Ever

https://seekingalpha.com/article/4326928-everquotes-growth-i…

EverQuote is one of the only publicly traded stocks in the so-called “InsurTech” space, which is among the last bastions of industries that have yet to be radically transformed by technology and software. Right now, EverQuote’s technology helps consumers sift through the mind-boggling number of options in getting insurance quotes.

This looks like it could be a good contender for a high growth SaaS stock.
Did Gary Alexander find a hidden gem? He is long EVER.
Everything I can think of on our usual checklist looks Great.

Increasing Growth Rate: 2019 rate of revenue growth y/y
Q1 19: 28%
Q2 19: 40%
Q3 19: 61%
Q4 19: 85%

New Revenue Streams: EverQuote’s bread-and-butter is automotive insurance, but its recent expansion into home and life has been extremely lucrative, seeing revenue growth of 130% y/y in Q4.

Gross Margins: As a web business, EverQuote benefits from high >90% gross margins.

Valuation: the company trades at a modest 3.7x EV/FY20 revenue multiple!

Decreasing losses: net loss 2018 %8.5 of revenue
net loss 2019 %2.86 of revenue

Key takeaways
EverQuote is still in the early innings of becoming a formidable InsurTech company, as its furious growth rates would suggest. At the same time, EverQuote is taking advantage of an extremely rich margin profile to drive huge gains in profitability, and this evidence of a path to profitability will continue being a tailwind to the stock in 2020. Keep riding this one higher.

17 Likes

I’ve been seeing this in IBD but haven’t looked into it so thanks for pointing it out.

  1. I would not call this a SaaS company because nobody is subscribing to anything. Correct?

2). How often do people requote home insurance or life insurance? I would suspect these people using EverQuote for home/life insurance will be infrequent customers. Even auto may not be that frequent. Compare that to, say, Bookibg.com that does not only airline tickets but hotels, rental car, etc. I could see that being a more repeat business thing. Because they are basically doing the same business model as booking and lending tree correct? Allowing visitors to quickly compare prices? The reason I bring up booking as a comparison is if you are not getting repeat business, you may have to permanently spend more on S&M to attract one time customers compared to booking where it will be repeat. That’s my main concern

  1. How does ever get revenue?

I’m worried if they have permanently high S&M expense they would never have the same profit margins as say booking.com thus lower p/s ratios.

Both booking.com and lending tree have treated shareholders well and EverQuote looks off to a good start as well.

2 Likes

1) I would not call this a SaaS company because nobody is subscribing to anything. Correct?

No, I’ll explain below.

2). How often do people requote home insurance or life insurance? I would suspect these people using EverQuote for home/life insurance will be infrequent customers. Even auto may not be that frequent. Compare that to, say, Bookibg.com that does not only airline tickets but hotels, rental car, etc. I could see that being a more repeat business thing. Because they are basically doing the same business model as booking and lending tree correct?

No, I’ll explain below.

3) How does ever get revenue?

That is the key question and it gives the right answers to points one and two! I used to like “marketplace” companies like Booking. Not knowing EverQuote but having sold insurance, I was pondering how they might do business. Insurance is too complicated to sell online by a marketplace website. A single insurance company might be able to do it but comparing the plans of multiple companies is just mind blowing. That got me thinking about what EverQuote’s business model might be and who was paying them. The Booking model did not fit. If EverQuote is not selling insurance, is it working more like a search engine? If so, does revenue come from advertising or from the commissions on insurance sold. I could not figure it out so “Ask Google!”

