EverQuote, Inc. ($EVER)

Welcome, and thank you for standing by. I would like to inform all participants that this conference call may be recorded and made available to clients of JPMorgan, where the company is presenting any recording may also be posted on the website. Views and opinions expressed by any external speakers on this call are those of the speakers and not of JPMorgan. Part of this conference call may also be reproduced in JPMorgan's Research. If you have any objections, you may disconnect at this time. This call is intended for JPMorgan clients only. Participants are not permitted on this call and should disconnect now. Unless otherwise permitted by JPMorgan's policy, members of JPMorgan Investment and Corporate Banking are not permitted on this call and should disconnect now. I would now like to turn the call over to Cory Carpenter. You may proceed.

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

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

Great. Well, look, the goal of this fireside chat is really a couple of things. We want to provide any clarity first on any outstanding questions that were for earnings or as we kind of get to the quiet period, but also we do want to discuss some of the bigger picture debates and topics such as AI, macro, et cetera. So we're going to go in a bit of a reverse order this time. We're actually going to start with Joseph and the financials and then from there, we'll kind of go to some of the bigger picture thematic questions around AI, carrier landscape and so forth. So with that backdrop, Joseph, I thought given we have a mixed audience here in terms of familiarity, why don't we start with just a recap of what your key takeaways were from 4Q earnings and then also just 2025 in general?

Sure. So thanks, Cory. And for those of you who are new to the EverQuote story, we are an insurance marketplace. We help insurance carriers and agents in the P&C landscape, which is auto and home insurance, find consumers online to grow their business through digital channels. So that's our mission. We've been at it for several years. And last year was a great year. We had a record year across all metrics. Just a high-level takeaway, I would say, is revenues grew 38%, adjusted EBITDA dollars grew 62%. So it was a very strong year for us. And as I said, it was a year that was categorized by the following which is, we've had carriers come out of a period of the downturn, auto insurance downturn, the sort of hard market cycle coming out of COVID that sort of troughed in '23. We started to see improvements in '24, and that continued into '25. So we started in '25, we start to see a dynamic evolve with the carriers, which is carriers are now broadly healthy, and that we saw that play out in the course of '25. And now they're shifting to a mindset of how do they think about growth in a different way. If you look at the insurance industry, the past couple of years have been categorized by how to get back to rate adequacy and underwriting profitability. And as you think about that from the point of view of carrier, that's one of the missions if you're a carrier, how do I get the right rates to get the right profitability. The second piece is maintaining and growing share. As you've seen this evolution through coming from the downturn, growth in '24 and '25, you're now seeing entering a period where it's referred to as a soft market, and we'll talk more about that. But that's a general backdrop where carriers say, "Hey, we have great rates. We have underwriting profitability that's quite strong. How do we think about growing -- maintaining and growing share"? And that's the dynamic we have as we go into '26. That is a very favorable dynamic for companies like us because as carriers look to grow, digital channels are very efficient in doing that. So that's a bit of the backdrop for our story. We're excited by 2026 after a great 2025 and see the momentum continuing.

