Participants

Brinlea Johnson; Investor Relations; EverQuote Inc

Jayme Mendal; President, Chief Executive Officer, Director; EverQuote Inc

Joseph Sanborn; Chief Financial Officer; EverQuote Inc

Michael Graham; Analyst; Canaccord Genuity

Cory Carpenter; Analyst; JP Morgan

Zach Cummins; Analyst; B. Riley Securities

Jed Kelly; Analyst; Oppenheimer

Ralph Schackart; Analyst; William Blair

Jason Kreyer; Analyst; Craig Hallum

Greg Peters; Analyst; Raymond James

Presentation

Operator

Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today.
(Operator Instructions)
I would now like to turn the conference over to Brindley Johnson with the Blue Share Group. You may begin.

Brinlea Johnson

Thank you. Good afternoon and welcome to EverQuote's 4th quarter and full year 2024 earnings call. We'll be discussing the results announced in our press release issued today after the market closed. With me on the call this afternoon are Jamie Mendau, Ebero's Chief Executive Officer, and Joseph Sanamborn, Chief Financial Officer of EverQuote.
During the call, we will make statements related to a business that may be considered forward-looking statements under the federal securities laws, including statements concerning our financial guidance for the first quarter of 2025. Forward-looking statements may be identified with words and phrases such as expect, believe, intend, anticipate, plan, may, upcoming, and similar words and phrases. These statements reflect our views only as of today and should not be considered our views as of any subsequent date. We specifically disclaim any obligation to update or revise these forward booking statements, except as required by law.
Forlooking statements are subject to a variety of risk and uncertainty that could cause the actual results to differ materially from our expectations. For discussion of those risks and uncertainties, please refer to our SEC filings, including our annual report on Form 10K and our quarterly reports on Form 10 on file with the Securities and Exchange Commission and available on the investor relations section of our website.
Also to note, starting this year as we look to simplify our investor communications, we will be referring to variable marketing margin as variable marketing dollars for BMD. Going forth, variable marketing margin or BMM will refer to BMD as a percentage of revenue.
Finally, during the course of today's call, we refer to certain non-gap financial measures which we believe are helpful to investors. A reconciliation of gaps to non-gap measures was included in the press release we issued after the close of market today, which is available on the investor relations section of our website.
And with that, I'll turn it over to Jamie.

Jayme Mendal

Thank you, Brindley, and thank you all for joining us today.
The state of ever is as strong as it's ever been thanks to remarkable progress made by the team over the last year in an improving auto insurance market.
The ever quote exiting 2024 would be almost unrecognizable to the ever quote which entered the year.
Thanks to rapidly accelerated growth, improved operational efficiency, and a strengthened balance sheet.
In 2024, we grew revenue by 74% to cross the $500 million dollar mark for the first time, and we grew adjusted Eat to nearly $60 million.
We entered 2025 with over $100 million of cash on the balance sheet and no debt.
In 2024, our unwavering support of carriers and agents helped them emerge from the auto insurance downturn.
Many enterprise carriers ramped marketplace participation over the course of the year, contributing to carrier growth in our business over 200% year over year.
Our local agent business also accelerated over the course of the year, despite a challenging start in Q1 to achieve 65% year over year growth in Q4, and we continue to build deeper ties with local agents.
Our customer relationships have never been better and consequently, we have a strong foundation for sustained and balanced growth moving forward.
Our ability to support customers' return to growth was enabled by strength in our traffic operations.
Our customer acquisition teams continue to demonstrate a remarkable ability to execute in a dynamic environment.
Last year's traffic landscape moved fast and became more competitive, as carriers often made sudden and significant changes to their marketing budgets and as the industry prepared for a now vacated FCC rule.
Against this backdrop, our team grew consumer volume by nearly 20% year over year in Q4 at healthy margins. They did so through operational rigor, focused growth initiatives, and continued refinement and improvement of our AI powered bidding solution.
On the technology front, we made great strides, advancing towards more modernized and simplified platforms across all facets of the business.
Advances in our tech stack are enabling faster development of a better and broader suite of products for customers moving forward, as experienced with recent releases of new agent and site features.
In our technology and beyond, we continue placing heavy emphasis on efficiency, investing in automation and AI tools throughout the business.
The impact of this can be seen in the immense operating leverage achieved over the last year, and we have more room to run.
With the strong recovery of our business, we are taking the opportunity to make investments in our team and our culture.
In the last year we ramped hiring in a highly disciplined way, focusing mostly on high leveraged technical roles.
We also implemented a return to office policy and upgraded our offices into new space to enhance in-person collaboration.
We remain extremely committed to strengthening our team and culture and ensuring E is a highly desirable place to work.
As we look to the future, I'll first share some perspective on the current landscape in which we operate, beginning with the auto insurance market.
I believe we've returned to broad-based healthy underwriting profitability.
While several states and carriers continue to lag, most carriers have restored campaigns with wide geographical footprints and healthy budgets.
The homeowners insurance market, whose recovery has lagged that of auto, is also beginning to see a return to healthy underlying combined ratios, which bodes well for growing carrier demand in the year to come.
The regulatory landscape was another prominent dynamic in 2024.
We spent much of the last year preparing to implement changes in response to a new FCC rule which the industry has referred to as 1 to 1 consent.
After we implemented the requisite changes, the courts vacated the rule, reverting the industry back to its pre-1 to 1 consent state.
While many others have rolled back changes entirely, we decided to keep certain changes in place where they benefit our customers and advance our strategy.
Looking ahead, based on the current administration's regulatory posture, we believe that the 1 to 1 consent requirement is behind us for the foreseeable future.
This favorable market backdrop aligns nicely with ever sharpened strategy.
Over the last year, we have refocused and clarified our vision to become the number one growth partner to PNC insurance providers by efficiently delivering one better performing referrals.
2 bigger traffic scale.
And 3, a broader suite of products and services.
We oriented our 2025 planning to advance this strategy and expect to make significant progress across all fronts in the upcoming year.
As we enter 2025, I can confidently say that not only did we weather the worst hard market in US auto insurance history, but we have emerged from the downturn with record performance and all the ingredients for sustained, strong, profitable growth in the years to come.
We have sharpened our focus on PNC, allowing us to more fully serve the needs of this increasingly healthy and growth-oriented market.
Our execution has been improving quarter after quarter with a team that is capable, hardened, and hungry.
Our teams and technology platforms have been streamlined, contributing to our efficiency and enabling us to move faster in supporting insurance providers' growth moving forward.
I'm incredibly proud of what the team has accomplished over the last year and look forward to carrying the momentum into 2025.
I'll now turn the call over to Joseph to discuss our financial results.

