EVERQUOTE, INC. – 10-Q – 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 together with our condensed consolidated financial
statements and related notes and other financial information included elsewhere
in this Quarterly Report on Form 10-Q and our consolidated financial statements
and the related notes and other financial information included in our Annual
Report on Form 10-K for the year ended December 31, 2022, on file with the
Securities and Exchange Commission. The following discussion and analysis
contains forward-looking statements that reflect our plans, estimates and
beliefs. Our actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to these
differences include those discussed below, elsewhere in this Quarterly Report on
Form 10-Q, particularly in Item 1A. Risk Factors, and in Part I, Item 1A. Risk
Factors in our Annual Report on Form 10-K for the year ended December 31, 2022.

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:

•

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

•

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

•

In 2015, we launched EverQuote Pro for agents.

•

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

•

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

•

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.

•

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 three months ended March 31, 2023 and 2022, our total revenue was $109.2
million and $110.7 million, respectively, representing a year-over-year decrease
of 1.3%. We had net losses of $2.5 million and $5.7 million for the three months
ended March 31, 2023 and 2022, respectively, and had $5.4 million and $2.4
million in adjusted EBITDA for the three months ended March 31, 2023 and 2022,
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.

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, elsewhere in this Quarterly Report
on Form 10-Q, particularly in Item 1A. Risk Factors, and in Part I, Item 1A.
Risk Factors in our Annual Report on Form 10-K for the year ended December 31,
2022.

Auto insurance industry risk

We derive a significant portion of our revenue from auto insurance providers,
including our two largest insurance carrier customers who represented 34% and
11%, respectively, of total revenue for the three months ended March 31, 2023,
and our financial results depend on the performance of the auto insurance
industry. Starting in the third quarter of 2021, the auto insurance industry has
experienced deteriorating underwriting performance due to 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 had a negative impact on the pricing and demand for consumer
referrals in our marketplace during 2022.

The state of the auto insurance market remains dynamic. In January 2023, we saw
a major carrier return to higher spending patterns, but subsequently reduce
customer acquisition spending in April 2023 due to higher than expected claims
losses. We expect revenue from referrals to continue to be impacted by changes
in demand from our insurance carrier customers caused by cost inflation, claim
severity and frequency and the adequacy of policy premiums to cover the cost of
claims.

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.

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, interest income and the provision for (benefit from) income taxes.
Adjusted EBITDA is a non-GAAP financial measure that we present in this
Quarterly Report on Form 10-Q 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

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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:

•

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

•

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

•

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

We 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 9% and 13% of total revenue in the
three months ended March 31, 2023 and 2022, respectively. 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:

                   Three Months Ended March 31,
                     2023                 2022
                          (in thousands)
Automotive      $       89,699       $       87,675
Other                   19,521               23,006
Total Revenue   $      109,220       $      110,681



We expect an overall decrease in revenue in 2023 as compared to 2022 as we
anticipate decreased 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, and 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

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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 decrease in the near term as we expect decreased carrier spend for
referrals, which will impact our advertising expenditures.

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 remain relatively consistent in the near
term.

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.

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 Quarterly Report on Form 10-Q 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; 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 Quarterly
Report on Form 10-Q 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 items
in calculating adjusted EBITDA can provide a useful measure for period-to-period
comparisons of our core operating performance.

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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:

•

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

•

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

•

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

•

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

•

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

•

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

In addition, other companies may use other measures to evaluate their
performance, all of which could reduce the usefulness of adjusted EBITDA as a
tool for comparison.

The following table reconciles adjusted EBITDA to net income (loss), the most
directly comparable financial measures calculated and presented in accordance
with GAAP.

Reconciliation of Net Loss to Adjusted EBITDA:

                                   Three Months Ended March 31,
                                     2023                 2022
                                          (in thousands)
Net loss                        $       (2,529 )     $       (5,715 )
Stock-based compensation                 6,509                7,530
Depreciation and amortization            1,407                1,511
Acquisition-related costs                 (113 )               (892 )
Interest income                           (187 )                 (8 )
Income tax expense                         286                    -
Adjusted EBITDA                 $        5,373       $        2,426


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Results of Operations
Comparison of the Three Months Ended March 31, 2023 and 2022
The following tables set forth our results of operations for the periods shown:

                                           Three Months Ended March 31,
                                             2023                 2022
                                                  (in thousands)
Statement of Operations Data:
Revenue(1)                              $      109,220       $      110,681
Cost and operating expenses(2):
Cost of revenue                                  5,770                5,984
Sales and marketing                             90,237               96,150
Research and development                         7,927                8,196
General and administrative                       7,830                6,941
Acquisition-related costs                         (113 )               (892 )
Total cost and operating expenses              111,651              116,379
Loss from operations                            (2,431 )             (5,698 )
Other income (expense):
Interest income                                    187                    8
Other income (expense), net                          1                  (25 )
Total other income (expense), net                  188                  (17 )
Loss before income taxes                        (2,243 )             (5,715 )
Income tax expense                                (286 )                  -
Net loss                                $       (2,529 )     $       (5,715 )
Other Financial and Operational Data:
Variable marketing margin               $       35,593       $       34,264
Adjusted EBITDA(3)                      $        5,373       $        2,426



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

                       Three Months Ended March 31,
                        2023                  2022
Direct channels                86 %                  88 %
Indirect channels              14 %                  12 %
                              100 %                 100 %

(2) Includes stock-based compensation expense as follows:

                               Three Months Ended March 31,
                                 2023                2022
                                      (in thousands)
Cost of revenue              $          54       $          59
Sales and marketing                  2,273               3,210
Research and development             2,374               2,411
General and administrative           1,808               1,850
                             $       6,509       $       7,530

(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.

