EverQuote, Inc. Annual Report 2020

FY2020 Annual Report · EverQuote, Inc.

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2020 Annual Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission file number: 001-38549

EverQuote, Inc.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
210 Broadway
Cambridge, Massachusetts
(Address of principal executive offices)

02139
(Zip Code)
Registrant’s telephone number, including area code: (855) 522-3444

26-3101161
(I.R.S. Employer
Identification No.)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Class A Common Stock, $0.001 Par
Value Per Share

Trading Symbol(s)

EVER

Securities registered pursuant to Section 12(g) of the Act:
None

Name of each exchange
on which registered

The Nasdaq Global Market

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No È
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934

during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes È No ‘

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of

Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes È No ‘

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an

emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2 of the Exchange Act.
È
Large accelerated filer
‘
Non-accelerated filer
Emerging growth company ‘

‘
Accelerated filer
Smaller reporting company È

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new

or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ‘

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report. È

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘ No È
Based on the closing price of the registrant’s Class A common stock on the last business day of the registrant’s most recently completed second fiscal
quarter, which was June 30, 2020, the aggregate market value of its Class A common stock and Class B common stock (based on a closing price of $58.16 per
share on June 30, 2020 as reported on the Nasdaq Global Market) held by non-affiliates was approximately $989,798,228.

As of February 23, 2021, the registrant had 22,045,813 shares of Class A common stock, $0.001 par value per share, issued and outstanding and 6,429,502

shares of Class B common stock, $0.001 par value per share, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders, which the registrant intends to file with the Securities and
Exchange Commission not later than 120 days after the registrant’s fiscal year ended December 31, 2020, are incorporated by reference into Part III of this
Annual Report on Form 10-K.

EverQuote, Inc.
Table of Contents

PART I

Page

Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.

Item 5.

Item 6.
Item 7.

Item 7A.
Item 8.
Item 9.

Item 9A.
Item 9B.

Item 10.
Item 11.
Item 12.

Item 13.
Item 14.

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . .
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 15.
Item 16.
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBITS INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5
13
41
41
41
41

42
43

44
58
59

87
87
88

89
89

89
89
89

90
92
90
93

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements, which reflect our current views

with respect to, among other things, our operations and financial performance. All statements other than
statements of historical fact contained in this Annual Report on Form 10-K, including statements regarding our
future results of operations and financial position, business strategy and plans, and objectives of management for
future operations, are forward-looking statements. These statements involve known and unknown risks,
uncertainties, and other important factors that may cause our actual results, performance or achievements to be
materially different from any future results, performance, or achievements expressed or implied by the forward-
looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “expects,”
“might,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,”
“predicts,” “potential,” “seek,” “would” or “continue,” or the negative of these terms or other similar
expressions. The forward-looking statements in this Annual Report on Form 10-K are only predictions. We have
based these forward-looking statements largely on our current expectations and projections about future events
and financial trends that we believe may affect our business, financial condition and results of operations.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot
guarantee that the future results, levels of activity, performance or events and circumstances reflected in the
forward-looking statements will be achieved or occur. These forward-looking statements speak only as of the
date of this Annual Report on Form 10-K and are subject to a number of risks, uncertainties and assumptions
described in the “Risk Factors” section and elsewhere in this Annual Report on Form 10-K. Because forward-
looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or
quantified, you should not rely on these forward-looking statements as predictions of future events. The events
and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results
could differ materially from those projected in the forward-looking statements. While we may elect to update
these forward-looking statements at some point in the future, whether as a result of any new information, future
events, or otherwise, we have no current intention of doing so except to the extent required by applicable law.

Summary of Risk Factors

In addition to the other information in this Annual Report on Form 10-K, the following risk factors should

be considered carefully in evaluating our company and our business. A summary of the principal factors that
create risk in investing in our securities and might cause actual results to differ is set forth below:

(cid:129)

our future financial performance, including our expectations regarding our revenue, cost of revenue,
variable marketing margin, operating expenses, cash flows and ability to achieve, and maintain,
future profitability;

our ability to attract and retain insurance providers using our marketplace;

our dependence on our relationships with insurance providers with no long-term contracts;

our reliance on a single insurance provider for a significant portion of our revenue;

our ability to attract consumers searching for insurance, including through search engines, display
advertising, email and social media;

our ability to develop new and enhanced products and services to attract and retain consumers and
insurance providers, and our ability to successfully monetize them;

our anticipated growth and growth strategies and our ability to effectively manage that growth;

our ability to maintain and build our brand;

our ability to properly collect, process, store, share, disclose and use consumer information and
other data;

our reliance on our third-party service providers;

(cid:129)

the impact of competition in our industry and innovation by our competitors;

our ability to hire and retain necessary qualified employees to expand our operations;

our limited experience acquiring quote requests from third-party sources;

our ability to stay abreast of and comply with new or modified laws and regulations that currently
apply or become applicable to our business;

failure to maintain an effective system of internal controls necessary to accurately report our
financial results and prevent fraud; and

the future trading prices of our Class A common stock.

PART I

Except where the context otherwise requires or where otherwise indicated, the terms “EverQuote,” “we,”
“us,” “our,” “our company,” “the company,” and “our business” refer to EverQuote, Inc. and its consolidated
subsidiaries.

ITEM 1.

BUSINESS

Company Overview

EverQuote makes insurance shopping easy, efficient and personal, saving consumers and insurance providers
time and money.

We operate a leading online marketplace for insurance shopping, connecting consumers with insurance
providers. Our mission is to empower insurance shoppers to better protect life’s most important assets—their
family, property, and future. Our vision is to become the largest online source of insurance policies by using data
and technology to make insurance simpler, more affordable and personalized, ultimately reducing cost and risk.
Our results-driven marketplace, powered by our proprietary data and technology platform, is reshaping the
insurance shopping experience for consumers and improving the way insurance providers, which we view as
including both carriers and agents, attract and connect with customers shopping for insurance.

Finding the right insurance product is often challenging for consumers, who face limited online options,

complex, variable and opaque pricing, and myriad coverage configurations. We present consumers with a single
starting point for a comprehensive and cost-effective insurance shopping experience. Our marketplace reduces
the time consumers spend searching across multiple sites by delivering broader and more relevant results than
consumers may find on their own. Our service is free for consumers, and we derive our revenue from sales of
consumer referrals to insurance providers and, in select verticals, directly from commissions on the sale of
policies. In consumer surveys we have conducted, consumers purchasing auto insurance policies from referrals
made through our marketplace reported average annual premium savings of approximately $600.

Insurance providers operate in a highly competitive and regulated industry and typically specialize on

pre-determined subsets of consumers. As a result, not every consumer is a good match for every provider, and
some providers can struggle to reach the segments that are most desirable for their business models. Traditional
offline and online advertising channels reach broad audiences but lack the fine-grained consumer acquisition
capabilities needed for optimally matching consumers to specific insurance products. We connect providers to a
large volume of high-intent, pre-validated consumer referrals that match the insurers’ specific requirements. The
transparency of our marketplace, as well as the campaign management tools we offer, make it easy for insurance
providers to evaluate the performance of their marketing spend on our platform and manage their own return on
investment. Based on insurance provider feedback, we believe we are a large and efficient consumer acquisition
and retention channel for our insurance provider customers.

Industry Overview

Insurance is one of the largest segments of the United States economy and is highly fragmented with over

2,000 insurance carriers and 100,000 insurance agencies, which collectively issued policies representing
approximately $2 trillion in premiums in 2020. To capture new policies and retain existing customers, U.S.
insurance carriers spent $154 billion in 2020 on marketing and distribution consisting of $137 billion in
commissions to agents and $16.7 billion in advertising, according to data from S&P Global Market Intelligence;
SNL Insurance Data, a study we commissioned by Stax Inc and our own estimates. Based on these same sources,
online insurance advertising spend of North American insurance carriers and agents was $6.5 billion in 2020 and
is estimated to grow more than 16% annually through 2024.

Market Opportunity

The challenges faced in the $154 billion insurance sales, marketing and distribution market create a
significant opportunity for companies that can efficiently align consumers and providers. These challenges
include:

(cid:129) Misalignment of providers and consumers creates an inefficient match between supply and demand
(cid:129)
(cid:129)

A complex, fragmented and opaque market for consumers
Inefficient advertising channels for insurance providers

Due to these challenges, insurance providers are seeking more efficient ways to connect with consumers,
and as a result the internet has become increasingly influential in consumer insurance shopping. While carriers
continue to shift advertising dollars online in order to capitalize on the superior marketing characteristics of
digital channels, the shift of marketing budgets online continues to lag the shift in consumer behavior. The
insurance industry is also beginning to make products easier to buy and sell through digital channels with the
integration and digitalization of insurance products. We believe that the rise of digital insurance products and
shopping experiences will enable more personal, end-to-end shopping experiences, products and services.

Our Solution

Our results-driven marketplace, powered by our proprietary data and technology platform, matches and

connects consumers seeking to purchase insurance with relevant options from our network of insurance
providers, saving consumers and providers time and money.

Proprietary, data-driven technology platform. Our platform efficiently attracts consumers shopping for
insurance to our websites and call center, which match them to relevant providers for streamlined quoting. This
enables us to maintain high levels of quality control and provide real-time referrals to our insurance provider
customers at the moment of the consumer’s purchase intent.

Consumer engagement and benefits. We engage with consumers through user-friendly and

easy-to-navigate websites that make shopping for insurance easy, cost-effective and more personal. We aim to
make the end-to-end shopping experience seamless by enabling consumers to securely share their data with
matched providers, accelerating quoting and reducing repetition in the shopping process. We also engage
consumers offline through non-company branded television campaigns and consumer calls placed directly to a
call center partner or insurance agent and through our verified partner network.

We offer consumers a streamlined and personalized insurance buying experience, providing the following

key benefits:

(cid:129)
(cid:129)
(cid:129)
(cid:129)

Saving time and money
A single starting point for a comprehensive insurance shopping experience
A results-driven insurance shopping destination efficiently matching consumers with relevant options
Seamless online or offline handoff to quote or bind a policy

Insurance provider engagement and benefits. Insurance carriers and agents connect with our marketplace

through our web-based provider portal. Our portal provides transparent, secure access to marketplace data
regarding consumer type, volume and referral pricing, along with sophisticated campaign management tools for
targeting consumers based on a wide array of attributes. Our tools are designed to integrate with insurance
providers’ internal workflows to minimize administrative burden, and can incorporate quote, bind and lifetime
value feedback, enabling providers to evaluate and optimize their acquisition and retention campaigns through a
single interface.

Based on insurance provider feedback, we believe we are a large and efficient consumer acquisition and

retention channel for our insurance provider customers. We offer insurance providers the following key benefits:

(cid:129)
(cid:129)
(cid:129)
(cid:129)

Access to a high volume of in-market online consumers
Efficient acquisition of consumers that match providers’ specific criteria
High bind rates for referrals through broad data integration with providers
A flexible advertising channel

Our Strengths

We believe that our results driven marketplace provides us a competitive advantage based on the following

key strengths:

Proprietary Data Assets and Algorithms. Our marketplace is powered by a proprietary data and

technology platform that efficiently attracts insurance shoppers from a diverse and large array of sources,
increases the bind rate for consumers, and we believe will drive down the cost of acquisition for providers over
time as well as improve our own monetization. Our proprietary data assets and machine learning algorithms
efficiently attract consumers, match them with relevant insurance providers and drive our overall business model.
We utilize our data assets and machine learning capabilities throughout our business, from advertising and
consumer acquisition to the innovation of new consumer and provider experiences, as well as to guide our
strategic direction. As our data assets grow, our algorithms become more powerful. We believe our data science
capabilities, combining the use of proprietary data assets with scalable machine learning driven automation, give
us a significant competitive advantage.

Powerful network effects. Our insurance marketplace benefits from significant network effects. As we
attract more consumers to our platform, we collect more data to improve user experience, which in turn improves
conversion rates, which we believe will improve consumer satisfaction. Over time, the combination of these
factors has increased consumer traffic, leading to more quote requests for our insurance provider customers.
Increased quote requests, combined with quote and bind feedback, improve providers’ advertising and marketing
efficiency in our marketplace, resulting in more providers and provider spend. More providers and provider
spend enable us to attract more consumers, generating more data. Through these characteristics of our platform,
we increased the volume of quote requests referred to our insurance provider customers from 2 million in 2014 to
27 million in 2020.

Flexible business model. Our cost structure provides us with the flexibility to react to changes in the

business cycle. Our largest expense advertising is variable and can be quickly adjusted to market conditions.
During periods of economic expansion, we can increase advertising spend to attract consumers to our platform
and further enhance the strength of our marketplace. Conversely, during economic downturns, advertising
expenses can be rapidly reduced. We are also able to quickly adjust our advertising expense if we believe the
revenue associated with it does not result in incremental profit to the business.

Breadth and scale of our distribution. Over the past decade, we have cultivated relationships with a broad
range of insurance provider partners and currently have over 100 carriers participating in our marketplace either
directly or via our network of over 8,500 agents. We believe that the breadth of our coverage provides a
significant benefit to our consumers and is a key competitive advantage, particularly in our largest vertical of
auto insurance where significantly all of the top carriers participate in our marketplace.

Ability to expand with significant operating leverage. We have leveraged our data assets, technology
platform and engineering and data science capabilities, along with our growing audience of consumers and network
of insurance providers, to expand our platform from the auto insurance market into other markets such as home, life
and health insurance. We have the ability to enter new verticals with only a modest increase in headcount.

Diversified business model. Our marketplace operates in several insurance markets including auto, home,
renters, life, health and commercial, which provides an opportunity to diversify our revenue base and expand our
potential growth opportunities. Additionally, by operating in several verticals we can lessen our exposure to
negative impacts in any one of these markets.

Our Growth Strategies

We aspire to be the largest online source of insurance policies by using data and technology to make
insurance simpler, more affordable and personalized, ultimately reducing cost and risk. Data-driven innovation is
at the core of our strategy, culture and operating focus. With our diverse team of analysts, engineers and business
development employees, as well as our partnerships with leading insurance providers, we are working to build
the largest and most trusted online insurance marketplace in the world. To achieve this goal, we intend to
continue to grow our business by pursuing the following strategies:

Attract more consumers to our marketplace. We plan to expand the number of consumers reaching our

marketplace through existing channels by leveraging the superior features and growing data assets of our
platform. In addition, we may launch new marketing channels to acquire consumers both online and offline. We
believe that there is an opportunity to attract substantially more high-intent consumers to our existing insurance
offerings and that there are further expansion opportunities in adjacent verticals.

Add more insurance providers and increase revenue per provider. We plan to grow the number of
insurance providers on our platform by demonstrating the value proposition of our marketplace as an efficient,
scalable customer acquisition channel and adding new provider-facing features. While not a factor in our
historical increases in revenue per quote request, we believe we have an opportunity to also increase the number
of referrals per quote request while maintaining or increasing the bind rate per quote request, which would allow
us to increase our revenue at limited marginal cost. In addition, we plan to expand revenue per provider by
increasing consumer traffic and quote request volume, adding verticals and innovating advertiser products and
services.

Despite the high costs, saturation and lower overall conversion rates associated with traditional advertising

channels, such as television, radio and billboards, insurance carriers still allocate a significant portion of their
advertising budgets towards these channels. We have achieved $346.9 million in annual revenue while capturing
only a small fraction of insurance marketing spend in aggregate and at an individual provider level.

Expand and deepen consumer engagement. We continuously leverage our data assets and growing

consumer volume to conduct test-driven product development. We actively innovate with new consumer
offerings and enhanced user experience to deepen consumer engagement. Our goal is to provide broader and
more meaningful consumer experiences, leading to increased return visits, and higher frequency of interaction,
which we believe will result in greater revenue per user.

Enhance our brand awareness. We believe we have significant opportunities to increase our brand
awareness. Historically, our marketing efforts have been focused on algorithmic consumer acquisition rather than
brand marketing. We plan to further expand our marketing channels to drive greater brand recognition and attract
a broader consumer audience.

Expand our platform. We regularly evaluate new products and services that we believe will attract more

consumers, and deepen our consumer and insurance provider engagement, which we believe will result in
enhanced monetization. For example, we recently launched our direct-to-consumer, or DTC, agency offerings in
our life vertical. Additionally, in September 2020, we acquired Crosspointe Insurance & Financial Services,
LLC, or Crosspointe, a specialized health insurance agency. Crosspointe is a DTC sales and decision support
contact center that connects consumers to high quality health insurance in a customer-centric environment and
serves the individual and family health, Medicare, and ancillary health product markets. This acquisition enables

us to accelerate and expand our opportunity in the health insurance market, by providing insurance shoppers with
a broader range of health insurance products through access to a greater number of carrier partners, and an
improved and more personalized customer buying experience. We believe that our DTC agency experience will
enable us to deepen consumer-provider engagement by creating a more personalized and streamlined end-to-end
consumer shopping journey, with enhanced product selection and less friction from arrival to policy sale. We
also plan to continue to invest in the growth of our non-auto insurance verticals and expect to expand these areas
by leveraging our customer acquisition capabilities, proprietary technology and data assets to attract consumers
and build distribution. In addition, we may selectively look for opportunities to expand into additional non-auto
insurance verticals beyond those currently in our marketplace, through either organic development or acquisition.

We believe there are additional opportunities to grow our business, such as expanding internationally and

launching non-insurance financial service offerings.

Technology and Infrastructure

Our technology platform combines internally developed, third-party and open-source software. This
combination allows for rapid development and release of high-performance technology solutions in a cost-
effective and scalable manner. Our websites, mobile applications and supporting services, as well as our
development and test environments, are hosted across industry-standard cloud providers such as Amazon Web
Services and Google Cloud Platform. Additional internal data and analysis tools are hosted at a third-party data
center in Boston, Massachusetts. We use content delivery network solutions for fast, local access to our products.
We use network, website, service and hardware-level monitoring, coupled with remote-content monitoring, to
maintain a high level of uptime and availability for our systems with high-performance delivery.

Sales and Marketing

Our marketing efforts are designed to increase engagement by both consumers and insurance providers and
enhance their awareness of our company. Our marketing spend across channels is fundamentally algorithmic and
performance based. Over time, we believe we will increase our brand equity and recognition as we serve more ad
impressions. Additionally, we have built an efficient, consultative sales and customer success organization,
which sells our marketplace referrals to insurance carriers and agencies and engages directly with consumers to
sell life and health insurance policies.

Consumer marketing. Our marketplace relies on consumer acquisition from our online and, to a lesser
extent, our offline marketing efforts. Our consumer marketing strategies are algorithmic and performance-based,
leveraging our team of analysts, data scientists and engineers, along with our data assets and technology. We
have built technology to automate our algorithmic traffic acquisition across multiple online advertising
platforms. Our technology serves millions of advertising impressions per day across hundreds of acquisition
sources in a diversified strategy including search, display, social, email and video, with no single acquisition
partner accounting for more than 19% of quote requests. We believe the combination of our talent, data and
technology provides us with competitive advantages in acquiring more consumers as we continue to scale our
business.

Direct-to-consumer sales. Our DTC agency group is a data-driven, sales and decision support contact
center that connects consumers to health and life insurance in a customer centric environment. In September
2020, we acquired Crosspointe, a specialized health insurance agency, to accelerate growth in our health vertical
and our own initiatives to offer DTC agency experiences.

Carrier sales and marketing. Our carrier marketing initiatives are designed to deliver high-value content

on how carriers can increase efficiency in their customer acquisition efforts by capitalizing on the increasing
targetability and personalization enabled by our marketplace. We focus on building deep relationships and
establishing thought leadership among carriers through our presence at industry tradeshows, targeted delivery of

whitepapers and other materials, and personal outreach to key decision makers and marketing teams. This team
takes a data-driven approach to helping insurance carriers bind more policies with their target consumers at lower
cost per sale than other channels. Our campaign management team develops a deep understanding of our carrier
customers’ objectives to optimize their campaign performance and grow their budgets in our marketplace.

Agent sales and marketing. Our agent marketing initiatives are designed to reach, educate and acquire

insurance agents not yet participating in our marketplace. Our agent marketing focuses on educating agents on
how consumer buying behavior is changing and increasingly moving online and how they can better acquire and
serve consumers in the digital world through participation in our marketplace. We reach new agents online
through email, search, social media, and content marketing and in person at tradeshows and conferences. For our
current agent customers, we communicate the value of our platform and educate them on its use through our
onboarding process, ongoing outreach and account performance reports. Our agency sales team focuses on
onboarding new agents. Our customer success team analyzes account performance and consults with agents to
optimize their participation in our marketplace, help them achieve growth and return-on-investment objectives,
expand volume and add products.

Our Customers

Our insurance provider customers include:

(cid:129)

Carriers: Insurance carriers write auto, home and renters, life, commercial and/or health insurance
policies for consumers either directly and/or through agents. Our marketplace consists of an extensive
network of national and regional carriers as well as technology enabled start-ups. Our largest customer
Progressive Casualty Insurance Company accounted for 22% and 21% of our revenue for the years
ended December 31, 2020 and 2019, respectively. We plan to continue to grow both the number of
carriers participating in our marketplace and the level of participation from each carrier.

Agents: Insurance agents deliver auto, home and renters, life, commercial and/or health insurance to
consumers on behalf of one or more carriers. As of December 31, 2020, we had over 8,500 enrolled
insurance agencies on our platform. We are focused on further penetrating the large base of more than
100,000 insurance agencies in the United States.

Competition

We face competition to attract consumers to our websites and mobile applications, as well as for insurance

provider advertising and marketing spend.

Competition for consumers. The competition for consumer traffic and advertising space online is broad
and diverse. Our competitors offer various marketplaces, products and services that compete with us. Some of
these competitors include internet search engines and social media platforms; brand advertisers and brand
agencies across a spectrum of industries; sites operated by individual insurance providers; finance and credit
savings sites; insurance lead-generation, affiliate and aggregator networks; and marketing services providers for
insurers and general marketing services providers. We believe we compete favorably in attracting insurance
shoppers due to our superior data assets, consumer acquisition technology, team and data sciences management
infrastructure. We believe we also compete favorably in converting consumer traffic into referrals and,
ultimately, purchased policies due to the depth of our provider network, our consumer matching algorithms and
our intuitive and streamlined consumer interface. Furthermore, we believe the breadth of the insurance provider
options in our marketplace gives us an inherent advantage over single-brand insurance providers with respect to
conversion and bind rates for consumers.

Competition for insurance provider advertising and marketing spend. We compete for insurance

providers’ advertising and marketing spend with other internet sites, performance marketers and online

marketing service providers. We also compete with offline media, such as television, radio and direct mail. We
believe we compete favorably on the basis of the scale and quality of our consumer referrals, our seamless
handoff capability, our ability to align consumers with our providers’ preferences and business strategies and the
targeting capabilities of our platform.

Employees

Our company culture is data-driven, entrepreneurial, diverse and innovative. We are focused on delivering

superb results for our consumers, insurance providers and partners. As of December 31, 2020, we had 456
employees, of which 447 were full-time.

Regulation

Our business operates in a heavily regulated industry. Various aspects of our business are, may become, or
may be viewed by regulators from time to time as subject, directly or indirectly, to U.S. federal, state and foreign
laws and regulations. We are affected by laws and regulations that apply to businesses in general and the
insurance industry, as well as to businesses operating on the internet and through mobile applications. This
includes a continually expanding and evolving range of laws, regulations and standards that address financial
services, information security, data protection, privacy and data collection, among other things. We are also
subject to laws governing marketing and advertising activities conducted by telephone, email, mobile devices and
the Internet, including the Telephone Consumer Protection Act, the Telemarketing Sales Rule, the Controlling
the Assault of Non-Solicited Pornography and Marketing Act of 2003, the Health Insurance Portability and
Accountability Act, and similar state laws. In addition, we are a licensed insurance producer. Insurance is highly
regulated by the states in which we do business, and we are required to comply with and maintain various
licenses and approvals. Because the laws and regulations governing insurance, financial services, privacy, data
security and marketing are constantly evolving and striving to keep pace with innovations in technology and
media, it is possible that we may need to materially alter the way we conduct some parts of our business
activities or be prohibited from conducting such activities altogether at some point in the future.

Intellectual Property

We seek to protect our intellectual property through a combination of copyrights, trademarks, service

marks, domain names, trade secret laws, confidentiality procedures and contractual restrictions.

We have a number of registered and unregistered trademarks. We own federal registrations for trademarks

including EVERQUOTE, as well as multiple pending applications. We will pursue additional trademark
registrations to the extent we believe doing so would be beneficial to our competitive position.

We are the registered holder of a variety of domestic and international domain names that include

“EverQuote” and similar variations.

In addition to relying on the protection provided by these intellectual property rights, we enter into

confidentiality and proprietary rights agreements with our employees, consultants, contractors and business
partners. Our employees and contractors are also subject to invention assignment agreements. We further control
the use of our proprietary technology and intellectual property through provisions in both our general and
specific terms of use on our website.

Our Corporate Information

We were incorporated in Delaware on August 1, 2008, under the name AdHarmonics, Inc., and changed

our name to EverQuote, Inc. on November 17, 2014. Our principal executive offices are located at 210
Broadway, Cambridge, Massachusetts 02139, and our telephone number at that address is (855) 522-3444. Our

website address is www.everquote.com. Our website and the information contained on, or that can be accessed
through, the website will not be deemed to be incorporated by reference in, and are not considered part of, this
Annual Report on Form 10-K.

Available Information

Our Internet address is www.everquote.com. Our Annual Reports on Form 10-K, Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K, including exhibits, proxy and information statements and amendments
to those reports filed or furnished pursuant to Sections 13(a), 14, and 15(d) of the Securities Exchange Act of
1934, as amended, or the Exchange Act, are available through the “Investors” portion of our website free of
charge as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Information on our website is not part of this Annual Report on Form 10-K or any of our other securities filings
unless specifically incorporated herein by reference. In addition, our filings with the SEC may be accessed
through the SEC’s Electronic Data Gathering, Analysis and Retrieval system at http://www.sec.gov. All
statements made in any of our securities filings, including all forward-looking statements or information, are
made as of the date of the document in which the statement is included, and we do not assume or undertake any
obligation to update any of those statements or documents unless we are required to do so by law.