Joseph Sanborn

Thank you, Jamie, and thank you all for joining.
I will start by discussing our financial results for the 4th quarter in full year 2024 before providing an update on what we are currently seeing in the auto insurance sector and our guidance for the 1st quarter of 2025.
Our strong momentum continued into Q4 as we again exceeded guidance across all three of our primary financial metrics total revenue, variable marketing dollars, or VMD, and adjusted EBETA. We achieved a record level of revenue and net income, as well as a record level of adjusted EBITDA.
These impressive financial results were due to three primary factors. First, we continue to experience strong execution from our operating teams who emerge from the auto carrier downturn, battle hardened and laser focused on helping our PNC carriers and agents grow profitably.
Second, we benefited from investments in our technology platforms that allowed us to better leverage our data assets and drive incremental operating efficiencies.
And finally, our strategic focus on the P&C industry has created significant operating leverage in our model and positioned us to benefit from an increasingly favorable auto carrier landscape.
Total revenues in the fourth quarter grew to $147.5 million, up 165% from the prior year period and also increasing 2% sequentially, a deviation from our normal seasonal pattern of Q4 declining sequentially from the third quarter.
Revenue growth was primarily driven by stronger enterprise carriers spent, which was up nearly 500% in the comparable period last year. Our agency operations also grew 65% year by year in Q4.
Revenue from our auto insurance vertical is $135.9 million in Q4, up over 200% year over year.
For the full year, revenue from our auto insurance vertical grew 96% to $446 million. Revenue from our home and renters' insurance vertical was $11.3 million in Q4, up 15% year over year. For the full year, we drove record revenue on our home and renters insurance vertical of $52 million up approximately 27% year over year.
VMD increased to $44 million for the fourth quarter, up approximately 113% from the prior year period.
Full year VMD increased to $155.2 million, up 55% from 2023.
Variable marketing margin or VMM, which is BMD as a percentage of revenue, was 31% for the full year and as expected, moderated as we progress through the period ending at 29.9% for the fourth quarter.
Turning to operating expenses and the bottom line, we continue to be disciplined and managing expenses and leveraging investments in our technology platform.
We have been successful in driving incremental efficiency across our operations, which is expanding our operating leverage as we scale and drive top line growth.
In the fourth quarter, we reported record net income of $12.3 million. For the full year, net income increased to $32.2 million compared to a loss of $51.3 million in 2023.
A just the Dow was also a record $18.9 million in Q4, an improvement from a loss of 900,000 in the prior year period.
Adjusted as a percentage of revenues remained at approximately 13% in the quarter as we continue to benefit from our strong offering leverage and higher VMD flowed through to adjusted.
For the full year, adjusted IBITDA increased to $58.2 million compared to an adjusted IBITDA of 500,000 in 2023.
We delivered strong operating cash flow of 20.1 million for the fourth quarter.
Ending the year with no debt in cash and cash equivalents of $102.1 million, up from $38 million at the end of 2023.
Cash operating expenses, which excludes advertising spend and certain non-cash and other one-time chargers were $25.1 million in Q4, unchanged from the previous quarter.
Before turning to guidance, I want to provide an update on our current outlook for the auto insurance industry.
We believe that the long term thesis of insurance advertising spend shifting to digital channels remains firmly intact.
And remain optimistic that the benefits we are seeing from the auto insurance recovery will continue this year.
With auto premiums up over 40% since the beginning of 2022, we believe that auto carriers have largely achieved underwriting profitability and are broadly focused on growth, with digital channels representing a preferred avenue given the ability to more specifically target desired consumers.
At the same time, the rate of increase in auto insurance premiums are forecasted to return to more normalized levels in 2025, which we expect will lead to our revenue growth rates also normalizing after the first quarter.
Now turning to guidance for the 1st quarter of 2025.
We expect revenue to be between $155 million and $160 million representing 73% year by year growth at the midpoint.
