable. Amounts are recorded as accounts receivable when our right to consideration is unconditional.
We only apply the five-step model to contracts when collectibility of the consideration to which we are entitled in exchange for the goods or services we transfer to the customer is determined to be probable. Amounts are recorded as accounts receivable when our right to consideration is unconditional.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Comparison of the Years Ended December 31, 2021 and 2020 included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Comparison of the Years Ended December 31, 2022 and 2021 included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of spending on business initiatives, purchases of capital equipment to support our growth, the expansion of sales and marketing activities, expansion of our business through acquisitions or our investments in complementary offerings, technologies or businesses, market acceptance of our platform and overall economic conditions.
Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our revenue, the timing and extent of spending on business initiatives, purchases of capital equipment to support our growth, sales and marketing activities, impact to our business from our recent restructuring, expansion of our business through acquisitions or our investments in complementary offerings, technologies or businesses, market acceptance of our platform and overall economic conditions.
Comparison of the Years Ended December 31, 2021 and 2020 For a discussion of our results of operations for the year ended December 31, 2021 as compared to the year ended December 31, 2020, see Item 7.
Comparison of the Years Ended December 31, 2022 and 2021 For a discussion of our results of operations for the year ended December 31, 2022 as compared to the year ended December 31, 2021, see Item 7.
To the extent that commission payment trends change or the underlying factors impacting commission payments change, our estimates of constrained LTVs could be materially impacted.
To the extent that commission payment trends change or the underlying factors impacting commission payments change, our estimate of constrained LTVs could be materially impacted.
Our estimate of constrained LTVs is based on an analysis of historical commission payment trends for relevant policies to establish an expected lifetime value and incorporates our judgment in 49 Table of Contents interpreting those trends to calculate LTVs and to apply constraints to such LTVs. The most significant factor impacting historical trends is average policy duration.
Our estimate of constrained LTVs is based on an analysis of historical commission payment trends for relevant policies to establish an expected lifetime value and incorporates management’s judgment in interpreting those trends to calculate LTVs and to apply constraints to such LTVs. The most significant factor impacting historical trends is average policy duration.
Personnel-related costs included in cost of revenue and each operating expense category include wages, fringe benefit costs and stock-based compensation expense. Cost of Revenue Cost of revenue is comprised primarily of the costs of operating our marketplace and delivering consumer referrals to our customers.
Personnel-related costs included in cost of revenue and operating expense categories include wages, fringe benefit costs and stock-based compensation expense. Cost of Revenue Cost of revenue is comprised primarily of the costs of operating our marketplace and delivering consumer referrals to our customers.
We have historically increased consumer traffic to our marketplace by expanding existing advertising channels and adding new channels such as by engaging with consumers through our verified partner network. We plan to continue to increase consumer traffic by leveraging the features and growing data assets of our platform.
We have historically increased consumer traffic to our marketplace by expanding existing advertising channels and adding new channels such as by engaging with consumers through our verified partner network. Over the long term, we plan to increase consumer traffic by leveraging the features and growing the data assets of our platform.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Cash Flows included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Contractual Obligations and Commitments Our cash flows are dependent on a number of factors in addition to our operational expenditures, including our contractual and other obligations.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Cash Flows included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. 37 Table of Contents Contractual Obligations and Commitments Our cash flows are dependent on a number of factors in addition to our operational expenditures, including our contractual and other obligations.
We measure stock options with market-based vesting based on the fair value on the date of grant using a Monte Carlo simulation model. We estimate the fair value of each restricted stock unit, or RSU, based on the market value of our common stock.
We measure stock options with market-based vesting based on the fair value on the date of grant using a Monte Carlo simulation model. We estimate the fair value of each RSU based on the market value of our common stock.
Some of these limitations are: • adjusted EBITDA excludes stock-based compensation expense as it has recently been, and will continue to be for the foreseeable future, a significant recurring non-cash expense for our business; • adjusted EBITDA excludes depreciation and amortization expense and, although this is a non-cash expense, the assets being depreciated and amortized may have to be replaced in the future; • adjusted EBITDA excludes acquisition-related costs that affect cash available to us and the change in fair value of non-cash contingent consideration; • adjusted EBITDA excludes severance charges incurred and paid in the fourth quarter of 2021 related to our reduction in non-marketing operating expenses that affected cash available to us; • adjusted EBITDA does not reflect the cash received from interest income on our investments, which affects the cash available to us; • adjusted EBITDA does not reflect income tax expense (benefit) that affects cash available to us; and • the expenses and other items that we exclude in our calculation of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from adjusted EBITDA when they report their operating results.
