EverQuote, Inc.
Q2 2020 Earnings Call Transcript

Published: 5 Aug 2020

[Operator:]

Ladies and gentlemen, thank you for standing by. And welcome to the EverQuote's Second Quarter 2020 Earnings Conference Call. At this time all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I'd now like to hand the conference over to your speaker today, Brinlea Johnson of The Blueshirt Group. Please go ahead, ma’am.

[Brinlea Johnson:]

Thank you. Good afternoon, and welcome to EverQuote's second quarter 2020 earnings call. We'll be discussing the results announced in our press release issued today after the market closed. With me on the call this afternoon is Seth Birnbaum, EverQuote's Chief Executive Officer and Co-Founder; and John Wagner, Chief Financial Officer of EverQuote. During the call, we will make statements related to our business that may be considered forward-looking statements under federal securities laws, including statements concerning our financial guidance for the third quarter and full year 2020, our growth strategy, and our plans to execute on our growth strategy, key initiatives, our investments in the business, the growth levers we expect to drive our business, our ability to maintain existing and acquire new customers, our recent acquisition, our interest or ability to acquire other companies, our goals for integrations and other statements regarding our plans and prospects. Forward-looking statements may be identified with words and phrases such as we expect, we believe, we intend, we anticipate, we plan, may, upcoming and similar words and phrases. These statements reflect our views only as of today and should not be considered our views as of any subsequent date. We specifically disclaim any obligation to update or revise these forward-looking statements except as required by law. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For a discussion of material risks and other important factors that could affect our actual results, please refer to those contained under the heading Risk Factors in our most recent quarter report on Form 10-Q, which is on file with the Securities and Exchange Commission and available on the Investor Relations section of our website at investor.everquote.com and on the SEC's website at sec.gov. Finally, during the course of today's call, we'll refer to certain non-GAAP financial measures, which we believe are helpful to investors. A reconciliation of GAAP to non-GAAP measures was included in the press release we issued after the close of market today, which is available on the Investor Relations section of our website at investors.everquote.com. With that I will turn the call over to Seth Birnbaum, EverQuote's Chief Executive Officer and Co-Founder. Go ahead, sir.

[Seth Birnbaum:]

Thank you, Brinlea. Good afternoon, and thank you, everyone, for joining us today. Our thoughts continue to be with all the individuals and businesses impacted around the world by the pandemic. As a company, we're meeting the challenges brought about by the unprecedented combination of a global health crisis, significant economic disruption and recent social upheaval, while continuing to execute on our growth initiatives and commitments to our customers. Our strategy continues to yield excellent results. Our tech- and data-driven marketplace flywheel continues to drive network effects via more consumers and providers with deeper engagement across multiple insurance verticals. In Q2, we reported a strong second quarter across all of our key financial metrics, delivering year-on-year growth of 41% in both revenue and variable marketing margin. We also delivered positive adjusted EBITDA expansion year-over-year, consistent with our model. And we have strong momentum in the business, which is allowing us to raise our full year 2020 guidance, which John will cover in more detail. In our view, significant changes in the market brought about by the pandemic will accelerate the long-term shift of insurance online, and we remain focused on building the comprehensive digital insurance distribution marketplace for consumers and providers using data and technology to make insurance simpler, more affordable and personalized, ultimately reducing costs and risk. While we continue to be vigilant in shifting market dynamics brought about by COVID, we are fortunate and deeply grateful that given the resilience of our model, our growth prospects have never been stronger. The insurance industry remains profitable and continues to exhibit strong demand to invest in online channels. The moderation in consumer demand that occurred since the start of the pandemic is largely in line with our historical seasonal traffic patterns, and its impact has been modest on our business given our diversity of traffic sources. Our team remains highly productive and collaborative, operating in a fully distributed manner. And we believe that the dominant dynamic for our business, the secular shift of insurance online is further validated by the emergence of a growing cohort of successful insurtech companies, many of whom our customers or partners. We're confident we are better positioned than ever and have set the stage for a strong second half and for 2021. I am personally energized by our mission to empower insurance shoppers to better protect life's most important assets, their family, property and future. And our team is passionate about our goal to become the destination for insurance customers, both consumers and providers, by delivering high-value experiences and broad product selection with low friction. Our strong financial performance in the quarter was achieved while continuing to invest and execute across our four growth levers. We have made strong progress with an expanding set of key initiatives, products as well as services as we lean into our massive opportunity in the shift of nearly $150 billion of insurance distribution spend online. Our four growth levers are