We expect VND to be between $44 and $46 million, representing 46% year to year growth at the midpoint.
And we expected just to be between $19 and $21 million, representing 163% year by year growth at the midpoint.
We also want to share an update with you on our investment plans for 2025.
Last fall we outlined that once we had addressed the anticipated operational complexities associated with transitioning our operations to conform to 1 to 1 consent requirements, we plan to increase investment in our technology and data assets in the second half of 2025 to position for long-term growth.
As a result of the 11th Circuit's decision to terminate this regulatory change in late January, we have already started redeploying capacity and management attention to focusing on accelerating investment in key strategic areas.
This includes leveraging AI capabilities to improve existing offerings, develop new products for our insurance providers, and drive greater operational efficiencies across our entire organization.
We believe these key investments are essential to building a more powerful competitive mode and positioning ever for strong future revenue growth with expanding profitability.
As we make these investments, we will continue to be disciplined in balancing incremental operating expenses to generate adjusted even down margins at or near current levels.
In summary, we delivered an outstanding 2024 and continued to drive record results across all of our key financial metrics in the fourth quarter.
We emerge from the auto insurance downturn as a stronger company with a refocused strategy, efficient cost structure, and a leading market position.
As we look into 2025, we are very excited about our ability to continue to leverage our traffic expertise, data assets, and technology to support our insurance providers in successfully growing their business. Before turning to Q&A, we want to take a moment to thank our team for their hard work and dedication this year and for our shareholders for their continued support. Management remains laser focused on driving growth, profits, and long term shareholder value. Jamie and I will now take your questions.

Question and Answer Session

Operator

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, (Operator Instructions)
Michael Graham from Canaccord Genuity.

Michael Graham

Thank you and congrats on the awesome quarter.
Just wanted to ask two questions. First, on your guidance. I know you referenced, pre premium growth kind of slowing down. I think I saw some stuff that. The market was expecting sort of 8% growth in in premiums, relative to 17% last year, and you sort of referenced, after really strong growth in Q1, you expect growth to slow down a little bit in the balance of the year. Can you just spend a moment maybe just trying to help us understand what a framework, where we should think about you guys growing relative to the overall premium, market, and then I have a follow up after that. Thanks.

Joseph Sanborn

Thanks Mike for the question. So just giving you context on the environment, so I guess the comments you're referring to on our script gave the backdrop of we've had 40% plus growth for the carriers and auto insurances between 2022 through the end of last year, providing a very healthy backdrop for the. Where carriers are getting to underwriting profitability generally speaking and getting stability broadly in a broad geographical we think to this year, the context last year. Last year we had 74% growth, which obviously extraordinary top line growth.
We see that continuing to 1 if you look at the midpoint of our guide. What we see is as we start to look through the last 3 quarters of the year, we'll see some, we'll see normalization of our of our growth rate and how exactly that plays out. I'd probably look to two things. One is say normalizing, does it sort of average more towards our long term growth for the last 3 quarters of the year be one thing. And the second thing we'd look to is the seasonal pattern.
And as we've talked about in the past, the seasonal pattern is never perfect and ever quote given this various things can happen in the broader macro sense that impact it. But what, but that being said, it is. A tool we use here internally and we've shared it with you and other analysts, which is as follows, which is 1 as you start the year tends to be from Q1 to Q2, usually have a sequential decline, single digit percent, low single digit percent. Q3 tends to be sequentially up, mid to high single digits, and Q4 tends to be down sort of you know mid single digits. So I think about that normalized growth rate for the rest of the year on average overlay with that seasonal pattern to give you a sense of top line top line.