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

Sure. So I think it's important to sort of categorize where the industry is as a whole right now, the carrier. So for those who don't know the insurance landscape, they talk about underwriting profitability measured by this metric called combined ratio. And think of combined ratio as all your costs reduce some revenues, the difference is profitability. Typically, carriers are in the mid- to high 90s on those metrics. Where are they right now? They're in the mid- to high 80s. So the industry is quite healthy, right? And that is a very favorable backdrop for the industry. And that is because over the past few years, you've seen carriers get rate restoration coming out of the downturn caused by COVID, the carriers struggle to have rate adequacy. So those of you who are new to insurance, the dynamic with P&C, auto and home insurance is that it's really not a national market. It's all 50 states. And in each of the different states, you have to go through this rate approval process. Some states are much more complicated than others. But -- and often they left the -- its lead times, which can't calls, "Hey, I want to increase rates tomorrow". It can be 6 months plus. And then if you go into a cycle saying, "I want rates to get to this level" and you get there and you go, "Wow, the costs have risen", which happened for those couple of years, they were chasing rates is the term in the industry. It made the carriers keep having to focus on getting rates. Now they have rate adequacy. Rate adequacy means they have sufficient rates that to cover their costs and have a healthy combined ratio. The other piece that's going on for the industry is that the cost structure, the underwriting claims costs, when you total a car, when you have a car accident, when you have medical claims, those are relatively stable. And so that combination is what's the key. It's rate adequacy and stability in the costs. And when you put those two together, that provides a favorable backdrop for folks. As you look -- and that is what's driven a lot of the sort of really strong growth in '24 and '25. Those are off trough levels. So I know if we were doing this call a year ago, folks were saying, "Wow, you're growing at 80% in 2024. Is that going to continue for another year"? And we said, "No, that's not going to continue". But this industry is a very is an industry that's a very favorable backdrop for wanting to grow in digital channels. And so the tailwind on the EverQuote story has been and continues to be insurance is a laggard going online, has been for many years. Just to give you a reference point, think about digital penetration relative to total advertising and insurance, it's about 1/3 less than broader financial services. Lots of reasons for that, which we can talk about, if you'd like, but we think that's a very favorable backdrop. So then you go into '26, what are we seeing, right? '26, we have this soft market cycle referred to it as. The soft market cycle concept is a good thing for EverQuote. That's a good backdrop. Why? Because in that environment, carriers are looking to grow and they want to -- but they want to grow share. And so that's a concept that we really think is a favorable backdrop for us because digital channels are effective to do that. And what are the carriers telling us as we enter this year? This will be a growth year for them. They want to engage in growth. The difference -- and this is part of a nuance for those who are new to insurance. You see well, they've had really strong growth over the past couple of years. How is that different? For the industry, the insurance industry over the past couple of years, that strong growth has been driven by getting rate adequacy, right? This next period of growth is really driven by getting growing policies in force. And that ultimately is the dynamic that leads to why we think it's going to be a favorable environment for us for this year.

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

Sure. So Q4, you referenced, we had really strong sequential growth in Q4, right? We were up a record from Q3 to Q4, 12%. We ended the year very strong. Typically, just put that in context, for those of you don't know EverQuote, that's usually down by single-digit percent. So the fact we were at that level of increase we were pleased by, it was a record quarter for us. What was notable about it was what drove it was, what drove it. We guided to being slightly up from Q3 to Q4. So we thought it would be up. We didn't expect it to be that up at the time of our guide. What drove it is in the last part of the quarter, you had a couple of carriers engaged very meaningfully and saying, "Hey, we have very strong underwriting profitability. Let's use some of the budget we have this year to start engaging growth in advance of 2026". Let's try to take -- this whole thing is about getting consumers, getting additional customers, let's start doing that now. And in some ways, you'd almost say it was a pull forward of some of the growth that would happen in early '26 came into late 2025. One of the two carriers interestingly that really drove that growth, say two things about it. It's gotten some attention from investors that we've said this about our Q4, and I guess the others in the industry haven't. We think one of the reasons those two carriers engaged with us, they said to us, you did really well for us in '25. We want to reward you as we had extra budget. We also knew you'd drive results. So I sort of mentioned that. But then as I said, one of those two actually said to us is that they were gauging in some strong growth in '25. As they started 2026, they said, we are going to be more measured. We got some growth in late '25. We want to be more measured. It's not that we don't believe in growth. We actually are going to be very -- we're going to grow this business really nicely in '26, we believe. The difference is it's more of a marathon mentality than a sprint mentality. It's probably the way I'd categorize it, is when you think about maintaining and growing share, that's not the pattern of what we might have seen a few years ago, which is start -- you get new budgets, let's start the year strong and then taper as we progress through the year, maybe up a little bit in Q3 and then taper again. It's about sustainment, right? That's consistent with the soft market cycle dynamic of maintaining and growing share over the period. And so that's the dynamic a bit going into the year. I think some folks said Q1, we thought you would be stronger than Q4. The sequential increase wasn't as much. I would note that we didn't guide for Q1. Folks like you put some things out there. And I think you sort of used the seasonal pattern that we might have had historically. And what we didn't know at the time was that carriers actually decided to do something a little different. And we saw that in Q4, we've seen this in Q1. We see this dynamic evolving where we see the seasonal pattern that we might have seen pre-downturn. It was never a perfect seasonal pattern, but it's sort of being changed as the carriers think about growth in a different way. None of it in our mind changes our view on the carriers wanting to grow in 2026, just the exact shape and form of it, may be different.