[John Wagner:]

Thank you, Seth. And good afternoon, everyone. I'll start by discussing our financial results for the second quarter of 2020, highlight our current financial performance and then provide guidance. We're pleased to report a solid second quarter of 2020 with results consistent with our guidance across all our key financial metrics. Second quarter revenue was $78.3 million, up 41% year-over-year, a growth rate that is notable considering the level of economic and social disruption during the quarter. Second quarter revenue in our auto insurance vertical increased to $64.6 million, a growth rate of 30% year-over-year. Second quarter revenue from our other insurance vertical, which includes home and renters, life, health and commercial insurance, increased to $13.7 million, a growth rate of 133% year-over-year. Non-auto revenue now represents 17.5% of total revenue. In the second quarter, variable marketing margin or VMM, which we define as revenue, less advertising expense was $23.5 million, an increase of 41% year-over-year. As a percentage of revenue, VMM expanded nearly a point over first quarter of VMM to 30%, while staying consistent with the prior year's quarter. In the second quarter, consumer quote requests increased 50% year-over-year to $6.8 million. We believe traffic this quarter was negatively impacted by a combination of factors, including the softer, seasonal trend of Q2, as well as a modest impact from consumer shopping distraction as a result of COVID-19 and social unrest. During the quarter, we put a greater focus on growing consumer volumes in a challenging consumer environment, while not losing sight of our primary goal of growing variable marketing margin. Although online advertising costs have decreased broadly, insurance specific advertising has remained more competitive reflecting the resilience of the general insurance industry during this time. Our traffic teams have been disciplined and selective across the advertising and acquisition landscape and were successful growing consumer quote request volumes through the quarter and importantly exited the quarter with momentum as extended into Q3. As anticipated, our increased volume of quote requests as compared to the prior year period was accompanied by 6% year-over-year decline in revenue per quote requests to $11.55 for the quarter. However, note that this was a 5% sequential improvement over Q1. Similar to quote requests volumes, we are seeing higher revenue per quote request continue into Q3 largely as a result of strong referral pricing. Although it's an output of our marketplace model, we do see higher revenue per referral as at least partially indicative of improving carrier sales performance from our referrals and a reflection of carrier's willingness to reflect that improved performance in their referral bids. Increases in revenue per quote request also provide us with the ability to bid more aggressively for advertising and consumer traffic while still delivering higher variable marketing margin as a percentage of revenue. Second quarter GAAP net loss was $2.8 million or a loss of $0.10 per share based on approximately $27.1 million weighted average shares outstanding. This compares to a GAAP net loss of $2 million in the prior year period. Our GAAP net loss was impacted by $6.3 million in stock-compensation expense, largely the direct result of our higher stock price. We expect stock compensation for the balance of the year to be between $15 million and $16 million. We delivered adjusted EBITDA of $4 million or 5.1% of revenue for the second quarter above the midpoint of our guidance range. Our adjusted EBITDA benefited directly from favorable expense management and the variable nature of a portion of our non-advertising operating expenses. We generated $4 million in positive cash-flow from operating activities in the quarter with $54.4 million in cash and cash equivalents on the balance sheet at the end of the quarter. We're also finalizing a renewal of our working capital line of credit, increasing it to $25 million further improving our liquidity position. As Seth mentioned earlier, we're excited today to announce the acquisition of Crosspointe to help fuel our growth in the health vertical. Crosspointe joins our recent direct to consumer agency initiative in the life vertical and will allow us to provide end-to-end insurance shopping experiences within the health vertical. The combined DTC agency initiative expands our TAM to include agency commissions and offers us the opportunity to improve the consumer shopping experience. Consideration to be paid at the closing of the acquisition is $15 million in cash, which will be funded from our balance sheet. Additional consideration payable in EverQuote ever quote stock maybe earned based on three years of post-closing operational performance. In 2019, Crosspointe reported cash based revenue of approximately $4 million and positive EBITDA. Crosspointe management has demonstrated a consistent growth trajectory, and we're excited to add approximately 30 new team members to our company, including the two passionate founders and leaders. We expect to close the acquisition in late Q3. Before discussing guidance, I'd like to provide a brief update of the impact of COVID-19 on our business. Beyond a modestly perceptible impact to consumer shopping, intent and volume, we believe COVID-19 had a relatively minor impact on Q2 results. We remain confident that the long-term impact of the pandemic will be to accelerate the transition of insurance industry advertising dollars to online channels, and to emphasize the importance of products and workflow that support online consumer insurance, shopping, and purchasing. We continue to closely monitor the near-term effect of COVID-19 on advertising and consumer traffic and acquisition. And as previously noted, we've seen early trends consistent with our seasonal pattern of sequential growth in Q3. Now turning to the specifics of Q3 guidance, we've reflected these operational trends observations, and our confidence as follows