Michael Graham

Okay, that's helpful, Joseph.
Thank you. And then the other one I just wanted to ask is on your traffic operations. You you referenced, kind of the ability to scale traffic a few times. You referenced some investments there. I just wonder if you could add a layer of depth around some of the things that are working for you there.

Jayme Mendal

Yeah, so there's a number of things. First, I just point to the team's operational rigor is like continued to get better and better over the course of, the volatility that the market's experienced over the last couple of years where we've had to, react to changes quite often, and I think we've developed, a set of sort of operating norms that allow us to really manage the business tightly in a dynamic environment like that.
Number 2, Mike is, the traffic bidding platform. So we have this this ML-based traffic bidding platform that we've talked about before that we've been kind of building out over the course of the last couple of years.
This has really automated and made more effective a lot of our traffic bidding.
And that just continues to get tuned and improved with more data and more work with every passing quarter. And so that's been a big part of the team's success. Beyond that, it's just continuing to expand channels, partners where we see opportunities to continue to grow and as monetization has come back into the marketplace, it has unlocked channels that for a period of time, were less profitable for us.

Michael Graham

Okay. Thank you, Jamie.

Joseph Sanborn

Thanks.

Operator

Cory Carpenter from JP Morgan.

Cory Carpenter

So, good afternoon. You made a comment in the prepared remarks about maintaining some of the one on one consent changes despite the order being stages, hoping you could kind of elaborate on that and the rationale and then maybe Joseph for you relatedly just now that that one on one consent was stayed but you're still maintaining some of it just how should we think about the impact that's going to have on financials relative to what you kind of framed last quarter for us.

Jayme Mendal

Thank you.
Yeah, thanks, Corey.
I'll take the first part of the question.
So, the whole A lot of the changes related to 1 to 1 consent were really about putting the consumer, giving the consumer a bit more control over the outreach that they receive. The net result of that is, really higher quality connections from the perspective. Of the agents. So if they now win the lead and the agents and the consumer's opted in more explicitly and or hasn't, there's less competition on that consumer, the performance of that lead is going to be higher and it's a better consumer experience. So there's an aspect of it which is really a win-win for both sides of the marketplace.
That you sort of take a step back, ever quotes strategy, we have a leading position with local agents in the market. We've been investing in extending that leadership position and a big part of that is not only being the largest but also providing the highest quality product to the customer.
And so some of the changes that we implemented through the 1 to 1 consent testing enabled us to really improve the quality of the product we were delivering to the agent. And we were able to optimize it to a point where, we were able to do so with minimal or sort of tolerable trade-off to our economics. And so where we found these sort of win-win kind of pockets of changes that we implemented, we have decided to leave them in place and continue to build around them in, sort of very much in line with with our strategy.

Joseph Sanborn

I'll just a little bit on BM BMM percentage for you. So, just give some context, Q4 was just under 30%. We said things would go to the high 20s and we just came into that in Q4 a little over 29.5%. If you look for our guide for Q1, it implies sort of 28, 20 to 29% range sort of mid-2028.5. So if you look at the impact of what Jamie just described of keeping some of the 1 to 1 in place. As we continue going forward, we see there's an opportunity to do that. It's sort of a modest impact to our margin and also looking at how do we bring, quality more broadly into our traffic operations so we think about building stronger long-term relations with clients. The net impact of that is we'd say VMM margin, sort of assuming instead of in the high 20s, for as we go past this quarter, 28 to 29 now so it stays in the high 20s as we look out for the rest of the year as our current view.

Operator

Zach Cummins from B. Riley Securities.

Jayme Mendal

Yeah, hi.

Zach Cummins

Good afternoon, Jamie and Joseph. Congrats on the strong results.
Just double clicking a little more on the vacation of of the SEC 1 to 1 consent rule, acknowledging that you're keeping some of the standards in place. I was just curious of some of the feedback that you've been getting from carriers from from my understanding, some carriers are still wanting to maintain some of those standards even with the ruling being vacated.