Description [edit]
EverQuote began as a marketplace for car insurance, but it has since expanded to home and life insurance.[1]

The service provided by EverQuote is matching insurance-seekers with companies that others with similar profiles preferred in the past.[2] [It’s a search engine!!! Denny’s comment] EverQuote does not directly give quotes on insurance rates. Instead, it selects a few companies whose insurance products were bought by similar drivers in the past, and gives those companies the insurance-seeker’s contact information. The company representatives then will quote prices for products they offer.[3]

The service is free to insurance-seekers. According to the Boston Globe, “EverQuote collects referral fees from insurance providers when customers buy policies, but it doesn’t allow companies to pay to be included in its recommendations.”[2]

https://en.wikipedia.org/wiki/EverQuote

Comparing policies is mind boggling difficult but profiling web visitors is now the bread and butter of thousands of businesses. I’m reminded of the case where Target discovered that a girl was pregnant before her dad did! This approach is brilliant, EverQuote doesn’t have to learn the details of every market they enter, only how to match the profiles of buyers and sellers. There is feedback, EverQuote gives you several leads and the winner not only pays the referral fee but provides EverQuote with the feedback to improve their search algorithm.

Worth looking into! Thanks!

Denny Schlesinger

15 Likes

As a recently retired insurance agent I can assure you there are many companies like Ever "selling leads’. Basically, they go on the web and find people interested in lowering their insurance costs, often promising unrealistic savings. They then sell the leads to many insurance agents, who then bombard the helpless inquirer with telephone calls for the next several weeks. Some of these companies sell only to 3 or 4 agents, some have no limits, and others even resell the leads to other companies like themselves, so there could be 20 or 30 agents paying for the same lead. And the inquirer has to tell 20 or 30 agents he is either not interested, or has already bought another brand. There is no moat, there is no recurring revenue, and it is a cut throat business. IMHO,I would not touch with a ten foot pool.

22 Likes

I didn’t realize EverQuote was publically traded. I’m the businessowner of an insurance agency in the Midwest for one of the large captive companies. I haven’t looked in to the aspects of the business like the OP has, but I will attest that EverQuote has become the best internet lead provider our company has used. Our agency pays for each internet lead we get. I don’t know what goes on between our corporation or EverQuote for any behind the scenes payment, but our agency doesn’t pay them any commission if we write the policy, we just buy the lead (interested person in an insurance quote, name, date of birth, address, vehicles etc) for say $8. However, I think once the customer enters their information they send out this lead to multiple companies (State Farm, American Family, Shelter, Farmers, Farm Bureau, etc.) So for one person interested in an insurance quote they could generate $40 if its $8 per lead and 5 companies are signed up to receive leads in that zip code. I’m not sure what their landing page is that the customers are going to to get a quote. I think there are ads and pop up ads that say save money on your car insurance click here and then they enter all of their info. I don’t think customers have to go direct to their website, they may click an advertisement and it takes them to the EverQuote site, not sure. I think life insurance leads are sent to 3 or 4 companies at $50 each so one lead (customers information) could generate $150-$200 from the insurance agencies. We used to use 6 different internet lead vendors, but many have incorrect information or bad phone numbers and won’t refund your money, so we have narrowed it down to only the top 3, and one of those is EverQuote, who is actually the best at providing accurate information and giving refunds. In our area we get 400 leads per month, half are wrong info or not interested in getting a quote and we get refunded. So we pay for 200 leads per month from them, it’s about $1000 from our agency per month. We write about 40 insurance policies off of those 200 leads and generate about $4000, giving us a $3000 profit for the agency each month from their lead services. One thing to note if you do research or reviews of the company is that customers don’t like them. As soon as they submit their information for an auto insurance quote they get like 10 different insurance companies calling them in about 30 minutes. Some customers think they are going to get all of the insurance prices shown to them off of their website, but that’s not the case, they will get calls from all of the companies to work up a quote, so a lot of people get upset about that, that they entered information and didn’t realize ten companies would be blowing up their phone over and over for a week trying to get them to do insurance with them. On the innovative side, they recently started doing live leads from warm transfers. Instead of $8 (estimated price) for an auto insurance customer who wants a quote it is $25. For this service once the client fills out their information, EverQuote calls them and once they get them on the phone they call an insurance agent who signed up for this service and tell them they have someone on the phone who wants a quote, then they tell the customer we will finish up the quote for them on the phone. After ten minutes or so they have their price and we try to close the sale and get the policy started. This is a great service as we close about 75-100% of them each month. You don’t get many who will answer EverQuotes call and allow them to get a live quote with an agent, but those that do usually do a policy. Maybe 4 or 5 policies per month for our agency comes out of this from 5 transferred calls. So while I don’t know all of the behind the scenes information, like what ad or pop up sends them to their landing page, or if the carrier pays any commission behind the scene if a policy is written, as a customer of their service, they are the best in their industry. Agents like them and customers looking for quotes maybe not, but it is a successful business model and profitable for us as the client and for them as they shop the customer information out to multiple insurance companies. The younger generation is going to more and more online quotes, so this trend of internet lead services should keep growing as more people prefer to do things over the internet instead of sitting down Face to face with an insurance agent in his office. I’ll be watching EVER now, and will keep you updated if anything changes in the industry or with their business practices. Right now they are leading the industry and are the most client friendly, and innovative.

