Participants

Brinlea Johnson; Investor Relations; EverQuote Inc

Jayme Mendal; Chief Executive Officer; EverQuote Inc

Joseph Sanborn; Chief Financial Officer; EverQuote Inc

Ralph Schackart; Analyst; William Blair

Michael Graham; Analyst; Canaccord Genuity Inc

Cory Carpenter; Analyst; JPMorgan

Zach Cummins; Analyst; B. Riley Securities

Greg Peters; Analyst; Raymond James

Jason Kreyer; Analyst; Craig-Hallum Capital Group

Jed Kelly; Analyst; Oppenheimer

Mayank Tandon; Analyst; Needham & Company

Presentation

Operator

Thank you for standing by. My name is Mark, and I will be your conference operator today. At this time, I would like to welcome everyone to the EverQuote first-quarter 2024 earnings call. (Operator Instructions) And I would now like to turn the call over to Brinlea Johnson. Please go ahead.

Brinlea Johnson

Thank you. Good afternoon, and welcome to EverQuote's first-quarter 2024 earnings call. We'll be discussing the results announced in our press release issued today after the market closed.
With me on the call this afternoon is Jayme Mendal, EverQuote's Chief Executive Officer; and Joseph Sanborn, Chief Financial Officer of EverQuote.
During the call, we will make statements related to our business that may be considered forward-looking statements under Federal Securities laws, including statements concerning our financial guidance for the second quarter 2024, our growth strategy and our plans to execute on our growth strategy, key initiatives, our investments in the business, the growth levers we expect to drive our business, our ability to maintain existing and acquire new customers, our expectations regarding recovery of the auto insurance industry, and other statements regarding our plans and prospects.
Forward-looking statements may be identified with words and phrases such as we expect, we believe, we intend, we anticipate, we plan, may, upcoming, and similar words and phrases. These statements reflect our views only as of today, and should not be considered our views as of any subsequent date. We specifically disclaim any obligation to update or revise these forward-looking statements, except as required by law. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations.
For a discussion of material risks and other important factors that could cause our actual results to differ materially from our expectations, please refer to those contained under the heading Risk Factors in our most recent quarterly report on Form 10-Q or annual report on Form 10-K, that is on file with the Securities and Exchange Commission and available on the Investor Relations section of our website at investors.everquote.com, and on the SEC's website at sec.gov.
Finally, during the course of today's call, we will refer to certain non-GAAP financial measures, which we believe are helpful to investors. A reconciliation of GAAP to non-GAAP measures was included in the press release we issued after the close of market today, which is available on the Investor Relations section of our website at investors.everquote.com
And with that, I'll turn it over to Jayme.

Jayme Mendal

Thank you, Brinlea, and thank you all for joining us today. 2024 is off to a strong start in the first quarter. Operating results exceeded the high end of our guidance range for revenue, variable marketing margin and adjusted EBITDA. We achieved record levels of net income, adjusted EBITDA and operating cash flow. These results were made possible by the actions we took in 2023 to strategically realign the business and return to our roots as a capital efficient digital insurance marketplace. Since the middle of last year, we have observed auto insurance carrier underwriting profitability steadily improving. With this trend persisting into 2024, carriers have continued to reactivate campaigns, restore budgets and reopen their state footprints in our marketplace actions and messaging from carriers indicate that the majority are either starting to or planning to restore greater emphasis on growth given the years long volatility in the auto insurance market. We maintain caution while noting that we believe a sustainable auto recovery is in fact, underway against an improving industry backdrop. Our team continues to execute effectively as evidenced by our bottom line performance alongside sequential growth in carrier revenue. We had strong growth in agent revenue compared to the fourth quarter. And as provider budgets increased our performance marketing engine continued to optimize in real-time driving volume and variable marketing margin growth progress extended into our home vertical as well as we achieved record home revenue in the first quarter. Q1 also marked numerous milestones and rebuilding technology infrastructure for future speed and scale. We moved most of our traffic to new site infrastructure, began migrating customers to a new agent platform and now have the majority of our traffic being migrated to our new ML powered bidding platform. These changes will enable faster feature development and greater employee productivity in the future. More importantly, sets us up to accelerate progress in areas ranging from site experiences to a high-powered bidding to new agents, products and features. I want to thank the EverQuote team for the incredible tenacity they demonstrated and continue to demonstrate through the recent hard market cycle. This period of unprecedented market conditions dating back to 2021 has been an extended challenging stretch for EverQuote, but we are emerging stronger. The team, which has led us through this challenging period as battle hardened and energized by the results, we're beginning to see this team, which gives me confidence in EverQuote's pursuit and eventual achievement of our vision, we become the largest online source of insurance policies by using data technology and knowledgeable advisers to make insurance simpler, more affordable and personalized.
I'll now turn the call over to Joseph to discuss our financial results.