Some of these limitations are: • adjusted EBITDA excludes stock-based compensation expense as it has recently been, and will continue to be for the foreseeable future, a significant recurring non-cash expense for our business; • adjusted EBITDA excludes depreciation and amortization expense and, although this is a non-cash expense, the assets being depreciated and amortized may have to be replaced in the future; • adjusted EBITDA excludes restructuring and other charges, which includes the sale of health assets, that affect cash available to us; 31 Table of Contents • adjusted EBITDA excludes acquisition-related costs that affect cash available to us and the change in fair value of non-cash contingent consideration liabilities; • adjusted EBITDA excludes severance charges incurred and paid in the fourth quarter of 2021 related to our reduction in non-marketing operating expenses that affected cash available to us; • adjusted EBITDA does not reflect the cash received from interest income on our investments, which affects the cash available to us; • adjusted EBITDA does not reflect income taxes that affects cash available to us; and • the expenses and other items that we exclude in our calculation of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from adjusted EBITDA when they report their operating results.
Revenue Recognition We derive our revenue primarily by selling consumer referrals to our insurance provider customers, including insurance carriers, agents and indirect distributors. We also generate revenue from commission fees for the sale of policies, primarily in our health and automotive verticals.
Revenue Recognition We derive our revenue primarily by selling consumer referrals to our insurance provider customers, including insurance carriers, agents and indirect distributors. We also generate revenue from commission fees for the sale of policies, primarily in our automotive insurance vertical, and prior to our exit from health, in our health insurance vertical.
As of December 31, 2022, we were obligated to make total minimum lease payments of $6.8 million under such leases, of which $3.2 million is payable in 2023. We have outstanding agreements with various vendors for hosting and other technical services. We believe that we will be able to fund these obligations through our existing cash and cash equivalents.
As of December 31, 2023, we were obligated to make total minimum lease payments of $2.2 million under such leases, of which $2.1 million is payable in 2024. We have outstanding agreements with various vendors for hosting and other technical services. We believe that we will be able to fund these obligations through our existing cash and cash equivalents.
While we plan to continue to increase the number of quote requests we acquire from our verified partner network, our ability to acquire quote requests in significant volume, at prices that are attractive, and that represent high-intent shoppers that insurance providers will purchase referrals for will impact our profitability.
While we plan to continue to increase the number of quote requests we acquire from our verified partner network, our profitability will be impacted by our ability to acquire quote requests in significant volume, at prices that are attractive, and that represent high-intent shoppers for which insurance providers will purchase referrals.
Pursuant to the Amended Loan Agreement, borrowings under the revolving line of credit cannot exceed 85% of eligible accounts receivable balances, bear interest at the greater of 4.25% or the prime rate as published in the Wall Street Journal and mature on July 15, 2025.
Pursuant to the 2023 Amended Loan Agreement, borrowings under the revolving line of credit cannot exceed 85% of eligible accounts receivable balances, bear interest at the greater of 7.0% or the prime rate as published in The Wall Street Journal and mature on July 15, 2025.
While we believe we have started to see some improvement in spending patterns, a recovery could be prolonged by further cost inflation, increased claim severity and frequency, or insufficient policy premium increases. Expanding consumer traffic Our success depends in part on the growth of our consumer traffic.
The state of the auto insurance market remains volatile and while we believe we have started to see some improvement in spending patterns, a recovery could be prolonged by further cost inflation, increased claim severity and frequency, or insufficient policy premium increases. Expanding consumer traffic Our success depends in part on the growth of our consumer traffic.
To determine revenue recognition for arrangements that we determine are within the scope of the revenue standard, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation.
To determine revenue recognition for arrangements that we determine are within the scope of ASC 606 Revenue from Contracts with Customers, or ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation.
We define adjusted EBITDA as our net income (loss), excluding the impact of stock-based compensation expense; depreciation and amortization expense; acquisition-related costs; one-time severance charges; interest income; and our provision for (benefit from) income taxes. The most directly comparable GAAP measure to adjusted EBITDA is net income (loss).
We define adjusted EBITDA as our net income (loss), excluding the impact of stock-based compensation expense; depreciation and amortization expense; restructuring and other charges; acquisition-related costs; one-time severance charges; interest income; and income taxes. The most directly comparable GAAP measure to adjusted EBITDA is net income (loss).
We believe our 46 Table of Contents existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next 12 months, without considering the borrowing availability under our credit facility.
We believe our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next 12 months, without considering the borrowing availability under our revolving line of credit.
We remeasure the fair value of the shares of Class A common stock issuable at each subsequent reporting date until the liability is fully settled. We use Monte Carlo simulation models in our estimates.
We estimated the fair value of the shares of Class A common stock issuable upon achievement of the targets as of the acquisition date. We remeasure the fair value of the shares of Class A common stock issuable at each subsequent reporting date until the liability is fully settled. We use Monte Carlo simulation models in our estimates.
Factors Affecting Our Performance We believe that our performance and future growth depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section titled “Risk Factors.” Auto insurance industry risk We derive a significant portion of our revenue from auto insurance providers and our financial results depend on the performance of the auto insurance industry.