24 Likes

That’s a pretty true statement, I’d say they are pretty safe in their industry for now. The thing to keep an eye out for is if any government regulations come out saying you can’t sell customers information, or if they have to disclose it upfront that they will get calls from 10 companies in 30 minutes, etc. Since they gave permission, the do not call list doesn’t protect them, but if any regulations changed how internet lead companies worked or if they had to be more transparent to the customer then I’d be leery of their future, but for now they are leading their industry.

nreid
Thanks so much for your detailed and informed response.
You’ve illuminated how they make $ very well.
It reminds me of another service I use called thumbtack. They send up to 5 quotes out for your business. It could be anything from music lessons to painters for your house.
Now that I understand them better it makes me wonder about their TAM and competitors and if they will be able to keep up their torrid growth rate.
I’ll keep it on my watch list as well for now

Now that I understand them better it makes me wonder about their TAM and competitors and if they will be able to keep up their torrid growth rate.

Their “torrid growth rate” seems to be 30%. I was not able to access their website from Portugal, they are solely US for now but have international in their long-term sights. Their 10-K describes the business in detail but does not discuss how the insurance provider interacts with the customer, it did not sound like making a phone call

10-K https://investors.everquote.com/financials-and-filings/sec-f…

Denny Schlesinger

On the right side of the picture on their investors website you can see the MIT Sailing Pavilion where I learned to sail

1 Like

The basic premise is still the same to me though. You go on booking.com to compare airfare and hotels. You go on lrmdingtree to compare loans.

Both booking.com and lrndungtree have done very well for their shareholders. Lendingtree does not have a public competitor I know of but booking.com does. And booking.com’s competitors TripAdvisor and Orbit have not done very well for shareholders. Is there an explanation for booking to have done so much better than its competitors?

You can see in the s-1 if you look at page 86 they say they have powerful network effects that allow them to have reduced cost per quote by 65% between 2014 and 2017.

They attribute this to the scale they reached. If so, this means it will become next to impossible for some other company to come along and duplicate what they’ve done.

Combine the lower cost due to scale and the higher quality leads due to ai, this could change the way insurance is bought and relegate any newcomers to the space to a TripAdvisor compared to EverQuote being the equivalent of booking.com.

https://www.sec.gov/Archives/edgar/data/1640428/000119312518…

2 Likes

Hi Denny,
Looking at the conference call there are 2 references to Q4 2019 growth rate y/y
for some reason this will only come up on the app. the conference call is not fully on the seeking alpha website.
I typed out the quotes below from the Q4 conf. call

Seth Birnbaum(CEO):
"we delivered 78% revenue growth in Q4 y/y in autos, while diversifying
our business with growth in our other verticals, which consists of home, renters, life, commercial and health which grew 130% in Q4 over the prior year period

John Wagner (CFO):
we delivered fourth quarter revenue of $73.8 million, up 86% year-over-year
"revenue growth rates accelerated across multiple verticals with continued impressive growth in our auto insurance vertical and even faster growth in our other insurance verticals, which includes home ad renters, life, health and commercial

1 Like

I’m going to say again insurance is more of a “one and done” type sale because it’s literally like a subscription. Everything renews. I don’t requote my auto or homeowners insurance because it auto renews. Whereas every time I take an airplane I have to get a quote on airfare. There is no auto renew. Thus, insurance will most likely have highest customer acquisition costs.