[Operator:]

[Operator Instructions] And our first question comes from the line of Ralph Schackart from William Blair. Please go ahead.

[Ralph Schackart:]

Good evening. Thank you for taking the question. I have a couple, if I could. First, Seth, on the DTC new initiatives, both via the Crosspointe acquisition and life insurance program that's homegrown, perhaps you can give us some more color on the strategic rationale for these. Obviously, a large TAM, but just curious how this is going to interact with the marketplace model. And then any more of these opportunities that you may have going forward that you could perhaps give some perspective on? And then if you could just kind of rewind – I would start with that one.

[Seth Birnbaum:]

Yes. No, go ahead.

[Ralph Schackart:]

Maybe just on the quarter, kind of like revisit some of the comments there. I think you had called out some seasonality, obviously, in Q2 on the traffic side but also some maybe pronounced impact from COVID as well as the social unrest in late Q2. Any way you could help us think about how that traffic rebounded, perhaps quantify in July? And then any perspective which one may have impacted more in the quarter between COVID and/or the social unrest? Thanks.

[Seth Birnbaum:]

Sure, Ralph, thanks. And good afternoon. So I'm going to take the first question, and John is going to answer the second question. Our traffic team is doing extraordinary work driving great growth, and there are specific segments where we obviously have more consumer demand than provider supply. And you can see that in the sort of RPQR, the revenue per quote request, dynamic. The direct-to-consumer agency initiatives, both of them, will actually help us cover these underserved consumers. They certainly can help us lower friction, drive higher revenue per quote request in these specific segments. And so ultimately, it will enable us to continue to ramp traffic, spin our flywheel more, increasing actual overall consumer demand in the marketplace to benefit everybody. So that includes our partners in the marketplace. So we do expect that the vast majority of consumers to continue to match and connect with partners. And again, this will enable us to drive incremental growth, especially by increasing the coverage for underserved consumers in these specific segments. As far as sort of incremental DTC segment, right now, we're focused on obviously health and life, and that's what we're working on right now.

[John Wagner:]

Sure. And then, hi Ralph. I'll take the second part. Within Q2, we saw a more challenging consumer environment. Our traffic teams reacted to that. And ultimately, we turned in quote request volumes that were in line with our expectations, albeit at slightly higher cost per quote request. I think more importantly, we saw very good momentum going into Q3. We've reflected that in our guide. I think when we look at Q3, we see a balanced quarter developing, certainly a quarter that's led by growth in consumer volumes, but I think you'll continue to see good sequential increases in unit economics as well. So I think we saw some turbulence in Q3, and you can connect that to the normal. Excuse me, Q2, you can connect that to the normal seasonal pattern of Q2. But we also ascribe some connection to consumer distraction from shopping, which is COVID-19 or social unrest. But I think we've seen a Q3 developing that is like Q2, largely consistent with the seasonal pattern, which for Q3 means sequential growth over Q2.

[Ralph Schackart:]

Great. That’s really helpful. Thanks Seth. Thanks John.

[Operator:]

And our next question comes from the line of Ron Josey from JMP Securities. Please go ahead.

[Ron Josey:]

Great. Thanks for taking the question. And hi Seth, hi John. So I wanted to understand, maybe following up on Ralph's question, the DTC agency model set a little bit more. Maybe just from the consumer approach, can you just talk about how the consumer experience might evolve here and really the two different channels on the DTC agency versus the marketplace? And then I wanted to ask a little bit on auto revenues. It looked like they declined sequentially around 4.5%. And just wondering if this has anything to do with what you talked about in civil unrest, et cetera, or is this more of a seasonal thing, which sort of ebbs and flows. Thank you.