Factors Affecting Our Performance We believe that our performance and future growth depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section titled “Risk Factors.” Auto insurance industry risk For the year ended December 31, 2023, we derived 79% of our revenue from auto insurance providers and our financial results depend on the performance of the auto insurance industry.
We allocate certain overhead expenses, such as rent, utilities, office supplies and depreciation and amortization of general office assets, to cost of revenue and operating expense categories based on headcount. As a result, an overhead expense allocation is reflected in cost of revenue and each operating expense category.
We allocate certain overhead expenses, such as rent, utilities, office supplies and depreciation and amortization of general office assets, to cost of revenue and operating expense categories based on headcount. As a result, an overhead expense allocation is reflected in cost of revenue, sales and marketing, research and development and general and administrative expenses.
We consider our performance obligation related to commissions for both the initial policy sale and future renewals of the policy to be satisfied upon submission of the policy application.
Commission revenue is recognized upon satisfaction of our performance obligation. We consider our performance obligation related to commissions for both the initial policy sale and future renewals of the policy to be satisfied upon submission of the policy application.
We had net losses of $24.4 million, $19.4 million and $11.2 million for the years ended December 31, 2022, 2021 and 2020, respectively, and had $5.9 million, $14.6 million and $18.4 million in adjusted EBITDA for these same periods, respectively.
We had net losses of $51.3 million, $24.4 million and $19.4 million for the years ended December 31, 2023, 2022 and 2021, respectively, and had $0.5 million, $5.9 million and $14.6 million in adjusted EBITDA for these same periods, respectively.
Acquisition-related Acquisition-related costs include expenses associated with third-party professional services we utilize for the evaluation and execution of acquisitions as well as changes in the fair value of our contingent consideration liabilities recorded as the result of our Eversurance and PolicyFuel acquisitions. Other Income (Expense) Other income (expense) consists of interest income and other income (expense).
Acquisition-related Acquisition-related costs include expenses associated with third-party professional services we utilize for the evaluation and execution of acquisitions as well as changes in the fair value of our contingent consideration liabilities recorded as the result of our acquisitions of Eversurance and PolicyFuel, which occurred in 2020 and 2021, respectively.
Valuation of Contingent Consideration In connection with our acquisitions of Eversurance and PolicyFuel we agreed to issue shares of Class A common stock to the former owners upon the achievement of certain revenue targets.
Valuation of Contingent Consideration In connection with our acquisitions of Eversurance and PolicyFuel we agreed to issue shares of Class A common stock to the former owners upon the achievement of certain revenue targets. Achievement of revenue targets that result in the issuance of a variable number of shares of Class A common stock are accounted for as a liability.
Increasing the number of insurance providers and their respective spend in our marketplace Our success also depends on our ability to retain and grow our insurance provider network.
Increasing the number of insurance providers and their respective spend in our marketplace Our success also depends on our ability to retain and grow our insurance provider network. Historically, we have generally expanded both the number of insurance providers and the spend per provider on our platform.
Net cash used by changes in our operating assets and liabilities consisted primarily of a $16.9 million increase in commissions receivable and a $1.3 million decrease in accounts payable and accrued expenses and other current liabilities, partially offset by a $10.5 million decrease in accounts receivable and a $1.8 million decrease in prepaid expenses and other current assets.
Net cash used by changes in our operating assets and liabilities consisted primarily of a $15.0 million decrease in accounts payable and accrued expenses and other current liabilities, partially offset by an $8.2 million decrease in accounts receivable, a $4.2 million decrease in commissions receivable and a $1.0 million decrease in prepaid expenses and other current assets.
Other income (expense) consists of miscellaneous income (expense) unrelated to our core operations. 41 Table of Contents Income Taxes Income tax expense is based on our estimate of taxable income, applicable income tax rates, net research and development tax credits, net operating loss carrybacks, changes in valuation allowance estimates and deferred income taxes.
Income Taxes Income tax expense is based on our estimate of taxable income, applicable income tax rates, net research and development tax credits, net operating loss carrybacks, changes in valuation allowance estimates and deferred income taxes.
General and Administrative Year Ended December 31, Change 2022 2021 Amount % (dollars in thousands) General and administrative expense $ 28,102 $ 24,703 $ 3,399 13.8 % Percentage of revenue 7.0 % 5.9 % General and administrative expenses increased by $3.4 million from $24.7 million for the year ended December 31, 2021 to $28.1 million for the year ended December 31, 2022.
General and Administrative Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) General and administrative expense $ 26,301 $ 28,102 $ (1,801 ) -6.4 % Percentage of revenue 9.1 % 7.0 % General and administrative expenses decreased by $1.8 million from $28.1 million for the year ended December 31, 2022 to $26.3 million for the year ended December 31, 2023.