Joseph Sanborn

Thank you, Jayme, and thank you all for joining. I will start by discussing our financial results for the first quarter of 2024. Before providing an update on what we are currently seeing in the auto insurance sector and our guidance for the second quarter, we had a strong start to 2024 and exceeded first quarter guidance across all three of our primary financial metrics of total revenue, variable marketing margin or VMM and adjusted EBITDA. We produced a record level of net income as well as a record level of adjusted EBITDA. These results were driven by continued strong execution of our operating teams against an improving auto carrier landscape. Total revenues in the first quarter were $91.1 million, driven by stronger enterprise carrier spend, up more than 150% from Q4 levels. Revenue from our auto insurance vertical was 77.5 million in Q1, representing roughly 85% of revenues in the period and a sequential increase of 72% from the fourth quarter of 2023. Revenue from our home and renters insurance vertical was 12.7 million in Q1, a sequential increase of 29% from the fourth quarter of 2023. Vmm was $30.8 million for the first quarter, up nearly 50% from the fourth quarter of 2023. Vmm as a percentage of revenues in the quarter was 33.8% and as expected, declined from the record level of the previous quarter as we experienced a more costly advertising environment, which was partially offset by continued strong execution by our traffic teams and the ongoing benefits of our investments and our bidding technology.
Turning to operating expenses in the bottom line, we continue to be very disciplined in managing expenses and driving incremental efficiency across our operations. Our efforts to streamline the business have led to improved execution and greater operating leverage. Cash operating expenses, which excludes certain non-cash and other one-time charges were in line with expectations of 23.2 million in the first quarter or 23% decline from the first quarter of 2023. In the first quarter we reached a milestone of generating positive GAAP net income for the first time since the third quarter of 2019, reporting a record high of 1.9 million. Adjusted EBITDA reached a record 7.6 million in Q1, a 41% improvement year over year on 17% lower revenues, reflecting the strong operating leverage that we have created in our model since our June 2023 strategic realignment, adjusted EBITDA as a percentage of revenues reached 8.3% in the quarter as the rapid increase in auto care recovery in Q1, coupled with our tight expense discipline led to VMD overperformance flowing through to adjusted EBITDA remain steadfast in our commitment to efficient operations and as we gain greater confidence in the sustainability of the recovery, we expect to modestly increase investments to support our future growth. As a result, as we progress through the second half of this year, adjusted EBITDA margins are likely to moderate but remain above pre-downturn levels.
We delivered operating cash flow of $10.4 million for the first quarter, ending the period with cash and cash equivalents of $48.6 million, up from 38 million at the end of the fourth quarter of 2023. Adjusted EBITDA will continue to be a close proxy for operating cash flow going forward, subject to normal working capital adjustments.
Before turning to guidance, I want to provide an update on what we are seeing in the auto insurance industry this year. During our February call, we shared that many of our carrier partners have recently reiterated their prior comments to us of wanting to return to acquiring new consumers during the course of 2024. We are pleased to see this more growth oriented mindset is taking hold, which has led to a strong start to the year with more auto insurers beginning to return to our marketplace. We are increasingly optimistic that auto recovery will be more sustainable this time around. However, we are cognizant that there is no playbook for how our carrier partners will emerge from what several insurance executives have referred to as a once-in-a-generation downturn. Given these dynamics, we expect unpredictability to persist in the near term, which makes it increasingly challenging to look at historical seasonal patterns to predict our outlook for the remainder of the year. We continue to execute on the strategy and accomplish the goals we laid out last year. Following our June strategic realignment, we committed to restoring consistent quarterly cash flow from operations in the first half of the year, followed by a return to our pre-downturn adjusted EBITDA margins in 2024. I am pleased to share that we achieved both of these goals but in the first quarter ahead of our expectations. Furthermore, we expect our operations to continue to generate cash flow in quarterly adjusted EBITDA margins to remain at or above pre-downturn levels for the remainder of this year.
Turning to our guidance for Q2 2024, we expect revenue to be between 101 hundred and 5 million. We expect to VMM to be between 31 and $33 million, and we expect adjusted EBITDA to be between seven and 9 million.
In summary, we entered 2024 with deep conviction that EverQuote is extremely well positioned to directly benefit as sustainable Auto Care recovery takes hold and process. We delivered strong performance in the first quarter, exceeding our guidance across revenue, VMM and adjusted EBITDA, our ability to achieve record levels of net income and adjusted EBITDA in the first quarter demonstrate our efficient business model. We will continue to focus on strong execution and remain steadfast in our commitment to efficiency while strategically investing and positioning EverQuote for future growth and success.
Jayme and I will now answer your question.

Question and Answer Session

Operator

(Operator Instructions) Ralph Schackart, William Blair.

Ralph Schackart

Good afternoon.
Thanks for taking the question, Jamie, maybe if you could provide some perspective, if you could, please, just in terms of how broad-based the recovery you're seeing in terms of number of carriers in increasing number of states, just any sort of like operational metrics you might be able to to add to those obviously, really strong performance in the quarter that I have a follow-up for Jason.