Jayme Mendal

So that's not accurate, Zach.
The majority of the carriers, the requirement that the carriers have put out is that Their partners, their providers remain in compliance with the laws. We've had no major carriers TRY and impose anything beyond that.
I do think there are, as we have concluded, I think some of the agents and probably some of the carriers saw through through the data, the limited data they had or some of the testing data late last year that you know you can generate a higher quality lead product by implementing some of the 1 to 1 consent sort of mechanisms that folks rolled out. And so I think there is interest and appetite.
Both from the agents and from the carriers themselves to continue to receive this higher quality product and benefit from it, and there's some willingness to pay for it too. And so this is kind of the path that we've chosen to follow is to maintain some of these changes in effect, maintain some of the sort of pricing increase that has come along with the higher performing, higher quality product. And and just move forward, with the requirements or without, at least on portions of portions of our traffic.

Zach Cummins

Understood that's that's helpful and just my one follow up question is.
Can you speak to the feedback you've been getting from just the broader set of carriers as they go into 2025 seems like underlying profitability is is better across the board here. So just curious of what you're hearing from maybe the enterprise side of the business versus maybe some of the agent li channels.

Jayme Mendal

Yeah, I would say that it's somewhat consistent, for the first time, I think the agent led channels and the enterprise, the direct carriers are kind of converging.
My sense is we've returned to broad-based healthy underwriting profitability. There will, there are a handful of states, a handful of carriers, a small handful that are that are lagging. But most are really back to a pretty wide geographical footprint, healthy budgets and auto, even homeowners, which was lagging on for a bit. If you look at some of the latest prints, you're seeing a return to healthy underlying combined ratios and home as well.
So I think by and large the orientation is swinging heavily towards growth. I think we've seen.
The sort of profitability box checked across, much of the market, and now the focus is back on growth.
Understood. Well.

Zach Cummins

Thanks for taking my questions and best of luck with the rest of the quarter.

Jayme Mendal

Thanks, Zach.
Thank you.

Operator

Next question comes from the line of Mayananon with Needham and Co. Your line is open.
Thank you. Good evening. Congrats Jamie and Joseph on the quarter. Well done. I wanted to just get a little bit more of an understanding in terms of the underlying drivers. So could you unpack the growth between traffic and RPQR and just would be curious to hear your thoughts on monetization. What is driving the growth there? Is it more bundling and or is it more like like pricing, any sort of details you can provide on some of the underlying drivers behind the growth?

Jayme Mendal

So you know I think it's been a balanced growth story over the last year. So we've we've benefited from growth both in our in our consumer volume as well as in monetization.
I think you know if you had to sort of look at the scale between the two, the balance would tip a bit in favor of monetization, but we had, double digit consumer volume growth in 2024 across auto and home. So it's being really driven by both of those things and you know there's a compounding effect when you have both volume and monetization growing and that's how you get the kind of growth that we produced last year, 70-80% growth.
Got it. That's helpful color. And then maybe I'll switch over to the balance sheet. Obviously the balance sheets in very healthy shape. So any thoughts, Joseph, around your capital allocation? I know you've done M&A in the past, what is your thought process around potential acquisitions and use of cash?

Joseph Sanborn

Sure, thanks for the question. So when you look at the balance sheet, obviously put it in context, we're pleased we're the end of the year $102 million in cash, up from about $38 million the year before. So I think it speaks to the progress in the business in driving cash flow and the leverage we've created in the model. So we're pleased with that. If we think about, how that impacts our our investment and use of capital. That's why I touch on three areas for you.
So first, to think of organic investment that we're doing in the business, as we start to think about the types of. As we do, we're starting to adopt, sort of a medium and longer term time horizon. When you have cash in the balance sheet, you can start to think in several quarters about how we investments and how we can make significant investments in things, especially in our technology platforms that will help really build our competitive mode over time. So that'd be the first and important one I'd highlight. The second one I'd highlight is on acquisitions. I think you touched on it. We have.
Seeing more interest in M&A opportunities coming to us, I think we'll continue to see that for us it's very much guided by the strategy though that we have, which is we are focused on the PNC market as we've mentioned in our prior comments and we were together in January, Mike, that. We did a long term update of our strategy last summer. It was very much focused on validating our efforts around PNC, and we'll, we believe we'll stay focused to those areas, and we'll also have the discipline on the financial side as we look at acquisitions they're very much looking at they creative on the financial side of the driving cash flow. So that criteria will continue to exist.
No immediate plans, but obviously we'll continue to look at opportunities and we expect to see more as we progress through the year. And I guess the third area I'd say more broadly is how do we think about building shareholder value in other categories and things like buybacks could make sense at some point as well. Obviously we're mindful of balancing buybacks with how it impacts our public float, etc. But certainly that'd be another levelver we can look at as well. And as we progress through this year, I think you'll see us talking more about how we'll think about capital investment and allocation over the medium time horizon.
Got it. Good position to be in though. Congrats again.
Thank you. Thanks.
Thank you.