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

Sure. So I think -- and so thanks for bringing it back to that point, which is as people have seen in the start of the year, they go, what does that mean? Do we have a different view on growth? No, nothing has changed in our vision on this business, right? We said in November, as you referenced, a path to $1 billion. First time we said it publicly, we said we'll be a $1 billion revenue business in 2 to 3 years. I would put that -- I would just give you this context when we made that statement publicly. Like everything we've been doing since -- over the past -- since the change we made in the summer of '20, everything we've said we're going to do, we've actually done, right? So that's been the mindset. And we actually -- before we put something out public, we put a lot of thought on to it internally before we go with it. So that path to $1 billion as we put out in November call, we reiterated in our February call. So in 2 to 3 years, we'll be a $1 billion business. We ended a little under $700 million for 2025. What exact -- what would those numbers look like just to contextualize it? If it takes 3 years, it'd be a 13% revenue growth. If it takes 2 years, it's like 21%. So I'm not going to tell you if this year is a 13% growth or 21% growth. I think that gives you a sense of the composition of getting to that path to $1 billion. We feel very good about getting to that path to $1 billion. There's three things that drive the path to $1 billion, I would say, when I think about the growth dynamics. One is how do we continue to get budget from carriers and carriers and agents, right? So on budget -- the budget side, you say, first and foremost, you see this ability to bring budget through what we're doing with smart campaigns, our AI-driven platform for carriers. Instead of trying to participate in our market with their own teams, they turn over their budget to us. Our machines do the bidding on their behalf. That -- today, the majority of our carriers use smart campaigns. What's interesting about that offering is it not only helps us get more budget from carriers, which is -- but it also has at the end, we deepen the relationship with the carriers by doing it because they're turning over some very sensitive data to us, disposition data, which we have a -- we built a lot of trust over doing this over a decade. That data also is valued to how we inform our traffic operations. So more budget is a key part. Smart campaigns is part of that on the carrier side. On the agent side of our business, for those of you who don't know EverQuote, we have 6,000 local agents, mostly captive agents. Something we're very proud of. It's taken many years to build because you have to get approval from the captive carriers and actually sell the individual agents. We've been very successful in doing it. Those 6,000 agents, we basically had one product for them a few years ago, online to off-line connections. Today, we've talked about we have 1.4 products. We have a product strategy. We've added things like digital marketing service to build out their local digital presence. We've added things like voice connection, which increasingly is being powered by AI conversational voice. So that's to bring more -- so more dollars coming from the agent budget to grow. So both of those are key parts of it. Next part, I'd say, on the traffic side, you think about the flywheel as we get more data from the carriers and more budget, how do we build traffic? We talked about in our Q4, we decided to make some investments in new traffic channels. So we had really strong growth in the first 3 quarters of last year. And what we said to folks is we're going to invest in Q4 in some of these channels. We did that, and the strategy executed exactly as planned. We can get them to talk about more details on the numbers. But we built out new channels such as some social channels, some upper funnel marketing channels, some channels around connected television as well. So all those things have been helping us build up the traffic, second part of our growth. Third part of our growth is obviously continuing to look at our vertical strategy. So we're strong in auto. Home is a market today that is 10% of our business, 90% is auto roughly. We think in that home dynamic, there's real growth opportunities to grow over a higher rate in the medium term. And there's other verticals within P&C. So that vertical strategy, I think is sort of the third leg of the stool. All of those together, more dollars on distribution helps more traffic coming in to feed the -- to sort of build the flywheel, feed the flywheel and think about vertical expansion as well.