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Revenue:
             Three Months Ended March 31,               Change
               2023                 2022           Amount        %
                            (dollars in thousands)
Revenue   $      109,220       $      110,681     $ (1,461 )     -1.3 %


Revenue decreased by $1.5 million from $110.7 million for the three months ended
March 31, 2022 to $109.2 million for the three months ended March 31, 2023. The
decrease was due to a decrease of $3.5 million in revenue from our other
insurance verticals, partially offset by an increase of $2.0 million in revenue
from our automotive vertical. The decrease in revenue from our other insurance
verticals was due to a decrease of $2.2 million in commission revenue and a
decrease in carrier spend for referrals of $1.3 million, with both of these
decreases primarily attributable to our health vertical. The increase in revenue
from our automotive vertical was primarily due to an increase in carrier spend
for referrals of $4.8 million, partially offset by a decrease of $2.8 million in
commission revenue.

Cost of Revenue

                          Three Months Ended March 31,              Change
                            2023                2022          Amount        %
                                         (dollars in thousands)
Cost of revenue         $       5,770       $       5,984     $  (214 )     -3.6 %
Percentage of revenue             5.3 %               5.4 %


Cost of revenue decreased by $0.2 million from $6.0 million for the three months
ended March 31, 2022 to $5.8 million for the three months ended March 31, 2023.
Cost of revenue decreased primarily due to a decrease in third-party call center
costs of $0.6 million as a result of shifting call referrals from third-party
call centers to employees. Hosting costs also decreased by $0.4 million. These
decreases were partially offset by increased personnel-related costs and office
and occupancy allocations of $0.6 million and $0.1 million, respectively.

Sales and Marketing

                                 Three Months Ended March 31,               Change
                                   2023                 2022           Amount        %
                                                (dollars in thousands)

Sales and marketing expense $ 90,237 $ 96,150 $ (5,913 ) -6.1 %
Percentage of revenue

                   82.6 %               86.9 %


Sales and marketing expense decreased by $5.9 million from $96.2 million for the
three months ended March 31, 2022 to $90.2 million for the three months ended
March 31, 2023. The decrease in sales and marketing expense was primarily due to
a decrease in advertising costs of $2.8 million and a decrease in
personnel-related costs of $2.6 million, primarily in our DTC agency.
Personnel-related costs included stock-based compensation expense of $2.3
million and $3.2 million for the three months ended March 31, 2023 and 2022,
respectively. Referral verification service costs and technology service costs
each also decreased by $0.2 million for the three months ended March 31, 2023 as
compared to the three months ended March 31, 2022.

Research and Development
                                     Three Months Ended March 31,              Change
                                       2023                2022          Amount        %
                                                    (dollars in thousands)

Research and development expense $ 7,927 $ 8,196 $ (269 ) -3.3 %
Percentage of revenue

                        7.3 %               7.4 %


Research and development expense decreased by $0.3 million from $8.2 million for
the three months ended March 31, 2022 to $7.9 million for the three months ended
March 31, 2023. The decrease in research and development expense was primarily
due to a decrease in personnel-related costs.

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General and Administrative

                                              Three Months Ended March 31,                 Change
                                                2023                2022           Amount           %
                                                                (dollars in thousands)
General and administrative expense          $       7,830       $       6,941     $     889           12.8 %
Percentage of revenue                                 7.2 %               6.3 %


General and administrative expenses increased by $0.9 million from $6.9 million
for the three months ended March 31, 2022 to $7.8 million for the three months
ended March 31, 2023. The increase in general and administrative expenses was
primarily due to an increase in personnel-related costs of $0.3 million, an
increase in legal and consulting fees of $0.3 million and an increase in bad
debt expense of $0.2 million.

Acquisition-related

Acquisition-related costs for the three months ended March 31, 2023 and 2022
solely consisted of the change in fair value of our contingent consideration
liabilities recorded as the result of our acquisitions. We recorded credits to
acquisition-related costs for the three months ended March 31, 2023 and 2022 of
$0.1 million and $0.9 million, respectively, related to the decrease in the fair
value of our contingent consideration liability due to changes to our future
revenue forecasts.

Other Income (Expense)

Interest income increased by $0.2 million in the three months ended March 31,
2023 compared to the three months ended March 31, 2022 due to increases in
interest rates. Other income (expense), net was not significant for either of
the three months ended March 31, 2023 or 2022.