Unless somehow they entice their buyers to requote every 6 months when their policy expires. I could probably save $100 or more a month requotung my insurance when it expires. Because we all know the game. Go with an insurer because they’re cheap then pay more every time the policy renews.

The average booking.com customer will most likely take more airplane trips in 5 years than an EverQuote customer will requote his homeowners insurance in those same 5 years. That’s my point. Insurance will not have the same repeat business. Still interested in ever though.

1 Like

The basic premise is still the same to me though. You go on booking.com to compare airfare and hotels. You go on lrmdingtree to compare loans.

Of course, they are all marketplaces, but not all markets work the same way. Compare horse auctions to shopping malls… :slight_smile:

I highly recommend Reinventing the Bazaar: A Natural History of Markets by John McMillan (Author)

https://www.amazon.com/dp/B001T7EJ9Q/ref=dp-kindle-redirect?..

Both booking.com and lrndungtree have done very well for their shareholders. Lendingtree does not have a public competitor I know of but booking.com does. And booking.com’s competitors TripAdvisor and Orbit have not done very well for shareholders. Is there an explanation for booking to have done so much better than its competitors?

Yes! The same reason Google has more than half the search market. It comes under many names. Increasing returns, first mover advantage, network effect, path dependence. Eating places don’t have it, search engines do. It’s in the nature of the business.

You can see in the s-1 if you look at page 86 they say they have powerful network effects that allow them to have reduced cost per quote by 65% between 2014 and 2017.

I read most of the Business section of their 10-K last night. It repeats much of the S-1. One comment in this thread said that they don’t have much repeat business because you only buy a car once every so many years. This is a wrong idea and the 10-K pointed it out. One does not insure cars or houses or health or life. One insures wealth. The car, the house, health, and life are the insurable interests but what you are protecting is your wealth, the cost of replacing the car, the cost of repairing your house, medical expenses, in the case of life, replacing your income stream when you are gone. If someone only had a car to insure I had no interest in their business. If they had a fleet of cars, a house or two, a business, then yes, they had lots of wealth to protect and they were great customers. The 10-K says they store the visitor’s data to facilitate multiple searches for different insurance products. This creates switching costs, why go elsewhere and enter the same data once again? And it also points out that they do have repeat business.

This is the kind of business which, properly done, can be a take most business like Booking and Google.

You can see in the s-1 if you look at page 86 they say they have powerful network effects that allow them to have reduced cost per quote by 65% between 2014 and 2017.

This is the magic of markets! The efficiency of markets is to eliminate all unnecessary profits. One very interesting point made by John McMillan is that the second lowest cost producer in commodities sets the street price. The low cost producer makes a profit, the second lowest cost producer breaks even. All others go broke. But, if you are in the rock business, the distance to the customer trumps the cost of the rock because transport is the cost driver. Rock piles have local advantage. Markets share supply and demand but each one has it very own peculiarities.

I highly recommend reading Reinventing the Bazaar, it is entertaining and educational.

Denny Schlesinger

8 Likes

Hi Denny,
Looking at the conference call there are 2 references to Q4 2019 growth rate y/y
for some reason this will only come up on the app. the conference call is not fully on the seeking alpha website.

MusiCali, I haven’t got to the earnings report yet. I was trying to understand their business model first. If they are growing revenue that fast, so much the better.

Seth Birnbaum(CEO):
"we delivered 78% revenue growth in Q4 y/y in autos, while diversifying
our business with growth in our other verticals, which consists of home, renters, life, commercial and health which grew 130% in Q4 over the prior year period

The 10-K gave the impression that they were diversifying verticals but AVOIDING health insurance. I wonder what changed. I’d be careful with growth rates off small bases. Your second customer is 100% growth, your third, 50% growth…

Denny Schlesinger

4 Likes