ITEM 1A.

RISK FACTORS

Investing in our Class A common stock involves a high degree of risk. Certain factors may have a material
adverse effect on our business, financial condition and results of operation. You should carefully consider the
risks and uncertainties described below, together with all of the other information included in this Annual Report
on Form 10-K, including our consolidated financial statements and the related notes, and in our other filings
with the SEC. Our business, financial condition, operating results, cash flow and prospects could be materially
and adversely affected by any of these risks or uncertainties. In that case, the trading price of our Class A
common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Business and Industry

Our business is dependent on our relationships with insurance providers with no long-term contractual
commitments. If insurance providers stop purchasing consumer referrals from us, decrease the amount they
are willing to spend per referral, or if we are unable to establish and maintain new relationships with
insurance providers, our business, results of operations and financial condition could be materially adversely
affected.

A substantial majority of our revenue is derived from sales of consumer referrals to insurance providers,
including both insurance carriers and agents. Our relationships with insurance providers are dependent on our
ability to deliver quality referrals at attractive volumes and prices. If insurance providers are not able to acquire
their preferred referrals in our marketplace, they may stop buying referrals from us, or may decrease the amount
they are willing to spend for referrals. Our agreements with insurance providers are short-term agreements, and
insurance providers can stop participating in our marketplace at any time with no notice. As a result, we cannot
guarantee that insurance providers will continue to work with us, or, if they do, the number of referrals they will
purchase from us, the price they will pay per referral or their total spend with us. In addition, we may not be able
to attract new insurance providers to our marketplace or increase the amount of revenue we earn from insurance
providers over time.

If we are unable to maintain existing relationships with insurance providers in our marketplace, or unable
to add new insurance providers, we may be unable to offer our consumers the shopping experience they expect.
This deficiency could reduce consumers’ confidence in our services, making us less popular with consumers. As
a result, consumers could cease to use us, or use us at a decreasing rate.

In addition, we derive revenue as a result of subsidy payments made by carriers to us on behalf of their
agents. Our insurance carrier customers often provide subsidies for the benefit of agents to offset agents’ costs in
connection with selling insurance policies from our referrals. Our carrier customers have no obligation to provide
such subsidies and may reduce the amount of such subsidies or cease providing them at any time. If our carrier
customers were to reduce the amounts of or cease providing such subsidies, our insurance agent customers may
terminate or reduce the extent of their relationships with us. Because our insurance provider customers can stop
buying from us, or spend less with us, at any time and our insurance carrier customers may cease providing
subsidies to our insurance agent customers at any time, our business, results of operations and financial condition
could be materially adversely affected with little to no notice.

We depend on search engines, display advertising, social media, email, content-based online advertising and
other online sources to attract consumers to our websites or marketplace, and if we are unable to cost-
effectively attract consumers and convert them into quote requests that we can sell to our insurance provider
customers, our business and financial results may be harmed.

Our success depends on our ability to attract online consumers to our websites or marketplace and convert
those consumers into quote requests that we can sell to our insurance provider customers. We depend, in part, on
search engines, display advertising, social media, email, content-based online advertising and other online
sources for our website traffic. We are included in search results as a result of both paid search listings, where we

purchase specific search terms that result in the inclusion of our advertisement, and, separately, organic searches
that depend upon the content on our sites.

Search engines, social media platforms and other online sources often revise their algorithms and introduce

new advertising products. If one or more of the search engines or other online sources on which we rely for
website traffic were to modify its general methodology for how it displays our advertisements, resulting in fewer
consumers clicking through to our websites, our business could suffer. In addition, if our online display
advertisements are no longer effective or are not able to reach certain consumers due to consumers’
use of ad-blocking software, our business could suffer.

If one or more of the search engines or other online sources on which we rely for purchased listings or
visitor traffic modifies or terminates its relationship with us, our expenses could rise, we could lose consumer
traffic to our websites, and a decrease in consumer traffic to our websites, for any reason, could have a material
adverse effect on our business, financial condition and results of operations. Consumer traffic to our websites and
the volume of quote requests generated by consumer traffic varies and can decline from to time. For example,
quote requests increased to 4,113,000 in the three months ended March 31, 2019, increased to 4,519,000 in the
three months ended June 30, 2019, increased to 5,516,000 in the three months ended September 30, 2019 and
increased to 5,863,000 in the three months ended December 31, 2019. Quote requests increased to 7,392,000 in
the three months ended March 31, 2020, decreased to 6,777,000 in the three months ended June 30, 2020
decreased to 6,291,000 in the three months ended September 30, 2020 and increased to 6,553,000 in the three
months ended December 31, 2020. Additionally, even if we are successful in generating traffic to our websites,
we may not be able to convert these visits into consumer quote requests.

We currently compete with numerous other online marketing companies, and we expect that competition

will intensify. Some of these existing competitors may have more capital or complementary products or services
than we do, and they may leverage their greater capital or diversification in a manner that adversely affects our
competitive position. In addition, other newcomers, including major search engines and content aggregators, may
be able to leverage their existing products and services to our disadvantage. We may be forced to expend
significant resources to remain competitive with current and potential competitors. If any of our competitors are
more successful than we are at attracting and retaining consumers, or if we are unable to effectively convert visits
into consumers quote requests, our business, financial condition and results of operations could be materially
adversely affected.

The ongoing COVID-19 pandemic could adversely affect our business, results of operations and financial
condition.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. The

To support the health and well-being of our employees and communities, our employees began working
remotely starting in March 2020. Work-from-home and other measures introduce additional operational risks,
including cybersecurity risks, and have affected the way we conduct our product and business development
efforts as well as other activities, which could have an adverse effect on our operations. There is no certainty that
such measures will be sufficient to mitigate the risks posed by the virus, and illness and workforce disruptions
could lead to unavailability of key personnel and harm our ability to perform critical functions. The disruptions to
our operations caused by COVID-19 may result in inefficiencies, delays and additional costs in our sales and
marketing efforts that we cannot fully mitigate through remote or other alternative work arrangements. We are

also unsure what additional actions our carrier and agent customers, as well as our users, may take in response to
coronavirus (COVID-19). In addition, we are unable to predict how user behavior will change in response to
COVID-19. For example, we believe that immediately after shelter-in-place orders went into effect consumers
performed less searches for insurance online.

The degree to which COVID-19 impacts our results will depend on future developments, which are highly

uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its
severity, the actions to contain the virus or treat its impact, other actions taken by governments, businesses, and
individuals in response to the virus and resulting economic disruption, and how quickly and to what extent
normal economic and operating conditions can resume. We are similarly unable to predict the degree to which
the pandemic will impact our users, insurance provider customers, suppliers, vendors, and other partners, and
their financial conditions, but a material effect on these parties could also adversely affect us. The impact of
COVID-19 could also exacerbate other risks discussed in this Risk Factors section and this report, which could in
turn have a material adverse effect on us. Developments related to COVID-19 have been rapidly changing, and
additional impacts and risks may arise that we are not currently aware of or to which we may not be able to
appropriately respond.

Although we expect that current cash and cash equivalent balances and cash flows generated from

operations will be sufficient to meet our working capital needs and other capital and liquidity requirements for at
least the next 12 months, if our access to capital is restricted or our borrowing costs increase, our operations and
financial condition could be adversely impacted.

We compete with other media for advertising spend from our insurance provider customers, and if we are
unable to maintain or increase our share of the advertising spend of our insurance provider customers, our
business could be harmed.

We compete for insurance provider advertising spend with traditional offline media such as television,

billboards, radio, magazines and newspapers, as well as online sources such as websites, social media and
websites dedicated to providing multiple quote insurance information. Our ability to attract and retain insurance
provider customers, and to generate advertising revenue from them, depends on a number of factors, including:

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the ability of our insurance provider customers to earn an attractive return on investment from
their spending with us;

our ability to increase the number of consumers using our marketplace;

our ability to compete effectively with other media for advertising spending; and

our ability to keep pace with changes in technology and the practices and offerings of our
competitors.

We may not succeed in retaining or capturing a greater share of our insurance provider customers’

advertising spending compared to alternative channels. If our current insurance provider customers reduce or end
their advertising spending with us and we are unable to increase the spending of our other insurance provider
customers or attract new insurance provider customers, our revenue and business and financial results would be
materially adversely affected. Furthermore, we cannot assure you that the market for online marketing services
will continue to grow. If the market for online marketing services fails to continue to develop or develops more
slowly than we anticipate, the success of our business may be limited, and our revenue may decrease.

If consumers do not find value in our services or do not like the consumer experience on our platform, the
number of referrals in our marketplace may decline, and our business, results of operations and financial
condition could be materially adversely affected.

If we fail to provide a compelling insurance shopping experience to our consumers both through our web

and mobile platforms, the number of consumer referrals purchased from us will decline, and insurance providers
may terminate their relationships with us or reduce their spending with us. If insurance providers stop offering
insurance in our marketplace, we may not be able to maintain and grow our consumer traffic, which may cause
other insurance providers to stop using our marketplace. We believe that our ability to provide a compelling
insurance shopping experience, both on the web and through mobile devices, is subject to a number of factors,
including:

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our ability to maintain a marketplace for consumers and insurance providers that efficiently
captures user intent and effectively delivers relevant quotes to each individual insurance buyer;

our ability to continue to innovate and improve our marketplace;

our ability to launch new vertical offerings that are effective and have a high degree of consumer
and insurance provider engagement; and

our ability to access a sufficient amount of data to enable us to provide relevant quotes to
consumers.

If the use of our marketplace declines or does not continue to grow, our business and operating results

would be harmed.

A significant portion of our revenue in recent periods was derived from one customer, and our results of
operations could be adversely affected and stockholder value harmed if we lose business from this customer.

Sales to Progressive Casualty Insurance Company accounted for 22% and 21% of our revenue for the years

ended December 31, 2020 and 2019, respectively. This customer made purchases from us under short-term
agreements and may decrease or cease doing business with us at any time with no notice. As a result, we have no
assurances that this customer will continue to purchase from us at its historical levels or at all. If this customer
were to reduce its level of purchases from us or discontinue its relationships with us, the loss could have a
material adverse effect on our results of operations in both the short and long term.

If our emails are not delivered and accepted or are routed by email providers less favorably than other emails
our business may be substantially harmed.

If email providers implement new or more restrictive email or content delivery or accessibility policies it
may become more difficult to deliver emails to consumers or for consumers to access our websites and services.
For example, certain email providers, including Google, may categorize our emails as “promotional,” and these
emails may be directed to an alternate, and less readily accessible, section of a consumer’s inbox. If email
providers materially limit or halt the delivery of our emails, or if we fail to deliver emails to consumers in a
manner compatible with email providers’ email handling or authentication technologies, our ability to contact
consumers through email could be significantly restricted. In addition, if we are placed on “spam” lists or lists of
entities that have been involved in sending unwanted, unsolicited emails, our operating results and financial
condition could be substantially harmed.

A significant portion of our revenue is derived from insurance providers acquiring referrals on an auction
basis. If insurance providers decrease their bids or stop bidding in our auctions, our business, results of
operations and financial condition could be materially adversely affected.

Insurance providers in our marketplace participate in a unified, real-time auction. Since our agreements

with insurance providers are short-term agreements, insurance providers can decrease their bids or stop

participating in our auctions at any time with no notice. In addition, insurance providers frequently change their
bidding in our auctions, which can make it difficult to predict revenue from period to period. Because our
insurance provider customers can stop buying from us, or spend less with us, at any time our business, results of
operations and financial condition could be materially adversely affected with little to no notice.

If we are unable to develop new offerings, achieve increased consumer adoption of those offerings or
penetrate new vertical markets, our business and financial results could be materially adversely affected.

Our success depends on our continued innovation to provide product and service offerings that make our

marketplace, websites and mobile applications useful for consumers. These new offerings must be widely
adopted by consumers in order for us to continue to attract insurance providers to our marketplace. Accordingly,
we must continually invest resources in product, technology and development in order to improve the
comprehensiveness and effectiveness of our marketplace and its related product and service offerings and
effectively incorporate new internet and mobile technologies into them. These product, technology and
development expenses may include costs of hiring additional personnel and of engaging third-party service
providers and other research and development costs.

Without an innovative marketplace and related product and service offerings, we may be unable to attract
additional consumers or retain current consumers, which could adversely affect our ability to attract and retain
insurance providers who want to participate in our marketplace, which could, in turn, harm our business and
financial results. In addition, while we have historically concentrated our efforts on the automobile insurance
market, we will need to further penetrate additional vertical markets, such as home and renters, life, commercial
and health insurance, in order to achieve our long-term growth goals. Our success in the automobile insurance
market depends on our deep understanding of this industry. In order to penetrate new vertical markets, we will
need to develop a similar understanding of those new markets and the associated business challenges faced by
participants in them. Developing this level of understanding may require substantial investments of time and
resources and we may not be successful. In addition, these new vertical markets may have specific risks
associated with them. If we fail to penetrate new vertical markets successfully, our revenue may grow at a slower
rate than we anticipate and our financial condition could suffer.

Our business is substantially dependent on revenue from automotive insurance providers and subject to risks
related to automotive insurance and the larger automotive industry. Our business may also be adversely
affected by downturns in the home and renters, life, commercial and health insurance industries.

A substantial majority of the insurance purchased through our marketplace is automobile insurance and our

financial prospects depend significantly on the larger automotive industry ecosystem. Revenue from automotive
insurance providers accounted for 82% of our total revenue for the year ended December 31, 2020 and 85% of
our revenue for the year ended December 31, 2019. If insurance carriers experience large or unexpected losses
through the offering of insurance, these carriers may choose to decrease the amount of money they spend with us.
In addition, decreases in consumer demand in the automotive industry in general could adversely affect the
demand for insurance and, in turn, the number of consumers using our marketplace to request insurance quotes.
For example, trends in the automotive industry, such as from the effects of ride sharing applications, including
Uber and Lyft, distracted driving and autonomous driving technologies, have the potential to adversely affect
automobile purchases and to decrease the demand for auto insurance.

We depend on third-party publishers, including strategic partners, for a significant portion of our visitors. Any
decline in the supply of media available through these third-party publishers’ websites or increase in the price
of this media could cause our revenue to decline or our cost to reach visitors to increase.

A significant portion of our revenue is attributable to visitor traffic originating from third-party publishers

(including strategic partners). In many instances, third-party publishers can change the media inventory they
make available to us at any time in ways that could impact our results of operations. In addition, third-party

publishers may place significant restrictions on our offerings. These restrictions may prohibit advertisements
from specific clients or specific industries, or restrict the use of certain creative content or formats. If a third-
party publisher decides not to make its media channel or inventory available to us or decides to demand a higher
cost for such inventory, we may not be able to find media inventory from other websites that satisfies our
requirements in a timely and cost-effective manner. Consolidation of internet advertising networks and third-
party publishers could eventually lead to a concentration of desirable inventory on websites or networks owned
by a small number of individuals or entities, which could limit the supply or impact the pricing of inventory
available to us. Additionally, third-party publishers may use advertising creatives that do not meet our
compliance guidelines or that of our insurance provider customers, which could result in loss of revenue and
reputational harm. As a result, we may not be able to acquire media inventory that meets our insurance provider’s
performance, price, and quality requirements, in which case our revenue could decline or our operating costs
could increase.

If we fail to build and maintain our brand, our ability to expand the use of our marketplace by consumers and
insurance providers may be adversely affected.

Our future success depends upon our ability to create and maintain brand recognition and a reputation for

delivering easy, efficient and personal insurance shopping. A failure by us to build our brand and deliver on these
expectations could harm our reputation and damage our ability to attract and retain consumers, which could
adversely affect our business. If consumers do not perceive our marketplace as a better insurance shopping
experience, our reputation and the strength of our brand may be adversely affected.

Many of our competitors have more resources than we do and can spend more advertising their brands and
services. As a result, we are required to spend considerable money and other resources to create brand awareness
and build our reputation. Should the need or competition for top-of-mind awareness and brand preference
increase, we may not be able to build brand awareness, and our efforts at building, maintaining and enhancing
our reputation could fail. Even if we are successful in our branding efforts, such efforts may not be cost-effective.
If we are unable to maintain or enhance consumer awareness of our brand cost-effectively, our business, results
of operations and financial condition could be materially adversely affected.

Complaints or negative publicity about our business practices, our marketing and advertising campaigns,

our compliance with applicable laws and regulations, the integrity of the data that we provide to consumers, data
privacy and security issues, and other aspects of our business, whether valid or not, could diminish confidence
and participation in our marketplace and could adversely affect our reputation and business. There can be no
assurance that we will be able to maintain or enhance our brand, and failure to do so would harm our business
growth prospects and operating results.

Our marketing efforts may not be successful.

We currently rely on performance marketing channels that must deliver on metrics that are selected by our
insurance provider customers and are subject to change at any time. We are unable to control how our insurance
provider customers evaluate our performance. Certain of these metrics are subject to inherent challenges in
measurement, and real or perceived inaccuracies in such metrics may harm our reputation and adversely affect
our business. In addition, the metrics we provide may differ from estimates published by third parties or from
similar metrics of our competitors due to differences in methodology. If our insurance provider customers do not
perceive our metrics to be accurate, or if we discover material inaccuracies in our metrics, it could adversely
affect our online marketing efforts and business.

In addition, we plan to further expand our marketing efforts in offline channels such as television and

radio. We face significant competition in marketing on offline channels, including from competitors and
insurance carriers who may have significantly greater resources and brand recognition than we do. If we fail to
expand our marketing efforts in offline channels or to market ourselves successfully on such channels, we may

not experience increases in consumer traffic and increased referral and advertising revenue necessary to grow our
business, which could have a material adverse effect on our results of operations and financial results.

Failure to increase our revenue or reduce our sales and marketing expense as a percentage of revenue would
adversely affect our financial condition and profitability.

We expect to make significant future investments to support the further development and expansion of our

business, and these investments may not result in increased revenue or growth on a timely basis or at all.
Furthermore, these investments may not decrease as a percentage of revenue if our business grows. In particular,
we intend to continue investing to market to our consumers including to increase awareness of our brand,
including through television and radio advertisements. There can be no assurance that these investments will
increase revenue or that we will eventually be able to decrease our sales and marketing expense as a percentage
of revenue, and failure to do so would adversely affect our financial condition and profitability.

We participate in a highly competitive market, and pressure from existing and new companies may adversely
affect our business and operating results.

We face significant competition from companies that provide information and insurance-buying services
designed to help consumers shop for insurance and to enable insurance providers to reach these consumers. Our
competitors offer various products and services that compete with us. Some of these competitors include:

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companies that operate, or could develop, insurance search websites;

media sites, including websites dedicated to providing multiple quote insurance information and
financial services information generally;

internet search engines; and

individual insurance providers, including through the operation of their own websites, physical
storefront operations and broker arrangements.

We compete with these and other companies for a share of insurance providers’ overall budget for online

and offline media marketing and referral spend. To the extent that insurance providers view alternative marketing
and media strategies to be superior to our marketplace, we may not be able to maintain or grow the number of
insurance providers using, and advertising on, our marketplace, and our business and financial results may be
harmed.

Our competitors could significantly impede our ability to maintain or expand the number of consumers and
insurance providers using our marketplace. Our competitors also may develop and market new technologies that
render our marketplace less competitive, unmarketable or obsolete. In addition, if our competitors develop
marketplaces with similar or superior functionality to ours, and our web traffic declines, we may need to decrease
our referral and advertising fees. If we are unable to maintain our current pricing structure due to competitive
pressures, our revenue would likely be reduced and our financial results would be adversely affected.

Our existing and potential competitors may have significantly more financial, technical, marketing and

other resources than we have, and the ability to devote greater resources to the development, promotion and
support of their marketplaces, products and services. In addition, they may have more extensive insurance
industry relationships than we have, longer operating histories and greater name recognition. As a result, these
competitors may be able to respond more quickly with new technologies and to undertake more extensive
marketing or promotional campaigns than we can. In addition, to the extent that any of our competitors have
existing relationships with insurance providers for marketing or data analytics solutions, those insurance
providers may be unwilling to partner with us. If we are unable to compete with these competitors, the demand
for our marketplace and related products and services could substantially decline.

In addition, if one or more of our competitors were to merge or partner with another of our competitors, the

change in the competitive landscape could adversely affect our ability to compete effectively. We may not be
able to compete successfully against current or future competitors, and competitive pressures may harm our
business and financial results.

We have limited experience, and may not be successful, in acquiring consumers from offline sources.

We recently began to acquire consumers through limited offline sources, including television

advertisements, direct mail and inbound calls from consumers. We may not succeed in advertising and acquiring
consumers to these channels and may incur substantial costs without corresponding benefit. In addition,
consumers that request quotes through offline sources like inbound calls do not provide the same level of
consumer data as we receive from our online sources and as a result, we may not be able to successfully match
these consumers with insurance providers.

We have limited experience acquiring consumer quote requests from third-party sources and as a result we
may not be successful with our verified partner network.

Through our verified partner network, we acquire consumer quote requests that are submitted by
consumers directly to select third parties. While we have increased the number of quote requests acquired from
these third-party sources, we still have limited experience in acquiring quote requests from third-party providers,
we do not know if we will be able to acquire quote requests in significant volume, at prices that are attractive,
whether the consumers will represent high-intent insurance shoppers, or whether insurance providers in our
marketplace will purchase referrals for consumers acquired through our verified partner network. Additionally,
any failure by us or third parties in our verified partner network on which we rely for quote requests to adhere to
or successfully implement appropriate processes and procedures in response to existing regulations and changing
regulatory requirements could result in legal and monetary liability, significant fines and penalties, or damage to
our reputation in the marketplace, any of which could have a material adverse effect on our business, financial
condition, and results of operations.

A significant portion of the agents in our marketplace are affiliated with a limited number of insurance
carriers. In the event one or more of these carriers no longer supports, or advises against, acquiring referrals
in our marketplace, our business, results of operations and financial condition could be materially adversely
affected.

Our marketplace includes thousands of insurance agencies, a significant portion of which are affiliated
with a limited number of carriers. If a carrier no longer supports our service, no longer provides a subsidy for our
referrals, or advises that its agents no longer do business with us, we could lose a substantial number of these
agents in our marketplace, which could harm our brand, results of operations and overall business.

Our business depends on our ability to maintain and improve the technology infrastructure necessary to send
marketing emails and operate our websites, and any significant disruption in service on our email network
infrastructure or websites could result in a loss of consumers, which could harm our business, brand,
operating results and financial condition.

Our brand, reputation and ability to attract consumers and insurance providers depend on the reliable

performance of our technology infrastructure and content delivery. We use emails to attract consumers to our
marketplace. Our systems may not be adequately designed with the necessary reliability and redundancy to avoid
performance delays or outages that could be prolonged and harmful to our business. If our websites are
unavailable when users attempt to access them, or if they do not load as quickly as expected, users may not return
as often in the future, or at all. As our user base and the amount of information shared on our websites and
mobile applications continue to grow, we will need an increasing amount of network capacity and computing
power. We have spent and expect to continue to spend substantial amounts on data centers and equipment and

related network infrastructure and services to handle the traffic on our websites and mobile applications and to
help shorten the length of or prevent system interruptions. The operation of these systems is expensive and
complex and we could experience operational failures. Interruptions, delays or failures in these systems, whether
due to earthquakes, adverse weather conditions, other natural disasters, power loss, computer viruses,
cybersecurity attacks, physical break-ins, terrorism, errors in our software or otherwise, could be prolonged and
could affect the security or availability of our websites and applications, and prevent consumers from accessing
our services. Such interruptions also could result in third parties accessing our confidential and proprietary
information, including our intellectual property or consumer information. Problems with the reliability or
security of our systems could harm our reputation, our ability to protect our confidential and proprietary
information, result in a loss of users of our marketplace or result in additional costs. If we do not maintain or
expand our network infrastructure successfully or if we experience operational failures or prolonged disruptions
or delays in the availability of our systems or a significant search engine, we could lose current and potential
consumers, which could harm our operating results and financial condition.

Substantially all of the communications, network and computer hardware used to operate our websites and

mobile applications are located in the United States in Amazon Web Services and Google Cloud Platform data
centers. Although we believe our systems are fully redundant, there may be exceptions for certain hardware. In
addition, we do not own or control the operation of these facilities. Our systems and operations are vulnerable to
damage or interruption from fire, flood, power loss, telecommunications failure, terrorist attacks, acts of war,
electronic and physical break-ins, computer viruses, earthquakes and similar events. The occurrence of any of
these events could result in damage to our systems and hardware or could cause them to fail. In addition, we may
not have sufficient protection or recovery plans in certain circumstances.

Problems faced by our third-party web hosting providers could adversely affect the experience of users of
our marketplace. Our third-party web hosting providers could close their facilities without adequate notice. Any
financial difficulties, up to and including bankruptcy, faced by our third-party web hosting providers or any of
the service providers with whom they contract may have adverse effects on our business, the nature and extent of
which are difficult to predict. If our third-party web hosting providers are unable to keep up with our growing
capacity needs, our business could be harmed.

Any errors, defects, disruptions or other performance or reliability problems with our network operations

could cause interruptions in access to our marketplace as well as delays and additional expense in arranging new
facilities and services and could harm our reputation, business, operating results and financial condition.
Although we carry business interruption insurance, it may not be sufficient to compensate us for the potentially
significant losses, including the potential harm to the future growth of our business that may result from
interruptions in our service as a result of system failures.

Consumer adoption of call blocking technology, or restrictions placed by telephone carriers and
communication platforms, may reduce our ability to call or text message our consumers, which could
significantly decrease the number of quote requests and value of our data referrals and substantially harm our
business.