Operator

Jed Kelly from Oppenheimer.

Jed Kelly

Hey, great, thanks for taking my question and and great job, awesome year. Just kind of going back to, I think it was to Mike's question, Joseph, talking about kind of the balance of the year and you kind of get to that normal seasonal cadence kind of implies like the year over year growth rate in the in the back half kind of.
I don't know, is is high, maybe low double digits is that the right way to think about it, or you kind of expect this market to continue to grow and then just I guess there's a question for Jamie strategically and maybe following up on the last question, as you kind of, 100/100 million dollars in cash now.
How do you think about making the business maybe less volatile as we kind of exit this period where the industry is just over earning? Thanks.

Joseph Sanborn

Sure, so I'll start with, so thanks, Jeff for the question. So I'll start with, your first one, which is on how do we think about growth over the balance of the year and back end versus the start of the year. And so I'm not going to get too into specifics, we are giving guidance for Q1 and not for the year and so, and I think, I guess I'll say at a high level is we feel it's a healthy industry.
We feel it's a favorable environment for us and we think digital channels will continue to be a preferred approach for carers as they come back in growth mode, given the ability to target customers, right? The reason we're not giving specifics is, there's, we think there's sort of puts and tanks in terms of how the carriers will come out of recovery.
Some states can come on faster, some could come slower. California being the big wildcard right now, how carriers make incremental moves, etc. So those are things that will factor into how the orders actually play out in practice. The guidance we TRY to give you is, as we think about the balance for the rest of the year, we said to Mike is, it sort of normalizes towards our long term growth rate on average. Maybe some quarters are higher, some quarters are lower, we would expect.
And also consider where you are in the comps, the back half of your, as you point out, you have some comps that are much stronger like Q4 of 2024 was seasonally high. It actually was up from Q3. Normally it'd be down, so that may result in, mathematically a lower year on year comp there.
So those are the things I would think about, but I can't give you more specificity than that given we're not giving guidance for the full year.

Jayme Mendal

Yeah, to your question about I guess stability, I think there's there's an element.
There's an aspect of this which is we've gone through 2022 to 2023. I mean this is like literally a historic period of volatility for the industry. If you look back before that, the business was quite a bit more stable, and we would expect things to sort of normalize. So I think you know the aberration that was 2022 and 2023 is not likely to sort of persist in perpetuity. Now that being said, I think there's some lessons learned and we have to take action to ensure that we've got the stability we need to kind of build this thing for the long term.
So to that end, I probably point to a couple of things. The first is, strategy contemplates going deeper in PNC, and so we want to be the number one growth partner to PNC insurance providers, and that can mean, a number of different things, but part of that is getting beyond kind of the.
You know the concentration in auto insurance legion right to begin to build out some of the non-auto verticals, so continuing to grow the homeowners vertical, and then within the P&C umbrella, I think you've got customers sort of asking or trying to pull out of us additional products from a vertical standpoint, whether that's you know some of the more ancillary products like A motorcycle or boat or RVs or it could be small business commercial, but I think you'll start to see us begin to kind of broaden the portfolio in the sort of along the vertical axis.
And then you know we are going to continue to invest in more products and services that that enable us to go deeper with our existing customers using the tech and data advantage that we have and our goal is to become the indispensable growth partner to these carriers. A good example of this that you know where we're sort of coming along now is in the agency business.
We used to primarily just sell leads to agents. Now we have a broader suite of offerings for these agents. We're building stickier, deeper relationships. We're kind of evolving from more of a transactional vendor to a much more strategic partner, and that's that's the direction that we're headed, right? So. I think if we if we just execute the strategy as is, hopefully we'll have a stable market for years to come, but the next time we, encounter a period of instability, I think the composition of the business will look sufficiently different that we'll we'll be able to get through it with less volatility the next time around.

Jed Kelly

Thank you, very helpful.

Operator

Ralph Schackart from William Blair.

Ralph Schackart

Good evening. Thanks for taking the question. First, Jamie, just on the products that you're contemplating this year, maybe some more color you can provide just in terms of how we should think about it, both from your carrier partners side as well as the consumer side and you know how you see the quick advancements in AI or Gen AI augmenting your. Approach and then Joseph, just a clarifying question, I think in the script or Q&A you talked about even being near current levels for 2025. Is that I'm assuming on a percentage basis and should that be fairly consistent through the year, or are you talking more about, a 2025 level?
Thank you.