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

Sure. So for those who are new to the story, as Cory alluded to, our margins have changed for the better. We were losing money in 2023. So that is not a model we're proud of. I guess we did some real changes in the business in the summer '23. And they really were focused on how do we add value to our carriers and agents for the business. We thought really deeply about it. We exited areas that we thought were -- were not ones we have a right to win long term, and we focused. And at the same time, it's focusing on how we help carriers and agents grow their business successfully. We did that, and supposed to be an inch deep and a mile wide across a lot of things, we went deeper. Then the second thing is we said, how do we, in turn, manage the business in a way to drive financial performance as we help the carriers and agents grow their business and do that in a very disciplined way. And so that's been a key part of it. As you look at what that resulted in our EBITDA margins have continued to grow. We got to 11.5% for 2024. We got to 13.7% for 2025. And for this, what we said is assume we'll grow 100 to 150 basis points a year on a path to getting to 20%. We've sort of said for '26, assume it's probably closer to 100 basis points after growing 200 last year. So that's like 14.5%, 14.7% for this year. Just to translate all those numbers down to like a little more granular, which is, hey, if we grew 13% this year, I'm not saying it's 2 years or 3, let's just say it's a 3-year path, 13%, what would that mean the bottom line? We grew EBITDA margin by 100 basis points to go from like 13.7% to 14.7%, adjusted EBITDA dollars will grow 20%, right? So just to give you a sense ballpark, how would look. Obviously, if we grow faster, you may see EBITDA margin growing faster. Of course, we'll be making incremental investments as well because this is a growth business, and we're focusing a lot on areas around AI and building on our technology and data center. So that's a little bit how to contextualize it in terms of the growth, but also how it translates into margin. And the last thing I'd hit is cash flow, right? Our EBITDA is very high cash converting. If you look at our 2025, for example, EBITDA and operating cash flow basically the same number, around $95 million.

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

So there's three things we think about with cash. So first is this idea of a fortress balance sheet. We think that is really important in this business. And we think for investors, I think investors -- long-term investors share our view, which is we're playing this for the long term. So things will happen, let's make sure we have a fortress balance sheet. If you go back a few years, Cory, you know our story, we did not have a fortress balance sheet. So we now have that. And we have -- at the end of -- at the end of 2025, we had $170 million on the balance sheet. We had no debt as well, right? We have access to lines, but no debt as well. And so we think about cash, we'll take three pieces. One is we'll continue to make sure there's cash on the balance sheet to make sure it's strong to weather whatever storms may happen in life. Second is we also are thinking about how we return capital to shareholders. We had our inaugural repurchase program put in place in August of last year. It was a $50 million program. We did -- last year, we did $21 million of that program. We've said on our call in late February, we did another $9 million since the start of this year. So we've done $30 million so far that we've announced publicly. We have $20 million remaining on that program. So I think our stock is -- we normally don't talk about our stock valuation. But given the current market, I think I can when you're trading at these low multiples of cash flow, I think we'll be using our buyback program between now and August and the $50 million the remaining $20 million between now and August. And then the last is M&A, right? When we think about M&A, we think M&A is a real opportunity for us. And as I think you and I have talked about before, I know you and I have talked about before is we've been very focused internally making sure the business is operating really well. Like we know the dials and levers. Our mentality as a management team is we maniacally control what we control because we realize the things we don't control. So let's control those things really well. And we've shown, for example, over the past couple of years as we've more than doubled the business, our operating costs have remained flat. And I love to make this point, when companies are, hey, we're using AI to drive efficiency, we're going to try to not have our expenses grow too much. We've been doing it for a couple of years, right? But if you look at our operating expenses of $97 million, it's not like they're the same cost. We've dramatically changed things underneath composition of employees, new product offerings. And so that's a key piece I would mention to you. So that's to give you, I guess, a little bit of context as how we think about it on the -- how we -- on efficiency and driving the cash. And then on M&A, I think that because we've made the business really tight and efficient and we're executing well, now is the time for us to think about how we may use inorganic growth to supplement our organic growth. To be clear, we don't think we need M&A on our path to $1 billion. I think that's not needed. But we see M&A as an opportunity to potentially accelerate our progress within the P&C vertical. The Insurtech landscape has a lot of private companies that are not going to get to that next stage. And there's some really good teams in there. And those teams could help us -- I talked about the growth areas for us they may help accelerate some of those areas in growth. We also in some of the initiatives we're doing in our tech and data and our AI initiatives, there's some teams to accelerate that as well. We're in a very good spot, not only do we have cash, but over the past year, we started to build more of a discussion with potential private companies. We are realizing they see the potential -- the reason to be part of us. We are playing to win in this space. And what entrepreneurial teams want, they want to play to win. They want to be part of a place that's going to do that. And so I think that is resonating. And so M&A is something we're going to be disciplined about. We're not rushing to spend money. It's not like it's burning a hole in our pocket. But I think there are some really good opportunities, and you'll see us watch those over the course. You'll see us talk about more, I think, as we go over the course of 2026 and 2027.