Increased adoption of call blocking technology may prevent us from reaching our consumers that have

expressed an interest in getting insurance information. Additionally, telephone carriers and communication
platforms may themselves place restrictions on our ability to call or send text messages to our consumers. If calls
or text messages to our consumers are blocked, or if insurance providers obtaining data referrals have their calls
or text messages blocked due to these call blocking technologies or restrictions, we may see a significant
decrease in quote requests, the value of our referrals and the number of data and call referrals we are able to sell
to insurance providers which could materially adversely impact our business.

We depend on key personnel to operate our business, and if we are unable to retain, attract and integrate
qualified personnel, our ability to develop and successfully grow our business could be harmed.

We believe our success has depended, and continues to depend, on the efforts and talents of our executives

and employees. Our future success depends on our continuing ability to attract, develop, motivate and retain
highly qualified and skilled employees. Qualified individuals are in high demand, and we may incur significant
costs to attract and retain them. Experienced information technology personnel, who are critical to the success of
our business, are in particularly high demand. This demand is particularly acute in the greater Boston,
Massachusetts area, where we are headquartered. Competition for their talents is intense, and retaining such
individuals can be difficult. The loss of any of our executive officers or key employees could materially
adversely affect our ability to execute our business plan and strategy, and we may not be able to find adequate
replacements on a timely basis, or at all. Our executive officers and other employees are at-will employees,
which means they may terminate their employment relationships with us at any time, and their knowledge of our
business and industry would be extremely difficult to replace. We cannot ensure that we will be able to retain the
services of any members of our senior management or other key employees. If we do not succeed in attracting
well-qualified employees or retaining and motivating existing employees, our business could be materially
adversely affected.

If we are unable to successfully respond to changes in the market, our business could be harmed.

While our business has grown rapidly as consumers and insurance providers have increasingly accessed
our marketplace, we expect that our business will evolve in ways that may be difficult to predict. For example,
we anticipate that over time we may reach a point when investments in new user traffic are less productive and
the continued growth of our revenue will require more focus on developing new product and service offerings for
consumers and insurance providers, expanding our marketplaces into new international markets and new
industries to attract new customers, and increasing our referral and advertising fees. It is also possible that
consumers and insurance providers could broadly determine that they no longer believe in the efficiency and
effectiveness of our marketplace. Our continued success will depend on our ability to successfully adjust our
strategy to meet the changing market dynamics. If we are unable to do so, our business could be harmed and our
results of operations and financial condition could be materially adversely affected.

We have incurred net losses in the past and we may generate losses in the future.

We have incurred net losses in the past and have never generated net income on an annual basis. We
anticipate that our operating expenses and capital expenditures will increase substantially in the foreseeable
future as we continue to invest to expand into new verticals, enhance our brand awareness, hire additional
employees, consider expanding outside of the United States and improve our technology and infrastructure
capabilities. Our expansion efforts may prove more expensive than we anticipate, and we may not succeed in
increasing our revenue and margins sufficiently to offset these higher expenses. We incur significant expenses in
acquiring consumers, developing our technology and marketing the products and services we offer. Our costs
also may increase due to our continued new product development and general administrative expenses, such as
legal and accounting expenses related to being a public company. If we fail to increase our revenue or manage
these additional costs, we may continue to incur losses in the future.

We expect our results of operations to fluctuate on a quarterly and annual basis.

Our revenue and results of operations could vary significantly from period to period and may fail to match
expectations as a result of a variety of factors, some of which are outside of our control. Our results may vary as
a result of fluctuations in the number of consumers and insurance providers using our marketplace and the size
and seasonal variability of the marketing budgets of our insurance provider customers. In addition, the auto,
home and renters, life, commercial and health insurance industries may each be subject to their own cyclical
trends and uncertainties. Fluctuations and variability across these different verticals may affect our revenue. As a

result of the potential variations in our revenue and results of operations, period-to-period comparisons may not
be meaningful and the results of any one period should not be relied on as an indication of future performance. In
addition, our results of operations may not meet the expectations of investors or public market analysts who
follow us, which may adversely affect our stock price.

Our past growth may not be indicative of our future growth, and our revenue growth rate may decline in the
future.

Our revenue grew from $96.8 million in 2015 to $122.8 million in 2016, to $126.2 million in 2017, to
$163.3 million in 2018, to $248.8 million in 2019 and to $346.9 million in 2020, increases of 26.8%, 2.8%,
29.4%, 52.3% and 39.4%, respectively. This growth may not be indicative of our future growth, if any, and we
will not be able to grow as expected, or at all, if we do not accomplish the following:

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increase the number of consumers using our marketplace;

maintain and expand the number of insurance providers that use our marketplace or our revenue
per provider;

further improve the quality of our marketplace, and introduce high-quality new products; and

increase the number of insurance shoppers acquired by insurance providers on our marketplace.

Our revenue growth rates may also be limited if we are unable to achieve high market penetration rates as

we experience increased competition. If our revenue or revenue growth rates decline, investors’ perceptions of
our business may be adversely affected and the market price of our Class A common stock could decline.

Our dedication to making decisions based primarily on the best interests of our company and stockholders
may cause us to forgo short-term gains in pursuit of potential but uncertain long-term growth.

Our guiding principle is to build our business by making decisions based primarily upon the best interests
of our entire marketplace, including consumers and insurance providers, which we believe has been essential to
our success in increasing our user growth rate and engagement and best serves the long-term interests of our
company and our stockholders. In the past, we have forgone, and we will in the future continue to forgo, certain
expansion or short-term revenue opportunities that we do not believe are in the best interests of our marketplace
and its users, even if such decisions adversely affect our results of operations in the short term. However, this
strategy may not result in the long-term benefits that we expect, in which case our user traffic and engagement,
business and financial results could be harmed.

We collect, process, store, share, disclose and use consumer information and other data, and our actual or
perceived failure to protect such information and data or respect users’ privacy could damage our reputation
and brand and harm our business and operating results.

Use of our marketplace involves the storage and transmission of consumers’ information, including

personal information, and security breaches could expose us to a risk of loss or exposure of this information,
which could result in potential liability, litigation and remediation costs, as well as reputational harm, all of
which could materially adversely affect our business and financial results. For example, unauthorized parties
could steal our users’ names, email addresses, physical addresses, phone numbers and other information that we
collect when providing referrals. While we use encryption and authentication technology licensed from third
parties designed to effect secure transmission of such information, we cannot guarantee the security of the
transfer and storage of the personal information we collect from customers.

Cybersecurity risks have significantly increased in recent years, in part, because of the proliferation of new

technologies, the use of the internet and telecommunications technologies to exchange information and conduct

transactions, and the increased sophistication and activities of computer hackers, organized crime, terrorists, and
other external parties, including foreign state actors. We have been subject to, and are likely to continue to be the
target of, future cyberattacks. These cyberattacks could include computer viruses, malicious or destructive code,
phishing attacks, denial of service or information, improper access by employees or third-party partners or other
security breaches that have or could in the future result in the unauthorized release, gathering, monitoring,
misuse, loss or destruction of our confidential, proprietary and other information, confidential and other
information concerning employees or consumers, or otherwise materially disrupt our or our other third party
partners’ network access or business operations.

Although we have a chief information officer who coordinates our cybersecurity measures, policies and

procedures, and our chief information officer regularly reports to our board of directors regarding these matters,
we cannot be certain that our efforts, as well as those of our third party partners and service providers, will be
able to prevent breaches of the security of our information systems and technology. If we, or any of our third-
party partners and service providers, experience compromises to security that result in websites or mobile
application performance or availability problems, the complete shutdown of our websites or mobile applications
or the loss or unauthorized disclosure, access, acquisition, alteration or use of confidential information,
consumers and insurance providers may lose trust and confidence in us, and consumers and insurance providers
may decrease the use of our website or stop using our website entirely. Further, outside parties may attempt to
fraudulently induce employees, consumers or insurance providers to disclose sensitive information in order to
gain access to our information or consumers’ or insurance providers’ information. Because the techniques used to
obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, often are not
recognized until launched against a target, and may originate from less regulated and remote areas around the
world, we may be unable to proactively address these techniques or to implement adequate preventative
measures.

Any or all of the issues above could adversely affect our ability to attract new users and increase
engagement by existing users, cause existing users to curtail or stop use of our marketplace, cause existing
insurance provider customers to cancel their contracts or subject us to governmental or third-party lawsuits,
investigations, regulatory fines or other actions or liability, thereby harming our business, results of operations
and financial condition. Although we are not aware of any material information security incidents to date, we
have detected common types of attempts to attack our information systems and data using means that have
included viruses and phishing.

There are numerous federal, state and local laws in the United States and around the world regarding
privacy and the collection, processing, storing, sharing, disclosing, using, cross-border transfer and protecting of
personal information and other data, the scope of which are changing, subject to differing interpretations, and
which may be costly to comply with, may result in regulatory fines or penalties, and may be inconsistent between
countries and jurisdictions or conflict with other rules.

We are subject to the terms of our privacy policies and privacy-related obligations to third parties. We
strive to comply with all applicable laws, policies, legal obligations and industry codes of conduct relating to
privacy and data protection, to the extent possible. However, it is possible that these obligations may be
interpreted and applied in new ways or in a manner that is inconsistent from one jurisdiction to another and may
conflict with other rules or our practices or that new regulations could be enacted. Any failure or perceived
failure by us to comply with our privacy policies, our privacy-related obligations to consumers or other third
parties, or our privacy-related legal obligations, or any compromise of security that results in the unauthorized
release or transfer of sensitive information, which could include personally identifiable information or other user
data, may result in governmental investigations, enforcement actions, regulatory fines, litigation or public
statements against us by consumer advocacy groups or others, and could cause consumers and insurance
providers to lose trust in us, all of which could be costly and have an adverse effect on our business. In addition,
new and changed rules and regulations regarding privacy, data protection and cross-border transfers of consumer
information could cause us to delay planned uses and disclosures of data to comply with applicable privacy and

data protection requirements. Moreover, if third parties that we work with violate applicable laws or our policies,
such violations also may put consumer or insurance provider information at risk and could in turn harm our
reputation, business and operating results.

We are subject to a number of risks related to the credit card and debit card payments we accept.

We accept payments through credit and debit card transactions. For credit and debit card payments, we pay

interchange and other fees, which may increase over time. An increase in those fees may require us to increase
the prices we charge and would increase our operating expenses, either of which could harm our business,
financial condition and results of operations.

We currently rely exclusively on one third-party vendor to provide payment processing services, including
the processing of payments from credit cards and debit cards, and our business would be disrupted if this vendor
becomes unwilling or unable to provide these services to us and we are unable to find a suitable replacement on a
timely basis. If we or our processing vendor fails to maintain adequate systems for the authorization and
processing of credit card transactions, it could cause one or more of the major credit card companies to disallow
our continued use of their payment products. In addition, if these systems fail to work properly and, as a result,
we do not charge our customers’ credit cards on a timely basis or at all, our business, revenue, results of
operations and financial condition could be harmed.

We are also subject to payment card association operating rules, certification requirements and rules
governing electronic funds transfers, which could change or be reinterpreted to make it more difficult for us to
comply. We are required to comply with payment card industry security standards. Failing to comply with those
standards may violate payment card association operating rules, federal and state laws and regulations, and the
terms of our contracts with payment processors. Any failure to comply fully also may subject us to fines,
penalties, damages and civil liability, and may result in the loss of our ability to accept credit and debit card
payments. Further, there is no guarantee that such compliance will prevent illegal or improper use of our
payment systems or the theft, loss or misuse of data pertaining to credit and debit cards, card holders and
transactions.

We may acquire other companies or technologies, which could divert our management’s attention, result in
additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results.

Our success will depend, in part, on our ability to grow our business in response to the demands of

consumers, insurance providers and other constituents within the insurance industry as well as competitive
pressures. In some circumstances, we may determine to do so through the acquisition of complementary
businesses and technologies rather than through internal development. For example, in September 2020, we
closed our acquisition of Crosspointe Insurance & Financial Services, LLC, or Crosspointe. The identification of
suitable acquisition candidates can be difficult, time-consuming and costly, and we may not be able to
successfully complete identified acquisitions. The risks we face in connection with acquisitions include:

(cid:129)

diversion of management time and focus from operating our business to addressing acquisition
integration challenges;

coordination of technology, research and development, and sales and marketing functions;

transition of the acquired company’s consumers and data to our marketplace;

retention of employees from the acquired company;

cultural challenges associated with integrating employees from the acquired company into our
organization;

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integration of the acquired company’s accounting, management information, human resources and
other administrative systems;

the need to implement or improve controls, procedures and policies at a business that prior to the
acquisition may have lacked effective controls, procedures and policies;

potential write-offs of intangibles or other assets acquired in such transactions that may have an
adverse effect on our operating results in a given period;

potential liabilities for activities of the acquired company before the acquisition, including patent
and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and
other known and unknown liabilities; and

litigation or other claims in connection with the acquired company, including claims from
terminated employees, consumers, former stockholders or other third parties.

Our failure to address these risks or other problems encountered in connection with future acquisitions and
investments could cause us to fail to realize the anticipated benefits of these acquisitions or investments, cause us
to incur unanticipated liabilities and harm our business generally. Future acquisitions also could result in dilutive
issuances of our equity securities, the incurrence of debt, contingent liabilities, amortization expense or
impairment charges associated with acquired intangible assets or goodwill, any of which could harm our
financial condition. Also, the anticipated benefits of any acquisitions may not be realized.

We use third-party contractor insurance agents to sell insurance for our direct-to-consumer agency. These
agents could take actions that could harm our business.

We contract licensed insurance agents to sell insurance in connection with our direct-to-consumer agency.

These agents are independent contractors and, as such, are not our employees, and we do not exercise control
over their day-to-day operations. If independent contractors were to provide diminished quality of service to
customers, engage in fraud, misconduct or negligence or otherwise violate the law, our image and reputation may
suffer materially, and we may become subject to liability claims based upon such actions of our independent
contractor agents. Additionally, actions by our independent contractor agents could damage our brand and even
isolated incidents can result in considerable negative publicity or litigation. Any such incidence could adversely
affect our results of operations.

We may require additional capital to pursue our business objectives and respond to business opportunities,
challenges or unforeseen circumstances. If capital is not available to us, our business, operating results and
financial condition may be harmed.

We intend to continue to make investments to support our growth and may require additional capital to
pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances,
including to increase our marketing expenditures to improve our brand awareness, develop new product and
service offerings or further improve our marketplace and existing product and service offerings, enhance our
operating infrastructure and acquire complementary businesses and technologies. Accordingly, we may need to
engage in equity or debt financings to secure additional funds. However, additional funds may not be available
when we need them, on terms that are acceptable to us, or at all. Volatility in the credit markets also may have an
adverse effect on our ability to obtain debt financing.

If we raise additional funds through further issuances of equity or convertible debt securities, our existing

stockholders could suffer significant dilution, and any new equity securities we issue could have rights,
preferences and privileges superior to those of holders of our Class A common stock. If we are unable to obtain

adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to pursue
our business objectives and to respond to business opportunities, challenges or unforeseen circumstances could
be significantly limited, and our business, operating results, financial condition and prospects could be materially
adversely affected.

Litigation could distract management, increase our expenses or subject us to material money damages and
other remedies.

We were previously subject to class action lawsuits alleging violations of the Telephone Consumer
Protection Act, or TCPA, and were subject to a class action lawsuit alleging federal securities law violations in
connection with our IPO, and may be involved from time to time in various additional legal proceedings,
including, but not limited to, actions relating to breach of contract, breach of federal and state privacy laws, and
intellectual property infringement that might necessitate changes to our business or operations. Regardless of
whether any claims against us have merit, or whether we are ultimately held liable or subject to payment of
damages, claims may be expensive to defend and may divert management’s time away from our operations. If
any legal proceedings were to result in an unfavorable outcome, it could have a material adverse effect on our
business, financial position and results of operations. Any adverse publicity resulting from actual or potential
litigation may also materially and adversely affect our reputation, which in turn could adversely affect our
results.

We conduct marketing activities, directly and indirectly, via telephone, text messages, email and/or
through other online and offline marketing channels, which general marketing activities are governed by
numerous federal and state regulations, such as the Telemarketing Sales Rule, state telemarketing laws, federal
and state privacy laws, the Controlling the Assault of Non-Solicited Pornography and Marketing Act of
2003, or CAN-SPAM Act, the TCPA, and the Federal Trade Commission Act and its accompanying regulations
and guidelines, among others. In addition to being subject to action by regulatory agencies, some of these laws,
like the TCPA, allow private individuals to bring litigation against companies for breach of these laws, and we
have received complaints from individuals that we have violated the TCPA. We are also dependent on our third-
party vendors to comply with applicable laws. For example, with the commencement of our verified partner
network in 2019, we depend upon these third-party vendors to obtain consent from consumers to receive
telemarking calls in compliance with the TCPA. We may be alleged to have indemnification obligations to third-
party customers for alleged breaches of privacy laws like the TCPA, which could increase our defense costs and
require that we pay damages if there were an adverse ruling in any such claims. Any of these events may have a
material adverse effect on our business, results of operations, financial condition and prospects.

Companies in the internet, technology and media industries are frequently subject to allegations of

infringement or other violations of intellectual property rights. We have been and may continue to become
subject to intellectual property claims by third parties. We plan to vigorously defend our intellectual property
rights and our freedom to operate our business; however, regardless of the merits of the claims, intellectual
property claims are often time consuming and extremely expensive to litigate or settle and are likely to continue
to divert managerial attention and resources from our business objectives. Successful infringement claims against
us could result in significant monetary liability or prevent us from operating our business or portions of our
business. Resolution of claims may require us to obtain licenses to use intellectual property rights belonging to
third parties, which may be expensive to procure, or we may be required to cease using intellectual property of
third parties altogether. Many of our contracts require us to provide indemnification against third-party
intellectual property infringement claims, which would increase our defense costs and may require that we pay
damages if there were an adverse ruling in any such claims. Any of these events may have a material adverse
effect on our business, results of operations, financial condition and prospects.

We may become subject to enforcement actions or litigation as a result of our failure to comply with laws and
regulations, even though noncompliance was inadvertent or unintentional.

We maintain systems and procedures designed to ensure that we comply with applicable laws and
regulations; however, some legal and regulatory frameworks provide for the imposition of fines or penalties for
noncompliance even though the noncompliance was inadvertent or unintentional and even though there were
systems and procedures designed to ensure compliance in place at the time.

For example, we engage in outbound telephone and text communications with consumers, and accordingly
must comply with a number of statutes and regulations, including the TCPA and Telemarketing Sales Rules, that
govern those communications and the use of automatic telephone dialing systems, or ATDS, and artificial or
pre-recorded voice messages. The U.S. Federal Communications Commission (the “FCC”), and the U.S. Federal
Trade Commission (the “FTC”) have responsibility for regulating various aspects of these laws. Among other
requirements, the TCPA requires us to obtain prior express written consent for certain telemarketing calls. Many
states have similar consumer protection laws regulating telemarketing. These laws limit our ability to
communicate with consumers and reduce the effectiveness of our marketing programs. The TCPA does not
currently distinguish between voice and data, and, as such, SMS/MMS messages are also “calls” for the purpose
of TCPA obligations and restrictions.

For violations of the TCPA, the law provides for a private right of action under which a plaintiff may
recover monetary damages of $500 for each call or text made in violation of the prohibitions on calls made using
an “artificial or pre-recorded voice” or an ATDS. A court may treble the amount of damages upon a finding of a
“willful or knowing” violation. There is no statutory cap on maximum aggregate exposure. An action may be
brought by the FCC, a state attorney general, an individual, or a class of individuals. Like other companies that
rely on telephone and text communications, we have been and may be subject to future putative class action suits
alleging violations of the TCPA. If in the future we are found to have violated the TCPA, the amount of damages
and potential liability could be extensive and adversely impact our business. Accordingly, were such a class
certified or if we are unable to successfully defend such a suit, then TCPA damages could have a material
adverse effect on our results of operations and financial condition.

Any future indebtedness could adversely affect our ability to operate our business.

We have $25.0 million available for borrowing under our revolving line of credit with Western Alliance

Bank, and in the future we could incur indebtedness beyond our revolving line of credit.

Borrowing on our revolving line of credit, combined with our other financial obligations and contractual

commitments, could have significant adverse consequences, including:

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requiring us to dedicate a portion of our cash resources to the payment of interest and principal,
reducing money available to fund working capital, capital expenditures, product development and
other general corporate purposes;

increasing our vulnerability to adverse changes in general economic, industry and market
conditions;

subjecting us to restrictive covenants that may reduce our ability to take certain corporate actions
or obtain further debt or equity financing (for example, the covenants in the loan and security
agreement for our revolving line of credit include limitations on our ability to incur additional
indebtedness and engage in certain fundamental business transactions, such as mergers or
acquisitions of other businesses);

limiting our flexibility in planning for, or reacting to, changes in our business and the industry in
which we compete; and

(cid:129)

placing us at a competitive disadvantage compared to our competitors that have less debt or better
debt servicing options.

In addition, any indebtedness we incur under our current revolving line of credit will bear interest at a

variable rate, which would make us vulnerable to increases in the market rate of interest. If the market rate of
interest increases substantially, we would have to pay additional interest, which would reduce cash available for
our other business needs. We intend to satisfy any future debt service obligations with our existing cash and cash
equivalents and cash flows from operations. Under our loan and security agreement with Western Alliance
Bank, our failure to make payments when due or comply with specified covenants, as well as the occurrence of
an event that would reasonably be expected to have a material adverse effect on our business, operations, assets
or condition, is an event of default. If an event of default occurs and the lender accelerates any indebtedness then
outstanding, we may need to seek additional financing, which may not be available on acceptable terms, in a
timely manner or at all. In such event, we may not be able to make accelerated payments, and the lender could
seek to enforce security interests in the collateral securing such indebtedness, which includes substantially all of
our assets. In addition, the covenants under our existing debt instruments, the pledge of our assets as collateral
and the negative pledge with respect to our intellectual property could limit our ability to obtain additional debt
financing. Any of these events could have a material adverse effect on our results of operations or financial
condition.

Risks Related to Our Intellectual Property

We may not be able to adequately protect our intellectual property rights.

Our business depends on our intellectual property, the protection of which is crucial to the success of our
business. We rely on a combination of trademark, trade secret and copyright law and contractual restrictions to
protect our intellectual property. In addition, we attempt to protect our intellectual property, technology and
confidential information by requiring our employees and consultants to enter into confidentiality and assignment
of inventions agreements and third parties to enter into nondisclosure agreements as we deem appropriate.
Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our
website features, software and functionality or obtain and use information that we consider proprietary.

We may not be able to discover or determine the extent of any unauthorized use or infringement or
violation of our intellectual property or proprietary rights. Third parties also may take actions that diminish the
value of our proprietary rights or our reputation. The protection of our intellectual property may require the
expenditure of significant financial and managerial resources. Litigation may be necessary in the future to
enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the
proprietary rights of others or to defend against claims of infringement or invalidity. Such litigation could be
costly, time-consuming and distracting to management, result in a diversion of resources, the impairment or loss
of portions of our intellectual property and could materially adversely affect our business, financial condition and
operating results. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses,
counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. These
steps may be inadequate to protect our intellectual property. We will not be able to protect our intellectual
property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual
property. Despite our precautions, it may be possible for unauthorized third parties to use information that we
regard as proprietary to create product offerings that compete with ours. We also cannot be certain that others
will not independently develop or otherwise acquire equivalent or superior technology or other intellectual
property rights, which could materially adversely affect our business, financial condition and operating results.

Competitors may adopt service names similar to ours, thereby harming our ability to build brand identity

and possibly leading to user confusion. In addition, there could be potential trade name or trademark
infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations
of the term “EverQuote.” We currently hold the “everquote.com” internet domain name as well as various other

related domain names. The regulation of domain names in the United States is subject to change. Regulatory
bodies could establish additional top-level domains, appoint additional domain name registrars, or modify the
requirements for holding domain names. As a result, we may not be able to acquire or maintain all domain names
that use the name EverQuote.

We currently operate only in the United States. To the extent that we determine to expand our business

internationally, we will encounter additional risks, including different, uncertain or more stringent laws relating
to intellectual property rights and protection.

We may in the future be subject to intellectual property disputes, which are costly to defend and could harm
our business and operating results.

From time to time we have faced and may continue to face allegations or claims that we have infringed the

trademarks, copyrights, patents and other intellectual property rights of third parties, including from our
competitors or non-practicing entities. Such claims, regardless of their merit, could result in litigation or other
proceedings and could require us to expend significant financial resources and attention by our management and
other personnel that otherwise would be focused on our business operations, result in injunctions against us that
prevent us from using material intellectual property rights, or require us to pay damages to third parties. Patent
and other intellectual property litigation may be protracted and expensive, and the results are difficult to predict
and may result in significant settlement costs or require us to stop offering some features, or purchase licenses or
modify our products and features while we develop non-infringing substitutes, but such licenses may not be
available on terms acceptable to us or at all, which would require us to develop alternative intellectual property.

Even if these matters do not result in litigation or are resolved in our favor or without significant cash
settlements, these matters, and the time and resources necessary to litigate or resolve them, could harm our
business, our operating results and our reputation.

As our business expands, we may be subject to intellectual property claims against us with increasing
frequency, scope and magnitude. We may also be obligated to indemnify affiliates or other partners who are
accused of violating third parties’ intellectual property rights by virtue of those affiliates or partners’ agreements
with us, and this could increase our costs in defending such claims and our damages. For example, many of our
agreements with insurance providers and other partners require us to indemnify these entities against third-party
intellectual property infringement claims. Furthermore, such insurance providers and partners may discontinue
their relationship with us either as a result of injunctions or otherwise. The occurrence of these results could harm
our brand or materially adversely affect our business, financial position and operating results.

Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets
and other proprietary information.