Jayme Mendal

Sure, so Ralph, with respect to your first question on sort of like products, I touched on a couple of them. I think there's, from the consumer lens, it's beginning to sort of contemplate further investment in our non-auto verticals, as we look at the carriers.
A lot of our efforts right now are focused on using AI machine learning to help carriers bid more efficiently into the marketplace. We have a tremendous amount of data that's proprietary to ever quote about consumers, historical shopping behavior that we can use to help carriers bid more effectively. And a lot of carriers are now beginning to actually turn over their bidding process to us through these smart bidding solutions that we're offering.
And you know that's an area that we'll continue to invest in this year. With agents, there's an aspect of it which is also related to bidding and help agents bidding for traffic a bit more effectively, but it's a bit broader with the agents. Like the agent has to do a lot of different things to grow their business. And so, we're delivering them leads. We're beginning to package some value add services around those leads, introduce new products sort of ancillary to the lead product. And so the vision there is to really be this one stop growth shop for the locallation.

Joseph Sanborn

And with regards to your question, you down margins, let me give a little context, Ralph. So you If you look at what we've done with Eva Martins over the past year, if you go back to our, we were doing this call a year ago, you would say if you look in the rearview mirror we had negative Eva margins. So over the course of last year we went from 0 to adding the year we added an average 11.6% on 2024 for the down margin. You know Q3 was 13%. Q4 was a little under that 12.8%. So I think we had a lot of progress in the down margins. As we look to this year, you look at Q1, our guide sort of implies 12.5% or so, give or take at the midpoint.
And so as we look forward to this year, we're saying, hey, assume we'll keep either down margins at a current levels for the rest of this year. And as we think about the second half of the year in our prepared remarks, we talked about investment plans the second half of the year.
And so we see just to give some context that we talked about investment plans in our in the fall and our November call saying once we got through FCC, we expected to start making investments in the second half of 25 to really start focusing on building our longer term advantage further, particularly on the technology side, investments in AI.
And now that we have the FCC behind us, faster than we initially expected, and we're now shifting to those plans now. So we think we'll expect to add more investment to get to the back half of the year, but we'll still be disciplined in doing it and that will be how we think about balancing against the ops with maintaining, even down margins at any other current levels. And obviously if you look at context where we ended last year, the average of 11.6% was twice what we ever achieved. At our peak during downturn levels, we've made good progress and we'll continue to make good progress and just the guidance for this year is sort of, keeping maintaining those levels through the year. Obviously there'll be some, it won't be perfect, I would say quarter to quarter as you have seasonality, you'll see some fluctuation I would expect quarter to quarter.

Ralph Schackart

Okay, that's helpful. Thanks, Jane.

Joseph Sanborn

Thank you, Ralph, appreciate it.

Operator

Jason Kreyer from Craig Hallum

Jason Kreyer

Great, thank you guys. I'm just wondering if you can maybe bifurcate your outlook across you know the local agent versus the the direct market, especially now that TCPA has been vacated and I think with that like a lot of the bigger captives didn't grow as rapidly as some of the other carriers last year so just curious if if you think that can be a bigger growth profile this year for your agent.

Joseph Sanborn

Business.

Jayme Mendal

Jason.
It's a good question.
So you know over the last couple of years, I think you saw the direct carriers kind of pull back quicker and then re-engage sooner as well, but we have started to see the local, the agent-based carriers kind of restoring profitability and restoring more support for agents and encouraging agents' growth as we sort of exited last year and turn the corner into this year.
So I think the Like I said earlier, there's been a bit of a convergence. I think all carriers now, or you say for a few exceptions, are generally growth minded. That includes the captive agent-based carriers and the direct carriers.
We've both of these businesses really accelerated over the course of last year, the direct business and the local agent business, and so they're both entering this year from a position of strength, and I would expect both to to generate healthy growth again this year.
With respect to the local agent piece, I think the interesting thing there is that we've got a kind of Multiple shots on goal in terms of driving growth, right? It's not just like it used to be. You're really primarily just focused on leads and leads kind of, we need to generate more traffic to drive more growth. I think as we begin expanding into some of these ancillary products and services, you've got multiple dimensions with which to grow the agent base, and that'll be an evolution over the course of the next couple of years as we continue to sort of develop, shift, and scale these products.

Jason Kreyer

And then maybe just to follow up as you were talking about kind of leads and traffic. I'm just curious from a VMM perspective, if there are I'm sorry, if there are external factors as you go across 2025 we've started to hear maybe like more media owners investing in traffic acquisitions. So could that be at least a modest tailwind to VMM as the year scales?