Acquisition-related Costs Acquisition-related costs for the years ended December 31, 2022 and 2021 were $(4.1) million and $1.1 million, respectively. We recorded a credit to acquisition-related costs for the year ended December 31, 2022 of $4.1 million related to the decrease in the fair value of our contingent consideration liabilities.
Acquisition-related Costs Acquisition-related costs for the years ended December 31, 2023 and 2022 were $(0.2) million and $(4.1) million, respectively. We recorded these credits to acquisition-related costs for the years ended December 31, 2023 and 2022 for the decreases in fair value of our contingent consideration liabilities.
Changes in accounts receivable, accounts payable and accrued expenses and other current liabilities were generally due to growth in our business, timing of customer and vendor invoicing and payments. Collection of commissions receivable depends upon the timing of our receipt of commission payments from insurance carriers. A significant portion of our commissions receivable asset is classified as long term.
Changes in accounts receivable, prepaid expenses and other current assets and accounts payable and accrued expenses and other current liabilities were generally due to level of activity in our business and timing of customer and vendor invoicing and payments. Collection of commissions receivable depends upon the timing of our receipt of commission payments from insurance carriers.
Cost of Revenue Year Ended December 31, Change 2022 2021 Amount % (dollars in thousands) Cost of revenue $ 23,980 $ 23,949 $ 31 0.1 % Percentage of revenue 5.9 % 5.7 % Cost of revenue increased slightly from $23.9 million for the year ended December 31, 2021 to $24.0 million for the year ended December 31, 2022.
Cost of Revenue Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) Cost of revenue $ 22,455 $ 23,980 $ (1,525 ) -6.4 % Percentage of revenue 7.8 % 5.9 % Cost of revenue decreased from $24.0 million for the year ended December 31, 2022 to $22.5 million for the year ended December 31, 2023.
Net cash used in investing activities Net cash used in investing activities was $4.3 million and $18.8 million for the years ended December 31, 2022 and 2021, respectively. Cash used in investing activities for the years ended December 31, 2022 and 2021 consisted of cash used to acquire property and equipment, which included the capitalization of software development costs.
Net cash used in investing activities was $4.3 million for the year ended December 31, 2022, consisting of cash used to acquire property and equipment, which included the capitalization of software development costs. During each of the years ended December 31, 2023 and 2022, we capitalized $3.6 million of software development costs.
We offset our taxable income with net operating loss carryforwards and therefore did not record income tax expense for the year ended December 31, 2022. We recorded an income tax benefit of $2.5 million for the year ended December 31, 2021 due to the release of a portion of our valuation allowance as a result of the PolicyFuel acquisition.
We recorded an income tax benefit of $2.5 million for the year ended December 31, 2021 due to the release of a portion of our valuation allowance as a result of the PolicyFuel acquisition.
General and Administrative General and administrative expense consists of personnel-related costs and related expenses for executive, finance, legal, human resources, technical support and administrative personnel as well as the costs associated with professional fees for external legal, accounting and other consulting services, insurance premiums and payment processing and billing costs.
We expect that research and development expense will remain relatively flat in 2024 as compared to 2023. 30 Table of Contents General and Administrative General and administrative expense consists of personnel-related costs and related expenses for executive, finance, legal, human resources, technical support and administrative personnel as well as the costs associated with professional fees for external legal, accounting and other consulting services, insurance premiums and payment processing and billing costs.
As a result, our liquidity and capital resources in future periods should be analyzed in conjunction with such factors. We lease office space in Cambridge, Massachusetts under a non-cancelable operating lease that expires in September 2024. We lease office space at various other locations under non-cancelable operating leases that expire at varying dates through 2030.
As a result, our liquidity and capital resources in future periods should be analyzed in conjunction with such factors. We lease office space in Cambridge, Massachusetts under a non-cancelable operating lease that expires in September 2024. We lease office space in Austin, Texas pursuant to a lease that expires in April 2025.
We estimate the fair value of stock options with service-based vesting or performance-based vesting granted to employees, non-employees and directors using the Black-Scholes option-pricing model, which uses as inputs the fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our common stock options, the risk-free interest rate for a period that approximates the expected term of our common stock options, and our expected dividend yield.
Compensation expense for nonemployee awards is recognized in the same manner as if we had paid cash for the goods or services received, which is generally the vesting period of the respective award. 39 Table of Contents We estimate the fair value of stock options with service-based vesting or performance-based vesting granted to employees, nonemployees and directors using the Black Scholes option pricing model, which uses as inputs the fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our common stock options, the risk-free interest rate for a period that approximates the expected term of our common stock options, and our expected dividend yield.
We connect providers to a large volume of high-intent, pre-validated consumer referrals that match the insurers’ specific requirements. The transparency of our marketplace, as well as the campaign management tools we offer, make it easy for insurance carriers and third-party agents to evaluate the performance of their marketing spend on our platform and manage their own return on investment.