In order to protect our technologies and processes, we rely in part on confidentiality agreements with our

employees, independent contractors and other advisors. These agreements may not effectively prevent disclosure
of confidential information, including trade secrets, and may not provide an adequate remedy in the event of
unauthorized disclosure of confidential information. In addition, others may independently discover our trade
secrets and proprietary information, and in such cases we may not be able to assert our trade secret rights against
such parties. To the extent that our employees, contractors or other third parties with whom we do business use
intellectual property owned by others in their work for us, disputes may arise as to the rights to related
or resulting know-how and inventions. The loss of confidential information or intellectual property rights,
including trade secret protection, could make it easier for third parties to compete with our products. In addition,
any changes in, or unexpected interpretations of, intellectual property laws may compromise our ability to
enforce our trade secret and intellectual property rights. Costly and time-consuming litigation could be necessary
to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain protection of our
trade secrets or other proprietary information could harm our business, results of operations, reputation and
competitive position.

Our use of “open source” software could adversely affect our ability to protect our proprietary software and
subject us to possible litigation.

We use open source software in connection with our software development. From time to time, companies
that use open source software have faced claims challenging the use of open source software and/or compliance
with open source license terms. We could be subject to suits by parties claiming ownership of what we believe to
be open source software, or claiming non-compliance with open source licensing terms. Some open source
licenses require users who distribute software containing open source to make available all or part of such
software, which in some circumstances could include valuable proprietary code of the user. While we monitor
our use of open source software and try to ensure that none is used in a manner that would require us to disclose
our proprietary source code or that would otherwise breach the terms of an open source agreement, such use
could inadvertently occur, in part because open source license terms are often ambiguous. Any requirement to
disclose our proprietary source code or pay damages for breach of contract could be harmful to our business,
results of operations or financial condition, and could help our competitors develop services that are similar to or
better than ours.

Risks Related to Government Regulation

Our businesses are heavily regulated. We are, and may in the future become, subject to a variety of
international, federal, state, and local laws, many of which are unsettled and still developing and which could
subject us to claims or otherwise harm our business.

Our activities are subject to extensive regulation under the laws of the United States and its various states

and the other jurisdictions in which we operate. We are currently subject to a variety of, and may in the future
become subject to additional, international, federal, state and local laws or judicial decisions that are
continuously evolving and developing, including laws regarding the insurance industry, mobile- and internet-
based businesses and other businesses that rely on advertising, as well as privacy and consumer protection laws,
including the TCPA, the Telemarketing Sales Rule, the CAN-SPAM Act, the Fair Credit Reporting Act, the
Health Insurance Portability and Accountability Act, and employment laws, including those governing wage and
hour requirements.

We also generate a significant amount of revenue from calls made by our internal call centers as well as, in

some cases, by third-party publishers’ call centers. We also purchase a portion of our lead data from third-party
vendors. These third-party vendors are outside contractors and we do not exercise control over their business or
day-to-day operations and cannot guarantee that these third parties will comply with regulations. Any failure by
us or the third-party vendors on which we rely for telemarketing, email marketing, and other lead generation
activities to adhere to or successfully implement appropriate processes and procedures in response to existing
regulations and changing regulatory requirements could result in legal and monetary liability, significant fines
and penalties, or damage to our reputation in the marketplace, any of which could have a material adverse effect
on our business, financial condition, and results of operations.

In addition, there is increasing attention by state and other jurisdictions to regulation in this area. Our

insurance activities are subject to regulation by state insurance regulators in the United States. These laws are
complex and can be costly to comply with, require significant management time and effort, and could subject us
to claims, government enforcement actions, civil and criminal liability or other remedies, including suspension of
business operations. These laws may conflict with each other, further complicating compliance efforts.

If we are alleged not to comply with these laws, regulations, or judicial decisions, we may be required to

modify affected products and services, which could require a substantial investment and loss of revenue, or cease
providing the affected product or service altogether. If we are found to have violated laws, regulations, or judicial
decisions, we may be subject to significant fines, penalties and other losses.

We assess customer insurance needs, collect customer contact information and provide other product

offerings, which results in us receiving personal information. This information is increasingly subject to

legislation and regulation in the United States. This legislation and regulation is generally intended to protect
individual privacy and the privacy and security of personal information. We could be adversely affected if
government regulations require us to significantly change our business practices with respect to this type of
information or if the insurance providers who use our marketplace violate applicable laws and regulations. For
example, the California Consumer Privacy Act, or CCPA, went into effect on January 1, 2020. The CCPA creates
new individual privacy rights for California consumers (as the word is broadly defined in the law) and places
increased privacy and security obligations on many organizations that handle personal information of consumers
or households. The CCPA requires covered companies to provide new disclosure to consumers about such
companies’ data collection, use and sharing practices, provides such consumers a new right to opt-out of certain
sales or transfers of personal information, and provides consumers with a new cause of action for certain data
breaches. The CCPA authorized the Attorney General to bring enforcement actions for violations beginning
July 1, 2020. The CCPA may have a substantial negative impact on our business activities and increase our
compliance costs and potential liability. Additionally, effective starting on January 1, 2023, the California
Privacy Rights Act, or the CPRA, will significantly modify the CCPA, including by expanding consumers’ rights
with respect to certain sensitive personal information. The CPRA also creates a new state agency that will be
vested with authority to implement and enforce the CCPA and the CPRA. Many similar privacy laws have been
proposed at the federal level and in other states. These potential new laws may impact our business practice and/
or the business practices of our customers and may have a material impact on our business activities.

Changes in applicable laws and regulations may materially increase our direct and indirect compliance and
other expenses of doing business, having a material adverse effect on our business, financial condition and results
of operations. If there were to be changes to statutory or regulatory requirements, we may be unable to comply
fully with or maintain all required insurance licenses and approvals. Regulatory authorities have relatively broad
discretion to grant, renew and revoke licenses and approvals. If we do not have all requisite licenses and
approvals, or do not comply with applicable statutory and regulatory requirements, the regulatory authorities
could preclude or temporarily suspend us from carrying on some or all of our activities or monetarily penalize us,
which could have a material adverse effect on our business, results of operations and financial condition.

We cannot predict the outcome of judicial decisions, or whether any proposed legislation or regulatory

changes will be adopted, or what impact, if any, such proposals or, if enacted, such laws could have on our
business, results of operations and financial condition. If we are alleged to have failed to comply with applicable
laws and regulations, we may be subject to investigations, criminal penalties or civil remedies, including fines,
injunctions, loss of an operating license or approval, increased scrutiny or oversight by regulatory authorities, the
suspension of individual employees, limitations on engaging in a particular business or redress to customers. The
cost of compliance and the consequences of non-compliance could have a material adverse effect on our
business, results of operations and financial condition. In addition, a finding that we have failed to comply with
applicable laws and regulations could have a material adverse effect on our business, results of operations and
financial condition by exposing us to negative publicity and reputational damage or by harming our customer or
employee relationships.

In most jurisdictions, government regulatory authorities have the power to interpret and amend applicable
laws and regulations, and have discretion to grant, renew and revoke the various licenses and approvals we need
to conduct our activities. Such authorities may require us to incur substantial costs in order to comply with such
laws and regulations. Regulatory statutes are broad in scope and subject to differing interpretation. In some areas
of our businesses, we act on the basis of our own or the industry’s interpretations of applicable laws or
regulations, which may conflict from jurisdiction to jurisdiction. In the event those interpretations eventually
prove different from the interpretations of regulatory authorities, we may be penalized or precluded from
carrying on our previous activities.

Federal, state and international laws and regulations regulating insurance activities are complex and could
have a material adverse effect on our business, may reduce our profitability and potentially limit our growth.

The insurance regulatory system in the United States is generally designed to protect the interests of
consumers or policyholders, and not necessarily the interests of insurance producers, insurers, their stockholders
and other investors. This system addresses, among other things: licensing companies and agents to transact
business and authorizing lines of business; and regulating unfair trade and claims practices, including through the
imposition of restrictions on marketing and sales practices, distribution arrangements and payment of
inducements. In some cases, these insurance and other laws and regulations may impose operational limitations
on our business, including on the products and services we may offer or on the amount or type of compensation
we may collect. Additionally, as a result of our entry into the health insurance vertical and our acquisition of
Crosspointe, we are now engaged in marketing and selling Medicare plans that are principally regulated by The
Centers for Medicare & Medicaid Services, but are also subject to state laws. The laws and regulations applicable
to the marketing and sale of Medicare plans are numerous, ambiguous and complex.

While we attempt to comply with applicable laws and regulations, there can be no assurance that we, our

employees, consultants, contractors and other agents are in full compliance with such laws and regulations or
interpretations at all times, or that we will be able to comply with any future laws or regulations.

In recent years, the state insurance regulatory framework has come under increased federal scrutiny, and

some state legislatures have considered or enacted laws that may alter or increase state authority to regulate
insurance entities. Further, the National Association of Insurance Commissioners and state insurance regulators
continually reexamine existing laws and regulations, interpretations of existing laws and the development of new
laws and regulations. With limited exceptions, the U.S. federal government does not directly regulate the
business of insurance. However, federal legislation and administrative policies in several areas can significantly
and adversely affect insurance entities. These areas include financial services regulation, securities regulation,
privacy and taxation. In the future, additional federal regulation may be enacted, which could affect the way we
conduct our business and could result in higher compliance costs.

Insurance laws or regulations that are adopted or amended, in addition to changes in federal statutes,
including the Gramm-Leach-Bliley Act and the McCarran-Ferguson Act, financial services regulations and
federal taxation laws or regulation, may be more restrictive than current laws or regulations and may result in
lower revenues or higher costs of compliance and thus could have a material adverse effect on our results of
operations and limit our growth.

Taxing authorities may assert that we should have collected or in the future should collect sales, use, value
added or similar taxes, and we could be subject to liability with respect to past or future sales, which could
adversely affect our operating results.

We do not collect sales, use, value added or similar taxes in jurisdictions in which we have sales, and we

believe that such taxes are not applicable either because we do not have the requisite amount of contacts with the
state for the state to be able to impose these taxes or our products and services are not subject to these taxes.
Sales, use, value added and similar tax laws and rates vary greatly by jurisdiction. Certain jurisdictions in which
we do not collect such taxes may assert that such taxes are applicable, which could result in tax assessments,
penalties and interest, to us or our end-customers for the past amounts, and we may be required to collect such
taxes in the future. If we are unsuccessful in collecting such taxes from our end-customers, we could be held
liable for such costs. Such tax assessments, penalties and interest, or future requirements may adversely affect
our operating results. For example, we were contacted by a representative from a state tax assessor’s office
requesting remittance of uncollected sales taxes. While we do not believe our services are taxable in this state, if
we do not prevail in our position, uncollected sales taxes due for the period could amount to approximately
$1.5 million including interest and penalties.

Federal, state and international laws regulating telephone and email marketing practices impose certain
obligations on marketers, which could reduce our ability to expand our business.

We, along with third parties we acquire quote requests from, and the insurance providers using our

marketplace, make telephone calls and send emails to consumers who request insurance quotes through our
marketplace. The United States regulates marketing by telephone and email. The TCPA prohibits companies
from making certain telemarketing calls to numbers listed in the Federal Do-Not-Call Registry and imposes other
obligations and limitations on making phone calls and sending text messages to consumers. The CAN-SPAM Act
regulates commercial email messages and specifies penalties for the transmission of commercial email messages
that do not comply with certain requirements, such as providing an opt-out mechanism for stopping future emails
from senders. We, along with third parties we acquire quote requests from, and the insurance providers who use
our marketplace may need to comply with such laws and any associated rules and regulations. States and other
countries have similar laws related to telemarketing and commercial emails. Additional or modified laws and
regulations, or interpretations of existing, modified or new laws, regulations and rules, could prohibit or increase
the cost of engaging with consumers and impair our ability to expand the use of our products, including our
demand response solution, to more users. Alleged failure to comply with obligations and restrictions related to
telephone, text message and email marketing could subject us to lawsuits, fines, statutory damages, consent
decrees, injunctions, adverse publicity and other losses that could harm our business. Moreover, over the past
several years there has been a significant amount of litigation alleging violations of laws relating to
telemarketing, which has increased the exposure of companies that operate telephone and text messaging
campaigns to class action litigation alleging violations of the TCPA. If we, third parties we acquire quote
requests from, or the insurance providers who use our marketplace become subject to such litigation, it could
result in substantial costs to and materially adversely affect our business.

Changes in the regulation of the internet could adversely affect our business.

Laws, rules and regulations governing internet communications, advertising and e-commerce are dynamic
and the extent of future government regulation is uncertain. Federal and state regulations govern various aspects
of our online business, including intellectual property ownership and infringement, trade secrets, the distribution
of electronic communications, marketing and advertising, user privacy and data security, search engines and
internet tracking technologies. In addition, changes in laws or regulations that adversely affect the growth,
popularity or use of the internet, including potentially the repeal in the United States of net neutrality, could
decrease the demand for our offerings and increase our cost of doing business. Future taxation on the use of the
internet or e-commerce transactions could also be imposed. Existing or future regulation or taxation could hinder
growth in or adversely affect the use of the internet generally, including the viability of internet e-commerce,
which could reduce our revenue, increase our operating expenses and expose us to significant liabilities.

Risks Related to Our Class A Common Stock

An active trading market for our Class A common stock may not be sustained.

Our Class A common stock began trading on the Nasdaq Global Market on June 28, 2018. Given the
limited trading history of our Class A common stock, there is a risk that an active trading market for our shares
may not be sustained, which could put downward pressure on the market price of our Class A common stock and
thereby affect the ability of our stockholders to sell their shares at attractive prices, at the times that they would
like to sell them, or at all.

The market price of our Class A common stock has been and may continue to be volatile, which could result
in substantial losses for investors and could subject us to securities class action litigation.

The market price of our Class A common stock has been and could continue to be subject to significant

fluctuations. For example, our Class A common stock traded within a range of a high price of $63.44 per share

and a low price of $4.05 per share for the period beginning June 28, 2018, our first day of trading on the Nasdaq
Global Market, through December 31, 2020. Some of the factors that may cause the market price of our Class A
common stock to fluctuate include:

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price and volume fluctuations in the overall stock market from time to time;

volatility in the market price and trading volume of comparable companies;

actual or anticipated changes in our earnings or fluctuations in our operating results or in the
expectations of securities analysts;

announcements of new service offerings, strategic alliances or significant agreements by us or by
our competitors;

loss of key personnel;

litigation involving us or that may be perceived as having an adverse effect on our business;

changes in general economic, industry and market conditions and trends;

investors’ general perception of us;

sales of large blocks of our stock; and

announcements regarding industry consolidation.

In addition, equity markets in general, and the equities of technology companies in particular, have
experienced and may experience in the future, extreme price and volume fluctuations due to, among other
factors, the actions of market participants or other actions outside of our control, including general market
volatility caused by the COVID-19 pandemic. Such price and volume fluctuations may adversely affect the
market price of our common stock for reasons unrelated to our business or operating results.

In the past, following periods of volatility in the market price of a company’s securities, securities class
action litigation has often been brought against that company. For example, we were subject to a class action
lawsuit alleging federal securities law violations in connection with our IPO. Because of the past and potential
future volatility of our stock price, we may become the target of additional securities litigation in the future.
Securities litigation could result in substantial costs and divert management’s attention and resources from our
business.

Our quarterly operating results or other operating metrics may fluctuate significantly, which could cause the
trading price of our Class A common stock to decline.

Our quarterly operating results and other operating metrics have fluctuated in the past and may in the
future fluctuate as a result of a number of factors, many of which are outside of our control and may be difficult
to predict, including:

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the level of demand for our product and service offerings and our ability to maintain and increase
our customer base;

the level of consumer traffic to our websites and the volume of quote requests generated by
consumer traffic;

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the timing and success of new product and service introductions by us or our competitors or any
other change in the competitive landscape of our market;

bind rates by consumers;

pricing pressure as a result of competition or otherwise;

our ability to reduce costs;

errors in our forecasting of the demand for our product and service offerings, which could lead to
lower revenue or increased costs;

seasonal or other variations in purchasing patterns by customers;

increases in and timing of sales and marketing and other operating expenses that we may incur to
grow and expand our operations and to remain competitive;

adverse litigation judgments, settlements or other litigation-related costs;

regulatory proceedings or other adverse publicity about us or our product and service offerings;

costs related to the acquisition of businesses, talent, technologies or intellectual property,
including potentially significant amortization costs and possible write-downs; and

general economic conditions.

Any one of the factors above or the cumulative effect of some of the factors above may result in

significant fluctuations in our operating results.

The variability and unpredictability of our quarterly operating results or other operating metrics could

result in our failure to meet our expectations or those of any analysts that cover us or investors with respect to
revenue or other operating results for a particular period. If we fail to meet or exceed such expectations for these
or any other reasons, the market price of our Class A common stock could fall substantially, and we could face
costly lawsuits, including securities class action suits.

If securities or industry analysts cease publishing research or reports about us, our business or our market, or
if they publish negative evaluations of our stock or the stock of other companies in our industry, the price of
our stock and trading volume could decline.

The trading market for our Class A common stock will be influenced by the research and reports that
industry or securities analysts may publish about us, our business, our market or our competitors. If one or more
of the analysts covering our business downgrade their evaluations of our Class A common stock or the stock of
other companies in our industry, the price of our Class A common stock could decline. If one or more of these
analysts cease to cover our Class A common stock, we could lose visibility in the market for our Class A
common stock, which in turn could cause our stock price to decline.

The dual-class structure of our common stock has the effect of concentrating voting control with the holders
of our Class B common stock, including our directors, executive officers and Link Ventures and other
significant stockholders, who collectively held in the aggregate approximately 78% of the voting power of our
capital stock as of February 23, 2021; and Link Ventures, directly or through a voting agreement, together
with Cogo Labs, held approximately 77% of the voting power of our capital stock as of that date. This
concentration of voting power will limit or preclude the ability of other stockholders to influence corporate
matters, including the election of directors, amendments of our organizational documents and any merger,
consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring
stockholder approval.

Our Class B common stock has 10 votes per share, and our Class A common stock has one vote per share.

Our directors, executive officers and holders of more than 10% of our common stock, and their respective
affiliates, held in the aggregate approximately 78% of the voting power of our capital stock as of February 23,
2021; and Link Ventures, directly or through a voting agreement pursuant to which each of Seth Birnbaum,
including through his heirs and estate, and Tomas Revesz have agreed to vote on all matters presented to our
stockholders all voting capital stock held by them in the manner directed by Link Ventures, together with Cogo
Labs, held in the aggregate approximately 77% of the voting power of our capital stock as of that date. Because
of the 10-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B
common stock collectively will continue to control a majority of the combined voting power of our common
stock and therefore be able to control all matters submitted to our stockholders for approval. This concentration
of voting power will limit or preclude your ability to influence corporate matters for the foreseeable future,
including the election of directors, amendments of our organizational documents, and any merger, consolidation,
sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.
This may also prevent or discourage unsolicited acquisition proposals or offers for our capital stock that you may
feel are in your best interest as one of our stockholders. In addition, major stock index providers, such as FTSE
Russell and S&P Dow Jones, exclude from their indices non-voting securities or the securities of companies with
unequal voting rights. Exclusion from stock indices could make it more difficult, or impossible, for some fund
managers to buy our Class A common stock, particularly in the case of index tracking mutual funds and
exchange traded funds, which could adversely affect the trading liquidity and market price of our Class A
common stock.

Future transfers by holders of Class B common stock will generally result in those shares converting to

Class A common stock, subject to limited exceptions, such as certain transfers to trusts and individual retirement
accounts. In addition, all shares of Class B common stock will be required to convert to Class A common stock
upon the election of a majority by voting power of the outstanding Class B common stock. The conversion of
Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting
power of those holders of Class B common stock who retain their shares.

Our status as a “controlled company” could make our Class A common stock less attractive to some investors
or otherwise harm our stock price.

More than 50% of our voting power is held by entities affiliated with Link Ventures. As a result, we are a
“controlled company” under the rules of the Nasdaq Stock Market. Under these rules, a company of which more
than 50% of the voting power is held by an individual, a group or another company is a “controlled company”
and, as such, will be exempt from certain corporate governance requirements, including requirements that:

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a majority of the board of directors consist of independent directors;

director nominees be selected or recommended for the board’s selection by independent directors
constituting a majority of the independent directors or by a nominations committee with
prescribed duties and a written charter and comprised solely of independent directors; and

(cid:129)

the board of directors maintain a compensation committee with prescribed duties and a written
charter and comprised solely of independent directors.

We have availed ourselves of certain of these exemptions and, for so long as we qualify as a “controlled

company,” we will maintain the option to utilize from time to time some or all of these exemptions. For example,
we do not have a nominations committee, and director nominees might not be selected or recommended for the
board’s selection by a qualifying nominations committee or by independent directors constituting a majority of
the independent directors, and our compensation committee is not comprised solely of independent directors.
Accordingly, should the interests of Link Ventures differ from those of other stockholders, the other stockholders
may not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq
Stock Market corporate governance standards. Our status as a controlled company could make our Class A
common stock less attractive to some investors or otherwise harm our stock price.

A significant portion of our total outstanding shares may be sold into the public market in the near future,
which could cause the market price of our Class A common stock to drop significantly, even if our business is
doing well.

Sales of a significant number of shares of our Class A common stock in the public market could occur at

any time. These sales, or the market perception that the holders of a large number of shares intend to sell shares,
could reduce the market price of our Class A common stock.

In addition to our outstanding Class A common stock, as of December 31, 2020, there were 1,032,613
shares of Class A common stock subject to outstanding options, 1,156,306 shares of either Class A common
stock or Class B common stock subject to outstanding options, 3,142,220 shares of Class A common stock
subject to outstanding restricted stock unit awards, or RSUs, and an additional 1,026,673 shares of Class A
common stock reserved for future issuance under our equity incentive plan. Because we have registered
12,677,509 shares of our Class A common stock and Class B common stock that may be issued under our equity
incentive plans pursuant to registration statements on Form S-8, any such shares that we issue can be freely sold
in the public market upon issuance, subject to the restrictions imposed on our affiliates under Rule 144.

Moreover, holders of a significant number of shares of our Class A common stock and Class B common

stock as of December 31, 2020, have rights, subject to certain conditions, to require us to file registration
statements covering their shares or to include their shares in registration statements that we may file for ourselves
or other stockholders. Upon registration, such shares would be able to be freely sold in the public market.

Anti-takeover provisions in our restated certificate of incorporation and our amended and restated bylaws, as
well as provisions of Delaware law, might discourage, delay or prevent a change in control of our company or
changes in our management and, therefore, depress the trading price of our Class A common stock.

Our restated certificate of incorporation and amended and restated bylaws and Delaware law contain

provisions that may discourage, delay or prevent a merger, acquisition or other change in control that
stockholders may consider favorable, including transactions in which you might otherwise receive a premium for
your shares of our Class A common stock. These provisions may also prevent or delay attempts by our
stockholders to replace or remove our management or directors. Our corporate governance documents include
provisions:

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providing that directors may be removed by stockholders only for cause and only with a vote of
the holders of shares representing a majority of the voting power of all shares that stockholders
would be entitled to vote for the election of directors;

limiting the ability of our stockholders to call and bring business before special meetings of
stockholders and to take action by written consent in lieu of a meeting;

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requiring advance notice of stockholder proposals for business to be conducted at meetings of our
stockholders and for nominations of candidates for election to our board of directors;

authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend
and other rights superior to our Class A common stock; and

limiting the liability of, and providing indemnification to, our directors and officers.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the

Delaware General Corporation Law, which limits the ability of stockholders holding shares representing more
than 15% of the voting power of our outstanding voting stock from engaging in certain business combinations
with us. Any provision of our restated certificate of incorporation or amended and restated bylaws or Delaware
law that has the effect of delaying or deterring a change in control could limit the opportunity for our
stockholders to receive a premium for their shares of our Class A common stock, and could also affect the price
that some investors are willing to pay for our Class A common stock.

The existence of the foregoing provisions and anti-takeover measures could limit the price that investors

might be willing to pay in the future for shares of our Class A common stock. They could also deter potential
acquirers of our company, thereby reducing the likelihood that you could receive a premium for your Class A
common stock in an acquisition.

Our restated certificate provides that the Court of Chancery of the State of Delaware is the sole and exclusive
forum for substantially all disputes between us and our stockholders. Our restated certificate further provides
that the federal district courts of the United States of America are the sole and exclusive forum for the
resolution of any complaint asserting a cause of action arising under the Securities Act. These choice of
forum provisions could limit the ability of stockholders to obtain a favorable judicial forum for disputes with
us or our directors, officers or employees.

Our restated certificate of incorporation provides that the Court of Chancery of the State of Delaware (or, if

the Court of Chancery of the State of Delaware does not have jurisdiction, the federal district court for the
District of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (1) any
derivative action or proceeding brought on behalf of our company, (2) any action asserting a claim of breach of
fiduciary duty owed by any director, officer or other employee or stockholder of our company to us or our
stockholders, (3) any action asserting a claim arising pursuant to any provision of the Delaware General
Corporation Law or as to which the Delaware General Corporation Law confers jurisdiction on the Court of
Chancery or (4) any action asserting a claim governed by the internal affairs doctrine. Our restated certificate of
incorporation further provides that, unless we consent in writing to the selection of an alternative forum, the
federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and
exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of
1933, as amended, or the Securities Act. In Salzberg v. Sciabacucchi, No. 346, 2019 (Del. Mar. 18, 2020), the
Delaware Supreme Court, reversing the Delaware Court of Chancery held that such federal forum selection
provisions are “facially valid” under Delaware law, although there is uncertainty as to whether courts in other
states will enforce these provisions and we may incur additional costs of litigation should such enforceability be
challenged. Neither of these choice of forum provisions would affect suits brought to enforce any liability or duty
created by the Securities Exchange Act of 1934, as amended, or the Exchange Act, or the rules and regulations
thereunder, jurisdiction over which is exclusively vested by statute in U.S. federal courts, or any other claim for
which U.S. federal courts have exclusive jurisdiction. These choice of forum provisions may limit a
stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our
directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers
and other employees. Alternatively, if a court were to find the choice of forum provisions contained in our
certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs
associated with resolving such action in other jurisdictions, which could materially adversely affect our business,
financial condition and operating results.