[Seth Birnbaum:]

Sure. Hi, Ron. Good afternoon. This is Seth. I am going to take the first question on DTC agency, and then Wag will follow up with your question with regards to auto's growth. On DTC agency, it is a consolidated marketplace experience. So consumer arrives. And if that consumer happens to be in one of the segments that we're covering with the direct-to-consumer agency experience, let's say, we can do it, we can sort of match them by age or coverage needs, basically, they can go through our workflow. They can get either a curated quote, so a single quote exit matched with a product that serves their needs, or multiple quote exit, and then they can actually connect with an agent directly in our platform either online of offline to purchase insurance. And so these are experiences that we're already building out. We already have these personalized experiences running in production in life, and it literally takes a consumer who's matched in a specific segment with an undermet need with a very streamlined product that they can purchase online or off-line through one of the agents in our platform. And so that's precisely how it works. Again, we're confident it will reduce friction, increase coverage and plug us, sort of broaden our exposure to the commission TAM.

[John Wagner:]

So Ron, on your second question there. We did connect our expectations around Q2 with the normal seasonal pattern, though we were quick to say in the past that we've seen disruption to that seasonal pattern, which is usually a softer Q2 in recent years. And that was really connected to the growth of the other verticals. So that seasonal pattern of a down Q2 is one that we do associate more with the autos vertical than with these new other verticals, which are growing kind of through any seasonal trend. And that's what you saw within the quarter with the other vertical growing 133% year-over-year. So we do see kind of the seasonal trend as being most connected to the autos vertical and kind of our historic business.

[Seth Birnbaum:]

I think, Ron, it's also important to note, right, we came in right on our traffic model, right? 50% year-on-year growth for quote request volume in the quarter and sort of right on the button in terms of sort of – maybe at the high end of the model for cost, which, again, we believe, is that compounding effect of COVID and social unrest. And then simply an air pocket came right out with strong momentum, strong unit economics into Q3.

[Operator:]

And your next question comes from the line of [indiscernible] Oppenheimer. Please go ahead.

[Unidentified Analyst:]

Hey, great. Thanks for taking my question. Just first, on the third quarter guidance, is that predominantly organic? And then on the Crosspointe acquisition, I mean, does the majority of that revenue show up in the fourth quarter? Just how should we view the guidance?

[John Wagner:]

Yes. You've got it, Jed. So third quarter, as we look at the Crosspointe acquisition, we anticipate that closing late in Q3. So we really don't anticipate much contribution within Q3. So what you're seeing there is a strong organic quarter. As you look at the full year guidance, we've considered the Crosspointe acquisition as well as the momentum that we're carrying into Q3 as well as the contribution from contribution from our own health vertical as well in terms of the full year raise with regard to the full year guidance there.

[Unidentified Analyst:]

Okay, thank you. That’s helpful. And then just a couple of things. On – I mean are you seeing any benefit from the increase in used car sales that we saw in June, July? And then how are you thinking of the large carriers budgets as brand television start – as live events and they start to lean more into branded channels? Just how is that dynamic shaping up for the second half of the year?

[Seth Birnbaum:]

So typically, Jed, we see no connective tissue – little to no connective tissue between car shopping and even auto insurance shopping. A vast majority of the business is renewal, price shopping, triggered by a claims experience, good or bad. And so, again, we don't see much connective tissue. We grew traffic in Q2 really at the high end of our growth model for traffic with a modestly increased cost per quote request. So we're pretty confident that the consumer demand dynamic and the opportunity to grow consumer demand is evident and right in front of us, and we'll keep executing on it. With regards to incremental advertising on TV and turning on some of these channels. Again, we see it more as a dimmer switch. It will turn on slowly over time as opposed to a light switch. And there are certain conditions under which incremental off-line advertising actually can drive up online consumer demand as well. So again, we've sort of considered all this in our model and our guidance, and we're really confident that we set the stage, not just for a strong Q3 but a strong back half of the year.

[Unidentified Analyst:]

Okay. And then just one more question. You talked about some of the social unrest maybe causing – impacting your traffic acquisition. The elections coming up. So I mean, how are you going to manage that? Because I guess that would seem to be – it could be potentially as volatile as social unrest online. So just can you talk about that, too?

