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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.

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, health, property, and future. Our vision is to become the largest online source of insurance policies by using data, technology and knowledgeable advisors 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 attract and connect with consumers 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. In addition to our marketplace, we operate a direct to consumer, or DTC, insurance agency. Our DTC agents bind policies for consumers, further streamlining the consumer shopping experience. Our services are free for consumers, and we derive our revenue from sales of consumer referrals to insurance providers and directly from commissions on sales of policies.

Insurance providers, which we view as including carriers, our own DTC agents, and third-party agents, operate in a highly competitive and regulated industry and typically specialize in 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 carriers and third-party agents to evaluate the performance of their marketing spend on our platform and manage their own return on investment.

Since 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.

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

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In 2015, we launched EverQuote Pro for agents.

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

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

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In 2020, we launched our DTC insurance offerings in our life vertical and in our health vertical via the acquisition of Crosspointe Insurance & Financial Services, LLC, which we later renamed Eversurance.

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In 2021, we launched our DTC insurance offerings in our auto and home and renters verticals via the acquisition of Policy Fuel LLC and its affiliates, or PolicyFuel.

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In the years ended December 31, 2022, 2021 and 2020, our total revenue was $404.1 million, $418.5 million and $346.9 million, respectively, representing a year-over-year decrease of 3.4% from 2021 to 2022 and a year-over-year increase of 20.6% from 2020 to 2021. We had net losses of $24.4 million, $19.4 million and $11.2 million for the years ended December 31, 2022, 2021 and 2020, respectively, and had $5.9 million, $14.6 million and $18.4 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

Uncertainty remains as to the duration and severity of business disruptions related to the COVID-19 pandemic, as well as with respect to the full impact of the pandemic on the global economy and consumer confidence. As a result, we are unable to accurately predict the full impact that COVID-19 will have on our insurance provider customers or our users, or on our operating results, financial condition, liquidity and cash flows. To support the health and well-being of our employees, customers, partners and communities, a majority of our employees continue to work remotely, however our offices are open for use. While disruptions related to COVID-19 have not had a material adverse impact on our financial results through December 31, 2022, 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. More recently, and specifically starting in the third quarter of 2021, the auto insurance industry has experienced similar challenges, which is impacting our financial performance in the auto insurance vertical. Auto insurance carriers experienced a sudden rise in the severity of claims caused by inflationary increases in the cost to repair and replace vehicles and settle medical and injury claims. The increase in claims severity has reduced underwriting performance for auto insurance carriers, causing them to implement policy premium increases and reduce spending on new customer acquisition. The reduction in new customer acquisition spending by auto insurance carriers has had a negative impact on the pricing and demand for consumer referrals in our marketplace.

The state of the auto insurance market remains dynamic. In August 2022, we began to see the first major carrier return to more normalized historical spending patterns. However, Hurricane Ian, which made landfall in Florida in September 2022, put incremental, downward pressure on carrier marketing spend. While we believe we have started to see some improvement in spending patterns, a recovery could be prolonged by further cost inflation, increased claim severity and frequency, or insufficient policy premium increases.

Expanding consumer traffic

Our success depends in part on the growth of our consumer traffic. We have historically increased consumer traffic to our marketplace by expanding existing advertising channels and adding new channels such as by engaging with consumers through our verified partner network. 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, if we believe the revenue associated with such consumer traffic does not result in incremental profit to our business. We have also increased the number of quote requests acquired from our verified partner network. While we plan to continue to increase the number of quote requests we acquire from our verified partner network, our ability to acquire quote requests in significant volume, at prices that are attractive, and that represent high-intent shoppers that insurance providers will purchase referrals for will impact our profitability.

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. Historically, we have generally expanded both the number of insurance providers and the spend per provider on our platform.

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Key Business Metrics

We regularly review a number of metrics, including 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.

Adjusted EBITDA

We define Adjusted EBITDA as net income (loss), adjusted to exclude: stock-based compensation expense, depreciation and amortization expense, acquisition-related costs, one-time severance charges, 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”.

Variable Marketing Margin

We define variable marketing margin, or VMM, as revenue, as reported in our consolidated statements of operations and comprehensive loss, less advertising costs (a component of sales and marketing expense, as reported in our consolidated statements of operations and comprehensive 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.

Key Components of Our Results of Operations

Revenue

We generate our revenue primarily 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 recognize revenue from consumer referrals at the time of delivery. We support three secure consumer referral formats:

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

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

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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 also generate revenue from commissions paid to us by insurance carriers for the sale of policies, primarily in our health and automotive verticals. Commission revenue represented approximately 13% of total revenue in the year ended December 31, 2022, and less than 10% of total revenue in the years ended December 31, 2021 and 2020. Commission revenue is recognized upon satisfaction of our performance obligation, which we consider to be submission of the policy application to the insurance carrier. We recognize revenue based on our constrained estimate of commission payments we expect to receive over the lifetime of the policies sold, which we refer to as constrained lifetime values, or constrained LTVs, of commission payments.

For the periods presented, our total revenue consisted of revenue generated from our automotive and other insurance verticals, which includes home and renters, life and health insurance verticals, as follows:

Year Ended December 31,

(in thousands)

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We expect an overall increase in revenue in 2023 as we anticipate increased spending from our carrier partners. We expect revenue to fluctuate from quarter to quarter and, in particular, for our commission revenue to be positively impacted during the open and annual enrollment periods in our health vertical.

Cost and Operating Expenses

Our cost and operating expenses consist of cost of revenue, sales and marketing, research and development, general and administrative expenses and acquisition-related costs.

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, including the cost of quote requests we acquire from our verified partner network, 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. In the longer term, we expect sales and marketing expense to decrease as a percentage of revenue due to efficiencies of scale and improvements in our marketplace technology.

Research and Development

Research and development expense consists 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 expense will increase as we continue to enhance and expand our platform technology.

General and Administrative

General and administrative expense consists 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 that general and administrative expense will increase in the near term due primarily to increases in personnel-related costs.

Acquisition-related

Acquisition-related costs include expenses associated with third-party professional services we utilize for the evaluation and execution of acquisitions as well as changes in the fair value of our contingent consideration liabilities recorded as the result of our Eversurance and PolicyFuel acquisitions.

Other Income (Expense)

Other income (expense) consists of interest income and other income (expense). Interest income consists of interest earned on invested cash balances. Other income (expense) consists of miscellaneous income (expense) unrelated to our core operations.

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Income Taxes

Income tax expense is based on our estimate of taxable income, applicable income tax rates, net research and development tax credits, net operating loss carrybacks, changes in valuation allowance estimates and deferred income taxes.

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; one-time severance charges; 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:

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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;

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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;

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adjusted EBITDA excludes acquisition-related costs that affect cash available to us and the change in fair value of non-cash contingent consideration;

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adjusted EBITDA excludes severance charges incurred and paid in the fourth quarter of 2021 related to our reduction in non-marketing operating expenses that affected cash available to us;

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

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

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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.