The requirements of being a public company may strain our resources, divert management’s attention and
affect our ability to attract and retain qualified board members.

As a public company, we are subject to the reporting requirements of the Exchange Act, the listing
requirements of the Nasdaq Stock Market and other applicable securities rules and regulations. Compliance with
these rules and regulations will increase our legal and financial compliance costs, make some activities more
difficult, time-consuming or costly, and increase demand on our systems and resources, particularly as we are no
longer an emerging growth company. Among other things, the Exchange Act requires that we file annual,
quarterly and current reports with respect to our business and operating results and maintain effective disclosure
controls and procedures and internal control over financial reporting. In order to maintain and, if required,
improve our disclosure controls and procedures and internal control over financial reporting to meet this
standard, significant resources and management oversight may be required. As a result, management’s attention
may be diverted from other business concerns, which could harm our business and operating results. Although
we have already hired additional employees to comply with these requirements, we may need to hire even more
employees in the future, which will increase our costs and expenses.

As a result of being a public company, it is more expensive for us to obtain director and officer liability

insurance than when we were a private company, and in the future we may be required to accept reduced
coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult
for us to attract and retain qualified members of our board of directors, particularly to serve on our audit
committee, and qualified executive officers.

We are obligated to maintain a system of effective internal control over financial reporting and any failure to
maintain the adequacy of these internal controls may harm investor confidence in our company and, as a
result, the value of our common stock.

The Sarbanes-Oxley Act of 2002 requires that we maintain effective internal control over financial

reporting and disclosure controls and procedures. We are required, pursuant to Section 404 of the Sarbanes-
Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control
over financial reporting. This assessment includes disclosure of any material weaknesses identified by our
management in our internal control over financial reporting.

Our compliance with Section 404 necessitates that we incur substantial accounting expense and expend

significant management efforts. We will continue to dedicate internal resources, engage outside consultants and
adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting,
continue steps to improve control processes as appropriate, validate through testing that controls are functioning as
documented and implement a continuous reporting and improvement process for internal control over financial
reporting and to compile the system and process documentation necessary to perform the evaluation needed to
comply with Section 404. However, we cannot assure you that our independent registered public accounting firm
will be able to attest to the effectiveness of our internal control over financial reporting. We may not be able to
remediate any material weaknesses that may be identified, or to complete our evaluation, testing and any required
remediation in a timely fashion and our independent registered public accounting firm may issue a report that is
adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.

Any failure to maintain adequate internal control over financial reporting could severely inhibit our ability

to accurately report our financial condition or results of operations. If we are unable to assert that our internal
control over financial reporting is effective, or if our auditors are unable to express an opinion on the
effectiveness of our internal control when they are required to issue such opinion, investors could lose confidence
in the accuracy and completeness of our financial reports, the market price of our Class A common stock could
decline, and we could be subject to sanctions or investigations by the Nasdaq Stock Market, the SEC or other
regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting,
or to implement or maintain other effective control systems required of public companies, could also restrict our
future access to the capital markets.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

Our principal executive offices are located in Cambridge, Massachusetts, where we lease approximately

32,000 square feet of space pursuant to a lease that expires in September 2024. We believe that our current
facilities are adequate to meet our immediate needs.

ITEM 3.

LEGAL PROCEEDINGS

Information with respect to legal proceedings and this item is included in Note 12 of the Notes to
Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K, which is
incorporated herein by reference.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Certain Information Regarding the Trading of Our Common Stock

Our Class A common stock trades under the symbol “EVER” on the Nasdaq Global Market and has been

publicly traded since June 28, 2018. Prior to this time, there was no public market for our Class A common stock.
Our Class B common stock is not listed or traded on any stock exchange.

Holders of Our Common Stock

As of February 23, 2021, there were approximately 14 holders of record of shares of our Class A common
stock and 9 holders of record of shares of our Class B common stock. These amounts do not include stockholders
for whom shares are held in “nominee” or “street” name.

Securities Authorized for Issuance Under Equity Compensation Plans

Information about our equity compensation plans will be included in our definitive proxy statement to be

filed with the SEC with respect to our 2021 Annual Meeting of Stockholders and is incorporated herein by
reference.

Recent Sales of Unregistered Equity Securities

None.

Use of Proceeds from Initial Public Offering

Our initial public offering of Class A common stock, or the IPO, was effected through a Registration
Statement on Form S-1 (File No. 333-225379) that was declared effective by the Securities and Exchange
Commission, or SEC, on June 27, 2018. The net offering proceeds to us, after deducting underwriting discounts
and commissions and other offering expenses, were $48.6 million. None of the net proceeds were paid directly or
indirectly to any of our directors or officers (or their associates) or persons owning 10.0% or more of any class of
our equity securities or to any other affiliates, other than payments in the ordinary course of business to officers
for salaries and to non-employee directors as compensation for board or board committee service. As of
December 31, 2020, we estimate that we have used approximately $32.4 million of the net proceeds from our
IPO for general corporate purposes, capital expenditures and our acquisition of Crosspointe, including
$7.0 million to repay amounts outstanding under our revolving line of credit with Western Alliance Bank. There
has been no material change in the planned use of IPO proceeds from that described in the final prospectus for
the IPO filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, on June 28,
2018.

Issuer Purchases of Equity Securities

We did not purchase any of our registered equity securities during the period from October 1, 2020 to

December 31, 2020.

Dividends

We have never declared or paid cash dividends on our capital stock. We anticipate that we will retain all of

our future earnings to finance the operation of our business and do not anticipate declaring or paying any cash

dividends on our capital stock in the foreseeable future. Any future determination to declare and pay cash
dividends, if any, will be made at the discretion of our board of directors and will depend on a variety of factors,
including applicable laws, our financial condition, results of operations, contractual restrictions, capital
requirements, business prospects, general business or financial market conditions, and other factors our board of
directors may deem relevant. In addition, our revolving credit facility contains covenants that could restrict our
ability to pay cash dividends.

ITEM 6.

SELECTED FINANCIAL DATA

This Annual Report on Form 10-K includes scaled disclosures for smaller reporting companies, as defined

in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, and, as such, this information is not
required.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read
in conjunction with our consolidated financial statements and related notes appearing in Part II, Item 8 of this
Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth
elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for
our business, includes forward-looking statements that involve risks and uncertainties. As a result of many
factors, including those factors set forth in the ‘‘Risk Factors’’ section of this Annual Report on Form 10-K, our
actual results could differ materially from the results described in, or implied by, the forward-looking statements
contained in the following discussion and analysis.

Overview

EverQuote makes insurance shopping easy, efficient and personal, saving consumers and insurance
providers time and money.

Finding the right insurance product is often challenging for consumers, who face limited online options,

Insurance providers operate in a highly competitive and regulated industry and typically specialize on

pre-determined subsets of consumers. As a result, not every consumer is a good match for every provider, and
some providers struggle to efficiently reach the segments that are most desirable for their business models.
Traditional offline and online advertising channels reach broad audiences but lack the fine-grained consumer
acquisition capabilities needed for optimally matching consumers to specific insurance products. We connect
providers to a large volume of high-intent, pre-validated consumer referrals that match the insurers’ specific
requirements. The transparency of our marketplace, as well as the campaign management tools we offer, make it
easy for insurance providers to evaluate the performance of their marketing spend on our platform and manage
their own return on investment.

Since our founding in 2011, our core mission has been to make finding insurance easy and more personal,
saving consumers and insurance providers time and money. We are working to build the largest and most trusted
online insurance marketplace in the world. In pursuing this goal, we have consistently innovated through our
disruptive data driven approach. Highlights of our history of innovation include:

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In 2011, we launched the EverQuote marketplace for auto insurance.

In 2013, we launched EverQuote Pro, our provider portal, for carriers.

In 2015, we launched EverQuote Pro for agents.

In 2016, we added home and life insurance in our marketplace.

In 2018, we exceeded 46 million cumulative quote requests since launch of our marketplace.

In 2019, we added health, renters and commercial insurance in our marketplace.

In 2020, we launched our direct-to-consumer insurance offerings in our life vertical and in our
health vertical via the acquisition of Crosspointe Insurance & Financial Services, LLC, or
Crosspointe.

In the years ended December 31, 2020 and 2019, our total revenue was $346.9 million and $248.8 million,
respectively, representing year-over-year growth of 39.4%. We had net losses of $11.2 million and $7.1 million
for the years ended December 31, 2020 and 2019, respectively, and had $18.4 million and $8.3 million in
adjusted EBITDA for these same periods, respectively. See the section titled “—Non-GAAP Financial Measure”
for information regarding our use of adjusted EBITDA and its reconciliation to net income (loss) determined in
accordance with generally accepted accounting principles in the United States, or GAAP.

COVID-19

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. The

COVID-19 pandemic has continued to spread throughout the United States and the world and has resulted in
authorities implementing numerous measures to contain the virus, including travel bans and restrictions,
quarantines, shelter-in-place orders, and business limitations and shutdowns. While we are unable to accurately
predict the full impact that COVID-19 will have on our results from operations, financial condition, liquidity and
cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment
measures, our compliance with these measures has impacted our day-to-day operations and could disrupt our
business and operations, as well as that of our customers and consumer traffic to our marketplace for an
indefinite period of time. For example, we believe that immediately after shelter-in-place orders went into effect
consumers performed less searches for insurance online. To support the health and well-being of our employees,
customers, partners and communities, our employees continue to work remotely as of March 1, 2021. While such
disruptions have not had a material adverse impact on our financial results through December 31, 2020, such
disruptions may impact consumer insurance shopping behavior. We continue to monitor and are managing our
operations for the ongoing impact of COVID-19.

Factors Affecting Our Performance

We believe that our performance and future growth depend on a number of factors that present significant
opportunities for us but also pose risks and challenges, including those discussed below and in the section titled
“Risk Factors.”

Auto insurance industry risk

We derive a significant portion of our revenue from auto insurance providers and our financial results
depend on the performance of the auto insurance industry. For example, in 2016, the U.S. commercial auto

insurance industry experienced its worst underwriting performance in 15 years, with higher loss ratios that were
driven by both adverse claim severity and frequency trends. As a result, our auto insurance carrier customers
reduced marketing spend and cost per sale targets the following year, ultimately impacting our revenue growth in
the auto insurance vertical in 2017.

Expanding consumer traffic

Our success depends in part on the growth of our consumer traffic, as measured by quote requests. We

have historically increased consumer traffic to our marketplace by expanding existing advertising channels and
adding new channels. We plan to continue to increase consumer traffic by leveraging the features and growing
data assets of our platform. While we plan to increase consumer traffic over the long term, we also have the
ability to decrease advertising, which would likely result in a decrease in quote requests from consumers targeted
by such advertising, if we believe the revenue associated with such consumer traffic does not result in
incremental profit to our business.

Increasing the number of insurance providers and their respective spend in our marketplace

Our success also depends on our ability to retain and grow our insurance provider network. We have
expanded both the number of insurance providers and the spend per provider on our platform. While not a factor
in our historical increases in revenue per quote request, we believe we have an opportunity to increase the
number of referrals per quote request while increasing the bind rate per quote request, which would allow us to
increase our revenue at low incremental cost.

Revenue per quote request

We seek to increase our revenue per quote request by attaining higher insurance provider bids and by
increasing the number of referrals per quote request. Insurance provider bids are influenced by competition in our
marketplace auctions, the performance of our consumer referrals for insurance providers relative to other
consumer acquisition channels, as well as by market conditions, insurance provider budgets and insurance
providers’ new customer acquisition targets. Increases in revenue per quote request allow us to increase
advertising and consumer traffic to our marketplace while maintaining or increasing profitability.

Cost per quote request

We seek to efficiently acquire consumers by increasing the effectiveness of our consumer advertising and

insurance marketplace. Cost per quote request is influenced by the cost and mix of advertising and the conversion
rate of marketplace visitors who request an insurance quote. While we seek to minimize cost per quote request,
we may incur increased cost per quote request in order to achieve profitability at relative volumes of quote
requests and revenue per quote request.

Key Business Metrics

We regularly review a number of metrics, including United States generally accepted accounting
principles, or GAAP, operating results and the key metrics listed below, to evaluate our business, measure our
performance, identify trends affecting our business, formulate financial projections, and make operating and
strategic decisions. Some of these metrics are non-financial metrics or are financial metrics that are not defined
by GAAP.

Quote Requests

Quote requests are consumer-submitted website forms that contain data required to provide an insurance
quote, quote requests we receive through offline channels such as telephone calls and quote requests submitted
directly to third-party partners.

Variable Marketing Margin

We define variable marketing margin, or VMM, as revenue, as reported in our consolidated statements of

operations and comprehensive income (loss), less advertising costs (a component of sales and marketing expense,
as reported in our statements of operations and comprehensive income (loss)). We use VMM to measure the
efficiency of individual advertising and consumer acquisition sources and to make trade-off decisions to manage
our return on advertising. We do not use VMM as a measure of profitability.

Adjusted EBITDA

We define Adjusted EBITDA as net income (loss), adjusted to exclude: stock-based compensation

expense, depreciation and amortization expense, acquisition-related costs, legal settlement expense, interest
income and the provision for (benefit from) income taxes. Adjusted EBITDA is a non-GAAP financial measure
that we present in this Annual Report on Form 10-K to supplement the financial information we present on a
GAAP basis. We monitor and present Adjusted EBITDA because it is a key measure used by our management
and board of directors to understand and evaluate our operating performance, to establish budgets and to develop
operational goals for managing our business. Adjusted EBITDA should not be considered in isolation from, or as
an alternative to, measures prepared in accordance with GAAP. Adjusted EBITDA should be considered together
with other operating and financial performance measures presented in accordance with GAAP. Also, Adjusted
EBITDA may not necessarily be comparable to similarly titled measures presented by other companies. For
further explanation of the uses and limitations of this measure and a reconciliation of Adjusted EBITDA to the
most directly comparable GAAP measure, net income (loss), please see “—Non GAAP Financial Measure”.

Key Components of Our Results of Operations

Revenue

We generate our revenue by selling consumer referrals to insurance provider customers, consisting of
carriers and agents, as well as to indirect distributors. To simplify the quoting process for the consumer and
improve performance for the provider, we are able to provide consumer-submitted quote request data along with
each referral. We support three secure consumer referral formats:

(cid:129)

Clicks: An online-to-online referral, with a handoff of the consumer to the provider’s website.

Data: An online-to-offline referral, with quote request data transmitted to the provider for follow-up.

Calls: An online-to-offline referral for outbound calls and an offline-to-offline referral for inbound calls,
with the consumer and provider connected by phone.

We recognize revenue from consumer referrals at the time of delivery. Our revenue is comprised of
consumer referral fees from the automotive and other insurance verticals, which includes home and renters, life,
health and commercial insurance verticals, as follows:

Automotive
Other

Total Revenue

Year Ended December 31,

2020

2019

(in thousands)

283,236
63,699

346,935

212,300
36,511

248,811

Cost and Operating Expenses

Our cost and operating expenses consist of cost of revenue, sales and marketing, research and

development, and general and administrative expenses.

We allocate certain overhead expenses, such as rent, utilities, office supplies and depreciation and

amortization of general office assets, to cost of revenue and operating expense categories based on headcount. As
a result, an overhead expense allocation is reflected in cost of revenue and each operating expense category.
Personnel-related costs included in cost of revenue and each operating expense category include wages, fringe
benefit costs and stock-based compensation expense.

Cost of Revenue

Cost of revenue is comprised primarily of the costs of operating our marketplace and delivering consumer
referrals to our customers. These costs consist primarily of technology service costs including hosting, software,
data services, and third-party call center costs. In addition, cost of revenue includes depreciation and amortization
of our platform technology assets and personnel-related costs.

Sales and Marketing

Sales and marketing expense consists primarily of advertising and marketing expenditures as well as
personnel-related costs for employees engaged in sales, marketing, data analytics and consumer acquisition
functions and amortization of sales and marketing-related intangible assets. Advertising expenditures consist of
variable costs that are related to attracting consumers to our marketplace, generating consumer quote requests
and promoting our marketplace to carriers and agents. Advertising costs are expensed as incurred. Marketing
costs consist primarily of content and creative development, public relations, memberships, and event costs. In
order to continue to grow our business and brand awareness, we expect that we will continue to commit
substantial resources to our sales and marketing efforts. We expect our sales and marketing expense will increase
in the near term, both as a percentage of revenue and in absolute dollars, but decrease in the longer term as a
percentage of revenue due to efficiencies of scale and improvements in our marketplace technology.

Research and Development

Research and development expenses consist primarily of personnel-related costs for software development

and product management. We have focused our research and development efforts on improving ease of use and
functionality of our existing marketplace platform and developing new offerings and internal tools. We primarily
expense research and development costs. Direct development costs related to software enhancements that add
functionality are capitalized and amortized as a component of cost of revenue. We expect that research and
development expenses will increase as we continue to enhance and expand our platform technology.

General and Administrative

General and administrative expenses consist of personnel-related costs and related expenses for executive,

finance, legal, human resources, technical support and administrative personnel as well as the costs associated
with professional fees for external legal, accounting and other consulting services, insurance premiums and
payment processing and billing costs. We expect general and administrative expenses to increase as we continue
to incur the costs of compliance associated with being a publicly traded company, including legal, audit,
insurance and consulting fees.

Acquisition-related costs

Acquisition-related costs include expenses associated with third-party professional services we utilize for

the evaluation and execution of successful acquisitions as well as changes in the fair value of our contingent
consideration liability recorded as the result of the Crosspointe acquisition.

Legal settlement

Legal settlement includes costs associated with the settlement of securities litigation in connection with our

initial public offering (see Note 12 to the Consolidated Financial Statements included elsewhere in this Annual
Report on Form 10-K) representing the net of the settlement amount and the insurance proceeds.

Other Income

Other income consists of interest income and other income. Interest income consists of interest earned on

invested cash balances. Other income consists of miscellaneous income unrelated to our core operations.

Income Taxes

We have not recorded income tax benefits for the net losses we have incurred in the years ended
December 31, 2020 and 2019 or for our research and development tax credits generated, as we believe, based
upon the weight of available evidence, that it is more likely than not that all of our net operating loss
carryforwards and tax credits will not be realized. As of December 31, 2020, we had federal net operating loss
carryforwards of $72.9 million, which may be available to offset future taxable income, of which $9.0 million of
the total net operating loss carryforwards expire at various dates beginning in 2029, while the remaining
$63.9 million do not expire but are limited in their usage to an annual deduction equal to 80% of annual taxable
income. As of December 31, 2020, we had state net operating loss carryforwards of $60.7 million, which may be
available to offset future taxable income and expire at various dates beginning in 2027. As of December 31,
2020, we also had federal and state research and development tax credit carryforwards of $4.5 million and
$2.4 million, respectively, which may be available to reduce future tax liabilities and expire at various dates
beginning in 2030 and 2029, respectively. We have recorded a full valuation allowance against our net deferred
tax assets at each balance sheet date.

Non-GAAP Financial Measure

To supplement our consolidated financial statements presented in accordance with GAAP and to provide

investors with additional information regarding our financial results, we present in this Annual Report on
Form 10-K adjusted EBITDA as a non-GAAP financial measure. Adjusted EBITDA is not based on any
standardized methodology prescribed by GAAP and is not necessarily comparable to similarly titled measures
presented by other companies.

Adjusted EBITDA. We define adjusted EBITDA as our net income (loss), excluding the impact of stock-
based compensation expense; depreciation and amortization expense; acquisition-related costs; legal settlement
expense; interest income; and our provision for (benefit from) income taxes. The most directly comparable
GAAP measure to adjusted EBITDA is net income (loss). We monitor and present in this Annual Report on
Form 10-K adjusted EBITDA because it is a key measure used by our management and board of directors to
understand and evaluate our operating performance, to establish budgets and to develop operational goals for
managing our business. In particular, we believe that excluding the impact of these expenses in calculating
adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core operating
performance.

We use adjusted EBITDA to evaluate our operating performance and trends and make planning decisions.
We believe adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by
the effect of the expenses that we exclude in the calculation of adjusted EBITDA. Accordingly, we believe that
adjusted EBITDA provides useful information to investors and others in understanding and evaluating our
operating results, enhancing the overall understanding of our past performance and future prospects.

Adjusted EBITDA is not prepared in accordance with GAAP and should not be considered in isolation of,
or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to
the use of adjusted EBITDA rather than net income (loss), which is the most directly comparable financial
measure calculated and presented in accordance with GAAP. Some of these limitations are:

(cid:129)

adjusted EBITDA excludes stock-based compensation expense as it has recently been, and will
continue to be for the foreseeable future, a significant recurring non-cash expense for our business;

adjusted EBITDA excludes depreciation and amortization expense and, although this is
a non-cash expense, the assets being depreciated and amortized may have to be replaced in the
future;

(cid:129)

adjusted EBITDA excludes acquisition-related costs that affect cash available to us;

adjusted EBITDA excludes legal settlement expense that affect cash available to us;

adjusted EBITDA does not reflect the cash received from interest income on our investments,
which affects the cash available to us;

adjusted EBITDA does not reflect income tax expense (benefit) that affects cash available to us;
and

the expenses and other items that we exclude in our calculation of adjusted EBITDA may differ
from the expenses and other items, if any, that other companies may exclude from adjusted
EBITDA when they report their operating results.

In addition, other companies may use other measures to evaluate their performance, all of which could

reduce the usefulness of adjusted EBITDA as a tool for comparison.

The following table reconciles adjusted EBITDA to net income (loss), the most directly comparable

financial measures calculated and presented in accordance with GAAP.

Reconciliation of Net Loss to Adjusted EBITDA:

Net loss

Stock-based compensation
Depreciation and amortization
Acquisition-related costs
Legal settlement
Interest income

Adjusted EBITDA

Year Ended December 31,

2020

2019

(in thousands)

(11,202)
24,179
3,350
2,258
—
(189)

18,396

(7,117)
12,721
2,186
—
1,227
(669)

8,348

Results of Operations

Comparison of the Years Ended December 31, 2020 and 2019

The following tables set forth our results of operations for the periods shown:

Statement of Operations Data:
Revenue(1)

Cost and operating expenses(2):

Cost of revenue
Sales and marketing
Research and development
General and administrative
Acquisition-related costs
Legal settlement

Total cost and operating expenses

Loss from operations

Other income:

Interest income
Other income

Total other income

Net loss

Other Financial and Operational Data:

Quote requests
Variable marketing margin
Adjusted EBITDA(3)

(1) Comprised of revenue from the following distribution channels:

Direct channels
Indirect channels

(2)

Includes stock-based compensation expense as follows:

Cost of revenue
Sales and marketing
Research and development
General and administrative

Year Ended December 31,

2020

2019

(in thousands)

346,935

248,811

21,373
284,880
29,662
20,444
2,258
—

358,617

(11,682)

189
291

480

15,903
202,689
20,214
16,827
—
1,227

256,860

(8,049)

669
263

932

$
$

(11,202)

(7,117)

27,013
108,642
18,396

$
$

20,011
73,316
8,348

Year Ended December 31,

2020

2019

92%
8%

100%

94%
6%

100%

Year Ended December 31,

2020

2019

(in thousands)
361
10,246
7,751
5,821

24,179

193
3,805
3,967
4,756

12,721

(3)

See “—Non-GAAP Financial Measure” for information regarding our use of adjusted EBITDA as a
non-GAAP financial measure and a reconciliation of adjusted EBITDA to its comparable GAAP financial
measure.

Revenue:

Year Ended December 31,

2020

2019

Change

Amount

(dollars in thousands)

Revenue

346,935

248,811

98,124

39.4%

Revenue increased by $98.1 million from $248.8 million for the year ended December 31, 2019 to
$346.9 million for the year ended December 31, 2020. The increase in revenue was due to an increase of
$70.9 million and $27.2 million from our automotive and other insurance marketplace verticals, respectively. The
increase in revenue from our automotive vertical was primarily driven by an increase in the volume of quote
requests resulting from increased advertising to attract consumers and an increase in revenue per quote request.
The increase in revenue from our other marketplace verticals was primarily due to an increase in quote requests
resulting from increased advertising to attract consumers, partially offset by a decline in revenue per quote
request.

Cost of Revenue

Cost of revenue
Percentage of revenue

Year Ended December 31,

2020

2019

Change

Amount

(dollars in thousands)

21,373

15,903

5,470

34.4%

6.2%

6.4%

Cost of revenue increased by $5.5 million from $15.9 million for the year ended December 31, 2019 to

$21.4 million for the year ended December 31, 2020. Cost of revenue increased due primarily to increased
hosting costs of $1.8 million related to increased marketplace activity and to increased third-party call center
costs of $1.5 million, which were primarily related to increased volume of call referrals. Technical services
increased by $1.0 million due primarily to increased volume of consumer referrals and amortization of
capitalized software costs increased by $0.7 million.

Sales and Marketing

Sales and marketing expense
Percentage of revenue

Year Ended December 31,

2020

2019

Change

Amount

(dollars in thousands)

284,880

202,689

82,191

40.6%

82.1%

81.5%

Sales and marketing expenses increased by $82.2 million from $202.7 million for the year ended

December 31, 2019 to $284.9 million for the year ended December 31, 2020. The increase in sales and marketing
expense was primarily due to an increase in advertising expenditures of $62.8 million and an increase in
personnel-related costs of $15.4 million. Personnel-related costs for the years ended December 31, 2020 and
2019 included stock-based compensation expense of $10.2 million and $3.8 million, respectively.

Research and Development

Research and development expense
Percentage of revenue

Year Ended December 31,
2019
2020

Change

Amount

(dollars in thousands)

29,662

20,214

9,448

46.7%

8.5%

8.1%

Research and development expenses increased by $9.4 million from $20.2 million for the year ended

December 31, 2019 to $29.7 million for the year ended December 31, 2020. The increase in research and
development expense was primarily due to an increase in personnel-related costs of $9.9 million as a result of our
continued hiring of research and development employees and a shift towards hiring more senior personnel, to
further develop and enhance our marketplace websites and technology. Personnel-related costs for the years
ended December 31, 2020 and 2019 included stock-based compensation expense of $7.8 million and
$4.0 million, respectively.