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

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

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

Sure. So for those new to EverQuote, so the model for us is we get -- we're performance marketing. So it's all about paid traffic for us. We look across the landscape, the traffic landscape. Google is certainly part of our spend on customer acquisition, been similar sort of in the -- always -- I'll preempt the question because you'll ask it, sort of in the low to mid-20s for a number of years and continues to be. We also have a broad number of partnerships as well we work with. But it's pretty broad across the landscape. It's all about performance marketing. And for us, it's always interesting for new investors, they certainly go, hey, best auto insurance, they will get EverQuote coming up because often for us, it's driven by performance. So carriers may think about brand spend and they want to associate with best auto insurance. For us, it's all about performance, getting the profile of consumers that the carriers want. We built up this repository of data on how providers and consumers match for over a decade. That informs how we think about performance marketing. And so as we've added new channels, it's been all about how do we go where consumers are. Like if we look at some of the new channels we've talked about, at the start of this call, we emphasized in the latter half of 2025, some of those channels like social, connected television, those were things we actually looked at upper funnel marketing, things we looked at prior to the downturn. The scale wasn't there to make them work in our mind. And then as we went into the downturn, it didn't make sense to scale them. We're going to the markets now, we're seeing this as much more of an opportunity for us because the market -- those traffic channels are more vibrant. So we think that is a really good backdrop for us. And we're in this spot where that performance marketing DNA fits really well where the carriers are in their journey, right? It's a soft market cycle. It's about how do you acquire consumers that specifically fit your profile. And so one of the things about our space for those who are new is like our biggest competitor on advertising dollars is actually the carriers themselves doing general brand spend. It's kind of a funny thing about our business and people go, how does that work? And so -- like some of the most sophisticated carriers are our largest customers. Why do they work with you? And sort of the analogy I give is if you're a large digital carriers, uses digital acquisition through us, they think versus doing it directly, you're casting a large net, like the fishing net. You pull in lots of different fish. You may or may not have a match for that consumer because insurance is very different than, say, travel. Like if you are flying to California, Delta have to sell the ticket out of one of us, right? In insurance, it's all about the exact profile of consumer that fits the profile of the carrier. And interestingly, that can change because it's all 50 states. Sometimes they want to acquire you. And other times, they go, we have too many queries in California, we need to go for someone else in like the Southeast United States, and they change their mix. And so we think about the net approach of fishing for some of the carriers, we're like a spear fisher. We have to be very precise, and that fits really well, I think, with some of these new channels we've added on.

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

Fair enough. We did talk about that. And I guess we did talk about VMM margins, I should address that for you, which is -- so when we think about the business, a lot of times, people like to think about VMM margins in business. And I want to orient folks, we run the business really for VMD first and foremost, like what's the approach in the VMD curve that maximizes those VMD dollars. It's not about just getting -- you can get revenues with very low margins. Some of our competitors do that. That's not our business. It's how do you maximize VMD. That's our goal because that ultimately maximizes cash flow, right? That's the goal because you cover expenses and you bring some of the bottom line and you invest in others. And so when we think about that VMM margin, it's not like we try to manage it quarter-to-quarter perfectly, right? Sometimes we go up and down. Why does it go up and down? There's two things that impact the VMM margin. So just for folks who are new revenues less advertising dollars is VMD dollars, VMD dollars divided by revenue is VMM. What informs that? One is a commodity cost of something called advertising, right? It's a raw material for our business. We don't control the advertising costs in the environment. These things can ebb and flow based on what's going on in the seasons of the year can change it. Other dynamics as well, the carriers themselves bidding. But at our VMM margin at the highest level, if you go back to sort of 2023 in the auto business, we were basically in the high 20s in VMM margin. We were about $260 million, $270 million business in auto insurance. Today, we're 3x the size of that, almost 3x the size, and our VMM is basically in the high 20s. Some quarters a little higher, sometimes a little lower. Q4 is a little bit lower by design because we're leaning into new channels. But in general, this is sort of a highish 20s kind of business in VM. But it's -- again, it's not how we manage. We manage it first and foremost for VMD dollars.