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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:

Year Ended December 31,

(in thousands)

Severance under a plan — 440 —

Benefit from income taxes — (2,510 ) —

Results of Operations

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

Year Ended December 31,

(in thousands)

Statement of Operations Data:

Cost and operating expenses(2):

Other income (expense):

Other income (expense), net 23 (57 ) 291

Total other income (expense), net 372 (20 ) 480

Benefit from income taxes — 2,510 —

Other Financial and Operational Data:

(1)

Comprised of revenue from the following distribution channels:

Year Ended December 31,

Indirect channels 14 % 10 % 8 %

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(2)

Includes stock-based compensation expense as follows:

Year Ended December 31,

(in thousands)

(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.

Comparison of the Years Ended December 31, 2022 and 2021

Revenue

Year Ended December 31, Change

(dollars in thousands)

Revenue decreased by $14.4 million from $418.5 million for the year ended December 31, 2021 to $404.1 million for the year ended December 31, 2022. The decrease in revenue was due to decreases of $7.9 million and $6.5 million in our other insurance and automotive verticals, respectively. The decrease in revenue from our other insurance verticals was due to a decrease of $16.9 million in carrier spend for referrals, partially offset by an increase in commission revenue of $9.1 million. The decrease in revenue from our automotive vertical was primarily due to a decrease of $21.1 million in carrier spend for referrals, partially offset by an increase in commission revenue of $14.6 million.

Cost of Revenue

Year Ended December 31, Change

(dollars in thousands)

Percentage of revenue 5.9 % 5.7 %

Cost of revenue increased slightly from $23.9 million for the year ended December 31, 2021 to $24.0 million for the year ended December 31, 2022. Cost of revenue increased primarily due to increased personnel-related costs of $1.3 million as a result of shifting call referrals from third-party call centers to employees and to increased amortization of intangible assets of $0.4 million, partially offset by decreases in technology service costs of $2.0 million, primarily due to decreased hosting costs, third-party call center costs and other technology service costs.

Sales and Marketing

Year Ended December 31, Change

(dollars in thousands)

Percentage of revenue 86.4 % 84.8 %

Sales and marketing expenses decreased by $5.7 million from $355.0 million for the year ended December 31, 2021 to $349.3 million for the year ended December 31, 2022. The decrease in sales and marketing expense was primarily due to a decrease in advertising expenditures of $13.1 million, partially offset by an increase in personnel-related costs of $5.5 million. The decrease in advertising expenditures primarily related to decreased carrier spend for referrals, which impacted our advertising expenditures. The

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increase in personnel-related costs was primarily due to an increase in headcount, a significant portion of which was in DTC agency. Agent license fees and office and occupancy costs related to DTC also increased by $0.8 million and $0.5 million, respectively.

Research and Development

Year Ended December 31, Change

(dollars in thousands)

Percentage of revenue 7.8 % 8.5 %

Research and development expenses decreased by $4.0 million from $35.7 million for the year ended December 31, 2021 to $31.7 million for the year ended December 31, 2022. The decrease in research and development expense was primarily due to a decrease in personnel-related costs of $4.1 million and a decrease in consulting costs of $0.4 million, partially offset by an increase in technology service costs of $0.8 million.

General and Administrative

Year Ended December 31, Change

(dollars in thousands)

Percentage of revenue 7.0 % 5.9 %

General and administrative expenses increased by $3.4 million from $24.7 million for the year ended December 31, 2021 to $28.1 million for the year ended December 31, 2022. The increase in general and administrative expenses was primarily due to an increase in personnel-related costs of $1.2 million, an increase in consulting fees of $0.9 million and an increase in bad debt expense of $0.7 million. Credit card fees also increased by $0.3 million.

Acquisition-related Costs

Acquisition-related costs for the years ended December 31, 2022 and 2021 were $(4.1) million and $1.1 million, respectively. We recorded a credit to acquisition-related costs for the year ended December 31, 2022 of $4.1 million related to the decrease in the fair value of our contingent consideration liabilities. The decrease was related to our future revenue forecasts and to a lesser extent, changes in market value of our Class A common stock. Acquisition-related costs for the year ended December 31, 2021 included costs for third-party professional services we utilized for the evaluation and execution of our completed acquisitions of $0.9 million and changes in the fair value of our contingent consideration liabilities recorded as the result of our acquisitions.

Other Income (Expense)

Other income (expense) included interest income of $0.3 million for the year ended December 31, 2022 as compared to less than $0.1 million for the year ended December 31, 2021, due to higher interest rates. Other income (expense), net was not significant for either of the years ended December 31, 2022 or 2021.

Income Taxes

We generated taxable income during the year ended December 31, 2022 related primarily to capitalized research and development costs due to the new requirement to capitalize research and development costs under Section 174 of the Internal Revenue Code of 1986. We offset our taxable income with net operating loss carryforwards and therefore did not record income tax expense for the year ended December 31, 2022. We recorded an income tax benefit of $2.5 million for the year ended December 31, 2021 due to the release of a portion of our valuation allowance as a result of the PolicyFuel acquisition. The net deferred tax liability recorded for the PolicyFuel acquisition primarily relates to the intangible assets recognized in purchase accounting which are non-deductible for tax purposes and result in a deferred tax liability.

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Variable Marketing Margin

Year Ended December 31, Change

(dollars in thousands)

Percentage of revenue 31.7 % 31.0 %

The decrease in variable marketing margin was due primarily to decreases in referral revenue, partially offset by increases in commission revenue.

Comparison of the Years Ended December 31, 2021 and 2020

For a discussion of our results of operations for the year ended December 31, 2021 as compared to the year ended December 31, 2020, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Comparison of the Years Ended December 31, 2021 and 2020 included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Liquidity and Capital Resources

Our principal sources of liquidity are cash and cash equivalents of $30.8 million as of December 31, 2022 and availability of up to $45.0 million under our revolving line of credit and term loan, each of which were amended in July 2022. On July 15, 2022, we entered into the Loan and Security Modification Agreement, which amended our existing Loan and Security Agreement, or the 2020 Loan Agreement, with Western Alliance Bank, or the Lender, to extend the maturity date of the revolving line of credit to July 15, 2025, to increase the revolving line of credit available thereunder from $25.0 million to $35.0 million, and to provide us with access to a term loan of up to $10.0 million. We refer to the 2020 Loan Agreement, as amended by the Loan and Security Modification Agreement, as the Amended Loan Agreement.

Pursuant to the Amended Loan Agreement, borrowings under the revolving line of credit cannot exceed 85% of eligible accounts receivable balances, bear interest at the greater of 4.25% or the prime rate as published in the Wall Street Journal and mature on July 15, 2025. The term loan may be drawn through December 31, 2023 and borrowings bear interest at 0.25% plus the greater of 4.25% or the prime rate as published in the Wall Street Journal. Borrowings under the term loan of the Amended Loan Agreement are repayable in monthly interest-only payments through December 31, 2023. Commencing on January 1, 2024, the term loan is payable in 42 equal monthly installments of the then outstanding principal and accrued interest through June 2027. We may prepay all, but not less than all, of any outstanding principal with respect to advances made under the term loan provided that such outstanding principal is paid in full along with any accrued but unpaid interest to date plus any fees that become payable under the Amended Loan Agreement. In an event of default, as defined in the Amended Loan Agreement, and until such event is no longer continuing, the annual interest rate to be charged would be the annual rate otherwise applicable to borrowings under the Amended Loan Agreement plus 5.00%.