General and Administrative

General and administrative expense
Percentage of revenue

Year Ended December 31,

2020

2019

Change

Amount

(dollars in thousands)

20,444

16,827

3,617

21.5%

5.9%

6.8%

General and administrative expenses increased by $3.6 million from $16.8 million for the year ended

December 31, 2019 to $20.4 million for the year ended December 31, 2020. The increase in general and
administrative expenses was primarily due to an increase in personnel-related costs of $2.9 million and an
increase in insurance costs of $0.6 million. Personnel-related costs for the years ended December 31, 2020 and
2019 included stock-based compensation expense of $5.8 million and $4.8 million, respectively.

Acquisition-related Costs

Acquisition-related costs for the year ended December 31, 2020 were $2.3 million and consisted of costs
for third-party professional services we utilized for the evaluation and execution of our Crosspointe acquisition
of $0.5 million and expense of $1.8 million related to the change in the fair value of our contingent consideration
liability recorded as the result of the Crosspointe acquisition.

Legal Settlement

Legal settlement expenses for the year ended December 31, 2019 were $1.2 million and were associated

with the settlement of securities litigation in connection with our initial public offering (see Note 12 to the
Consolidated Financial Statements).

Other Income

The decrease in interest income from $0.7 million for the year ended December 31, 2019 to $0.2 million
for the year ended December 31, 2020 was due to lower interest rates on invested cash balances. Other income
also included sublease income of $0.3 million in each of the years ended December 31, 2020 and 2019. The
sublease ended in 2020.

Quote Requests

Quote requests

Year Ended December 31,

Change

2020

2019

Amount

27,013

(in thousands except percentages)
7,002

20,011

35.0%

Quote requests increased by 7.0 million for 2020 as compared to 2019 due to increased spending on online

marketplace advertising as well as improvements in our traffic acquisition.

Variable Marketing Margin

Revenue
Less: total advertising expense (a component of
sales and marketing expense)

Variable marketing margin

Percentage of revenue

Year Ended December 31,

Change

2020

2019

Amount

346,935

(dollars in thousands)
248,811

98,124

39.4%

238,293

175,495

108,642

73,316

35,326

48.2%

31.3%

29.5%

The increase in variable marketing margin was due primarily to an increased volume of quote requests.

Liquidity and Capital Resources

At December 31, 2020, our principal sources of liquidity were cash and cash equivalents of $42.9 million

and availability of $25.0 million under our revolving line of credit.

Borrowings under our revolving line of credit are collateralized by substantially all of our assets and
property. Additionally, we are subject under our revolving line of credit to affirmative and negative covenants to
which we will remain subject until maturity. These covenants include limitations on our ability to incur
additional indebtedness and engage in certain fundamental business transactions, such as mergers or acquisitions
of other businesses. As of December 31, 2020, we were in compliance with these covenants. In addition, we are
required to maintain a minimum asset coverage ratio of 1.5 to 1 calculated as the sum of unrestricted cash and
qualified accounts receivable divided by borrowings outstanding under the revolving line of credit. Events of
default under our revolving line of credit include failure to make payments when due, insolvency events, failure
to comply with covenants and material adverse events with respect to us. In the event of a default, the lender may
declare all borrowings immediately due and payable.

Since our inception, we have incurred operating losses and may continue to incur losses in the foreseeable

future. We believe our existing cash and cash equivalents will be sufficient to fund our operating expenses and
capital expenditure requirements for at least the next 12 months, without considering the borrowing availability
under our revolving line of credit. Our future capital requirements may vary materially from those currently
planned and will depend on many factors, including our rate of revenue growth, the timing and extent of
spending on business initiatives, purchases of capital equipment to support our growth, the expansion of sales
and marketing activities, expansion of our business through acquisitions or our investments in complementary
offerings, technologies or businesses, market acceptance of our platform and overall economic conditions. If we
do not achieve our revenue goals as planned, we believe that we can reduce our operating costs. If we need
additional funds and are unable to obtain funding on a timely basis, we may need to significantly curtail our
operations in an effort to provide sufficient funds to continue our operations, which could adversely affect our
business prospects.

Cash Flows

The following table shows a summary of our cash flows for each of the years ended December 31, 2020

and 2019:

Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
Effect of exchange rate changes on cash, cash equivalents and restricted

cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Year Ended December 31,

2020

2019

(in thousands)

10,668
(18,752)
4,907

(7)

(3,184) $

4,413
(2,975)
2,982

—

4,420

Net cash provided by operating activities

Operating activities provided $10.7 million and $4.4 million of cash during the years ended December 31,
2020 and 2019, respectively. Cash provided by operating activities in 2020 primarily resulted from the offset of
net non-cash charges of $29.4 million to our net loss of $11.2 million and net cash used by changes in our
operating assets and liabilities of $7.5 million. Net cash used by changes in our operating assets and liabilities
consisted primarily of a $14.0 million increase in accounts receivable, partially offset by an aggregate
$5.3 million increase in accounts payable and accrued expenses and other current liabilities and a $0.8 million
increase in other long-term liabilities. Cash provided by operating activities in 2019 primarily resulted from the
offset of net non-cash charges of $15.5 million to our net loss of $7.1 million and net cash used by changes in our
operating assets and liabilities of $4.0 million. Net cash used by changes in our operating assets and liabilities
consisted primarily of a $15.2 million increase in accounts receivable and a $5.6 million increase in prepaid
expenses and other current assets, both partially offset by an aggregate $17.0 million increase in accounts
payable and accrued expenses and other current liabilities.

Changes in accounts receivable, accounts payable and accrued expenses and other current liabilities were
generally due to growth in our business, timing of customer and vendor invoicing and payments. The change in
other long-term liabilities in 2020 was primarily due to the deferred payment of employer tax remittances.

Net cash used in investing activities

Net cash used in investing activities was $18.8 million and $3.0 million for the years ended December 31,

2020 and 2019, respectively. Net cash used in investing activities for the year ended December 31, 2020 included
cash paid of $14.9 million to purchase Crosspointe. Cash used in investing activities for the years ended
December 31, 2020 and 2019 also consisted of cash used to acquire property and equipment, which included the
capitalization of software development costs. During the years ended December 31, 2020 and 2019, we
capitalized $3.0 million and $2.7 million, respectively, of software development costs.

Net cash provided by financing activities

During the years ended December 31, 2020 and 2019, net cash provided by financing activities was

$4.9 million and $3.0 million, respectively, and consisted of proceeds received from the exercise of common
stock options.

Critical Accounting Policies and Significant Judgments and Estimates

Our consolidated financial statements are prepared in accordance with GAAP. The preparation of our
consolidated financial statements and related disclosures requires us to make estimates and judgments that affect

the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets
and liabilities in our consolidated financial statements. We base our estimates on historical experience, known
trends and events, and various other factors that we believe are reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results
may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2 to our audited consolidated

financial statements, appearing in Part II of Item 8 of this Annual Report on Form 10-K, we believe that the
following accounting policies are those most critical to the judgments and estimates used in the preparation of
our consolidated financial statements.

Goodwill and Acquired Intangible Assets

We record goodwill when consideration paid in a business acquisition exceeds the value of the net assets
acquired. Our estimates of fair value are based upon assumptions believed to be reasonable at that time but that
are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated
events or circumstances may occur, which may affect the accuracy or validity of such assumptions, estimates or
actual results. During the measurement period, which extends no later than one year from the acquisition date, we
may record certain adjustments to the carrying value of the assets acquired and liabilities assumed with the
corresponding offset to goodwill. After the measurement period, all adjustments are recorded in the consolidated
statements of operations and comprehensive loss as operating expenses or income.

Goodwill is not amortized, but rather is tested for impairment annually, or more frequently if facts and
circumstances warrant a review, such as significant underperformance of the business in relation to expectations,
significant negative industry or economic trends and significant changes or planned changes in the use of the
assets. We have determined that there is a single reporting unit for the purpose of conducting our goodwill
impairment assessment. We assess both the existence of potential impairment and the amount of impairment loss
by comparing the fair value of the reporting unit with its carrying amount, including goodwill. Intangible assets
are recorded at their estimated fair values at the date of acquisition. We amortize acquired intangible assets over
their estimated useful lives based on the pattern of consumption of the economic benefits or, if that pattern
cannot be readily determined, on a straight-line basis.

Valuation of Contingent Consideration

The Crosspointe acquisition provides for shares of Class A common stock to be issued to the former
owners of Crosspointe upon achievement of certain revenue targets over three years. Shares of Class A common
stock issuable upon achievement of the first two annual targets are for a fixed number of shares of Class A
common stock, and as such, we recorded the fair value of these shares within stockholders’ equity based on the
number of shares issuable and the fair market value of Class A common stock on the acquisition date.
Achievement of the third annual target will result in the issuance of a variable number of shares of Class A
common stock and, as such, we recorded the fair value of these shares as a long-term liability. We estimated the
fair value of the shares of Class A common stock issuable upon achievement of the three annual targets as of the
acquisition date. We remeasure the fair value of the shares of Class A common stock issuable upon the estimated
achievement levels of the third annual target at each subsequent reporting date until the liability is fully settled.
We use a Monte Carlo simulation model in our estimates. Significant assumptions and estimates utilized in the
model include the forecasted revenue, revenue volatility and discount rate.

Revenue Recognition

We derive our revenue by selling consumer referrals to insurance provider customers, including insurance

carriers and agents. On January 1, 2019, we adopted the new revenue standard ASC 606, which amended revenue
recognition principles and provides a single, comprehensive set of criteria for revenue recognition within and

across all industries. To determine revenue recognition for arrangements that we determine are within the scope
of the revenue standard, we perform the following five steps: (i) identify the contract(s) with a customer;
(ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the
transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we
satisfy a performance obligation.

Revenue is recognized when control of promised goods or services is transferred to a customer at an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or
services. We only apply the five-step model to contracts when collectability of the consideration to which we are
entitled in exchange for the goods or services we transfer to the customer is determined to be probable. Amounts
are recorded as accounts receivable when our right to consideration is unconditional. We do not assess whether a
contract has a significant financing component if the expectation at contract inception is that the period between
payment by the customer and the transfer of the promised goods or services to the customer will be one year or
less. We recognize revenue when we satisfy our performance obligations by delivering the referrals to our
customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those
referrals.

Stock-Based Compensation

We measure stock options and other stock-based awards granted to employees, non-employees and

directors based on their fair value on the date of the grant. We recognize compensation expense of employee
awards, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the
respective award. We apply the straight-line method of expense recognition to all employee awards with only
service-based vesting conditions and apply the graded-vesting method to all employee awards with both service-
based and performance-based vesting conditions, commencing when achievement of the performance condition
becomes probable. Compensation expense for nonemployee awards is recognized in the same manner as if we
had paid cash for the goods or services received.

We estimate the fair value of stock options with service-based vesting or performance-based vesting
granted to employees, non-employees and directors using the Black-Scholes option-pricing model, which uses as
inputs the fair value of our common stock and assumptions we make for the volatility of our common stock, the
expected term of our common stock options, the risk-free interest rate for a period that approximates the expected
term of our common stock options, and our expected dividend yield. We measure stock options with market-
based vesting based on the fair value on the date of grant using a Monte Carlo simulation model. We estimate the
fair value of each restricted stock unit, or RSU, based on the fair value using the market value of our common
stock.

Income Taxes

We account for income taxes using the asset and liability method, which requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the
consolidated financial statement and tax basis of assets and liabilities, as measured by enacted tax rates
anticipated to be in effect when these differences reverse. This method also requires the recognition of future tax
benefits to the extent that realization of such benefits is more likely than not. Deferred tax expense or benefit is
the result of changes in the deferred tax assets and liabilities. We assess the likelihood that our deferred tax assets
will be recovered from future taxable income and, to the extent we believe, based upon the weight of available
evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, we
establish a valuation allowance through a charge to income tax expense. We evaluate the potential for recovery
of deferred tax assets by estimating the future taxable profits expected and considering prudent and feasible tax
planning strategies.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet

arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial

position and results of operations is disclosed in Note 2 to our audited consolidated financial statements
appearing in Part II, Item 8 of this Annual Report on Form 10-K.

Inflation Risk

During the last two years, inflation and changing prices have not had a material effect on our business. We

are unable to predict whether inflation or changing prices will materially affect our business in the foreseeable
future.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This Annual Report on Form 10-K includes scaled disclosures for smaller reporting companies, as defined

in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, and, as such, this information is not
required.

ITEM 8.

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

EVERQUOTE, INC.

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations and Comprehensive Loss . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page(s)

60
63
64
65
66
67

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of EverQuote, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of EverQuote, Inc. and its subsidiaries (the
“Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations and
comprehensive loss, of stockholders’ equity and of cash flows for each of the two years in the period ended
December 31, 2020, including the related notes (collectively referred to as the “consolidated financial
statements”). We also have audited the Company’s internal control over financial reporting as of December 31,
2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 2020 in conformity with accounting
principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in
all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria
established in Internal Control—Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it
accounts for leases in 2020.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over
financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing
under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and
on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are
free of material misstatement, whether due to error or fraud, and whether effective internal control over financial
reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded
Crosspointe Insurance & Financial Services, LLC (“Crosspointe”) from its assessment of internal control over
financial reporting as of December 31, 2020 because it was acquired by the Company in a purchase business
combination during 2020. We have also excluded Crosspointe from our audit of internal control over financial
reporting. Crosspointe is a wholly-owned subsidiary whose total assets and total revenues excluded from
management’s assessment and our audit of internal control over financial reporting represent 2% and 1%,
respectively, of the related consolidated financial statement amounts as of and for the year ended December 31,
2020.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the
consolidated financial statements that was communicated or required to be communicated to the audit committee
and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and
(ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit
matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we
are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the accounts or disclosures to which it relates.

Acquisition of Crosspointe Insurance & Financial Services, LLC – Valuation of Contingent Consideration and
Customer Relationship Intangible Asset

As described in Note 3 to the consolidated financial statements, the Company completed its acquisition of
Crosspointe Insurance & Financial Services, LLC (“Crosspointe”) on September 1, 2020. The purchase
consideration of $16.7 million reflected a cash payment of $14.9 million and contingent consideration of
$1.8 million representing the fair value of Class A common stock issuable to the former owners of Crosspointe
upon achievement of certain revenue targets over three years. These revenue targets are measured in annual
intervals. Shares of Class A common stock issuable upon achievement of the first two annual targets are for a
fixed number of shares of Class A common stock and, as such, management has recorded the fair value of these
shares within stockholders’ equity based on the number of shares issuable and the fair market value of Class A
common stock on the acquisition date. Achievement of the third annual target will result in the issuance of a
variable number of shares of Class A common stock and, as such, management has recorded the fair value of
these shares as a long-term liability. As of September 1, 2020, the acquisition date, the estimated fair value of the
contingent consideration included in other long-term liabilities was $0.4 million. As of December 31, 2020,

management estimated the fair value of the contingent consideration included in other long-term liabilities to be
$2.2 million, and as a result recorded a $1.8 million charge to acquisition-related costs for the increase in fair
value subsequent to the acquisition date. Management estimated the fair value of the shares upon achievement of
the three annual targets as of the acquisition date, and remeasures the fair value of the shares issuable upon the
estimated achievement levels of the third annual target at each subsequent reporting date until the liability is fully
settled, using a Monte Carlo simulation model. Management’s significant assumptions and estimates utilized in
the model include the forecasted revenue, revenue volatility, and discount rate. Additionally, as part of the
preliminary allocation of the purchase price for Crosspointe, management recorded $3.6 million for the customer
relationship intangible asset at fair value using the income approach. Management’s significant assumptions and
estimates utilized in the model include the customer attrition rate and discount rate.

The principal considerations for our determination that performing procedures relating to the valuation of
contingent consideration and the customer relationship intangible asset in the Crosspointe acquisition is a critical
matter are (i) the high degree of auditor judgment and subjectivity in applying procedures relating to the fair
value measurement of the contingent consideration and the customer relationship intangible asset due to the
significant judgment by management when developing the fair value estimates, (ii) significant audit effort in
evaluating management’s significant assumptions related to the forecasted revenue, revenue volatility, and
discount rate for the contingent consideration, and the customer attrition rate and discount rate for the customer
relationship intangible asset, and (iii) the audit effort involved the use of professionals with specialized skill and
knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming
our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness
of controls relating to the acquisition accounting, including controls over management’s determination of the fair
value of contingent consideration and the customer relationship intangible asset. These procedures also included,
among others, (i) reading the purchase agreement, (ii) testing the completeness and accuracy of the underlying
data used in the valuation models, and (iii) evaluating the appropriateness of the valuation models and
reasonableness of the significant assumptions used by management related to the forecasted revenue, revenue
volatility, and discount rate for the contingent consideration and the customer attrition rate and discount rate for
the customer relationship intangible asset. Evaluating the reasonableness of the forecasted revenue used in
developing the fair value of the contingent consideration involved considering the consistency with external
economic and market data. Evaluating the reasonableness of the customer attrition rate used in the determination
of the fair value of the customer relationship intangible asset involved considering the consistency with historical
data. Professionals with specialized skill and knowledge were used to assist in the evaluation of the
appropriateness of the Monte Carlo simulation model for the contingent consideration and the income approach
for the customer relationship intangible asset, as well as evaluating the appropriateness of the significant
assumptions related to the revenue volatility and discount rate for the contingent consideration, and the customer
attrition rate and discount rate for the customer relationship intangible asset.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts
March 1, 2021

We have served as the Company’s auditor since 2014.

EVERQUOTE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)

December 31,

2020

2019

Assets
Current assets:

Cash and cash equivalents
Accounts receivable, net
Prepaid expenses and other current assets

Total current assets
Property and equipment, net
Goodwill
Acquired intangible assets, net
Operating lease right-of-use assets
Other assets

Total assets

Liabilities and Stockholders’ Equity
Current liabilities:

Accounts payable
Accrued expenses and other current liabilities
Deferred revenue
Operating lease liabilities

Total current liabilities

Operating lease liabilities, net of current portion
Other long-term liabilities

Total liabilities

Commitments and contingencies (Note 12)
Stockholders’ equity:

Preferred stock, $0.001 par value; 10,000,000 shares authorized; no

shares issued and outstanding

Class A common stock, $0.001 par value; 220,000,000 shares

authorized; 20,784,065 shares and 14,635,834 shares issued and
outstanding at December 31, 2020 and 2019, respectively
Class B common stock, $0.001 par value; 30,000,000 shares

authorized; 7,429,502 shares and 11,802,341 shares issued and
outstanding at December 31, 2020 and 2019, respectively

Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit

Total stockholders’ equity

42,870
46,079
8,452

97,401
6,173
9,794
3,366
9,621
2,695

129,050

32,964
9,421
1,869
2,593

46,847
8,093
3,128

58,068

—

7
189,172
(7)
(118,211)

70,982

Total liabilities and stockholders’ equity

129,050

The accompanying notes are an integral part of these consolidated financial statements.

46,054
32,214
7,065

85,333
5,197
—
—
—
691

91,221

23,663
13,225
1,501
—

38,389
—
1,062

39,451

—

12
158,752
—
(107,009)

51,770

91,221

EVERQUOTE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except per share amounts)

Revenue

Cost and operating expenses:

Cost of revenue
Sales and marketing
Research and development
General and administrative
Acquisition-related costs
Legal settlement

Total cost and operating expenses

Loss from operations

Other income:

Interest income
Other income

Total other income

Net loss

Net loss per share, basic and diluted

Weighted average common shares outstanding,

basic and diluted

Comprehensive loss:
Net loss
Other comprehensive income (loss):

Foreign currency translation adjustment

Comprehensive loss

Year Ended December 31,

2020

2019

346,935

248,811

21,373
284,880
29,662
20,444
2,258
—

358,617

(11,682)

189
291

480

(11,202) $

(0.41) $

15,903
202,689
20,214
16,827
—
1,227

256,860

(8,049)

669
263

932

(7,117)

(0.28)

27,329

25,759

(11,202) $

(7)

(11,209) $

(7,117)

—

(7,117)

The accompanying notes are an integral part of these consolidated financial statements.

EVERQUOTE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY
(in thousands, except share amounts)

Class A
Common Stock

Class B
Common Stock

Amount

Additional
Paid-in
Capital

Accumulated
Other
Comprehensive
Loss

Accumulated
Deficit

Total
Stockholders’
Equity

7,528,741

17,696,414

$ 143,050

— $

(99,892) $

43,184

Balances at December 31, 2018
Issuance of common stock upon

exercise of stock options

Vesting of restricted stock units
Stock-based compensation expense
Transfer of Class B common stock

to Class A common stock

Net loss

Balances at December 31, 2019
Contingent consideration to be

settled in Class A common stock

Issuance of common stock upon

exercise of stock options

Vesting of restricted stock units
Stock-based compensation expense
Transfer of Class B common stock

to Class A common stock
Foreign currency translation

adjustment

Net loss

645,920
567,100
—

5,894,073
—

14,635,834

—

776,914
998,478
—

1
—
—

6
—

—

1
—
—

—
—
—

(5,894,073)
—

11,802,341

—

—
—
—

4,372,839

(4,372,839)

—
—

—
—
—

(6)
—

—

—
—
—

(5)

—
—

2,981
—
12,721

—
—

158,752

1,335

4,906
—
24,179

—

—
—

—
—
—

—
—

—

—
—
—

—

—
—
—

—
(7,117)

(107,009)

—

—
—
—

—

2,982
—
12,721

—
(7,117)

51,770

1,335

4,907
—
24,179

—

(7)
—

—
(11,202)

(7)
(11,202)

Balances at December 31, 2020

20,784,065

7,429,502

$ 189,172

(7) $ (118,211) $

70,982

The accompanying notes are an integral part of these consolidated financial statements.

EVERQUOTE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Year Ended December 31,

2020

2019

(11,202) $

(7,117)

Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization expense
Loss on disposal of property and equipment
Stock-based compensation expense
Change in fair value of contingent consideration
Provision for bad debt
Changes in operating assets and liabilities, net of effects from

acquisition:
Accounts receivable
Prepaid expenses and other current assets
Operating lease right-of-use assets
Other assets
Accounts payable
Accrued expenses and other current liabilities
Operating lease liabilities
Deferred revenue
Other long-term liabilities

Net cash provided by operating activities

Cash flows from investing activities:
Acquisition of property and equipment, including costs capitalized for

development of internal-use software

Acquisition of business

Net cash used in investing activities

Cash flows from financing activities:
Proceeds from exercise of stock options

Net cash provided by financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period

Supplemental disclosure of noncash investing and financing

information:

Fair value of contingent consideration in connection with acquisition

included in stockholders’ equity

Fair value of contingent consideration in connection with acquisition

included in other long-term liabilities

Operating lease liabilities arising from obtaining right-of-use assets
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents
Restricted cash (included in other assets)
Total cash, cash equivalents and restricted cash shown in the statement of

cash flows

$
$

3,350
—
24,179
1,778
105

(13,970)
623
2,076
(554)
9,301
(3,968)
(2,233)
368
815
10,668

(3,822)
(14,930)
(18,752)

4,907
4,907
(7)
(3,184)
46,304
43,120

1,335

416
541

42,870
250

$
$

2,186
98
12,721
—
478

(15,232)
(5,609)
—
(1)
6,837
10,126
—
61
(135)
4,413

(2,975)
—
(2,975)

2,982
2,982
—
4,420
41,884
46,304

—

—
—

46,054
250

43,120

46,304

The accompanying notes are an integral part of these consolidated financial statements.

EVERQUOTE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of the Business and Basis of Presentation

EverQuote, Inc. (the “Company”) was incorporated in the state of Delaware in 2008. Through its internet
websites, the Company operates an online marketplace for consumers shopping for auto, home and renters, life,
health and commercial insurance. The Company generates revenue by selling consumer referrals to insurance
provider customers, consisting of carriers and agents, and indirect distributors in the United States.

The Company is subject to a number of risks and uncertainties common to companies in similar industries
and stages of development including, but not limited to, rapid technological changes, competition from substitute
products and services from larger companies, protection of proprietary technology, customer concentration,
patent litigation, the need to obtain additional financing to support growth and dependence on third parties and
key individuals.

In addition, the Company is subject to risks and uncertainties relating to the ongoing outbreak of the novel
strain of coronavirus (“COVID-19”), which the World Health Organization declared a pandemic in March 2020.
The COVID-19 pandemic has continued to spread throughout the United States and the world and has resulted in
authorities implementing numerous measures to contain the virus, including travel bans and restrictions,
quarantines, shelter-in-place orders, and business limitations and shutdowns. Work-from-home and other
measures have introduced additional operational risks, including cybersecurity risks, and may adversely affect
the way the Company and its customers and insurance providers conduct business. The extent to which the
COVID-19 pandemic impacts the Company’s workforce, business, financial condition, results of operations and
the Company’s use of estimates in preparation of its consolidated financial statements will depend on future
developments, which are highly uncertain and cannot be predicted at this time.

The accompanying consolidated financial statements have been prepared on the basis of continuity of
operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of
business. Since inception, the Company has incurred operating losses, including net losses of $11.2 million and
$7.1 million for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, the
Company had an accumulated deficit of $118.2 million. As of the issuance date of these consolidated financial
statements, the Company expects that its cash and cash equivalents will be sufficient to fund its operating
expenses and capital expenditure requirements for at least the next 12 months from the issuance date of the
consolidated financial statements, without considering borrowing availability of up to $25.0 million under the
Company’s revolving line of credit.