And hello, Jayme. I see Jayme has joined. Thanks for joining. We've gone through a lot of financial questions. We've kind of -- actually, we were literally just about to shift to some of the more macro thematic AI type stuff. So obviously, either of you feel free to address, but good timing on joining. I would say, look, I kind of want to get to a few topics that we get a lot of questions on. And I think this is a good time to address. So one is how does ever -- and Joseph and I talked about where we are in the carrier cycle and all that. But I think one question we get is how does EverQuote perform when carriers are lowering rates, right? I think investors are seeing rates kind of actually start to come down for the first time in a long time. And I think the fear is, oh, no, are carriers kind of going from peak margins to margin compression? Is that bad? Is that bad for EverQuote? So maybe just talk a bit about, a, I guess, are you seeing the lower rates in the market? And then b, how would you -- how would you expect that to impact you guys?

Yes. So I mean, typically, when you're entering now like the soft cycle, the soft market part of the cycle, the carriers are looking to grow. So the good news is the underwriting profitability is very healthy across the board. And when we get into this sort of zone, all the carriers are just completely fixated on growth. And the way that -- there's sort of two levers to pull, broadly speaking. One is to lower rates to be more competitive in the market. The other is to lean in on advertising to be more sort of aggressive in the market. And we're finding that carriers are -- they're pulling both levers, right? So on the one hand, we benefit from the increase in advertising spend, and it's a very direct benefit. But as they start to lower rates, their premiums come down and as they're managing advertising as a percent of premium, you could start to see some compression there. But the sort of counterweight is their conversion rates go up. So we haven't seen any compression in pricing from our perspective. And as long as sort of the conversion math holds, we historically benefit a lot more from the increase in advertising than we do from the lowering in rates, which has been quite modest so far.

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

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

Maybe I'll start and then Jayme, if you want to add on. So I would say just to give you some insight on the stat, right? So it's -- you would never expect all our carriers to be a peak spend a quarter. Why? Because it's a competitive marketplace and they're competing against other carriers. So carriers come and go in a quarter on an aggregate basis because of what they're doing in all 50 states, the aggregated view can change, right? The thing that's interesting on the stat as well is that carriers are trying to lean in to be more aggressive, but you're also seeing other carriers lean in to be relatively more aggressive. And so when you think about the dynamic, I want to get back into growth and guys like I want to get back in the growth even more than you. So that's a little bit of the dynamic that informs when you think about that stat. And so I think you are seeing this -- I think what it really represents to us is there's a broadening out of carriers showing interest and wanting to be in growth. We feel it's pretty broad right now. We've mentioned there's one large national carrier just really coming on the platform now this year, who was a top 3 carrier for us prior to the downturn. But if you look broadly that you see this dynamic of that stat represents, we think there's a lot of room to grow. But I don't expect we're going to get to a quarter where they're all at peak quarterly spend. I'd be very surprised. You're going to see the stat still be -- seem relatively high because carriers will come and go in a quarter on an aggregate basis based on what they're doing in each of the 50 markets they're operating in.

That makes sense. We do get asked a lot about the competitive landscape. I know you guys don't like to talk about the competitive landscape much. So I think the way I'd frame the question, but I think it's interesting because, right, I mean, for a couple of years, like everyone was growing 80% to 100% in the space. Now I think we're starting to see a bit of differentiation given just where we are in the cycle. So I think what would be helpful is just from your perspective, what's kind of what differentiates EverQuote? What's your kind of unique value prop? And like what are carriers in particular value from EverQuote that maybe they can't get from somewhere else?

Yes. So there are a few things. First, as you compare us to some of the other public comps, EverQuote is the only pure-play P&C focused player in the space. So we've made a decision a few years ago to really try and go deeper within P&C and win this market with our customers by investing in product, the data and kind of now starting to package more kind of AI-oriented features to really dramatically deepen the relationships with the customers. We are the only -- I would say we are -- they look at us as more of a performance marketing sort of data and tech powered performance marketing partner. We do a lot of our own programmatic traffic acquisition, whereas some of the others are more like just platforms connecting publishers with partners. And I think that's enabled us to start to actually build some like deeper relationships with these carriers as we start to expand into new product offerings with them. On the distribution side, I think the big difference is we have started to introduce a lot of these smart bidding products that allow us to take on the bidding activity on behalf of the carriers. And in doing so, materially increase performance when carriers turn over the keys in bidding to us. So again, I think the decision to go deep has allowed us to start to roll out products and features at an accelerated rate to start to expand the nature of the relationships. And then the last piece that's different about us is the agent network that we have. So we have the largest local agent network of anyone in the space. We've had that for some time. But over the last few years, we've really begun to invest more heavily and again, broadening out the product suite there. Our goal is to become this one-stop shop for all insurance agents to grow their agencies. And that started by selling them leads, which was the core product. But now we've started to build a lot of features and products around that core product of leads, including like telephony services, digital marketing suite. And we're beginning to introduce more and more to consolidate agent spend. And that has worked quite well for us. And so I think we're particularly uniquely positioned with some of these large captive carriers -- captive agent carriers like the Allstates and the State Farms and the farmers of the world as we roll out more marketing solutions for their local agents.