Borrowings are collateralized by substantially all of our assets and property. Under the Amended Loan Agreement, we agreed to affirmative and negative covenants to which we will remain subject until maturity. The 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. In addition, under the Amended Loan Agreement and through December 31, 2023, we are required to maintain a minimum asset coverage ratio of 1.5 to 1 calculated as the sum of unrestricted cash held at the Lender and eligible accounts receivable divided by all borrowings outstanding under the Amended Loan Agreement. Commencing December 31, 2023, we are required to maintain, and test on a quarterly basis, a fixed charge coverage ratio and a leverage ratio. The fixed charge coverage ratio is measured as the ratio of (i) our trailing twelve-month adjusted “EBITDA” (as defined in the Amended Loan Agreement) less capital expenditures, less cash taxes, to (ii) our trailing twelve-month interest and principal payments to the Lender, of at least 1.25 to 1.00. The leverage ratio is measured as the ratio of (i) our outstanding obligations owing to the Lender, to (ii) our trailing twelve-month adjusted EBITDA (as defined in the Amended Loan Agreement), of not more than 3.00 to 1.00. As of December 31, 2022, we were in compliance with these covenants.

Since our inception, we have incurred operating losses and may continue to incur losses in the foreseeable future. We anticipate that our operating expenses and capital expenditures will increase in the near term as we hire additional employees and improve our technology and infrastructure capabilities. Additionally, a significant portion of the commission revenue we record will be collected over a multi-year time frame as policyholders renew their policies, and we are paid commissions on those renewals. As of December 31, 2022, $33.4 million of our $46.9 million commissions receivable contract asset was classified as long-term. We believe our

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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 credit facility. 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:

Year Ended December 31,

(in thousands)

Net cash provided by (used in) operating activities $ (15,791 ) $ 7,189 $ 10,668

Net cash provided by operating activities

Operating activities used $15.8 million of cash during the year ended December 31, 2022 and provided $7.2 million of cash during the year ended December 31, 2021. Cash used by operating activities in the year ended December 31, 2022 resulted from our net loss of $24.4 million and net cash used by changes in our operating assets and liabilities of $22.8 million, partially offset by net non-cash charges of $31.4 million. Net cash used by changes in our operating assets and liabilities consisted primarily of a $24.2 million increase in commissions receivable, a $2.1 million increase in prepaid expenses and other current assets and a $1.3 million decrease in accounts payable and accrued expenses and other current liabilities, partially offset by a $5.4 million decrease in accounts receivable.

Cash provided by operating activities in the year ended December 31, 2021 primarily resulted from the offset of net non-cash charges of $32.8 million to our net loss of $19.4 million, partially offset by net cash used by changes in our operating assets and liabilities of $6.1 million. Net cash used by changes in our operating assets and liabilities consisted primarily of a $16.9 million increase in commissions receivable and a $1.3 million decrease in accounts payable and accrued expenses and other current liabilities, partially offset by a $10.5 million decrease in accounts receivable and a $1.8 million decrease in prepaid expenses and other current assets.

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. Collection of commissions receivable depends upon the timing of our receipt of commission payments from insurance carriers. A significant portion of our commissions receivable asset is classified as long term.

Net cash used in investing activities

Net cash used in investing activities was $4.3 million and $18.8 million for the years ended December 31, 2022 and 2021, respectively. Cash used in investing activities for the years ended December 31, 2022 and 2021 consisted of cash used to acquire property and equipment, which included the capitalization of software development costs. During the years ended December 31, 2022 and 2021, we capitalized $3.6 million and $2.3 million, respectively, of software development costs. Net cash used in investing activities for the year ended December 31, 2021 included cash paid of $16.0 million to purchase PolicyFuel.

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Net cash provided by financing activities

During the years ended December 31, 2022 and 2021, net cash provided by financing activities was $15.8 million and $3.6 million, respectively. Net cash provided by financing activities during the year ended December 31, 2022 consisted primarily of $15.0 million of proceeds from the issuance and sale of shares of common stock in a private placement with Recognition Capital, LLC, an entity which is owned and controlled by David Blundin, Chairman of the Board of Directors and co-founder of the Company, and $0.9 million from the exercise of common stock options. Net cash provided by financing activities during the year ended December 31, 2021 consisted of proceeds of $3.6 million received from the exercise of common stock options.

For a discussion of our cash flows for the year ended December 31, 2020, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Cash Flows included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Contractual Obligations and Commitments

Our cash flows are dependent on a number of factors in addition to our operational expenditures, including our contractual and other obligations. As a result, our liquidity and capital resources in future periods should be analyzed in conjunction with such factors.

We lease office space in Cambridge, Massachusetts under a non-cancelable operating lease that expires in September 2024. We lease office space at various other locations under non-cancelable operating leases that expire at varying dates through 2030. As of December 31, 2022, we were obligated to make total minimum lease payments of $6.8 million under such leases, of which $3.2 million is payable in 2023.

We have outstanding agreements with various vendors for hosting and other technical services. We believe that we will be able to fund these obligations through our existing cash and cash equivalents.

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. To date, we have not recorded any impairments of goodwill or acquired intangible assets.

Valuation of Contingent Consideration

In connection with our acquisitions of Eversurance and PolicyFuel we agreed to issue shares of Class A common stock to the former owners upon the achievement of certain revenue targets. Achievement of revenue targets that will result in the issuance of a variable number of shares of Class A common stock are accounted for as a liability. We estimated the fair value of the shares of Class

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A common stock issuable upon achievement of the targets as of the acquisition date. We remeasure the fair value of the shares of Class A common stock issuable at each subsequent reporting date until the liability is fully settled. We use Monte Carlo simulation models in our estimates. The estimated fair value of the contingent consideration is based upon available information and certain assumptions, known at the time of our estimates, which management believes are reasonable. Changes in the fair value of contingent consideration related to updated assumptions and estimates are recognized as acquisition-related costs.

We used a Monte Carlo simulation model in our estimates of the fair value of the contingent consideration related to the PolicyFuel acquisition that will be settled based on achievement at varying levels of three annual targets. The most significant assumptions and estimates utilized in the model include forecasted revenue (an acquisition specific input) and the market value of our Class A common stock (an observable input). Other assumptions utilized in the model include equity volatility, revenue volatility and discount rate. In December 2022, we issued 58,754 shares of Class A common stock to the former owners of Eversurance upon achievement of the third and final target of the contingent consideration arrangement. We issued 62,671 shares of our Class A common stock in December 2022 to settle the first milestone related to the PolicyFuel contingent consideration. The fair value of our contingent consideration liability for the PolicyFuel shares for the second and third milestones was $0.2 million as of December 31, 2022. A hypothetical change of 10% in our estimate of the number of shares of our Class A common stock to be released upon achievement of the revenue targets or the market value of Class A common stock, would not be material.