The Company’s consolidated financial statements have been prepared in conformity with accounting

principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to
applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards
Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board
(“FASB”). The accompanying consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses
during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial
statements include, but are not limited to, revenue recognition and collectability of accounts receivable, the

expensing and capitalization of website and software development costs, goodwill and acquired intangible assets,
commissions receivable, the contingent consideration liability, the valuation of stock-based awards and income
taxes. The Company bases its estimates on historical experience, known trends and other market-specific or other
relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management
evaluates its estimates, as there are changes in circumstances, facts and experience. Changes in estimates are
recorded in periods in which they become known. Actual results may differ from those estimates or assumptions.
Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial
markets. The Company is not aware of any specific event or circumstance that would require an update to its
estimates or judgments or a revision of the carrying value of its assets or liabilities as of March 1, 2021, the date
of issuance of these consolidated financial statements. These estimates may change, as new events occur and
additional information is obtained. Actual results could differ materially from these estimates under different
assumptions or conditions.

Restricted Cash

As of both December 31, 2020 and 2019, restricted cash consisted of $0.3 million deposited in a separate
restricted bank account as a security deposit for the Company’s corporate credit cards. Restricted cash accounts
are classified within other assets.

Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the

date of purchase to be cash equivalents.

Concentrations of Credit Risk and of Significant Customers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily

of cash and cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents at
two accredited financial institutions. The Company does not believe that it is subject to unusual credit risk
beyond the normal credit risk associated with commercial banking relationships.

The Company sells its consumer referrals to insurance provider customers, consisting of carriers and
agents, and indirect distributors in the United States. For the years ended December 31, 2020 and 2019, one
customer represented 22% and 21%, respectively, of total revenue. As of December 31, 2020, one customer
accounted for 12% of the accounts receivable balance. As of December 31, 2019, two customers accounted for
14% each of the accounts receivable balance.

Accounts Receivable

The Company provides credit to customers in the ordinary course of business and believes its credit
policies are prudent and reflect industry practices and business risk. The Company monitors economic conditions
to identify facts or circumstances that may indicate that its receivables are at risk of collection. The Company
provides reserves against accounts receivable for estimated losses, if any, that may result from a customer’s
inability to pay based on the composition of its accounts receivable, current economic conditions, and historical
credit loss activity. Amounts determined to be uncollectible are charged or written-off against the reserve. The
Company’s allowance for doubtful accounts was $0.1 million as of December 31, 2020. The Company had no
allowance for doubtful accounts as of December 31, 2019. During the year ended December 31, 2020, the
Company wrote off less than $0.1 million of uncollectible accounts. During the year ended December 31, 2019,
the Company wrote off $0.5 million of uncollectible accounts.

Commissions Receivable

Commissions receivable are contract assets that represent estimated variable consideration for

commissions to be received from insurance carriers for performance obligations that have been satisfied. The
current portion of commissions receivable (included within prepaid expenses and other current assets) are
estimated commissions expected to be received within one year, while the non-current portion of commissions
receivable (included within other assets (non-current)) are expected to be received beyond one year. The

Company assesses impairment for uncollectible consideration when information available indicates it is probable
that an asset has been impaired. There were no impairments recorded during the year ended December 31, 2020.

Commissions Payable

Commissions payable represent the estimated share of policy commissions earned by the Company’s

agents. The current portion of commissions payable (included within accrued expenses and other current
liabilities) are estimated commissions expected to be paid within one year, while the non-current portion of
commissions payable (included within other long-term liabilities) are expected to be paid beyond one year.

Goodwill and Acquired Intangible Assets

The Company records goodwill when consideration paid in a business acquisition exceeds the value of the
net assets acquired. The Company’s estimates of fair value are based upon assumptions believed to be reasonable
at that time but that are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate,
and unanticipated events or circumstances may occur, which may affect the accuracy or validity of such
assumptions, estimates or actual results. During the measurement period, which extends no later than one year
from the acquisition date, the Company may record certain adjustments to the carrying value of the assets
acquired and liabilities assumed with the corresponding offset to goodwill. After the measurement period, all
adjustments are recorded in the consolidated statements of operations and comprehensive loss as operating
expenses or income.

Goodwill is not amortized, but rather is tested for impairment annually, or more frequently if facts and
circumstances warrant a review, such as significant underperformance of the business in relation to expectations,
significant negative industry or economic trends and significant changes or planned changes in the use of the
assets. The Company has determined that there is a single reporting unit for the purpose of conducting this
goodwill impairment assessment. The Company assesses both the existence of potential impairment and the
amount of impairment loss by comparing the fair value of the reporting unit with its carrying amount, including
goodwill. Intangible assets are recorded at their estimated fair values at the date of acquisition. The Company
amortizes acquired intangible assets over their estimated useful lives based on the pattern of consumption of the
economic benefits or, if that pattern cannot be readily determined, on a straight-line basis.

Valuation of Contingent Consideration

The Crosspointe acquisition provides for shares of Class A common stock to be issued to the former
owners of Crosspointe upon achievement of certain revenue targets over three years. Shares of Class A common
stock issuable upon achievement of the first two annual targets are for a fixed number of shares of Class A
common stock and, as such the Company has recorded the fair value of these shares within stockholders’ equity
based on the number of shares issuable and the fair market value of Class A common stock on the acquisition
date. Achievement of the third annual target will result in the issuance of a variable number of shares of Class A
common stock and, as such, the Company has recorded the fair value of these shares as a long-term liability. The
Company estimated the fair value of the shares of Class A common stock issuable upon achievement of the three
annual targets as of the acquisition date. The Company remeasures the fair value of the shares of Class A
common stock issuable upon the estimated achievement levels of the third annual target at each subsequent
reporting date until the liability is fully settled. The Company uses a Monte Carlo simulation model in its
estimates. Significant assumptions and estimates utilized in the model include the forecasted revenue, revenue
volatility and discount rate.

Deferred Financing Costs

The Company capitalizes lender, legal and other third-party fees that are directly associated with obtaining
access to capital under credit facilities. Deferred financing costs incurred in connection with obtaining access to
capital are recorded in prepaid expenses and other current assets and are amortized over the availability period or
term of the credit facility. Deferred financing costs related to a recognized debt liability are recorded as a direct
reduction of the carrying amount of the debt liability and amortized to interest expense on an effective interest
basis over the repayment term.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation

and amortization expense is recognized using the straight-line method over the estimated useful life of each asset
as follows:

Computer equipment
Software
Furniture and fixtures
Leasehold improvements

Estimated Useful Life

3 years
3 years
5 years
Shorter of lease term or estimated useful life

Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation and
amortization are removed from the accounts and any resulting gain or loss is included in loss from operations on
the statements of operations and comprehensive loss. Expenditures for repairs and maintenance are charged to
expense as incurred.

Leases

Prior to January 1, 2020, the Company accounted for leases under ASC 840, Leases (“ASC 840”).
Effective January 1, 2020, the Company accounts for leases under ASC 842, Leases (“ASC 842”). Therefore, as
of and for the year ended December 31, 2019, the Company’s financial statements continue to be presented in
accordance with ASC 840, the accounting standard originally in effect for such period. As of and for the year
ended December 31, 2020 the Company’s consolidated financial statements are presented in accordance with
ASC 842.

In accordance with ASC 842, the Company accounts for a contract as a lease when it has the right to
control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. The
Company determines if an arrangement is a lease or contains an embedded lease at inception. For arrangements
that meet the definition of a lease, the Company determines the initial classification and measurement of
its right-of-use asset and lease liability at the lease commencement date and thereafter if modified. The lease
term includes any renewal options that the Company is reasonably assured to exercise. The present value of lease
payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable;
otherwise, the Company uses its estimated secured incremental borrowing rate for that lease term. The
Company’s policy is to not record leases with an original term of twelve months or less on its consolidated
balance sheets and recognizes those lease payments in the income statement on a straight-line basis over the lease
term. The Company’s existing leases are for office space.

In addition to rent, the leases may require the Company to pay additional costs, such as utilities,

maintenance and other operating costs, which are generally referred to as non-lease components. The Company
has elected to not separate lease and non-lease components. Only the fixed costs for lease components and their
associated non-lease components are accounted for as a single lease component and recognized as part of
a right-of-use asset and lease liability. Rent expense for operating leases is recognized on a straight-line basis
over the reasonably assured lease term based on the total lease payments and is included in operating expense in
the consolidated statements of operations and comprehensive loss.

Impairment of Long-Lived Assets

Long-lived assets consist primarily of property and equipment, right-of-use assets and intangible assets

with finite lives. Long-lived assets to be held and used are tested for recoverability whenever events or changes
in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors
that the Company considers in deciding when to perform an impairment review include significant
underperformance of the business in relation to expectations, significant negative industry or economic trends
and significant changes or planned changes in the use of the assets. If an impairment review is performed to
evaluate a long-lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows
expected to result from the use and eventual disposition of the long-lived asset group to its carrying value. An

impairment loss would be recognized in loss from operations when estimated undiscounted future cash flows
expected to result from the use of an asset group are less than its carrying amount. The impairment loss would be
based on the excess of the carrying value of the impaired asset group over its fair value, determined based on
discounted cash flows. The Company did not record any impairment losses on long-lived assets during the years
ended December 31, 2020 or 2019.

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability

(an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. Valuation techniques used to measure fair value must
maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and
liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair
value hierarchy, of which the first two are considered observable and the last is considered unobservable:

(cid:129) Level 1—Quoted prices in active markets for identical assets or liabilities.

(cid:129) Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active

markets for similar assets or liabilities, quoted prices in markets that are not active for identical or
similar assets or liabilities, or other inputs that are observable or can be corroborated by observable
market data.

(cid:129) Level 3—Unobservable inputs that are supported by little or no market activity and that are
significant to determining the fair value of the assets or liabilities, including pricing models, discounted
cash flow methodologies and similar techniques.

The Company’s cash equivalents of $15.8 million as of December 31, 2020, consisting of money market

funds, are carried at fair value based on Level 1 inputs. The carrying values of the Company’s accounts
receivable, commissions receivable and commissions payable, accounts payable and accrued expenses and other
current liabilities approximate their fair values due to the short-term nature of these assets and liabilities. The
Company’s contingent consideration included in other long-term liabilities is carried at fair value based on
Level 3 inputs (see Note 3).

Segment Information

The Company manages its operations as a single segment for the purposes of assessing performance and

making operating decisions. The Company operates an online marketplace for consumers shopping for auto,
home and renters, life, health and commercial insurance quotes. Significantly all of the Company’s tangible
assets are held in the United States.

Revenue Recognition

The Company derives its revenue by selling consumer referrals to its insurance provider customers,

including insurance carriers and agents. On January 1, 2019, the Company adopted the new revenue standard
ASC 606, which amended revenue recognition principles and provides a single, comprehensive set of criteria for
revenue recognition within and across all industries. To determine revenue recognition for arrangements that the
Company determines are within the scope of the revenue standard, the Company performs the following five
steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract;
(iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the
contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

The Company only applies the five-step model to contracts when collectability of the consideration to
which the Company is entitled in exchange for the goods or services it transfers to the customer is determined to
be probable. Amounts are recorded as accounts receivable when the Company’s right to consideration is
unconditional. The Company does not assess whether a contract has a significant financing component if the
expectation at contract inception is that the period between payment by the customer and the transfer of the
promised goods or services to the customer will be one year or less. The Company recognizes revenue when it

satisfies its performance obligations by delivering the referrals to its customers in an amount that reflects the
consideration to which it expects to be entitled in exchange for those referrals.

The Company presents disaggregated revenue from contracts with customers by distribution channel as the

distribution channel impacts the nature and amount of the Company’s revenue and by vertical market segment.

Total revenue is comprised of revenue from the following distribution channels:

Direct channels
Indirect channels

Year Ended December 31,

2020

2019

92%
8%

100%

94%
6%

100%

Total revenue is comprised of revenue from the following insurance verticals (in thousands):

Automotive
Other

Total Revenue

Year Ended December 31,

2020

2019

283,236
63,699

346,935

212,300
36,511

248,811

The Company has elected to apply the practical expedient in ASC 606 to expense incremental direct costs
of obtaining a contract, consisting of sales commissions, as incurred as the expected period of benefit of the sales
commissions is one year or less. At December 31, 2020 and 2019, the Company had not capitalized any costs to
obtain any of its contracts.

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in

the accompanying balance sheets. Amounts expected to be recognized as revenue within 12 months of the
balance sheet date are classified as current deferred revenue. Deferred revenue was $1.9 million and $1.5 million
as of December 31, 2020 and 2019, respectively. During the year ended December 31, 2020, the Company
recognized revenue of $1.1 million that was included in the contract liability balance (deferred revenue) at
December 31, 2019. The Company recognizes deferred revenue by first allocating from the beginning deferred
revenue balance to the extent that the beginning deferred revenue balance exceeds the revenue to be recognized.
Billings during the period are added to the deferred revenue balance to be recognized in future periods.

Research and Development

Research and development expenses consist primarily of personnel-related expenses (wages, fringe benefit
costs and stock-based compensation expense) for product management and software development. Research and
development costs are expensed as incurred, except for certain costs which are capitalized in connection with the
development of the Company’s website and internal-use software.

Costs incurred in the preliminary and post-implementation stages of development are expensed as incurred.

Once an application has reached the development stage, internal costs, if direct and incremental, are capitalized
until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion
of all substantial testing performed to ensure the product is ready for its intended use. The Company also
capitalizes costs related to specific upgrades and enhancements of its website and internal-use software when it is
probable that the expenditures will result in additional functionality. Maintenance and training costs are expensed
as incurred. Capitalized software costs are recorded as part of property and equipment and are amortized on a
straight-line basis over an estimated useful life of three years.

Advertising Expense

Advertising expense consists of variable costs that are related to attracting consumers to the Company’s
marketplace and generating consumer quote requests and promoting its marketplace to insurance carriers and

agents. The Company expenses advertising costs as incurred and such costs are included in sales and marketing
expense in the accompanying statements of operations and comprehensive income (loss). During the years ended
December 31, 2020 and 2019, advertising expense totaled $238.3 million and $175.5 million, respectively.

Stock-Based Compensation

The Company measures stock options with service-based vesting or performance-based vesting granted to

employees, non-employees and directors based on the fair value on the date of grant using the Black-Scholes
option-pricing model. The Company measures stock options with market-based vesting based on the fair value
on the date of grant using a Monte Carlo simulation model. The Company measures restricted common stock
units based on the fair value on the date of grant using the market value of the Company’s common stock.
Compensation expense for employee awards is recognized over the requisite service period, which is generally
the vesting period of the respective award. The Company uses the straight-line method to record the expense of
employee awards with only service-based vesting conditions. The Company uses the graded-vesting method to
record the expense of employee awards with both service-based and performance-based vesting conditions,
commencing once achievement of the performance condition becomes probable. Compensation expense for
nonemployee awards is recognized in the same manner as if the Company had paid cash for the goods or services
received.

The Company classifies stock-based compensation expense in its statements of operations and

comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the
award recipient’s service payments are classified.

Foreign Currency Translation

The functional currency of the Company’s foreign subsidiary is the currency of the local country. Assets
and liabilities of the Company’s foreign subsidiary is translated into U.S. dollars using the period-end exchange
rates, and income and expense items are translated into U.S. dollars using average exchange rates in effect during
each period. The effects of these foreign currency translation adjustments are included in accumulated other
comprehensive loss, a separate component of stockholders’ equity. The Company also incurs transaction gains
and losses resulting from intercompany transactions as well as transactions with customers or vendors
denominated in currencies other than the functional currency of the legal entity in which the transaction is
recorded. Foreign currency transaction gains (losses) are included in the consolidated statements of operations
and comprehensive loss as a component of other income (expense) and has not been significant.

Comprehensive Loss

Comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) that result

from transactions and economic events other than those with stockholders. The Company’s only element of other
comprehensive loss are foreign currency translation adjustments.

Net Income (Loss) per Share

Basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted

average number of shares of common stock outstanding for the period. Diluted net income (loss) per common
share is computed by dividing net income (loss) by the weighted average number of common shares outstanding
for the period, including potential dilutive common shares assuming the dilutive effect of outstanding stock
options and unvested restricted stock units. For periods in which the Company reported a net loss, diluted net loss
per common share is the same as basic net loss per common share, since dilutive common shares are not assumed
to have been issued if their affect is anti-dilutive.

The Company has two classes of common stock outstanding: Class A common stock and Class B common

stock. As more fully described in Note 8, the rights of the holders of Class A and Class B common stock are
identical, except with respect to voting and conversion. Each share of Class B common stock is convertible into
one share of Class A common stock at the option of the holder at any time. The Company allocates undistributed
earnings attributable to common stock between the common stock classes on a one-to-one basis when computing
net income (loss) per share. As a result, basic and diluted net income (loss) per share of Class A common stock
and share of Class B common stock are equivalent.

The Company excluded the following potential common shares, presented based on amounts outstanding at

each period end, from the computation of diluted net loss per share attributable to common stockholders for the
periods indicated because including them would have had an anti-dilutive effect:

Options to purchase common stock
Unvested restricted stock units

December 31,

2020

2019

2,188,919
3,142,220

5,331,139

2,827,868
3,367,846

6,195,714

The Company may also issue up to 97,922 shares of common stock to the former owners of Crosspointe

Insurance & Financial Services, LLC, upon the achievement of certain revenue targets (see Note 3). These shares
were not included in the Company’s calculation of basic or diluted net income (loss) per common share or in the
table above.

Income Taxes

The Company accounts for income taxes using the asset and liability method, which requires the

recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been
recognized in the consolidated financial statements or in the Company’s tax returns. Deferred tax assets and
liabilities are determined on the basis of the differences between the financial statements and tax basis of assets
and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company
assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent
it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the
deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax
expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits
expected and considering prudent and feasible tax planning strategies.

The Company accounts for uncertainty in income taxes recognized in the consolidated financial statements

by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position
must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing
authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to
determine the amount of benefit to recognize in the consolidated financial statements. The amount of the benefit
that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon
ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or
unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties. The
Company’s policy is to record interest and penalties related to income taxes as part of the tax provision.

Recently Adopted Accounting Pronouncements

The Company adopted ASU No. 2016-02, Leases (Topic 842), effective January 1, 2020, using the
modified retrospective method under ASU No. 2018-11, Leases (Topic 842): Targeted Improvements. Since the
Company ceased to be an emerging growth company as of December 31, 2020, the Company adopted the
standard during the fourth quarter of 2020 effective as of January 1, 2020. The modified retrospective transition
method allows entities to apply the transition requirements at the effective date rather than at the beginning of the
earliest comparative period presented. The Company’s reporting for comparative periods is presented in
accordance with ASC 840. Adoption of the new standard resulted in the recording of right-of-use (“ROU”) assets
and lease liabilities of $9.7 million and $10.9 million, respectively. The adoption of the standard did not have a
material impact on the Company’s results of operations or cash flows. The Company elected to use the transition
package of three practical expedients, which among other things, allowed the Company to carry forward the
historical lease classification. The Company has elected, under ASC 842, the further practical expedient not to
separate non-lease components from the lease components to which they relate and instead to combine them and
account for them as a single lease component. The Company also elected the accounting policy election to keep
leases with a term of twelve months or less off the balance sheet and to recognize payments for those leases on a

straight-line basis over the lease term. The underlying assets of the Company’s leases as of the adoption date
consisted of office space.

The Company adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (ASU 2016-13) for the year ended December 31, 2020.
This standard requires entities to estimate an expected lifetime credit loss on financial assets and report credit
losses using an expected losses model rather than the incurred losses model that was previously used, and
establishes additional disclosures related to credit risks. The adoption of this standard did not have a material
impact on the consolidated financial statements and related disclosures.

The Company adopted ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a

Cloud Computing Arrangement That Is a Service Contract (Subtopic 350-40) for the year ended December 31,
2020. The objective of the standard is to align the requirements for capitalizing implementation costs incurred in
a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs
incurred to develop or obtain internal-use software. The adoption of this standard did not have a material impact
on the consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes - Simplifying the Accounting for
Income Taxes (Topic 740). The amendments in this update simplify the accounting for income taxes by removing
certain exceptions to the general principles as well as clarifying and amending existing guidance to improve
consistent application. The amendments in this update are effective for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2020, with early adoption permitted. Depending on the
amendment, adoption may be applied on the retrospective, modified retrospective or prospective basis. The
Company is currently assessing the impact of the adoption of this guidance on its consolidated financial
statements.

3. Acquisition

On September 1, 2020, the Company completed the acquisition of Crosspointe Insurance & Financial
Services, LLC (“Crosspointe”), a health insurance agency headquartered in Evansville, Indiana. Crosspointe is a
sales and decision support contact center that connects consumers to high quality health insurance in a customer-
centric environment and serves the individual and family health, Medicare, and ancillary health product markets.
This acquisition enables the Company to accelerate and expand its opportunity in the health insurance market, by
providing insurance shoppers with a broader range of health insurance products through access to a greater
number of carrier partners, and an improved and more personalized customer buying experience.

The Crosspointe acquisition was accounted for as a purchase of a business under ASC Topic 805, Business

Combinations. Under the acquisition method of accounting, the assets and liabilities of Crosspointe were
recorded as of the acquisition date, at their respective fair values. The purchase consideration of $16.7 million
reflected a cash payment of $14.9 million and contingent consideration of $1.8 million representing the fair value
of Class A common stock issuable to the former owners of Crosspointe upon achievement of certain revenue
targets over three years. The former owners of Crosspointe are eligible to receive up to 97,922 shares of Class A
common stock upon achievement of certain revenue targets. These revenue targets are measured in annual
intervals. Shares of Class A common stock issuable upon achievement of the first two annual targets are for a
fixed number of shares of Class A common stock and, as such, the Company has recorded the fair value of these
shares within stockholders’ equity based on the number of shares issuable and the fair market value of Class A
common stock on the acquisition date. Achievement of the third annual target will result in the issuance of a
variable number of shares of Class A common stock and, as such, the Company has recorded the fair value of
these shares as a long-term liability. The Company’s consolidated financial statements reflect the preliminary
allocation of the purchase price to the assets and liabilities assumed based on fair value as of the date of the
acquisition. The Company’s preliminary estimate of the fair value of specifically identifiable assets acquired and
liabilities assumed as of the date of acquisition is subject to change upon finalizing its valuation analysis. The

final determination may result in changes in the fair value of certain assets and liabilities as compared to these
preliminary estimates, which is expected to be finalized in the first half of 2021.

The Company estimated the fair value of the shares of Class A common stock issuable upon achievement

of the three annual targets as of the acquisition date. The Company remeasures the fair value of the shares of
Class A common stock issuable upon the estimated achievement levels of the third annual target at each
subsequent reporting date until the liability is fully settled. The Company uses a Monte Carlo simulation model
in its estimates. Significant assumptions and estimates utilized in the model include the forecasted revenue,
revenue volatility and discount rate. As of September 1, 2020, the acquisition date, the estimated fair value of the
contingent consideration included in other long-term liabilities was $0.4 million. The Company recognizes
changes in the fair value of the liability in earnings until the liability is fully settled. As of December 31, 2020,
the Company estimated the fair value of the contingent consideration included in other long-term liabilities to be
$2.2 million, and as a result recorded a $1.8 million charge to acquisition-related costs for the increase in fair
value subsequent to the acquisition date.

The following tables summarize the preliminary purchase price for Crosspointe and the preliminary

allocation of the purchase price (in thousands):

Cash paid
Fair value of contingent consideration to be settled in stock
Total purchase price consideration

Assets acquired and liabilities assumed:
Commission receivable (current and long-term)
Customer relationships
Other identifiable intangible assets
Operating lease right-of-use assets
Goodwill

Total assets acquired

Accounts payable and accrued expenses (current and long-term)
Operating lease liabilities

Total allocation of purchase price consideration

14,930
1,751
16,681

3,460
3,600
270
1,469
9,794

18,593
(443)
(1,469)

16,681

Customer relationships were valued using the income approach. Significant assumptions and estimates

utilized in the model include the customer attrition rate and discount rate. Acquired intangible assets are
amortized over their estimated useful lives of three to five years based on the pattern of consumption of the
economic benefits of the intangible asset.

Commissions receivable were recorded at constrained lifetime values.

Goodwill was recognized for the excess purchase price over the fair value of the net assets acquired.

Goodwill is primarily attributable to the workforce of the acquired business (which is not eligible for separate
recognition as an identifiable intangible asset) and future growth. Goodwill from the Crosspointe acquisition is
included within the Company’s one reporting unit and is included in the Company’s enterprise-level annual
review for impairment. Goodwill resulting from the acquisition of Crosspointe is deductible for tax purposes.

The Company incurred costs of $0.5 million for third-party professional services utilized for the
acquisition, which were expensed as incurred within acquisition-related costs on the Company’s consolidated
statements of operations and comprehensive loss. The operating results of the acquired entity have been included
in the consolidated financial statements beginning on the acquisition date but have not been disclosed as the
Company does not account for the results of the acquired entity separate from its own results. Pro forma results

of operations for the acquisition have not been presented as they are not material to the Company’s consolidated
results of operations.

4. Goodwill and Acquired Intangible Assets

The carrying amount of goodwill was $9.8 million as of December 31, 2020 related to goodwill from the

Company’s acquisition of Crosspointe. Goodwill is not amortized, but instead is reviewed for impairment at least
annually or more frequently when events and circumstances occur indicating that the recorded goodwill may be
impaired. The Company considers its business to be one reporting unit for purposes of performing its goodwill
impairment analysis. To date, the Company has had no impairments to goodwill.

Acquired intangible assets consisted of the following (in thousands):

Customer relationships
Other identifiable intangible assets

Weighted
Average
Useful Life

(in years)
5
3.7

December 31, 2020

Gross
Amount

Accumulated
Amortization

Carrying
Value

3,600
270

3,870

(464) $
(40)

(504) $

3,136
230

3,366

Future amortization expense of the intangible assets as of December 31, 2020, is expected to be as follows (in
thousands):

Year Ending December 31,

2021
2022
2023
2024
2025

1,182
826
609
440
309

3,366

5. Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

Computer equipment
Software
Furniture and fixtures
Leasehold improvements

Less: Accumulated depreciation and amortization

December 31,

2020

2019

2,183
11,113
1,127
921

15,344
(9,171)

6,173

1,940
8,829
1,032
850

12,651
(7,454)

5,197

Depreciation and amortization expense was $2.8 million and $2.2 million for the years ended

December 31, 2020 and 2019, respectively. The Company capitalized costs associated with the development of
internal use software of $3.0 million and $2.7 million included in the Software line item above and recorded
related amortization expense of $2.2 million and $1.4 million (included in depreciation and amortization
expense) during the years ended December 31, 2020 and 2019, respectively. The remaining net book value of
capitalized software costs was $4.8 million and $4.0 million as of December 31, 2020 and 2019, respectively.

