EverQuote's Q3 2025 Earnings Call Contradictions: Carrier Budgets, AI's Impact on Traffic, VMM Dynamics, and New Channel Investments

Date of Call: None provided

Financials Results

• Revenue: $173.9M, up 20% YOY

Guidance:

• Q4 revenue expected to be $174M–$180M (~20% YoY at midpoint)
• Q4 VMD expected to be $46M–$48M (~7% YoY at midpoint)
• Q4 adjusted EBITDA expected to be $21M–$23M (~16% YoY at midpoint)
• Company will invest in new traffic channels in Q4, which will pressure VMM/VMD and adjusted EBITDA in the period
• Midpoint implies FY2025 revenue growth ~35% and adjusted EBITDA growth >55%

Business Commentary:

• Record Financial Performance:
• EverQuote achieved record revenue of $173.9 million in Q3 2025, up 20% year-over-year, with variable marketing dollars (VMD) increasing to $50.1 million, up 14% from the previous year.

• The growth was driven by stronger enterprise carrier spend, up over 27% year-over-year, and increased revenue from auto insurance vertical by over 21%.

• SmartCampaigns and AI Bidding Product:

• The launch of SmartCampaigns 3.0 improved ad spend efficiency by 7% compared to the previous version. EverQuote also became the number one customer acquisition partner for a major national carrier in their channel.

• The adoption of AI-driven bidding systems led to improved campaign performance, attracting more budget from carriers and increasing their market share.

• Investment in New Traffic Channels and AI:

• EverQuote is investing in rebuilding higher funnel traffic channels such as social, video, display, and connected TV, as well as AI search platforms, to drive future growth.

• These investments are expected to impact variable marketing margins (VMM) by a few hundred basis points in Q4, although EverQuote anticipates improvements over the long term.

• Future Growth and Revenue Target:

• The company aims to reach a billion dollars in annual revenue within the next two to three years, with a goal of delivering 20% annual growth and expanding adjusted EBITDA margin by 100-150 basis points per year.
• This growth is based on a strategy to improve performance for carriers and agents, expand traffic channels, and leverage data assets to create a competitive advantage.

Sentiment Analysis:

Overall Tone: Positive

• Management repeatedly described 'record top and bottom-line performance' and 'record' revenue, VMD, adjusted EBITDA and net income; CFO: 'Total revenues in the third quarter grew 20% year over year to a record $173.9 million.' CEO: 'We are very energized to continue growing towards our billion-dollar revenue goal.'

Q&A:

• Question from Maria Ripps (Unknown): Can you share your view on the sustainability of current carrier profitability levels and what that means for customer acquisition spend?
  Response: Underwriting margins are healthy and likely early in a multi-year soft-market cycle, so advertising spend should increase over time as carriers catch up; ~80% of top-25 partners are below peak spend.

• Question from Maria Ripps (Unknown): What AI/platform features should investors expect in 2026?
  Response: Primary investments are in SmartCampaigns (AI bidding — 3.0), which improves ad-spend efficiency (example: +7% for a migrated customer), plus plans to extend AI bidding to local agents and expand AI voice in call workflows.

• Question from Zach Cummins (B. Riley Securities): Can you detail the incremental Q4 investments into new channels and their anticipated impact on VMM, and what appetite carriers have to ramp budgets?
  Response: Investing in higher-funnel channels (social, video, display, CTV, AI search) will likely reduce VMM by a couple hundred basis points initially (guide midpoint implies ~27% VMM vs 28.8% in Q3); management expects VMM back to high-20s over time and sees carriers as bullish with room to increase spend.

• Question from Jason Kreyer (Craig Hallum): Are carrier consumer rebates a risk to your marketplace and what assumptions are baked into the Q4 guide?
  Response: No meaningful rebating observed in carrier conversations; carriers are focused on growth and the Q4 guide reflects carriers pulling forward customer-acquisition investments and defying normal seasonal patterns.

• Question from Ralph Schackart (William Blair): How are you transforming from a lead-gen vendor to a multi-product provider and will the revenue model change?
  Response: Strategy is to wrap tech, data and services around referrals (e.g., SmartCampaigns) and build a multi-product suite for agents; recurring subscription revenue is growing and the commercial model may evolve once products are proven.

• Question from Mayank Tandon (Needham & Company): Is the $1B revenue target organic or does it include M&A, and where will margin expansion come from?
  Response: The path to $1B is planned organically (M&A could supplement but is not required); margin expansion will come mainly from operating leverage and technology investments while VMM is expected to remain in the high-20s.

• Question from Jed Kelly (Oppenheimer): Are these traffic investments discretionary or reactive to competitors, and how does this affect long-term margin goals?
  Response: Investments are discretionary and aligned to long-term strategy (not reactive); company targets sustained adjusted EBITDA expansion (~100–150 bps per year) driven by tech-led efficiency.