[Seth Birnbaum:]

Sure. Again, it is important to emphasize that the traffic teams delivered a significant 50% year-on-year growth. In addition, as you know, we keep diversifying the marketplace, adding traffic sources, expanding our major sort of traffic elements or the sort of different marketing campaigns. And in fact, In Q2, we saw an increase across the board in all of our traffic operations, certainly, with some highlights in search or industry-specific channels. And again, we didn't so much see traffic moderation because we were able to keep executing against our model. And I believe that's also related to just our team's increasing an extraordinary ability to execute and demonstrate resilience in the traffic models that we have. And then sort of finally, coming out of that, I'm really confident that we'll be able to continue to execute as we did in Q2, even with the election in view. And that is a function of increasing diversity, great execution and resilience in the business model or traffic model.

[Unidentified Analyst:]

Thank You.

[Operator:]

And your next question comes from the line of Michael Graham from Canaccord. Please go ahead.

[Michael Graham:]

Thank you. Hey, everyone. Does the DTC initiative change your regulatory footprint at all? Do you have to go like state-by-state and get licensed or anything like that? Does it impact your growth trajectory? And then you've talked in the past about sort of tapping you've talked in the past about sort of tapping more into the agent commission TAM in auto, sort of moving beyond advertising budgets. Do you plan on taking this model to auto as well? And can you just touch on like what are some of the other strategies you have in place to capitalize on the agent commissions TAM in auto?

[Seth Birnbaum:]

Well, sure, let me take your let me take your first question. Hi, Michael. Good afternoon. So as far as the clients, in order to share quote information to basically help folks get insurance, we have been licensed to produce insurance for some time. So we maintain – I believe we maintain licensing in all or most of the states that we operate in. So we don't expect any kind of sort of bottleneck or growth – any of our growth to be prevented by having to go through licensing because we've done that. In the health segment, the acquisition of Crosspointe sort of gives us incremental – not just incremental in-market experience but also some incremental licensing around health and appointments with some of the carriers in the specific segments that we're going to serve together with Crosspointe. As far as plans for DTC in auto, right now, again, there's so much opportunity in these two specific segments that we're announcing today in health and life, so that, that's where we're really focused. And there's always an opportunity with agency partners to evolve the business on more of a commission share basis. So that's always open to us. We will continue to explore the opportunities as we expand the marketplace for both consumers and providers, and we're going to be focused – laser-focused on growing out the health and life verticals using these new initiatives.

[Michael Graham:]

Okay, that’s great. And I’ll just slip in one more. Seth, maybe you can just comment on the macro in auto. I mean, I think we saw a little bit of carriers with maybe a little more money to spend. How much have you guys factored into your thinking for the balance of the year the possibility that miles driven starts to go up and claims activity starts to go up? And does that impact carrier spending?

[Seth Birnbaum:]

So maybe we'll go backwards through that. Again, we’re confident that by increasing diversity outside of auto by even within auto, having a diversity between the carrier business, the agency business and the DTC distribution businesses, we further increased monetization diversity. And that, we believe, over the long term, really strengthens the business. As far as the dynamics we're seeing, and again, what we expect through Q3 and back half of the year is we saw even in Q2 and now leading into Q3 increasing monetization. So Q2 revenue per quote was up sequentially from Q1. We saw that momentum continuing again into Q3 where monetization continues to strengthen. And we believe that reflects really two things. One is our performance for referrals and – the performance of our referrals for our provider partners, but also our provider partners' appetite to grow their business with us, right, to increase their marketing spend. As far as what do we expect the impact to be on the provider side of the business, we expect continued strength and demand from the providers. Now on the consumer side, we did see some modest moderation towards the end of Q2, and that also has just – was just an air pocket come out in both July was very strong, volume and unit economic-wise for consumer demand in auto, and we expect that to continue into the quarter, and it's reflected in our guidance. As far as how do we expect all these puts and takes to play out, again, I think the effects in terms of turning back on TV, folks driving more because of the way the pandemic was managed in the U.S. are likely to be more of a dimmer switch turning up than a light switch, and we expect continued strength, both in growing consumer demand and in provider monetization and provider budget demand in the marketplace in Q3 and through the end of the year because it's going to be sort of a slow shift back to normal, if you will.

[Michael Graham:]

Okay, sounds good. Thanks so much.

[Operator:]

And your next question comes from the line of Mayank Tandon from Needham. Please go ahead.