The transparency of our marketplace, as well as the campaign management tools we offer, are designed to make it easy for insurance carriers and third-party agents to evaluate the performance of their marketing spend on our platform and manage their own return on investment.
Sales and Marketing Year Ended December 31, Change 2022 2021 Amount % (dollars in thousands) Sales and marketing expense $ 349,255 $ 354,990 $ (5,735 ) -1.6 % Percentage of revenue 86.4 % 84.8 % Sales and marketing expenses decreased by $5.7 million from $355.0 million for the year ended December 31, 2021 to $349.3 million for the year ended December 31, 2022.
Sales and Marketing Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) Sales and marketing expense $ 240,131 $ 349,255 $ (109,124 ) -31.2 % Percentage of revenue 83.4 % 86.4 % Sales and marketing expenses decreased by $109.1 million from $349.3 million for the year ended December 31, 2022 to $240.1 million for the year ended December 31, 2023.
Highlights of our history of innovation include: • In 2011, we launched the EverQuote marketplace for auto insurance. • In 2013, we launched EverQuote Pro, our provider portal, for carriers. • In 2015, we launched EverQuote Pro for agents. • In 2016, we added home and life insurance in our marketplace. • In 2019, we added health and renters insurance in our marketplace. • In 2020, we launched our DTC insurance offerings in our life vertical and in our health vertical via the acquisition of Crosspointe Insurance & Financial Services, LLC, which we later renamed Eversurance. • In 2021, we launched our DTC insurance offerings in our auto and home and renters verticals via the acquisition of Policy Fuel LLC and its affiliates, or PolicyFuel. 38 Table of Contents In the years ended December 31, 2022, 2021 and 2020, our total revenue was $404.1 million, $418.5 million and $346.9 million, respectively, representing a year-over-year decrease of 3.4% from 2021 to 2022 and a year-over-year increase of 20.6% from 2020 to 2021.
Highlights of our history of innovation include: • In 2011, we launched the EverQuote marketplace for auto insurance. • In 2013, we launched EverQuote Pro, our provider portal, for carriers. • In 2015, we launched EverQuote Pro for agents. • In 2016, we added home and life insurance in our marketplace. • In 2019, we added health and renters insurance in our marketplace. • In 2020, we launched our DTC insurance offerings in our life vertical and in our health vertical via the acquisition of Crosspointe Insurance & Financial Services, LLC, which we later renamed Eversurance. • In 2021, we launched our DTC insurance offerings in our auto and home and renters verticals via the acquisition of Policy Fuel LLC and its affiliates, or PolicyFuel.
Research and Development Year Ended December 31, Change 2022 2021 Amount % (dollars in thousands) Research and development expense $ 31,713 $ 35,732 $ (4,019 ) -11.2 % Percentage of revenue 7.8 % 8.5 % Research and development expenses decreased by $4.0 million from $35.7 million for the year ended December 31, 2021 to $31.7 million for the year ended December 31, 2022.
Research and Development Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) Research and development expense $ 27,591 $ 31,713 $ (4,122 ) -13.0 % Percentage of revenue 9.6 % 7.8 % 34 Table of Contents Research and development expenses decreased by $4.1 million from $31.7 million for the year ended December 31, 2022 to $27.6 million for the year ended December 31, 2023.
We support three secure consumer referral formats: • Clicks: An online-to-online referral, with a handoff of the consumer to the provider’s website. • Data: An online-to-offline referral, with quote request data transmitted to the provider for follow-up. • Calls: An online-to-offline referral for outbound calls and an offline-to-offline referral for inbound calls, with the consumer and provider connected by phone.
We support three secure consumer referral formats: • Clicks: An online-to-online referral, with a handoff of the consumer to the provider’s website. • Data: An online-to-offline referral, with quote request data transmitted to the provider for follow-up. • Calls: An online-to-offline referral for outbound calls and an offline-to-offline referral for inbound calls, with the consumer and provider connected by phone. 29 Table of Contents We also generate revenue from commissions paid to us by insurance carriers for the sale of policies in our automotive insurance vertical, and prior to our exit from health, in our health insurance vertical.
Cash provided by operating activities in the year ended December 31, 2021 primarily resulted from the offset of net non-cash charges of $32.8 million to our net loss of $19.4 million, partially offset by net cash used by changes in our operating assets and liabilities of $6.1 million.
Cash used by operating activities in the year ended December 31, 2023 resulted from our net loss of $51.3 million and net cash used by changes in our operating assets and liabilities of $1.7 million, partially offset by net non-cash charges of $50.1 million, which included a loss on sale of health assets of $19.4 million.
While we plan to increase consumer traffic over the long term, we also have the ability to decrease advertising, if we believe the revenue associated with such consumer traffic does not result in incremental profit to our business. We have also increased the number of quote requests acquired from our verified partner network.