• Question from Corey Carpenter (JPMorgan): How long will new traffic investments depress VMM and is 20% growth achievable next year given comps?
  Response: New channels typically take 1–2 quarters to optimize and should reach parity thereafter; management is confident in averaging 20% growth and reaching $1B in 2–3 years but did not commit to a specific 2026 growth rate on the call.

• Question from Mitch Rubin (Raymond James): Update on California carrier participation and any room to improve non-ad costs?
  Response: California is ramping carrier-by-carrier with meaningful but sub‑potential spend (top 3–5 state in Q3); steady-state expected in 2026; non-ad cost efficiency is being driven company-wide by AI/automation (bidding automation, engineering copilots, AI voice) with limited headcount growth planned.

Contradiction Point 1

Carrier Budget Dynamics and Growth Strategy

It involves differing perspectives on carrier budget dynamics and growth strategy, which are critical for understanding EverQuote's financial outlook and market positioning.

How sustainable is carrier profitability, and how does it impact customer acquisition spending? - Maria Ripps (Investor Relations)

2025Q3: Carriers have strong underwriting margins and are focused on growth. - Jamie Mendal(CEO)

Can you discuss carrier budget trends and potential M&A? - Zachary Cummins (B. Riley Securities, Inc., Research Division)

2025Q2: Most carriers are in growth mode, with stable budgets. - Jayme Mendal(CEO)

Contradiction Point 2

AI-Powered Search and Traffic Acquisition Strategy

It involves differing statements about the impact of AI-powered search on EverQuote's traffic acquisition strategy, which is crucial for understanding their competitive positioning and business model.

How sustainable is current carrier profitability, and how might it affect customer acquisition spending? How will AI-powered search impact your traffic acquisition strategy? - Maria Ripps (Investor Relations)

2025Q3: AI-powered search is not a significant threat at this point, but we do have a significant advantage over everyone else. - Jamie Mendal(CEO)

How committed are carriers' budgets for H2 given tariff uncertainty? How will AI-powered search impact your traffic acquisition strategy? - Maria Ripps (Canaccord Genuity)

2025Q2: AI-powered search will shift traffic, but EverQuote is well-positioned to adapt. - Jayme Mendal(CEO)

Contradiction Point 3

Carrier Profitability and Acquisition Spend

It involves differing perspectives on the sustainability of carrier profitability and its impact on customer acquisition spend, which are crucial factors for EverQuote's business strategy.

How sustainable is carrier profitability, and what impact does it have on customer acquisition spending? - Maria Ripps(Investor Relations)

2025Q3: Carrier underwriting is back to a healthy level, and acquisition spend lags profitability. There's room for advertising spend to catch up, with approximately 80% of top 25 partners below their highest spend levels. - Jamie Mendal(CEO)

What are your expectations for the second half of the year, particularly regarding auto tariffs? Is carrier profitability structurally healthier now? - Maria Ripps(Canaccord Genuity)

2025Q1: Carriers have broad-based healthy underwriting profitability, which creates a cushion for potential tariff pressures. - Jayme Mendal(CEO)

Contradiction Point 4

Impact of AI and ML on VMM

It relates to the impact of AI and ML on VMM, which is a key performance metric for EverQuote and crucial for investor understanding of the company's financial health.

Can you detail the incremental investments in new channels during Q4 and their impact on VMM? - Zach Cummins(B. Riley Securities)

2025Q3: AI improves operational efficiency and customer outcomes. Traffic bidding ML platform enhances performance and preserves VMM. - Jamie Mendal(CEO)

What impact is AI and machine learning having on VMM? Have benefits been realized or are they expected soon? - Jason Kreyer(Craig Hallum)

2025Q1: Future VMM should stay in the high-20s range. Traffic bidding ML platform enhances performance and preserves VMM. - Jayme Mendal(CEO)

Contradiction Point 5

Investment in New Channels and Impact on VMM

It reflects differing perspectives on the impact of investments in new channels on VMM margins, which directly affects EverQuote's financial performance.

Can you provide details on Q4's incremental investments in new channels and their impact on VMM? - Zach Cummins(B. Riley Securities)

2025Q3: Investments in channels like social, video, and display are underway. These take time to optimize but are necessary for future growth. Joseph Sanborn: Investments in new traffic channels will impact VMM margins by a few hundred basis points. Despite this, we expect VMM to remain in the high 20s due to efficient bidding technology. - Jamie Mendal(CEO), Joseph Sanborn(CFO)

What is the rationale for maintaining certain one-to-one consent changes, and how do they impact financials? - Cory Carpenter(JPMorgan)

2024Q4: VMM margin is expected to be in the high 20%s range, factoring in strategic changes. - Joseph Sanborn(CFO)