Joseph Sanborn

If you look at the traffic landscape, obviously, it certainly does, it certainly has a direct impact on our VMM percentage. I guess I wouldn't point any one specific thing that would be sort of positive or negative, as we've seen progressing through last year. There's puts and takes that happen in any given quarter, and so what you described could be a positive. It can be something else on the other side that kind of balances. So you know when we thought about our planning here internally and the comment I gave earlier in the Q&A was, if you think about VMM margin for the year, you see where we are in Q3, Q1 guidance, which is.
28 29%. You think that's, the high 20s is probably the zone because we think about the rest of the year driven by the two things we've been doing. One is maintaining that ex exclusive 1 to 1 traffic for select agents who see the value in that premium traffic. And second, more broadly investing quality as we think about how to build a longer term relationship with our clients and quality is a part of it. So how that factors out certainly what you described could be a could be a benefit, other things may counterbalance and we'll see as the year progresses.
Great, thanks guys.
Thank you, Jason.

Operator

Greg Peters from Raymond James

Greg Peters

Hey, thanks for taking my question. This is Mitch Rubin on behalf of Greg Peters. Congratulations on the excellent results. My question today on free cash flow. Could you give some color on your outlet for 2025? Any headwinds or other moving parts you could go over?

Joseph Sanborn

Sure, so just in our model as we've talked about since we exited our health business in 203 and our broader strategic realignment, JessBat is a good proxy for operating cash flow in the business, and you saw, if you look through, 2024, quarter by quarter you had a pretty good conversion for Jessievaat operating cash flow. The wildcard that goes slightly above 100% or slightly below 100%.
Really, working is collection on payables from carriers versus when we pay out our own receivables and cars when we do our own payables, but except that minor fluctuation, it's a very good proxy for operating cash flow. In 24 we expect to continue to be in 25.
As we think more broadly, taxes will become a consideration as we go further out. But for this year, taxes are relatively modest. Last year they were like 5%, so pretty modest overall in terms of our business and As you think about the back cap this year, we're still doing that as we progress through this year, maybe it becomes high single digits, so not a meaningful impact on that working capital adjustment I described for 2025. So goes to 26, we'll talk more about tax as we get further into we're doing work on it now.
But again, is a very good proxy for operating cash flow and that will continue.

Greg Peters

Thank you, that's very helpful. And my follow up is how do you see the delay of the FCC rule change impacting your expenses?

Joseph Sanborn

So on the, so maybe I'll talk about. You're talking to cash operating expenses or are you referring to sort of our traffic costs?

Greg Peters

Yeah, the cash operating expenses.

Joseph Sanborn

Yeah, so I'd say cash operating expenses really not an impact, if you look in Q3, cash operating expenses are around $25 million Q4, they're around $25 million unchanged.
If you look at what's implied by our guidance for Q1, they'll generally be in that that zone, maybe moving up a bit as we get into queue two, we expect to move up a bit with you have cost for start of the year and benefits and things flowing through. And I think the back half of the year we expect incremental cash operating expenses from those levels, but as we invest in new areas of technology to build our advantage longer term, as I referenced in my prepared remarks. We're going to be disciplined in how we do that such that we continue to sort of maintain that margin at a near current level, so that you know 12 13% level.
And so as you think about what that means for how much they'll grow in the second half of the year, the wild card is how we see revenue growth in BMD precisely come through. But we'll see incremental expenses in the second half, but again it'll be guided by making sure we're also trying to maintain that adjust the down margin as we progress through the year.
Thank you so much for the responses.
Thank you, Mitch.

Operator

This now concludes our call for today. I will turn it back to management for closing remarks.

Jayme Mendal

Great. Well, thanks everyone for taking the time with us this evening. For those of you who have been following us for a while, I hope and I certainly think you'll appreciate that this last year really punctuated the completion of a multi-year transformation of the business.
I started out at the top by sharing that every quote entering this year would be virtually unrecognizable to every quote from a couple of years ago.
And bring this to life. I'll just share a few data points.
We exited last year with close to half the headcount with which we started in 2023, so we cut headcount by nearly half, and you know expenses as well. We grew while doing that, we grew by 70+% year over year last year to across the half a billion dollars dollar revenue milestone for the first time.
That enabled us to go from breaking even roughly on an adjusted basis to nearly $60 million of adjusted Et last year, with great cash flow with positive net income, and as a result, we went from a relatively modest balance sheet to $100 million now on the balance sheet with no debt.
So the state of the business is strong, and this is the quote of the future. It's a company that's focused on helping customers win, on profitable growth, on building the best team in the industry by far, on leading the insurance industry and developing technology and AI solutions to help providers grow in the digital age. So this is really the beginning of our next chapter, and we appreciate your interest in being along for the ride. Thanks.

Operator

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