However, we have decreased advertising spend in response to lower demand for consumer referrals and we have the ability to further decrease advertising spend in the future when the revenue associated with such consumer traffic does not result in incremental profit to our business. We have also increased the number of quote requests acquired from our verified partner network.
Commission revenue represented approximately 13% of total revenue for the year ended December 31, 2022 and less than 10% of total revenue for each of the years ended December 31, 2021 and 2020.
Commission revenue represented less than 10% of total revenue for the year ended December 31, 2023.
We have focused our research and development efforts on improving ease of use and functionality of our existing marketplace platform and developing new offerings and internal tools. We primarily expense research and development costs. Direct development costs related to software enhancements that add functionality are capitalized and amortized as a component of cost of revenue.
Research and Development Research and development expense consists primarily of personnel-related costs for software development and product management. We have focused our research and development efforts on improving ease of use and functionality of our existing marketplace platform and developing new offerings and internal tools. We primarily expense research and development costs.
The decrease in revenue was due to decreases of $7.9 million and $6.5 million in our other insurance and automotive verticals, respectively. The decrease in revenue from our other insurance verticals was due to a decrease of $16.9 million in carrier spend for referrals, partially offset by an increase in commission revenue of $9.1 million.
The decrease in revenue from our other insurance verticals was primarily due to a decrease in commission revenue of $18.7 million and a decrease in carrier spend for referrals of $9.6 million, both due primarily to our exit from health insurance.
Comparison of the Years Ended December 31, 2022 and 2021 Revenue Year Ended December 31, Change 2022 2021 Amount % (dollars in thousands) Revenue $ 404,127 $ 418,515 $ (14,388 ) -3.4 % Revenue decreased by $14.4 million from $418.5 million for the year ended December 31, 2021 to $404.1 million for the year ended December 31, 2022.
Comparison of the Years Ended December 31, 2023 and 2022 Revenue Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) Revenue $ 287,921 $ 404,127 $ (116,206 ) -28.8 % Revenue decreased by $116.2 million from $404.1 million for the year ended December 31, 2022 to $287.9 million for the year ended December 31, 2023.
For the periods presented, our total revenue consisted of revenue generated from our automotive and other insurance verticals, which includes home and renters, life and health insurance verticals, as follows: Year Ended December 31, 2022 2021 2020 (in thousands) Automotive $ 324,417 $ 330,928 $ 283,236 Other 79,710 87,587 63,699 Total Revenue $ 404,127 $ 418,515 $ 346,935 40 Table of Contents We expect an overall increase in revenue in 2023 as we anticipate increased spending from our carrier partners.
For the periods presented, our total revenue consisted of revenue generated within our insurance verticals as follows: Year Ended December 31, 2023 2022 2021 (in thousands) Automotive $ 227,505 $ 324,417 $ 330,928 Home and Renters 40,889 31,909 37,548 Other 19,527 47,801 50,039 Total Revenue $ 287,921 $ 404,127 $ 418,515 We expect an overall increase in revenue in 2024, including in our automotive and home and renters verticals, as we anticipate increased spending from our carrier partners.
Other Income (Expense) Other income (expense) included interest income of $0.3 million for the year ended December 31, 2022 as compared to less than $0.1 million for the year ended December 31, 2021, due to higher interest rates. Other income (expense), net was not significant for either of the years ended December 31, 2022 or 2021.
The increase in interest income in 2023 was due to higher interest rates. Other income (expense), net was not significant for either of the years ended December 31, 2023 or 2022. Income Taxes Income tax expense of $0.6 million for the year ended December 31, 2023 consisted of foreign and state income expense.
Cost of revenue increased primarily due to increased personnel-related costs of $1.3 million as a result of shifting call referrals from third-party call centers to employees and to increased amortization of intangible assets of $0.4 million, partially offset by decreases in technology service costs of $2.0 million, primarily due to decreased hosting costs, third-party call center costs and other technology service costs.
Cost of revenue decreased primarily due to a decrease in third-party call center costs of $3.1 million as a result of shifting call referrals from third-party call centers to employees and a decrease in calls related to our health insurance vertical. Hosting costs also decreased by $0.9 million.
Since 2011, our core mission has been to make finding insurance easy and more personal, saving consumers and insurance providers time and money. We are working to build the largest and most trusted online insurance marketplace in the world. In pursuing this goal, we have consistently innovated through our disruptive data driven approach.
We are working to build the largest and most trusted online insurance marketplace in the United States. In pursuing this goal, we have consistently innovated through our disruptive data driven approach.
Assumptions may be incomplete or inaccurate, and unanticipated events or circumstances may occur, which may affect the accuracy or validity of such assumptions, estimates or actual results.
Our estimates of fair value are based upon assumptions believed to be reasonable at that time but that are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events or circumstances may occur, which may affect the accuracy or validity of such assumptions, estimates or actual results.