All right. So we're 39 minutes in, and we're just now going to touch on AI. So we did say to be fair at the beginning that we were going to go in a bit of a reverse order. I want to come at it from two angles. One, just how you're leveraging it internally, but then I think maybe we'll come back to that. Let's start with -- look, there's just a lot of noise on AI around every company that we cover. And one of the challenges is deciding what's a real risk, what's not, how to think about things. So I think it would be really helpful really to hear from you, how do you expect AI to change the way consumers shop for insurance, which is your core to your business, of course? And then what does that mean? Like what type of opportunities does that present? What type of risk does that present for you guys?

Yes. So I'd sort of begin with how they start their search. And maybe separate how they start their search and how they actually complete their search, right? And I'll start with actually the latter piece first. Insurance is a category that is regulated. It's very opaque in that there's no pricing transparency offered by the carriers. In fact, they really try to guard their prices for reasons related to avoiding adverse selection and so on and so forth. And so insurance often gets lumped into like a sort of price comparison future that everybody expects to come next year, next year, next year. And thus far, the carriers have been very effective at resisting this sort of price comparison experience. You contrast that with a category like travel or something like that, where prices are available, rates are available for flights and hotels publicly via API. So I think in some of those categories, you're probably likely -- there's like a more clear path to seeing a version of our future where there's like a lot more agentic shopping for those types of products. In insurance, I think there's quite a few sort of obstacles to getting to a good experience. And I'm not so sure that the carriers will support it. Now if you move to the top of the funnel, I do think where do people start looking for insurance and what kind of -- and how do they gather information, I do think that will continue to evolve as it is for everything. And we're looking at a lot of the LLMs as a large opportunity to begin to acquire more organic traffic that historically we've not accessed, right? We were largely paid programmatic shop. So for us, there's a number of different ways that we can start to access that traffic. One is through basically a content strategy that's purpose-built for the LLMs. And that will start to get you showing in some of the organic conversational results that they're showing. The second is through building apps and/or integrations with like the ChatGPTs of the world, which we're working on. And then the third is through advertising. I think one or more of these, OpenAI has already started, will begin to open up for paid programmatic advertising over time. So we think there's like a nice opportunity for us to tap into these platforms as a traffic source. And then we think it will be a while before there's significant disruption to the actual buying process. And I think in the middle, there's an opportunity for a player to emerge as the conduit kind of between the LLMs and insurance distribution. It's a very fragmented, very opaque and complex space where not only are prices opaque, but you have this distribution system set up with local agents, captive agents, direct carriers. And we think we're uniquely positioned to begin to build the technology that serves as somewhat of the interface between insurance distribution and these platforms.

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

Yes. I mean I think it's going to be huge. This is like -- this is in our DNA, right? I mean we've been deploying. Before generative AI, there was machine learning and reinforcement learning. And that's embedded throughout our marketplace in terms of how we bid for traffic, how we help carriers sort of bid for traffic, how we do routing and matching. And over the years, we've been able to pull a lot of cost out of the business while improving the performance by rendering so many decisions in the marketplace to an automated state through machine learning and reinforcement learning, and that continues. Now you're getting into this world of generative AI, which at first, really the use cases were somewhat limited. There was AI voice that we've started to use to replace some sort of call center operations. There's Copilots that our engineers were using to increase their productivity from a software development standpoint. But now with the introduction -- with like some of the recent progress and like the most recent models that have been released by Claude and like Claude Code, we're beginning to move from like Copilot-assisted coding to fully agentic coding. And so I think software engineering as a whole is going to change. I mean, it is in the process of changing dramatically for everyone and certainly for EverQuote. And we're going to get to a place where we have like -- we see step function improvements in our engineering productivity, not like 20% better, but it's like 5 to 10x the amount of products and features being released at a given moment in time, which is super exciting. And now as the sort of agents begin to roll out, you could start to see a future where not just -- there's not just automation in engineering, but like it is now possible to automate so much of the operations of the business, whether that's by deploying agents or agent-generated software. And I think this is a year where we're going to see like a really accelerated and significant transformation of how we work to dramatically increase the productivity of the workforce. That's super cool.