[Mayank Tandon:]

Thank you. Good evening. Hi, Seth and John. Just a few questions here. I wanted to ask broadly about competition. Your larger peer, or I guess you’re about the same size now in terms of your revenue, has talked about some relative softness versus you. It is what you're showing in your business despite some of the challenges in the second quarter. Could you talk about what are some of the differences that have helped you maybe come out relatively unscathed so far during the pandemic? And then also just I would love to hear about thoughts if you could comment on some of the emerging – so-called emerging players in this market. I think there is a lot of like noise around platforms like Zebra, Gabi, et cetera. Are they making a dent in the market? Or is it sort of so large that it's not really having an impact on your opportunity?

[Seth Birnbaum:]

Sure, Mayank. Let me take that maybe backwards with your second question first and good afternoon. So again, the trend in the business is the secular shift of literally billions of dollars from off-line spend by the insurance industry to online. A lot of the online agencies, which you just mentioned, and a lot of the insurtechs, some of them who just went public, many of them are either partners or customers of ours because, again, we can help provide them consumers for the specific books of business or the segments that they’re each addressing. So we’re really well positioned to not just inherit increased marketing spend from the carriers but also partner with these insurtechs and online agencies so they can grow their business profitably, and we do. They are, in essence, especially the names you just mentioned, potential or already incremental budget in our marketplace. As far as our comp, I think you're referring to Tree, I understand our revenues sort of exceed theirs at this point. But all that having been said, I have no commentary on their operations for insurance, by the way. Not in total, but for insurance, I have no commentary on their operations. I will say what's different about us is we've taken a tech- and data-driven approach that's really focused on addressing the broadest possible swath of consumers with broad product selection, maximize provider inclusion to basically also maximize conversion rate to a policy, and we think it's a winning formula for an insurance marketplace. And I think our incremental growth over our peers should demonstrate that.

[Mayank Tandon:]

That’s very helpful background. Also just one question for John. John, as we think about the second half model, how should we think about the quote request versus revenue per quote request tracking? And then also, do you still expect to see some benefit on the cost per quote? Or is that going to start to trend higher as I think, you mentioned that the – it is still competitive on that side of the market as well?

[John Wagner:]

Sure. So I think what we think about for Q3 and beyond is really balanced growth, right? We think of that as in recent quarters being driven by quote request volume, but we also expect incremental increases or sequential increases in the unit economics. And I think that would be led by revenue per quote request, so I think you would expect increases in Q3 in revenue per quote request. I would almost look to Q3 of last year as a more meaningful benchmark than, say, this past quarter in terms of where revenue per quote request could go. But it's still going to be a story that's led by volume increases. But it's a balanced story with revenue per quote request as well. I think as part of that, whenever we see revenue per quote request increases, that allows us to get a little more aggressive on traffic acquisition, and that usually is a accompanied by an increasing cost per quote request, but often not quite the level of revenue per quote request. So that usually is reflected in increases in variable marketing margin, which is what we've reflected in our guidance for Q3.

[Mayank Tandon:]

Great, that’s clarified it. Great job guys. Thank you so much.

[Seth Birnbaum:]

Thanks Mayank.

[John Wagner:]

Thanks, Mayank.

[Operator:]

And your next question comes from the line of Doug Anmuth from JPMorgan. Please go ahead.

[Ryder Cleary:]

This is Ryder on for Doug. Thanks for taking my questions. I'm wondering what kind of increases you're seeing in bind rates from carriers with deep integrations versus carriers without deep integration and how that translates into revenue per quote request?

[Seth Birnbaum:]

Sure, I think what we’ve discussed publicly and published is that we see an increase – depending upon the depth of the integration, an increase in bind rate or conversion rate to a policy sale of anywhere between 10% at the low end and 41% at the high end. And we expect that essentially to linearly be reflected in revenue per quote request in two ways. One is just a bit up because now providers actually can recycle higher performance into higher volume. And then we also feel, or believe you're confident you can leverage integration, specifically deep integrations to increase the number of referrals we make per quote request. So there's two ways that that can drive increasing RPQR as we execute on that.

[Ryder Cleary:]

Great. Thank you.

[Operator:]

And your next question comes from the line of Aaron Kessler from Raymond James. Please go ahead.