Income Tax Expense

We recorded income tax expense of $0.3 million in the three months ended March
31, 2023. We maintain a valuation allowance on our overall net deferred tax
asset as it is deemed more likely than not the net deferred tax asset will not
be realized.

Variable Marketing Margin
                                               Three Months Ended March 31,                 Change
                                                 2023                 2022           Amount          %
                                                                (dollars in thousands)
Revenue                                     $      109,220       $      110,681     $ (1,461 )         -1.3 %
Less: total advertising expense (a
component of sales and marketing expense)           73,627               76,417
Variable marketing margin                   $       35,593       $       34,264     $  1,329            3.9 %
Percentage of revenue                                 32.6 %               31.0 %

The increase in variable marketing margin was due primarily to traffic
optimization.

Liquidity and Capital Resources

Our principal sources of liquidity are cash and cash equivalents of $28.8
million as of March 31, 2023 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.

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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 March 31, 2023, 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. 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 March 31, 2023, $34.7 million of our $46.3 million commissions
receivable contract asset was classified as long-term. We believe our existing
cash and cash equivalents will be sufficient to fund our operating expenses and
capital expenditure requirements for at least the next 12 months, without
considering the borrowing availability under our 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 for the three months ended
March 31, 2023 and 2022:

                                                        Three Months Ended March 31,
                                                         2023                  2022
                                                               (in thousands)
Net cash used in operating activities               $        (1,237 )     $        (3,845 )
Net cash used in investing activities                        (1,007 )                (681 )
Net cash provided by financing activities                       157         

15,558

Effect of exchange rate changes on cash, cash
equivalents
 and restricted cash                                              5                    (5 )
Net increase (decrease) in cash, cash equivalents
and restricted cash                                 $        (2,082 )     $        11,027





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Net cash used in operating activities

Operating activities used $1.2 million during the three months ended March 31,
2023, primarily resulting from our net loss of $2.5 million and net cash used by
changes in our operating assets and liabilities of $6.8 million, partially
offset by net non-cash charges of $8.1 million. Net cash used by changes in our
operating assets and liabilities consisted primarily of a $9.8 million increase
in accounts receivable, partially offset by decreases of $1.7 million in prepaid
expenses and other current assets and $0.6 million in commissions receivable and
an increase in accounts payable and accrued expenses and other current
liabilities of $0.9 million. Operating activities used $3.8 million during the
three months ended March 31, 2022 primarily resulting from our net loss of $5.7
million and net cash used by operating activities of $6.4 million, partially
offset by net non-cash charges of $8.2 million. Net cash used by changes in our
operating assets and liabilities consisted primarily of an $11.0 million
increase in accounts receivable and a $5.4 million increase in commissions
receivable, partially offset by a $10.4 million increase in accounts payable and
accrued expenses and other current liabilities.

Changes in accounts receivable, accounts payable and accrued expenses and other
current liabilities were generally due to changes in our business and 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 is classified as
long-term.

Net cash used in investing activities

Net cash used in investing activities was $1.0 million and $0.7 million for the
three months ended March 31, 2023 and 2022, respectively. Net cash used in
investing activities for the three months ended March 31, 2023 and 2022 included
the acquisition of property and equipment, which included the capitalization of
certain software development costs. During the three months ended March 31, 2023
and 2022, we capitalized $0.9 million and $0.5 million, respectively, of
software development costs.

Net cash provided by financing activities

During the three months ended March 31, 2023 and 2022, net cash provided by
financing activities was $0.2 million and $15.6 million, respectively. Net cash
provided by financing activities during the three months ended March 31, 2023
consisted of proceeds received from the exercise of common stock options,
partially offset by tax withholding payments relating to net share settlements.
Net cash provided by financing activities during the three months ended March
31, 2022 consisted 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 our company, and $0.6 million from the exercise of
common stock options.

Contractual Obligations and Commitments

There have been no material changes to the contractual obligations reported in
our Annual Report on Form 10-K for the year ended December 31, 2022.

Critical Accounting Policies and Significant Judgments and Estimates

Our condensed consolidated financial statements are prepared in accordance with
GAAP. The preparation of our condensed 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 condensed 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. We believe that the accounting policies
discussed below are critical to understanding our historical and future
performance, as these policies relate to the more significant areas involving
management's judgments and estimates.

The following critical accounting policies reflect significant judgments and
estimates used in the preparation of our condensed consolidated financial
statements:

•

goodwill and acquired intangible assets;

•

valuation of contingent consideration;

•

revenue recognition and the valuation of commissions and accounts receivable;
and

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•

stock-based compensation expense.

There have been no material changes to our critical accounting policies from
those disclosed in our financial statements and the related notes and other
financial information included in our Annual Report on Form 10-K for the year
ended December 31, 2022, on file with the Securities and Exchange Commission.
For further disclosure, refer to our unaudited condensed consolidated financial
statements included in this Quarterly Report on Form 10-Q and our audited
consolidated financial statements included in our Annual Report on Form 10-K.

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 unaudited condensed consolidated financial statements included in this
Quarterly Report on Form 10-Q.