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

Sure. So I'll start out and maybe feel free to add on, which is, see, just high level, home is roughly 10% of the business for us today, 90% auto. Look at the property and casualty space. Home is roughly half the size of auto. So between 10% and 50%, we think there's a lot of room to grow, and we're excited about that. We had 20% growth in home last year year-on-year. Actually, Q4 was actually higher. But I'd say the home market is one had some similarities to auto coming out of COVID, some things disruption, supply chains, labor costs, et cetera. You saw the carriers prioritize getting rate adequacies in the auto market. You're seeing them in 2025 doing that in the home market. And I think that has been -- we saw that continue to benefit as we progress through the year. And we look in the medium term, home will be a faster grower for us than auto. So we're very bullish on home. And then you say, what are some of the specific things we need to do to make -- to sort of do that. So one, I think, has obviously been doing it sort of with our -- the execution focus internally, put a really good leader in charge of it. And then obviously, when you think about home, the end-to-end experience thinking that through, there are some differences from auto. That's one. We've also made change in how we think about the landscape of distribution a lot of carriers do both home and auto, but not all carriers do home and auto. Some carriers do home in a way that may be a bigger opportunity for us. So how do we sort of discern exactly what carriers need to lean into that, particularly with our agent network. We have 6,000 local agents in our captive network. That is actually a really important part of the home story because you think about buying a home, largest purchase for pretty much everyone when they do it. When you often want to have an experience, we actually connect to a human to make that final decision and get advice. So how do we think about product refinement and connecting the traffic that's more finally focused on home to the agents. That's another piece of it. And so I think of that idea of management, the idea of fine-tuning the product areas and then obviously, the overall backdrop, we think, is favorable. So we're bullish on home as we look to continue to grow the business and go between 10% and 15%. We'll see where we land, but I think there's a lot of upside for us.

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

I mean I think the biggest misperception is that the business is sort of susceptible to overnight disruption. I think that's reflected in our share price. The reality is we're not a software business. I'd say 80%, 90% of the value of EverQuote comes in the data that's packaged with technology, deployed through this performance marketing engine that has a really complex distribution network attached to it. And it's not something that can just be replicated or created overnight. And then you look at, well, is insurance shopping in general going to transform overnight? And I think for all the reasons I mentioned earlier, our expectation is that no, it won't happen overnight. It will certainly evolve over time, and EverQuote is probably in pole position to help be an integral part of that evolution. And we are -- we've always been a somewhat AI-native company even before AI was the thing everyone was talking about. We've automated the whole business using machine learning and reinforcement learning. And now as we get into this agentic AI era, I mean, the whole organization is leaning in and truly embracing it. And so I think the misperception put simply is that, we think probably there's a lot of people out there who think EverQuote will be an AI victim, and we would contend that EverQuote will be an AI beneficiary.

So the thing I would add to that is that the other thing I think investors are missing, which is we're doing all of that, and we have a business we're balancing growth and profitability with real cash flow generation. I think when you're trading at roughly, I think, 3x your model for this year on cash flow, I think investors really aren't getting the durability of that cash flow. I believe it would imply a terminal value that's like 0 in 3 years, whatever. So I think this -- we have this backdrop to build a really big business in a very large market. And we are playing with -- in this AI landscape, I think we are well positioned to continue to drive a lot of growth and innovation for our customers to help them win, but in turn, continue to make our business just a dramatically different business and drive more and more efficiency. And just given the discipline with how we control what we can control, we know how to adapt to a changing environment. What this team has proven to what we've proven to investors is whatever you throw at us, throw a lot of stuff has been thrown at us in the past 3 years. We adapt. We know how to make money. We have to take advantage of opportunity to help our customers succeed and in turn, drive results for our shareholders. And so that is things that is missing. And hopefully, people will start to appreciate that more, Cory, as we're out there talking to folks and you're sharing our story with them.

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

Thanks, Cory.

Thank you, Cory.

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

Thank you.

Thank you.

Thank you.