Some of these metrics are non-financial metrics or are financial metrics that are not defined by GAAP. Adjusted EBITDA We define Adjusted EBITDA as net income (loss), adjusted to exclude: stock-based compensation expense, depreciation and amortization expense, acquisition-related costs, one-time severance charges, interest income and the provision for (benefit from) income taxes.
Adjusted EBITDA We define Adjusted EBITDA as net income (loss), adjusted to exclude: stock-based compensation expense, depreciation and amortization expense, restructuring and other charges, acquisition-related costs, one-time severance charges, interest income and income taxes.
Historically, we have generally expanded both the number of insurance providers and the spend per provider on our platform. 39 Table of Contents Key Business Metrics We regularly review a number of metrics, including GAAP operating results and the key metrics listed below, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections, and make operating and strategic decisions.
Key Business Metrics We regularly review a number of metrics, including GAAP operating results and the key metrics listed below, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections, and make operating and strategic decisions. Some of these metrics are non-financial metrics or are financial metrics that are not defined by GAAP.
We recognize compensation expense of employee awards, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award.
Stock-Based Compensation We measure stock options and other stock-based awards granted to employees, nonemployees and directors based on their fair value on the date of the grant. We recognize compensation expense of employee awards, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award.
Cash Flows The following table shows a summary of our cash flows: Year Ended December 31, 2022 2021 2020 (in thousands) Net cash provided by (used in) operating activities $ (15,791 ) $ 7,189 $ 10,668 Net cash used in investing activities (4,290 ) (18,817 ) (18,752 ) Net cash provided by financing activities 15,842 3,615 4,907 Effect of exchange rate changes on cash, cash equivalents and restricted cash (27 ) (6 ) (7 ) Net decrease in cash, cash equivalents and restricted cash $ (4,266 ) $ (8,019 ) $ (3,184 ) Net cash provided by operating activities Operating activities used $15.8 million of cash during the year ended December 31, 2022 and provided $7.2 million of cash during the year ended December 31, 2021.
If we need additional funds and are unable to obtain funding on a timely basis, we may need to significantly curtail our operations in an effort to provide sufficient funds to continue our operations, which could adversely affect our business prospects. 36 Table of Contents Cash Flows The following table shows a summary of our cash flows: Year Ended December 31, 2023 2022 2021 (in thousands) Net cash provided by (used in) operating activities $ (2,828 ) $ (15,791 ) $ 7,189 Net cash provided by (used in) investing activities 9,354 (4,290 ) (18,817 ) Net cash provided by financing activities 577 15,842 3,615 Effect of exchange rate changes on cash, cash equivalents and restricted cash 18 (27 ) (6 ) Net increase (decrease) in cash, cash equivalents and restricted cash $ 7,121 $ (4,266 ) $ (8,019 ) Operating activities Operating activities used $2.8 million and $15.8 million of cash during the years ended December 31, 2023 and 2022, respectively.
Commission Revenue Commission revenue consists of the estimated constrained lifetime values, or constrained LTVs, of commission payments we expect to receive from health insurance carriers and auto insurance carriers on the sale of insurance policies to consumers and renewals of such policies. Commission revenue is recognized upon satisfaction of our performance obligation.
Commission Revenue Our commission revenue consists of the constrained LTVs of commission payments that we expect to receive in our automotive insurance vertical, and prior to our exit from health, that we expected to receive in our health insurance vertical on the sale of insurance policies to consumers and renewals of such policies.
In December 2022, we issued 58,754 shares of Class A common stock to the former owners of Eversurance upon achievement of the third and final target of the contingent consideration arrangement. We issued 62,671 shares of our Class A common stock in December 2022 to settle the first milestone related to the PolicyFuel contingent consideration.
We issued 62,671 shares of our Class A common stock in December 2022 to settle the first milestone related to the PolicyFuel contingent consideration. The fair value of our contingent consideration liability for the PolicyFuel shares for the second and third milestones was zero as of December 31, 2023.
The decrease in revenue from our automotive vertical was primarily due to a decrease of $21.1 million in carrier spend for referrals, partially offset by an increase in commission revenue of $14.6 million.
The decrease in revenue from our automotive insurance vertical was primarily due to a decrease in carrier spend for referrals of $83.3 million, including a decrease in subsidies from one of our larger carrier customers, and a decrease in commission revenue of $13.6 million.
Key Components of Our Results of Operations Revenue We generate our revenue primarily by selling consumer referrals to insurance provider customers, consisting of carriers and agents, as well as to indirect distributors. To simplify the quoting process for the consumer and improve performance for the provider, we are able to provide consumer-submitted quote request data along with each referral.
To simplify the quoting process for the consumer and improve performance for the provider, we are able to provide consumer-submitted quote request data along with each referral. We recognize revenue from consumer referrals at the time of delivery.
Our vision is to become the largest online source of insurance policies by using data, technology and knowledgeable advisors to make insurance simpler, more affordable and personalized, ultimately reducing cost and risk.