6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

Accrued employee compensation and benefits
Accrued advertising expenses
Accrued legal settlement
Other current liabilities

December 31,

2020

2019

4,105
2,596
—
2,720

9,421

2,388
4,119
4,750
1,968

13,225

7. Loan and Security Agreement

As of December 31, 2019, the Company had available borrowings of $11.0 million under its amended
Loan and Security Agreement, as modified by the 2018 Loan and Modification Agreement (the “2018 Loan
Modification”). Pursuant to the 2018 Loan Modification, borrowings under the revolving line of credit could not
exceed 80% of eligible accounts receivable balances and bore interest at one-half percent (0.5%) above the
greater of 4.25% or the prime rate. The 2018 Loan Modification was amended during the three months ended
March 31, 2020 to extend the availability of the line of credit to May 2020. The 2018 Loan Modification was
amended and restated in August 2020 (the “2020 Loan Agreement”) to increase the available line of credit to
$25.0 million, extend the maturity date to August 2022 and amend the interest rate. Pursuant to the 2020 Loan
Agreement, borrowings under the revolving line of credit cannot exceed 80% of eligible accounts receivable
balances and bear interest at the greater of 3.25% or the prime rate. Borrowings are collateralized by substantially
all of the Company’s assets and property. As of December 31, 2020, the Company had available borrowings of
$25.0 million under the 2020 Loan Agreement.

Under the 2020 Loan Agreement, the Company is subject to specified affirmative and negative covenants

until maturity. These covenants include limitations on the Company’s ability to incur additional indebtedness and
engage in certain fundamental business transactions, such as mergers or acquisitions. As of December 31, 2020,
the Company was in compliance with these covenants. In addition, the Company is required to maintain a
financial performance covenant: a minimum asset coverage ratio of 1.5 to 1, calculated as the sum of unrestricted
cash and qualified accounts receivable divided by borrowings outstanding under the revolving line of credit.
Events which would meet the criteria of a default under the 2020 Loan Agreement include failure to make
payments when due, insolvency events, failure to comply with covenants or material adverse events with respect
to the Company.

As of December 31, 2020, the Company had no amounts outstanding on the revolving line of credit.

8. Equity

Each share of Class A common stock entitles the holder to one vote for each share on all matters submitted

to a vote of the Company’s stockholders at all meetings of stockholders and written actions in lieu of meetings.
Each share of Class B common stock entitles the holder to ten votes for each share on all matters submitted to a
vote of the Company’s stockholders at all meetings of stockholders and written actions in lieu of meetings.

Holders of both classes of common stock are entitled to receive dividends, when and if declared by the

board of directors.

Each share of Class B common stock is convertible into one share of Class A common stock at the option

of the holder at any time. Automatic conversion shall occur upon the occurrence of a transfer of such share of
Class B common stock or at the date and time, or the occurrence of an event, specified by a vote or written
consent of the holders of a majority of the voting power of the then outstanding shares of Class B common stock.

A transfer is described as a sale, assignment, transfer, conveyance, hypothecation or disposition of such share or
any legal or beneficial interest in such share other than certain permitted transfers as described in the Restated
Certificate of Incorporation, including a transfer to a holder of Preferred Stock. Each share of Class B common
stock held by a stockholder shall automatically convert into one fully paid and non-assessable share of Class A
common stock nine months after the death or incapacity of the holder of such Class B common stock.

9. Stock-Based Compensation

The Company has outstanding awards under its 2008 Stock Incentive Plan, as amended (the “2008 Plan”),
but is no longer granting awards under this plan. Shares of common stock issued upon exercise of stock options
granted prior to September 8, 2017 will be issued as either Class A common stock or Class B common stock.
Shares of common stock issued upon exercise of stock options granted after September 8, 2017 will be issued as
Class A common stock.

The Company’s 2018 Equity Incentive Plan (the “2018 Plan” and, together with the 2008 Plan, the
“Plans”) provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights,
restricted stock awards, restricted stock units, and other stock-based awards. The number of shares initially
reserved for issuance under the 2018 Plan is the sum of 2,149,480 shares of Class A common stock, plus the
number of shares (up to 5,028,832 shares) equal to the sum of (i) the 583,056 shares of Class A common stock
and Class B common stock that were available for grant under the 2008 Plan upon the effectiveness of the 2018
Plan and (ii) the number of shares of Class A common stock and Class B common stock subject to outstanding
awards under the 2008 Plan that expire, terminate or are otherwise surrendered, canceled, forfeited or
repurchased by the Company at their original issuance price pursuant to a contractual repurchase right (subject,
in the case of incentive stock options, to any limitations of the Internal Revenue Code). The number of shares of
Class A common stock that may be issued under the 2018 Plan will automatically increase on the first day of
each fiscal year until, and including, the fiscal year ending December 31, 2028, equal to the least of (i) 2,500,000
shares of Class A common stock; (ii) 5% of the sum of the number of shares of Class A common stock and
Class B common stock outstanding on the first day of such fiscal year; and (iii) an amount determined by the
Company’s board of directors. The shares of common stock underlying any awards that are forfeited, canceled,
held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, repurchased or
are otherwise terminated by the Company under the 2018 Plan will be added back to the shares of common stock
available for issuance under the 2018 Plan. As of December 31, 2020, 1,026,673 shares remain available for
future grants under the 2018 Plan. The number of authorized shares reserved for issuance under the 2018 Plan
was increased by 1,410,678 shares effective as of January 1, 2021 in accordance with the provisions of the 2018
Plan described above.

Options and restricted stock units granted under the Plans vest over periods determined by the board of
directors. Options granted under the Plans expire no longer than ten years from the date of the grant. The exercise
price for stock options granted is not less than the fair value of common shares based on quoted market prices.

Stock Option Valuation

During the year ended December 31, 2020, the Company granted 531,108 options with service-based,
market-based and performance-based vesting conditions. The fair value of these grants is estimated using a
Monte Carlo simulation model. Assumptions and estimates utilized in the model include the risk-free interest
rate, dividend yield, expected stock volatility and the estimated period to achievement of the performance and
market condition.

The following table presents the assumptions used in the Monte Carlo simulation model to determine the

fair value of these stock-based awards on their issuance date:

Risk-free interest rate
Expected volatility
Expected dividend yield
Derived service period (in years)

1.5%
49.0%
0%

4.1

Stock-based compensation expense is recognized when the achievement of the performance-based vesting
conditions is probable regardless of whether the market condition is achieved. The aggregate grant date fair value
of these options was $8.1 million. As the Company has deemed achievement of the performance condition to be
probable, the Company is recognizing stock-based compensation for these awards over the estimated service
period using the graded-vesting method.

The Company did not grant stock options in the year ended December 31, 2019.

Stock Option Activity

The following table summarizes the Company’s option activity since December 31, 2019:

Outstanding as of December 31, 2019
Granted
Exercised
Forfeited

Outstanding as of December 31, 2020

Vested and expected to vest as of

December 31, 2020

Options exercisable as of December 31,

2020

Number of Shares

Weighted
Average
Exercise
Price

2,827,868
531,108
(776,914)
(393,143)

2,188,919

7.17
45.17
6.32
33.26

12.01

Weighted
Average
Remaining
Contractual
Term

(in years)

6.5

Aggregate
Intrinsic
Value

(in thousands)
76,850
$

5.72

57,538

2,121,884

12.12

5.71

55,616

1,370,762

6.94

4.84

41,689

As of December 31, 2020, outstanding options of 1,032,613 were for the purchase of Class A common
stock and outstanding options of 1,156,306 were for the purchase of either Class A common stock or Class B
common stock.

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of

the stock options and the fair value of the Company’s common stock for those stock options that had strike prices
lower than the fair value of the Company’s common stock.

The aggregate intrinsic value of options exercised during the years ended December 31, 2020 and 2019

was $26.6 million and $8.8 million, respectively.

Restricted Stock Units

The Company has granted restricted stock units (“RSUs”) with service-based vesting conditions and with
both service-based and performance-based vesting conditions. RSUs with service-based and both service-based
and performance-based vesting conditions are valued on the grant date using the grant date market price of the
underlying shares.

The following table summarizes the Company’s RSU activity since December 31, 2019:

Unvested balance December 31, 2019

Granted
Vested
Forfeited

Unvested balance December 31, 2020

Number of Shares

Weighted Average Grant-
Date Fair Value

3,367,846
1,331,417
(998,478)
(558,565)

3,142,220

14.84
42.35
16.30
19.02

25.29

As of December 31, 2020, the Company had outstanding 270,131 unvested RSUs with performance-based

vesting conditions for which achievement of the performance condition has not been deemed probable.

Stock-Based Compensation

The Company recorded stock-based compensation expense in the following expense categories of its

statements of operations and comprehensive loss (in thousands):

Cost of revenue
Sales and marketing
Research and development
General and administrative

Year Ended December 31,

2020

2019

361
10,246
7,751
5,821

24,179

193
3,805
3,967
4,756

12,721

Stock-based compensation expense for the year ended December 31, 2020 included a total of $2.0 million
related to unvested RSUs and option awards with performance-based vesting conditions, including options with
performance- and market-based vesting conditions, for which the performance-based condition has not yet been
achieved but has been deemed probable of being achieved. As of December 31, 2020, unrecognized
compensation expense for RSUs and option awards with service-based vesting conditions and RSUs and option
awards with performance-based vesting conditions either achieved or deemed probable of being achieved was
$50.1 million, which is expected to be recognized over a weighted average period of 3.6 years. Additionally, the
Company had unrecognized compensation expense of $5.8 million related to unvested awards with performance-
based vesting conditions, which have not been deemed probable.

10. Income Taxes

The Company had no income tax expense for the years ended December 31, 2020 or 2019. The Company’s

foreign operations have not been significant and therefore, the Company has not provided for any foreign taxes.
A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as
follows:

Federal statutory income tax rate

State taxes, net of federal benefit
Federal and state research and development tax credits
Nondeductible items
Stock-based compensation
Other
Change in valuation allowance

Effective income tax rate

Year Ended December 31,

2020

2019

21.0 %
4.2
12.4
(0.7)
97.2
2.2
(136.3)

— %

21.0 %
5.5
19.4
(1.6)
13.3
(0.9)
(56.7)

— %

Net deferred tax assets as of December 31, 2020 and 2019 consisted of the following (in thousands):

Deferred tax assets:

Net operating loss carryforwards
Research and development tax credit carryforwards
Accrued expenses and other current liabilities
Intangible assets
Property and equipment
Stock-based compensation
Operating lease liability
Other

Total deferred tax assets

Valuation allowance

Net deferred tax assets

Deferred tax liabilities:

Capitalized software development costs
Operating lease right-of-use assets

Deferred tax liabilities

Net deferred tax assets and liabilities

December 31,

2020

2019

19,197
6,470
566
1,598
220
3,092
2,829
221

34,193
(30,558)

3,635

(1,088)
(2,547)

(3,635)

— $

8,165
5,040
671
33
215
1,463
—
725

16,312
(15,292)

1,020

(1,020)
—

(1,020)

—

As of December 31, 2020, the Company had federal net operating loss carryforwards of $72.9 million,
which may be available to offset future taxable income, of which $9.0 million of the total net operating loss
carryforwards expire at various dates beginning in 2029, while the remaining $63.9 million do not expire but are
limited in their usage to an annual deduction equal to 80% of annual taxable income. As of December 31, 2020,
the Company had state net operating loss carryforwards of $60.7 million, which may be available to offset future
taxable income and expire at various dates beginning in 2027. As of December 31, 2020, the Company also had
federal and state research and development tax credit carryforwards of $4.5 million and $2.4 million,
respectively, which may be available to reduce future tax liabilities and expire at various dates beginning in 2030
and 2029, respectively.

Utilization of the U.S. federal and state net operating loss carryforwards and research and development tax

credit carryforwards may be subject to a substantial annual limitation under Section 382 and Section 383 of the
Internal Revenue Code of 1986, and corresponding provisions of state law, due to ownership changes that have
occurred previously or that could occur in the future. These ownership changes may limit the amount of
carryforwards that can be utilized annually to offset future taxable income and tax liabilities. In general, an
ownership change, as defined by Section 382, results from transactions increasing the ownership of certain
stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. In 2019,
the Company performed an analysis of the ownership changes as defined within IRC §382(g) during the period
beginning with the first issuance of the Company’s stock on August 8, 2008 through June 30, 2019. It was
determined that it is more likely than not that the Company did not undergo an ownership change within the
meaning of IRC §382(g) during the analysis period. Therefore net operating losses for that period are not limited
and will be available to cover future taxable income.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the

deferred tax assets, which are comprised primarily of net operating loss carryforwards and research and
development tax credit carryforwards. Management has considered the Company’s history of cumulative net
losses incurred since inception, estimated future taxable income and prudent and feasible tax planning strategies
and has concluded that it is more likely than not that the Company will not realize the benefits of federal and
state deferred tax assets. Accordingly, a full valuation allowance has been established against the net deferred tax
assets as of December 31, 2020 and 2019. The Company reevaluates the positive and negative evidence at each
reporting period.

The change in the valuation allowance for deferred tax assets during the years ended December 31, 2020

and 2019 related primarily to an increase in net operating loss carryforwards and research, development tax
credit carryforwards and stock-based compensation expense. The changes in the valuation allowance were as
follows (in thousands):

Valuation allowance as of beginning of year

Increases recorded to tax provision

Valuation allowance as of end of year

Year Ended December 31,

2020

2019

15,292
15,266

30,558

11,257
4,035

15,292

The Company assesses the uncertainty in its income tax positions to determine whether a tax position of

the Company is more likely than not to be sustained upon examination, including resolution of any related
appeals of litigation processes, based on the technical merits of the position. For tax positions meeting the more-
likely-than-not threshold, the tax amount recognized in the consolidated financial statements is reduced by the
largest benefit that has a greater than fifty percent likelihood of being realized upon the ultimate settlement with
the relevant taxing authority. No reserve for uncertain tax positions or related interest and penalties has been
recorded at December 31, 2020 and 2019.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the

normal course of business, the Company is subject to examination by federal and state jurisdictions, where
applicable. There are currently no pending tax examinations. The Company is open to future tax examination
under statute from 2017 to the present, however, carryforward attributes that were generated prior to January 1,
2017 may still be adjusted upon examination by federal, state or local tax authorities if they either have been or
will be used in a future period.

11. Leases

The Company leases office space in Cambridge, Massachusetts under a non-cancelable operating lease that

expires in September 2024. The Company also leases office space in Woburn, Massachusetts under a

non-cancelable operating lease that expires in January 2022. In the first quarter of 2020, the Company entered
into a three-year non-cancelable operating lease in Seattle, Washington under which lease payments commenced
in the second quarter of 2020.

In connection with the acquisition of Crosspointe, the Company acquired a ten-year non-cancelable

operating lease in Evansville, Indiana that expires in August 2030.

As of December 31, 2020 and 2019, the Company maintained security deposits of $0.5 million and

$0.4 million, respectively, with the landlords of its leases, which amounts are included in other assets on the
Company’s consolidated balance sheet.

The components of lease cost under ASC 842 were as follows (in thousands):

Operating lease cost
Short-term lease cost
Variable lease cost

Year Ended
December 31, 2020

2,590
—
387

2,977

Supplemental disclosure of cash flow information related to leases was as follows (in thousands):

Year Ended
December 31, 2020

Cash paid for amounts included in the measurement of operating lease liabilities
Operating lease liabilities arising from obtaining right-of-use assets

$
$

2,747
541

The weighted-average remaining lease term and discount rate were as follows:

Weighted-average remaining lease term - operating leases (in years)
Weighted-average discount rate - operating leases

December 31, 2020

4.44
4.67%

Because the interest rate implicit in the lease was not readily determinable, the Company’s incremental
borrowing rate was used to calculate the present value of the leases. In determining its incremental borrowing
rate, the Company considered its credit quality and assessed interest rates available in the market for similar
borrowings, adjusted for the impact of collateral over the term of the lease.

Future annual lease payments under the Company’s leases as of December 31, 2020 were as follows (in

thousands):

Year Ending December 31,

2021
2022
2023
2024
2025
Thereafter

Total future minimum lease payments
Less: imputed interest

Total operating lease liabilities

3,025
2,872
2,785
2,099
177
826

11,784
(1,098)

10,686

The following table presents lease assets and liabilities and their classification on the consolidated balance

sheet (in thousands):

Included in the balance sheet (in thousands):

Current operating lease liabilities
Operating lease liabilities, net of current portion

Total operating lease liabilities

Disclosures under ASC 840

December 31, 2020

2,593
8,093

10,686

The following table summarizes the future minimum lease payments due under the Company’s operating
leases as of December 31, 2019 (in thousands), presented in accordance with ASC 840, the relevant accounting
standard at that time:

Year Ending December 31,

2020
2021
2022
2023
2024
Thereafter

12. Commitments and Contingencies

Leases

2,573
2,659
2,502
2,534
1,922
—

12,190

The Company’s commitments under its leases are described in Note 11.

Indemnification Agreements

In the normal course of business, the Company may provide indemnification of varying scope and terms to

third parties and enters into commitments and guarantees (“Agreements”) under which it may be required to
make payments. The duration of these Agreements varies, and in certain cases, is indefinite. Furthermore, many
of these Agreements do not limit the Company’s maximum potential payment exposure.

In addition, the Company has entered into indemnification agreements with members of its board of
directors and executive officers that will require the Company, among other things, to indemnify them against
certain liabilities that may arise by reason of their status or service as directors or officers.

Through December 31, 2020 and 2019, the Company has not incurred any material costs as a result of such

indemnifications. The Company does not believe that the outcome of any claims under indemnification
arrangements will have a material effect on its financial position, results of operations or cash flows, and it has
not accrued any liabilities related to such obligations in its consolidated financial statements as of December 31,
2020 and 2019, respectively.

Legal Proceedings and Other Contingencies

On February 15, 2019, Sean F. Townsend, a purported holder of the Company’s common stock, filed a

civil action in the Supreme Court for the State of New York against the Company, the Company’s chief
executive officer, chief financial officer, general counsel, the Company’s directors, and the Company’s

underwriters for its IPO, captioned Townsend v. EverQuote, Inc. et al., Index No. 650997-2019. On February 26,
2019, Mark Townsend, a second purported holder of the Company’s common stock, filed an identical civil action
in the Supreme Court for the State of New York against the same defendants, captioned Townsend v. EverQuote,
Inc. et al., Index No. 651177-2019. The plaintiffs alleged claims for violations of Sections 11, 12(a), and 15 of
the Securities Act of 1933, on behalf of a purported class of all persons or entities who purchased or otherwise
acquired the Company’s common stock pursuant or traceable to the Registration Statement issued in connection
with its IPO. Those claims generally challenged as false or misleading certain of the Company’s disclosures
about its quote request volume. The plaintiffs sought, on behalf of themselves and the purported class, damages,
costs and expenses of litigation, and rescission, disgorgement, or other equitable relief. After filing a motion to
dismiss the plaintiffs’ consolidated amended complaint, the Company participated in a mediation and agreed to
pay $4.8 million in settlement of all of plaintiffs’ purported class claims, of which $3.6 million was reimbursed
by the Company’s insurance provider. The parties thereafter on February 6, 2020 filed a Stipulation of Settlement
settling the litigation in principle, subject to final approval of the Court. On June 11, 2020, the Court entered a
final order approving the settlement and terminating the case.

The Company was contacted by a representative from a state tax assessor’s office requesting remittance of

uncollected sales taxes. The Company does not believe its services are taxable in this state and is investigating
this request and intends to vigorously defend this position. If the Company does not prevail in its position,
uncollected sales taxes due for the period could amount to approximately $1.5 million, including interest and
penalties. The Company has not recorded any liabilities related to this matter as the loss has not been deemed
probable.

On April 29, 2020, EverQuote was named as a defendant in a putative, statewide (Colorado) class action

lawsuit filed in U.S. District Court for the District of Colorado captioned Scott M. Runyon v EverQuote, Inc. The
complaint alleged that the Company violated the Telephone Consumer Protection Act by making unsolicited
marketing calls to his cellphone and those of other Colorado residents using an automatic telephone dialing
system without prior express consent. Plaintiff sought, among other forms of relief, statutory damages of $500 to
$1,500 for each alleged violation and an order enjoining future violations. Plaintiff also asserted an individual
claim against the Company for invasion of privacy arising out of the same calls to his cellphone and a claim for
unspecified damages. The Company believed Plaintiff’s claims lacked merit. On July 23, 2020, the U.S. District
Court granted a stay pending the Supreme Court’s decision in Facebook Inc. v. Duguid, Case No. 19-511. In
October 2020 the case was resolved on an individual basis for an immaterial amount, with EverQuote denying
any wrongdoing, and was dismissed pursuant to settlement in November 2020.

On July 30, 2020, EverQuote was named as a defendant in a putative, nationwide class action lawsuit filed

in U.S. District Court for the Western District of Pennsylvania captioned Carol Scavo v. EverQuote, Inc. The
complaint alleged that the Company violated the Telephone Consumer Protection Act by sending unsolicited text
message advertisements to her cellphone and those of other United States residents using an automatic telephone
dialing system without prior express consent. Plaintiff sought, among other forms of relief, statutory damages of
$500 to $1,500 for each alleged violation and an order enjoining future violations. The Company believed
Plaintiff’s claims lacked merit. The case was resolved on an individual basis for an immaterial amount, with
EverQuote denying any wrongdoing, and was dismissed pursuant to settlement in October 2020.

The Company is from time to time subject to various other legal proceedings and claims, either asserted or
unasserted, which arise in the ordinary course of its business. While the outcome of these other claims cannot be
predicted with certainty, management does not believe that the outcome of any of these other legal matters will
have a material adverse effect on the Company’s results of operations or financial condition.

13. Retirement Plan

The Company has established a defined-contribution plan under Section 401(k) of the Internal Revenue
Code (the “401(k) Plan”). The 401(k) Plan covers all employees who meet defined minimum age and service

requirements, and allows participants to defer a portion of their annual compensation on a pre-tax basis. As
currently established, the Company is not required to make any contributions to the 401(k) Plan. The Company
contributed $0.7 million and $0.5 million during the years ended December 31, 2020 and 2019, respectively.

14. Related Party Transactions

The Company has, in the ordinary course of business, entered into arrangements with other companies who
have shareholders in common with the Company. Pursuant to these arrangements, related-party affiliates receive
payments for providing website visitor referrals and to a lesser extent a small amount of office space. During the
years ended December 31, 2020 and 2019, the Company recorded expense of $3.1 million and $5.2 million,
respectively, related to these arrangements. During the years ended December 31, 2020 and 2019, the Company
paid $3.1 million and $5.7 million, respectively, related to these arrangements. As of December 31, 2020 and
2019, amounts due to related-party affiliates totaled $0.5 million and $0.6 million, respectively, which were
included in accounts payable and accrued expenses on the balance sheets.

15.

Selected Quarterly Financial Data (Unaudited)

The following information has been derived from unaudited consolidated financial statements that, in the
opinion of management, include all recurring adjustments necessary for a fair statement of such information (in
thousands except per share data):

Dec 31,
2020

Sep 30,
2020

Jun 30,
2020

Mar 31,
2020

Dec 31,
2019

Sep 30,
2019

Jun 30,
2019

Mar 31,
2019

Three Months Ended

Statements of Operations

Data:
Revenue
Cost of revenue
Loss from operations
Net income (loss)
Basic and diluted net income
(loss) per share available
(attributable) to common
stockholders:

$ 97,292 $ 89,977 $ 78,302 $ 81,364 $ 73,799 $ 67,112 $55,667 $ 52,233
3,666
(4,566)
(4,382)

3,504
(2,246)
(1,974)

5,683
(3,784)
(3,768)

5,378
(3,289)
(3,184)

5,335
(1,653)
(1,442)

4,977
(2,956)
(2,808)

4,681
(1,155)
(934)

4,052
(82)
173

(0.13) $

(0.12) $

(0.10) $

(0.05) $

(0.04) $

0.01 $ (0.08) $

(0.17)

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

None.

ITEM 9A.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our

principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our
disclosure controls and procedures as of December 31, 2020. The term “disclosure controls and procedures,” as
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a
company that are designed to ensure that information required to be disclosed by a company in the reports that it
files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be disclosed by a company in the reports
that it files or submits under the Exchange Act is accumulated and communicated to the company’s management,
including its principal executive and principal financial officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment
in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our
disclosure controls and procedures as of December 31, 2020, our Chief Executive Officer and Chief Financial
Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable
assurance level.

Internal Control over Financial Reporting

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial

reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements.

Our management has assessed the effectiveness of our internal control over financial reporting as of
December 31, 2020. In making this assessment, management used the criteria described in Internal Control—
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on this assessment, our management has concluded that as of December 31, 2020,
our internal control over financial reporting is effective, based on the specified criteria.

As permitted by the U.S. Securities and Exchange Commission staff guidance, we have excluded
Crosspointe Insurance & Financial Services, LLC (“Crosspointe”) from our assessment of the effectiveness of
internal control over financial reporting as of December 31, 2020, because it was acquired in a purchase business
combination during 2020. The total assets and revenue of Crosspointe, a wholly-owned subsidiary, represent 2%
and 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended
December 31, 2020.

The effectiveness of our internal control over financial reporting as of December 31, 2020, has been

audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their
report which is included herein.

Changes in Internal Control Over Financial Reporting

No changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)

under the Exchange Act) occurred during the three months ended December 31, 2020 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.

OTHER INFORMATION

None.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item 10 will be included in our definitive proxy statement to be filed