Revenue Recognition

We derive our revenue primarily by selling consumer referrals to our insurance provider customers, including insurance carriers, agents and indirect distributors. We also generate revenue from commission fees for the sale of policies, primarily in our health and automotive verticals. 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.

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.

Referral Revenue

We recognize referral 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.

Commission Revenue

Commission revenue consists of the estimated constrained lifetime values, or constrained LTVs, of commission payments we expect to receive from health insurance carriers and auto insurance carriers on the sale of insurance policies to consumers and renewals of such policies. Commission revenue is recognized upon satisfaction of our performance obligation. We consider our performance obligation related to commissions for both the initial policy sale and future renewals of the policy to be satisfied upon submission of the policy application. Therefore, a significant portion of the commission revenue we record upon satisfaction of our performance obligation is paid by our insurance provider customer over a multi-year time frame as policyholders renew and pay the insurance provider for their policies. The current portion of commissions receivable consists of estimated commissions on new policies sold and estimated renewal commissions on policies expected to be renewed within one year, while the non-current portion of commissions receivable are commissions for estimated renewals expected to be renewed beyond one year. Commission revenue represented approximately 13% of total revenue for the year ended December 31, 2022 and less than 10% of total revenue for each of the years ended December 31, 2021 and 2020.

We estimate commission revenue for each health insurance product by using a portfolio approach to a group of policies by product type and the application submission date of the relevant policy, which are referred to as “cohorts.” Our estimate of constrained LTVs is based on an analysis of historical commission payment trends for relevant policies to establish an expected lifetime value and incorporates our judgment in interpreting those trends to calculate LTVs and to apply constraints to such LTVs. Significant factors impacting historical trends include carrier mix, average policy duration and conversion rates of paying policies.

Commission revenue from auto insurance carriers consists of constrained LTVs of commission payments we expect to receive for selling an insurance policy based on the effective date of the policy. Our estimate of constrained LTVs is based on an analysis of historical commission payment trends for relevant policies to establish an expected lifetime value and incorporates our judgment in

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interpreting those trends to calculate LTVs and to apply constraints to such LTVs. The most significant factor impacting historical trends is average policy duration.

We apply a constraint to estimated LTVs to only recognize the amount of variable consideration that we believe is probable that we will be entitled to receive and will not be subject to a significant revenue reversal in the future.

To the extent that commission payment trends change or the underlying factors impacting commission payments change, our estimates of constrained LTVs could be materially impacted. To the extent we make changes to our estimates of constrained LTVs, we recognize any material impact of the change to commission revenue in the reporting period in which the change is made, including revisions of estimated lifetime commissions either below or in excess of previously estimated constrained LTVs recognized as an adjustment to revenue and the related contract asset. We recognize revenue for new policies by applying the latest estimated constrained LTV for that product.

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 market value of our common stock.

The fair value of performance-based RSUs that are liability classified will be recorded as compensation expense based on the fair value of the number of shares issued at vesting. Prior to vesting, compensation expense is recognized over the period during which services are rendered, based on the performance conditions deemed to be probable of achievement. At the end of each financial reporting period prior to the vesting date, the fair value of these awards is remeasured using the then-current fair value of our Class A common stock. For a description of liability-classified performance-based RSUs refer to Note 10 of the Notes to Consolidated Financial Statements.

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.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have a credit agreement that provides us with credit at a floating rate of interest. As of December 31, 2022, we had no outstanding borrowings under our credit facility and therefore no material exposure to fluctuations in interest rates.

We contract with vendors in foreign countries and we have foreign subsidiaries. As such, we have exposure to adverse changes in exchange rates of foreign currencies associated with our foreign transactions and our foreign subsidiaries. We believe this exposure to be immaterial. We do not hedge against this exposure to fluctuations in exchange rates.

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ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

EVERQUOTE, INC.

Index to Consolidated Financial Statements

Page(s)

Report of Independent Registered Public Accounting Firm (PCAOB ID 238) 52

Consolidated Balance Sheets 54

Consolidated Statements of Operations and Comprehensive Loss 55

Consolidated Statements of Stockholders’ Equity 56

Consolidated Statements of Cash Flows 57

Notes to Consolidated Financial Statements 58

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Report of Independent Registered Public Accounting Firm

To theBoard 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, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2022, 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, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 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, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

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.

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.

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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.

Valuation of contingent consideration liability related to the acquisition of Policy Fuel, LLC and its affiliated entities

As described in Notes 3 and 4 to the consolidated financial statements, the Company completed its acquisition of Policy Fuel, LLC and its affiliated entities (PolicyFuel) on August 13, 2021. The total purchase consideration was $20.0 million, which included contingent consideration representing the estimated fair value as of the acquisition date of Class A common stock issuable to the former owners of PolicyFuel upon achievement of certain revenue targets over the three years following the acquisition. The former owners of PolicyFuel are eligible to receive shares of Class A common stock upon the achievement (at varying levels) of each of three twelve-month revenue targets. As achievement of each of the three twelve-month targets results in the issuance of a variable number of shares of Class A common stock, management recorded a liability for the fair value of this contingent consideration. As of December 31, 2022, management estimated the fair value of the contingent consideration to be $0.2 million, and recorded a $4.0 million credit to acquisition-related costs for the decrease in fair value during the year ended December 31, 2022. Management estimated the fair value of the contingent consideration as of the acquisition date, and remeasures the fair value of the contingent consideration 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, equity volatility, revenue volatility, and discount rate.

The principal considerations for our determination that performing procedures relating to the valuation of the contingent consideration liability related to the PolicyFuel acquisition is a critical audit matter are (i) a high degree of auditor judgment and subjectivity in applying procedures relating to the fair value of the contingent consideration liability due to the significant judgment by management when determining the fair value, (ii) the significant audit effort in evaluating management’s significant assumptions related to the forecasted revenue, equity volatility, and revenue volatility, 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 management’s determination of the fair value of the contingent consideration liability, including controls over the development of the forecasted revenue and assessment of the equity volatility and revenue volatility used in the Monte Carlo simulation model. These procedures also included, among others, (i) testing the completeness and accuracy of the underlying data used in the Monte Carlo simulation model and (ii) evaluating the appropriateness of the Monte Carlo simulation model and reasonableness of the significant assumptions used by management related to the forecasted revenue, equity volatility, and revenue volatility. Evaluating the reasonableness of the forecasted revenue involved considering the consistency with historical data as well as consistency with external economic and market data. Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the Monte Carlo simulation model, as well as evaluating the reasonableness of the significant assumptions related to the equity volatility and revenue volatility.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

February 27, 2023

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

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EVERQUOTE, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

December 31,

Assets

Current assets:

Commissions receivable, current portion 13,530 9,285

Prepaid expenses and other current assets 7,005 4,899

Operating lease right-of-use assets 5,769 7,291

Commissions receivable, non-current portion 33,410 13,415

Liabilities and Stockholders' Equity

Current liabilities:

Accrued expenses and other current liabilities 9,924 13,015

Operating lease liabilities, net of current portion 3,501 5,531

Other long-term liabilities 125 5,545

Commitments and contingencies (Note 13)

Stockholders' equity:

Accumulated other comprehensive income (loss) (6 ) 10

Total liabilities and stockholders' equity $ 156,519 $ 143,607

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

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EVERQUOTE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except per share amounts)

Year Ended December 31,

Cost and operating expenses:

Other income (expense):

Other income (expense), net 23 (57 ) 291

Total other income (expense), net 372 (20 ) 480

Benefit from income taxes — 2,510 —

Net loss per share, basic and diluted $ (0.77 ) $ (0.67 ) $ (0.41 )

Comprehensive loss:

Other comprehensive income (loss):

Foreign currency translation adjustment (16 ) 17 (7 )

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

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EVERQUOTE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

Accumulated

Class A Class B Additional Other Total

Common Stock Common Stock Paid-in Comprehensive Accumulated Stockholders’

Shares Amount Shares Amount Capital Income (Loss) Deficit Equity

Vesting of restricted stock units 998,478 — — — — — — —

Stock-based compensation expense — — — — 24,179 — — 24,179

Foreign currency translation adjustment — — — — — (7 ) — (7 )

Vesting of restricted stock units 1,127,509 1 — — — — — 1

Stock-based compensation expense — — — — 29,944 — — 29,944

Foreign currency translation adjustment — — — — — 17 — 17

Stock-based compensation expense — — — — 28,898 — — 28,898

Foreign currency translation adjustment — — — — — (16 ) — (16 )

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

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EVERQUOTE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Year Ended December 31,

Cash flows from operating activities:

Change in fair value of contingent consideration (4,135 ) 196 1,778

Deferred taxes — (2,510 ) —

Provision for (recovery of) bad debt 693 (41 ) 105

Unrealized foreign currency transaction (gains) losses (9 ) 24 —

Changes in operating assets and liabilities, net of effects from acquisitions:

Prepaid expenses and other current assets (2,111 ) 1,801 4,465

Commissions receivable, current and non-current (24,240 ) (16,871 ) (5,829 )

Accrued expenses and other current liabilities (2,375 ) 2,692 (3,968 )

Other long-term liabilities — (934 ) 815

Net cash provided by (used in) operating activities (15,791 ) 7,189 10,668

Cash flows from investing activities:

Cash flows from financing activities:

Proceeds from private placement of common stock 15,000 — —

Tax withholding payments related to net share settlement (100 ) — —

Supplemental disclosure of noncash investing and financing information:

Reconciliation of cash, cash equivalents and restricted cash:

Restricted cash (included in other assets) — 250 250

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

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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 and health insurance. The Company generates revenue primarily by selling consumer referrals to insurance provider customers, consisting of carriers and agents, and indirect distributors in the United States. The Company also generates revenue from commission fees paid by insurance provider customers for insurance policies it sells to consumers.

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 coronavirus (“COVID-19”) pandemic. Uncertainty remains as to the duration and severity of business disruptions related to the COVID-19 pandemic, as well as with respect to the full impact of the pandemic on the global economy and consumer confidence. Work-from-home 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 a net loss of $24.4 million for the year ended December 31, 2022. As of December 31, 2022, the Company had an accumulated deficit of $162.1 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 under the Company’s credit facility.

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 the valuation of commissions and accounts receivable, the expensing and capitalization of website and software development costs, goodwill and acquired intangible assets, the contingent consideration liabilities, the valuation of stock-based awards and income taxes. The Company bases its estimates on historical experience, known trends and other market-specific or 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. These estimates may change, as new events occur and additional information is obtained and actual results could differ materially from these estimates.

Restricted Cash

As of December 31, 2021, 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 was classified within other assets. The restricted cash was released to the Company in January 2022 and as a result, as of December 31, 2022, the Company no longer maintains a restricted cash balance.

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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 and commissions receivable. The Company maintains its cash and cash equivalents at 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 year ended December 31, 2022, two customers represented 21% and 11%, respectively, of total revenue. For the years ended December 31, 2021 and 2020, one customer represented 16% and 22%, respectively, of total revenue. As of December 31, 2022, one customer accounted for 23% of the total accounts and commissions receivable balance. As of December 31, 2021, one customer accounted for 12% of the total accounts and commissions 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. As of December 31, 2022 and 2021, the Company’s allowance for credit losses was $0.7 million and less than $0.1 million, respectively. During the years ended December 31, 2022, 2021 and 2020, the Company wrote off an insignificant amount of uncollectible accounts.

Revenue Recognition

The Company derives its revenue primarily by selling consumer referrals to its insurance provider customers, including insurance carriers, agents and indirect distributors. The Company also generates revenue from commission fees for the sale of policies, primarily in its health and automotive verticals. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606 Revenue from Contracts with Customers ("ASC 606"), 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.

Referral Revenue

The Company recognizes referral 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.

Commission Revenue

The Company’s commission revenue consists of the estimated constrained lifetime values (the “constrained LTVs”) of commission payments the Company expects to receive from health insurance carriers and auto insurance carriers on the sale of insurance policies to consumers and renewals of such policies. Commission revenue is recognized upon satisfaction of the Company’s performance obligation. The Company considers its performance obligation related to commissions for both the initial policy sale and future renewals of the policy to be satisfied upon submission of the policy application. Therefore, a significant portion of the commission revenue the Company records upon satisfaction of its performance obligation is paid by the Company’s insurance provider customer over a multi-year time frame as policyholders renew and pay the insurance provider for their policies. The current portion of commissions receivable consists of estimated commissions on new policies sold and estimated renewal commissions on policies expected to be renewed within one year, while the non-current portion of commissions receivable are commissions for estimated renewals expected to be renewed beyond one year. Commission revenue represented approximately 13% of total revenue in the year ended December 31, 2022, and less than 10% of total revenue in each of the years ended December 31, 2021 and 2020.

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The Company estimates commission revenue for each health insurance product by using a portfolio approach to a group of policies by product type and the application submission date of the relevant policy, which are referred to as “cohorts.” The Company’s estimate of constrained LTVs is based on an analysis of historical commission payment trends for relevant policies to establish an expected lifetime value and incorporates management’s judgment in interpreting those trends to calculate LTVs and to apply constraints to such LTVs. Significant factors impacting historical trends include carrier mix, average policy duration and conversion rates of paying policies.

Commission revenue from auto insurance carriers consists of constrained LTVs of commission payments the Company expects to receive for selling an insurance policy based on the effective date of the policy. The Company’s estimate of constrained LTVs is based on an analysis of historical commission payment trends for relevant policies to establish an expected lifetime value and incorporates management’s judgment in interpreting those trends to calculate LTVs and to apply constraints to such LTVs. The most significant factor impacting historical trends is average policy duration.

The Company applies a constraint to its estimated LTVs to only recognize the amount of variable consideration that it believes is probable that it will be entitled to receive and will not be subject to a significant revenue reversal in the future.