Overview We operate a leading online marketplace for insurance shopping, connecting consumers with insurance provider customers, which includes both carriers and agents. Our vision is to become the largest online source of insurance policies by using data, technology and knowledgeable advisors to make insurance simpler, more affordable and personalized.
The increase in general and administrative expenses was primarily due to an increase in personnel-related costs of $1.2 million, an increase in consulting fees of $0.9 million and an increase in bad debt expense of $0.7 million. Credit card fees also increased by $0.3 million.
The decrease in general and administrative expenses was primarily due to a decrease in personnel-related costs of $0.9 million and decreases in insurance costs and bad debt expense of $0.5 million each. These decreases were partially offset by a net increase in professional fees of $0.5 million, primarily due to an increase in legal costs.
We expect revenue to fluctuate from quarter to quarter and, in particular, for our commission revenue to be positively impacted during the open and annual enrollment periods in our health vertical. Cost and Operating Expenses Our cost and operating expenses consist of cost of revenue, sales and marketing, research and development, general and administrative expenses and acquisition-related costs.
We expect revenue from our other insurance vertical to further decrease in 2024 as a result of our exit from the health insurance vertical. Cost and Operating Expenses Our cost and operating expenses consist of cost of revenue, sales and marketing, research and development, general and administrative expenses, restructuring and other charges and acquisition-related costs.
The increase in claims severity has reduced underwriting performance for auto insurance carriers, causing them to implement policy premium increases and reduce spending on new customer acquisition. The reduction in new customer acquisition spending by auto insurance carriers has had a negative impact on the pricing and demand for consumer referrals in our marketplace.
The auto insurance industry has experienced deteriorated underwriting performance due to a rise in claims, inflation, and inadequate policy premiums. This deteriorated underwriting performance has caused our insurance carrier customers to reduce spending on new customer acquisition, which has had a negative impact on the pricing and demand for consumer referrals in our marketplace during 2022 and 2023.
Interest income consists of interest earned on invested cash balances.
Other Income (Expense) Other income (expense) consists of interest income and other income (expense). Interest income consists of interest earned on invested cash balances. Other income (expense) consists of miscellaneous income (expense) unrelated to our core operations.
The decrease in sales and marketing expense was primarily due to a decrease in advertising expenditures of $13.1 million, partially offset by an increase in personnel-related costs of $5.5 million. The decrease in advertising expenditures primarily related to decreased carrier spend for referrals, which impacted our advertising expenditures.
The decrease in sales and marketing expense was primarily due to a decrease in advertising costs of $88.2 million due to a decrease in carrier spend.
The decrease in research and development expense was primarily due to a decrease in personnel-related costs of $4.1 million and a decrease in consulting costs of $0.4 million, partially offset by an increase in technology service costs of $0.8 million.
The decrease in research and development expense was due to a decrease in personnel-related costs.
Net cash provided by financing activities during the year ended December 31, 2021 consisted of proceeds of $3.6 million received from the exercise of common stock options. For a discussion of our cash flows for the year ended December 31, 2020, see Item 7.
For a discussion of our cash flows for the year ended December 31, 2021, see Item 7.
Our DTC agents bind policies for consumers, further streamlining the consumer shopping experience. Our services are free for consumers, and we derive our revenue from sales of consumer referrals to insurance providers and directly from commissions on sales of policies.
Our services are free for consumers, and we derive our revenue from consumer inquires sold as referrals to insurance providers and directly from commissions on sales of policies by our DTC insurance agency. Since 2011, our core mission has been to make finding insurance easy and more personal, saving consumers and insurance providers time and money.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. QUANTITATIVE AN D QUALITATIVE DISCLOSURES ABOUT MARKET RISK We have a credit agreement that provides us with credit at a floating rate of interest. As of December 31, 2022, we had no outstanding borrowings under our credit facility and therefore no material exposure to fluctuations in interest rates.
Biggest changeITEM 7A. QUANTITATIVE AN D QUALITATIVE DISCLOSURES ABOUT MARKET RISK We have a credit agreement that provides us with credit at a floating rate of interest. As of December 31, 2023, we had no outstanding borrowings under our credit facility and therefore no material exposure to fluctuations in interest rates.
We contract with vendors in foreign countries and we have foreign subsidiaries. As such, we have exposure to adverse changes in exchange rates of foreign currencies associated with our foreign transactions and our foreign subsidiaries. We believe this exposure to be immaterial. We do not hedge against this exposure to fluctuations in exchange rates. 50 Table of Contents
We contract with vendors in foreign countries and we have foreign subsidiaries. As such, we have exposure to adverse changes in exchange rates of foreign currencies associated with our foreign transactions and our foreign subsidiaries. We believe this exposure to be immaterial. We do not hedge against this exposure to fluctuations in exchange rates. 40 Table of Contents

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