[Aaron Kessler:]

Great, thanks guys. Maybe just on – be curious to hear your thoughts on what you're seeing in the market for ad pricing, I assume it did improve from Q2 or just in terms of you buying traffic and then, or from Q1, sorry. And then how much room do you think you further have to improving maybe your efficiency of buying that was obviously a big benefit over the last year? How should we think about that going forward? Maybe finally, just if you can tell how our consumers changing their policies with COVID-19, I assume obviously they're driving less. Are they ratcheting down kind of their insurance levels? I assume the offset is that insurance companies are more profitable as well. Thank you.

[Seth Birnbaum:]

Sure. Can you just – can you clarify Aaron, did you say efficiency of binds?

[Aaron Kessler:]

Yes. That was the second question. Yes. Just how much room do you think you further have to improve your kind of ad buying efficiencies?

[Seth Birnbaum:]

So what we saw and was consistent in Q2 in the non-insurance industry specific channel, we saw pricing soften, and then we saw certainly towards the – throughout the quarter, we saw the specific, and we had talked about this before and we saw industry specific channels again because of the resilience of the industry. We had expected this. We saw industry specific marketing channels. So relatively, the costs were stable to up as there was some tighter competition and the unit economics were strong throughout. In terms of overall traffic execution, we stayed focused on continuing to drive higher converting traffic and our channels and saw a modest increase in price towards the end of the quarter, which then sort of cleared out as we entered July. And we had a very strong July, both in terms of volume, but also in terms of cost dynamics on a per converted basis. As far as the efficiency of binds in the platform, what I can say publicly is year-on-year we've dramatically increased the rate at which we go from an arrival to a quote. And we do expect that with deep integrations, we will continue to drive up our binder policy sales rate. And that will be reflected back to us as monetization. That's what we believe. And we have seen monetization not just increase sequentially from Q1 to Q2, but also shows strong momentum and strengthening from Q2 into Q3, which is sort of giving us confidence that that dynamic is underway. As far as major policy changes, I think what we can say is we do expect people to continue to shop, especially given the economic pressure on them, and they have to tighten their belts and move for policies. They are seeing incremental discounts from a lot of the big carriers to both shop and save as well as renew. So we expect policy shopping and renewal volumes to remain healthy. And consumers are going to put some incremental money, both from the industry as well as from shopping in their pocket. That's what we believe.

[Aaron Kessler:]

Great. Thank you, Seth.

[Operator:]

[Operator Instructions] And your next question comes from the line of Michael McGovern from Bank of America. Please go ahead.

[Michael McGovern:]

Hey, thanks for taking my question. I just want to ask a quick one about the brand strategy and how does the long-term strategy change now with the DTC – with the DTC agency offering? And also would you consider expanding the DTC agency business to more verticals longer term? Thanks.

[Seth Birnbaum:]

Sure. Maybe I'll take them a bit out of order. Good afternoon, Michael. So as far as long-term strategy, the DTC agency initiatives really extend our marketplace by deepening provider and consumer engagement and serving underserved consumer segments. So again, we think ultimately it provides better coverage, which will enable us to drive more traffic and all of our partners will benefit. It also gives us an opportunity to broaden our exposure to the commission TAM, the $130 billion commission TAM in the shift of insurance online. As far as brand strategy, what we said is our long-term model and we expect to continue to execute with our data driven and tech marketplace model. And we'll extend our growth levers and keep building on our path to a billion. But we have an opportunity to introduce what we call a performance brand strategy, Michael, which is – gives us the ability to basically leverage increasingly what we call upper funnel advertisement to build out audiences across our specific vertical and it actually further increased conversion rate, not just of our traffic, but downstream to policies. So we conducted some of – probably really the largest test that we have in our history on building in-market insurance audiences, across several different consumer segments, it was successful and we're going to keep involving – evolving our brand strategy. We do see it as incremental potentially to our long-term model. And we do expect that any “brand spend” we have to drive positive ROI in our existing marketing channels, which is an important distinction from loss leading brand marketing.

[Michael McGovern:]

All right, thanks so much.

[Operator:]

And currently, I'm showing no questions at this time in the queue.

[Seth Birnbaum:]

So I do want to thank everybody for joining us. Our teams, shareholders, investors and analysts, it was a great quarter. We put in place the basis for what we're confident is a strong Q3 and back half of 2020 and into next year. We're more bullish and excited about our business than ever. And we appreciate everybody's support and participation in our journey. We look forward to taking your questions offline and meeting you at upcoming events. Thank you so much.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you for participating.