To the extent that commission payment trends change or the underlying factors impacting commission payments change, the Company’s estimate of constrained LTVs could be materially impacted. To the extent the Company makes changes to its estimates of constrained LTVs, it recognizes any material impact of the change to commission revenue in the reporting period in which the change is made, including revisions of estimated lifetime commissions either below or in excess of previously estimated constrained LTVs recognized as an adjustment to revenue and the related contract asset. The Company recognizes revenue for new policies by applying the latest estimated constrained LTV for that product.

Disaggregated Revenue

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. The Company’s direct distribution channel consists of insurance carriers and third-party agents. The Company’s indirect distribution channel consists of insurance aggregators and media networks who purchase referrals with the intent to resell. Revenue generated via the Company’s direct distribution channel is generally higher per referral than revenue generated by the Company’s indirect distribution channels and provides the Company with additional insights and data regarding insurance provider demand and referral performance.

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

Year Ended December 31,

Indirect channels 14 % 10 % 8 %

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

Year Ended December 31,

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, 2022 and 2021, the Company had not capitalized any costs to obtain any of its contracts.

Deferred Revenue

Amounts received for referrals 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 $2.1 million as of December 31, 2022 and 2021, respectively. During the year ended December 31, 2022, the Company recognized revenue of $1.5 million that was included in the contract liability balance (deferred revenue) at December 31, 2021. 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.

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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 are estimated commissions expected to be received within one year, while the non-current portion of commissions receivable 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 years ended December 31, 2022, 2021 or 2020.

While the Company is exposed to credit losses due to the non-payment by insurance carriers, it considers the risk of this to be remote.

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 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 Company’s two acquisitions in 2021 and 2020 provided for shares of Class A common stock to be issued to former owners of the purchased entities upon the achievement of certain revenue targets (see Note 3). Achievement of revenue targets that will result in the issuance of a variable number of shares of Class A common stock are accounted for as a liability. The Company estimates the fair value of the shares of Class A common stock issuable upon achievement of the targets as of the acquisition date. The Company remeasures the fair value of the shares of Class A common stock issuable at each subsequent reporting date until the liability is fully settled. The Company uses Monte Carlo simulation models in its estimates. The estimated fair value of the contingent consideration is based upon available information and certain assumptions, known at the time of its estimates, which management believes are reasonable.

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:

Estimated Useful Life

Computer equipment 3 years

Software 3 years

Furniture and fixtures 5 years

Leasehold improvements Shorter of lease term or estimated useful life

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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

The Company accounts for leases under ASC Topic 842, Leases (“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 12 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, 2022, 2021 or 2020.

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:

•

Level 1—Quoted prices in active markets for identical assets or liabilities.

•

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.

•

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 and contingent consideration liabilities are carried at fair value, determined according to the fair value hierarchy described above (see Note 4). The carrying values of the Company’s accounts receivable, accounts payable and accrued expenses and other current liabilities approximate their fair values due to the short-term nature of these assets and liabilities. Commissions receivable are recorded at constrained lifetime values.

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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 and health insurance quotes and generates revenue from referral fees and commission payments. Significantly all of the Company’s tangible assets are held in the United States.

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, including through its verified partner network, 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 loss. During the years ended December 31, 2022, 2021 and 2020, advertising expense totaled $275.9 million, $289.0 million and $238.3 million, respectively.

Stock-Based Compensation

The Company measures compensation expense for 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 compensation expense for 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 compensation expense for 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 fair value of performance-based restricted stock units that are liability classified will be recorded as compensation expense based on the fair value of the number of shares issued at vesting. Prior to vesting, compensation expense is recognized over the period during which services are rendered, based on the performance conditions deemed probable of achievement. At the end of each financial reporting period prior to the vesting date, the fair value of these awards is remeasured using the then-current fair value of the Company’s Class A common stock (see Note 10).

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 subsidiaries is the currency of the local country. Assets and liabilities of the Company’s foreign subsidiaries are 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 have not been significant.

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Comprehensive Loss

Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders. The Company’s only element of other comprehensive loss is 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 effect 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 9, 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 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:

December 31,

The table above does not include shares issuable upon settlement of contingent consideration for the Company’s acquisitions (see Note 3). Such shares are also not included in the Company’s calculation of basic or diluted net loss per common share until issued.

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 Issued Accounting Pronouncements

In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805), which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606 as if it had originated the contracts. This approach differs from the current requirement to measure contract assets and contract liabilities acquired in a business combination at

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fair value.The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The amendments in this update are to be applied prospectively to business combinations occurring on or after the effective date. The Company is currently assessing the impact of the adoption of this guidance.

In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (Topic 820), which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The guidance also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The guidance includes disclosure requirements including the fair value of equity securities subject to contractual sale restrictions included in the balance sheet, the nature and remaining duration of the restriction and circumstances that could cause a lapse in the restriction. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, with early adoption permitted. The amendments in this update are to be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. The Company is currently assessing the impact of the adoption of this guidance.

3. Acquisitions

PolicyFuel

On August 13, 2021, the Company completed the acquisition of Policy Fuel, LLC and its affiliated entities (“PolicyFuel”), a policy-sales-as-a-service provider, with principal offices in Austin and San Antonio, Texas. PolicyFuel operated in the property and casualty insurance industry providing services that enabled carriers to complement their own call center operations with access to dedicated advisor teams focused exclusively on selling that carrier’s offerings. This acquisition enabled the Company to expand the range of products the Company offers to carriers and expand the market of the Company’s direct-to-consumer offerings.

The PolicyFuel 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 PolicyFuel were recorded at their respective fair values as of the acquisition date. The purchase consideration of $20.0 million reflected a cash payment of $16.0 million, net of cash acquired, settlement of an outstanding receivable from PolicyFuel of $0.2 million and contingent consideration of $3.8 million, representing the estimated fair value as of the acquisition date of Class A common stock issuable to the former owners of PolicyFuel upon achievement of certain revenue targets over the three years following the acquisition. The former owners of PolicyFuel are eligible to receive shares of Class A common stock upon the achievement (at varying levels) of each of three twelve-month revenue targets. The number of shares that may be issued at maximum performance is based on a total dollar value of $12.9 million; 50% of which would be calculated at the time of issuance by dividing the applicable dollar value by a volume weighted average price per share for a 20-day period preceding the acquisition. These shares are referred to as the “Fixed Shares” and the maximum number of Fixed Shares that may be issued is 199,311. The fair value of such shares to be recorded upon issuance will be based on the number of shares issued multiplied by the market value of the Company’s Class A common stock on the date of issuance. The remaining 50%, or $6.5 million at maximum performance, may be issued as shares of Class A common stock calculated by dividing the applicable dollar value earned by the volume weighted average price per share for a 20-day period preceding each revenue target determination date. These shares are referred to as the “Fixed Dollar Shares” and there is no maximum to the number of shares that may be issued as Fixed Dollar Shares. The fair value of such shares to be recorded upon issuance will be based on the number of shares issued multiplied by the market value of the Company’s Class A common stock on the date of issuance.

The Fixed Shares described above include 17,030 performance-based restricted stock units issued as an Inducement Award and the Fixed Dollar Shares described above include $0.6 million of performance-based restricted stock units issued as an Inducement Award (see Note 8).

As achievement of each of the three twelve-month targets results in the issuance of a variable number of shares of Class A common stock, the Company recorded a liability for the fair value of this contingent consideration. The Company estimated the fair value of the contingent consideration liability as of the acquisition date using a Monte Carlo simulation model. The most significant assumptions and estimates utilized in the model include forecasted revenue (an acquisition specific input) and the market value of the Company’s Class A common stock (an observable input). Other assumptions utilized in the model include equity volatility, revenue volatility and discount rate. The Company remeasures the fair value of the contingent consideration at each subsequent reporting date until the liability is fully settled (see Note 4).

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The following tables summarize the purchase price for PolicyFuel and the allocation of the purchase price (in thousands):

Cash paid, net of cash acquired $ 15,955

Fair value of contingent consideration to be settled in stock 3,784

Settlement of existing relationship 233

Total purchase price consideration, net of cash acquired $ 19,972

Assets Acquired and Liabilities Assumed:

Accounts receivable $ 283

Commissions receivable (current and long-term) 2,761

Prepaid expenses and other current assets 12

Customer relationships 6,600

Developed technology 1,700

Other identifiable intangible assets 300

Total assets acquired 23,188

Accounts payable and accrued expenses (current) (706 )

Deferred tax liability (2,510 )

Total allocation of purchase price consideration, net of cash acquired $ 19,972

Customer relationships were valued using the income approach and are being amortized to sales and marketing expense over their estimated useful life of nine years. Significant assumptions and estimates utilized in the model include revenue and earnings growth rates, royalty rates and the discount rate.

Developed technology was valued using the relief from royalty method and is being amortized to cost of revenue over its estimated useful life of three years. Significant assumptions and estimates utilized in this model include the royalty rate, the discount rate and the obsolescence curve.

Commissions receivable were recorded at constrained LTVs and are included in prepaid expenses and other current assets and other assets on the Company’s consolidated balance sheets.

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 resulting from the acquisition of PolicyFuel is not deductible for tax purposes.

The Company incurred costs of $0.9 million for the year ended December 31, 2021, 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.

The Company recorded an income tax benefit for the year ended December 31, 2021 of $2.5 million related to the release of a portion of its valuation allowance as a result of the acquisition of PolicyFuel. The net deferred tax liability recorded for the PolicyFuel acquisition relates to the intangible assets recognized in purchase accounting, which are non-deductible for tax purposes and result in a deferred tax liability. The net deferred tax liability is a source of income to support the recognition of a portion of the Company’s existing deferred tax assets. Therefore, the Company recorded a tax benefit for the release of a portion of its valuation allowance related to the net deferred tax liability recorded in purchase accounting.

Eversurance

On September 1, 2020, the Company completed the acquisition of Crosspointe Insurance & Financial Services, LLC, a health insurance agency headquartered in Evansville, Indiana. In the third quarter 2021, the Company changed the name of Crosspointe Insurance & Financial Services, LLC to Eversurance, LLC (“Eversurance”). Eversurance was a sales and decision support contact center connecting consumers to high quality health insurance in a customer-centric environment serving the individual and family health, Medicare, and ancillary health product markets. This acquisition enabled 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.

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The Eversurance 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 Eversurance 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 Eversurance upon achievement of certain revenue targets over three years. The former owners of Eversurance were 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 were for a fixed number of shares of Class A common stock of 39,168 shares and, as such, the Company recorded the fair value of these shares within stockholders’ equity based on the number of shares issuable and the market value of Class A common stock on the acquisition date. Achievement of the third annual target results in the issuance of a variable number of shares of Class A common stock of up to 58,754 shares and, as such, the Company recorded a liability for the fair value of this contingent consideration.

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 used a Monte Carlo simulation model in its estimates. Significant assumptions and estimates utilized in the model included forecasted revenue, revenue volatility and discount rate. The Company remeasured 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 was fully settled in the fourth quarter of 2022 (see Note 4).

The following tables summarize the purchase price for Eversurance and the allocation of the purchase price (in thousands):

Fair value of contingent consideration to be settled in stock 1,751

Total purchase price consideration $ 16,681

Assets Acquired and Liabilities Assumed:

Commissions receivable (current and long-term) $ 3,285

Customer relationships 3,600

Other identifiable intangible assets 270

Operating lease right-of-use assets 1,469

Total assets acquired 18,593

Accounts payable and accrued expenses (current and long-term) (443 )

Operating lease liabilities (1,469 )

Total allocation of purchase price consideration $ 16,681

Customer relationships were valued using the income approach and are being amortized to sales and marketing expense over their estimated useful life of five years. Significant assumptions and estimates utilized in the model include the customer attrition rate and discount rate.

Commissions receivable were recorded at constrained LTVs and are included in prepaid expenses and other current assets and other assets on the Company’s consolidated balance sheet.

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 in 2020. 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.

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4. Fair Value of Financial Instruments

The following tables present the Company’s fair value hierarchy for its assets and liabilities which are measured at fair value on a recurring basis as of December 31, 2022 and 2021 (in thousands):

Fair Value Measurements at December 31, 2022 Using:

Level 1 Level 2 Level 3 Total

Assets:

Cash equivalents:

Liabilities:

Fair Value Measurements at December 31, 2021 Using:

Level 1 Level 2 Level 3 Total

Assets:

Cash equivalents:

Liabilities:

There were no transfers into or out of Level 3 during the years ended December 31, 2022, 2021 or 2020.

Money market funds were valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy.

Contingent consideration liabilities are valued by the Company using significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions and estimates to forecast a range of outcomes for the contingent consideration. The Company assesses these assumptions and estimates on a quarterly basis as additional data impacting the assumptions is obtained. Changes in the fair value of contingent consideration related to updated assumptions and estimates are recognized as acquisition-related costs within the consolidated statements of operations and comprehensive loss.

The Company estimated the fair value of the maximum 58,754 shares of Class A common stock issuable as contingent consideration upon achievement of certain Eversurance revenue targets (see Note 3) using probability of achievement of the revenue target (acquisition specific input) and the market value of the Company’s Class A common stock (observable input). The decrease in fair value of the contingent consideration liability for the years ended December 31, 2022 and 2021 was due to the decrease in the market value of the Company’s Class A common stock during the periods. The increase in fair value of the contingent consideration liability for the year ended December 31, 2020 was due primarily to a change in estimate of forecasted revenue. Shares of Class A common stock were issued in December 2022 to settle the third and final milestone at which time the fair value of the contingent consideration liability was reclassified to stockholders' equity.

The Company uses a Monte Carlo simulation model in its estimates of the fair value of the contingent consideration liabilities related to the PolicyFuel acquisition. The most significant assumptions and estimates utilized in the model include forecasted revenue (an acquisition specific input) and the market value of the Company’s Class A common stock (an observable input). Other assumptions utilized in the model include equity volatility, revenue volatility and discount rate. The decrease in fair value of

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contingent consideration related to the Class A common stock issuable upon achievement of revenue targets during the year ended December 31, 2022 was primarily due to a change in estimate of forecasted revenue and the decrease in market value of the Company’s Class A common stock. The increase in fair value of contingent consideration related to the Class A common stock issuable upon achievement of revenue targets for the year ended December 31, 2021 was primarily due to a change in estimate of forecasted revenue, partially offset by the decrease in the market value of the Company’s Class A common stock during the year. In December 2022, the Company issued shares of Class A common stock in settlement of the first annual milestone, at which time the fair value of the contingent consideration liability for the first milestone was reclassified to stockholders' equity.

The following table provides a roll-forward of the aggregate fair values of the Company’s contingent consideration liabilities for which fair value is determined by Level 3 inputs (in thousands):

Contingent

Consideration

Liabilities

Fair value at December 31, 2019 $ —

Acquisition of Eversurance 416

Acquisition of PolicyFuel 3,784

5. Goodwill and Acquired Intangible Assets

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.

Changes in goodwill were as follows (in thousands):

Final adjustment to Eversurance purchase price allocation 175

Goodwill resulting from PolicyFuel acquisition 11,532

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

(in years)

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(in years)

Amortization expense for intangible assets for the years ended December 31, 2022, 2021 and 2020 was $2.3 million, $1.7 million and $0.5 million, respectively. Future amortization expense of the intangible assets as of December 31, 2022, is expected to be as follows (in thousands):

Year Ending December 31,

6. Property and Equipment, Net

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

December 31,

Less: Accumulated depreciation and amortization (13,291 ) (11,880 )

Depreciation and amortization expense was $3.6 million, $3.3 million and $2.8 million for the years ended December 31, 2022, 2021 and 2020, respectively. The Company capitalized costs associated with the development of internal use software of $3.6 million, $2.2 million and $3.0 million included in the Software line item above and recorded related amortization expense of $2.7 million, $2.6 million and $2.2 million (included in depreciation and amortization expense) during the years ended December 31, 2022, 2021 and 2020, respectively. The remaining net book value of capitalized software costs was $5.3 million and $4.4 million as of December 31, 2022 and 2021, respectively.

7. Accrued Expenses and Other Current Liabilities

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

December 31,

Accrued employee compensation and benefits $ 4,254 $ 4,115

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8. Loan and Security Agreement

On July 15, 2022, the Company executed a Loan and Security Modification Agreement to amend its Loan and Security Agreement (the “2020 Loan Agreement”) with Western Alliance Bank (“Lender”), to increase the revolving line of credit available thereunder from $25.0 million to $35.0 million, to extend the maturity date of the revolving line of credit from August 2022 to July 2025 and to provide the Company access to a term loan of up to $10.0 million. The 2020 Loan Agreement, as amended by the Loan and Security Modification Agreement, is referred to as the Amended Loan Agreement.

Pursuant to the Amended Loan Agreement, borrowings under the revolving line of credit cannot exceed 85% of eligible accounts receivable balances, bear interest at the greater of 4.25% or the prime rate as published in the Wall Street Journal and mature on July 15, 2025. The term loan may be drawn through December 31, 2023 and borrowings bear interest at 0.25% plus the greater of 4.25% or the prime rate as published in the Wall Street Journal. Borrowings under the term loan of the Amended Loan Agreement are repayable in monthly interest-only payments through December 31, 2023. Commencing on January 1, 2024, the term loan is payable in 42 equal monthly installments of the then outstanding principal and accrued interest through June 2027. The Company may prepay all, but not less than all, of any outstanding principal with respect to advances made under the term loan provided that such outstanding principal is paid in full along with any accrued but unpaid interest to date plus any fees that become payable under the Amended Loan Agreement. In an event of default, as defined in the Amended Loan Agreement, and until such event is no longer continuing, the annual interest rate to be charged would be the annual rate otherwise applicable to borrowings under the Amended Loan Agreement plus 5.00%.

Borrowings are collateralized by substantially all of the Company’s assets and property. Under the Amended Loan Agreement, the Company has agreed to affirmative and negative covenants to which the Company will remain subject until maturity. The covenants include limitations on the Company’s ability to incur additional indebtedness and engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses. In addition, under the Amended Loan Agreement and through December 31, 2023, the Company is required to maintain a minimum asset coverage ratio of 1.5 to 1 calculated as the sum of unrestricted cash held at the Lender and eligible accounts receivable divided by all borrowings outstanding under the Amended Loan Agreement. Commencing December 31, 2023, the company is required to maintain, and test on a quarterly basis, a fixed charge coverage ratio and a leverage ratio. The fixed charge coverage ratio is measured as the Company’s ratio of (i) trailing twelve-month adjusted “EBITDA” (as defined in the Amended Loan Agreement) less capital expenditures, less cash taxes, to (ii) trailing twelve-month interest and principal payments to the Lender, of at least 1.25 to 1.00. The leverage ratio is measured as the ratio of (i) the Company’s outstanding obligations owing to the Lender, to (ii) the Company’s trailing twelve-month adjusted EBITDA (as defined in the Amended Loan Agreement), of not more than 3.00 to 1.00. As of December 31, 2022, the Company was in compliance with these covenants.

As of December 31, 2022, the Company had no amounts outstanding under the revolving line of credit.

9. 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.

During the year ended December 31, 2022, the Company issued 58,754 shares of Class A common stock to the former owners of Eversurance upon achievement of the third and final target of the contingent consideration arrangement. During the year ended December 31, 2021, the Company issued 39,168 shares of Class A common stock to the former owners of Eversurance upon achievement of the first two targets of the contingent consideration arrangement (see Note 3). During the year ended December 31, 2022, the Company issued 62,671 shares of Class A common stock to the former owners of PolicyFuel upon achievement of the first target of the contingent consideration arrangement (see Note 3).

During the year ended December 31, 2022, the Company sold 1,004,016 shares of Class A common stock at a purchase price of $14.94 per share for gross proceeds of $15.0 million in a private placement to a related party (see Note 15).

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10. Stock-Based Compensation

2008 and 2018 Plans

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, 2022, 1,518,804 shares remained available for future grant under the 2018 Plan. The number of authorized shares reserved for issuance under the 2018 Plan was increased by 1,629,382 shares effective as of January 1, 2023 in accordance with the provisions of the 2018 Plan described above.

Options and restricted stock units (“RSUs”) 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. Certain of the Company’s RSUs are net settled by withholding shares of the Company’s Class A common stock to cover statutory income taxes.

Stock Option Valuation

The fair value of stock option grants with service-based or performance-based vesting conditions is estimated on the date of grant using the Black-Scholes option-pricing model. The volatility has been determined using the Company’s traded stock price to estimate expected volatility. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. The relevant data used to determine the fair value of the stock option grants during the year ended December 31, 2022 is as follows, presented on a weighted-average basis:

Year Ended

Risk-free interest rate 3.2 %

Expected volatility 78.1 %

Expected dividend yield —

EVER US Equity

EVER · 10-K · period ended 2022-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

EVER US Equity☆

EVER · 10-K · period ended 2022-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

EVER US Equity