Jayme Mendal

Sure. Thanks, Rob. So yes, if you take a step back, I think sort of across the board, you're seeing broad-based improvement in carrier underwriting profitability. So that's been steadily improving over the last year. I think auto carriers have taken 20 ish points of rate and you're seeing across a number of carriers double digit percentage point improvements in their combined ratios. So I think we are the industry itself is certainly getting back to a more broad-based position of health, which is the primary leading indicator to reentry back into the marketplace. Within our marketplace, some negative data points I can share as we've seen all of the top 10 carriers from Q4 had have stepped up their spend and into Q1. And there is a broad base of carriers that are reactivating campaigns, restoring budgets reopening state footprints in our marketplace.
Now if you just look at the performance we've seen so far this year, and the guidance we're providing for that for the second quarter. What that demonstrates is a recovery that has happened much faster than we expected in the first part of this year. And so I think a good bit of that recovery is somewhat front-loaded relative to how we expected the year to play out. And there is certainly one major carrier that has leaned in very aggressively. But by and large, we're seeing it more broad-based of recovery than we were seeing this time last year.

Ralph Schackart

Okay. That's really helpful. And then just a historical analysis, unpredictable, like you talked about on the recovery path that historically see a strong Q1 seasonally, maybe down Q2 up Q3, maybe Q4 is down. Just can you help us kind of think about sort of the shape of the revenue recovery as we think about sort of modeling 2024?

Jayme Mendal

Sure. Happy to Rob. So maybe just maybe start this thing about how is the year unfold to date, as Jamie said, relative expectation. So the normal, the normal seasonal patterns you just described start the year with having a good start to the year, Q2 down in Q3 and Q4 down given given what's actually transpired, it's been a much stronger start to the year, as Jamie mentioned, and it's really been led by a handful of carriers who have been aggressively expanding their state footprint more quickly and resulting is having a strong Q1. But if you look at our Q2 guide, Q2 guide implies auto returning to peak or near peak levels that we saw in Q1 of 2023. So as a result, we see this growth as we expected for 2024 being more front end loaded. And so we think about how we think for what does the second half, what does that imply? So we think about the carriers are more aggressive in coming into the marketplace more aggressively. There's relatively few additional states and open at this point in part because of some of those opportunities, some of the more challenging states, some of the larger states. But the timing on those is still TBD and some are saying will be till 2025. And then as we look at the broader range of carriers out there. We certainly see enthusiasm for getting back to growth mode. But the specifics just as the specificity of their plans for the second half is still uncertain. So we put this all together, the way we think about it is we expect to have strong year-on-year growth in the second half of the year, but we are not currently expecting the sort of the seasonal pattern of a sequential improvement from Q2 to Q3 of five this year, just given the front-end loaded nature of the recovery so far. So that's what we can give you right now based on what we're seeing.

Ralph Schackart

I think just appreciate a picture.

Jayme Mendal

Thanks, Rob.

Operator

Michael Graham, Canaccord.

Michael Graham

Thank you and congrats on the strong results. Maybe just to follow up on Ralph's question. One of the other players in the industry had suggested that volumes were recovering, but pricing was especially strong here in the early phases of this recovery so far. I just wonder if you could comment on the role that pricing might be playing and whether that you know, it means the recovery is more sustainable, less amenable.
And then I just wanted to ask a quick question on operating leverage. I know you mentioned that in your prepared remarks, but you had such good disclosure here in the quarter. How are you thinking about the ability to keep delivering that thread through the year?

Joseph Sanborn

Sure. Thanks, Mike. I'll take the first question, then I'll turn it over to Josip on the operating leverage question. So we come we have we continue to see as it relates to volume. We continue to see elevated levels of shopping persisting into Q one. And we would expect that to really persist over the course of this year as the rate cycle unfolds, people get renewal notices, those renewal notices are coming in with rates that are meaningfully higher than what people are paying and that trigger shopping behavior. So for as long as the rate cycle is unfolding and you got to remember, there's a six to 12-month lag from when a rate increase goes into effect to when the renewal notice may flood will add to the customer for as long as that remains in effect, we expect to see these elevated levels of shopping behavior. And so we're kind of planning for some heightened levels of shopping in 2024 and 2025 gradual return to more normalized levels of shopping activity.
As it relates to pricing, pricing is stepped up meaningfully from Q4 to Q1, but it is operating at healthy levels by historical standards. And yes, we'd expect some some stability in higher pricing levels, assuming the auto recovery continues to maintain its foothold. So we're benefiting from a combination.
Yes, certainly sequentially a higher volume and higher pricing.

Ralph Schackart

So with regards to operating leverage, let's give you a little color on. So there's at least following our strategic realignment last last summer, in June, we've really focused on driving operating leverage in the business. I think what you saw in Q1 was representative of what we have done. We got a record level of adjusted EBITDA and actually also a record level of net income. The adjusted EBITDA margin of the business was 8.3% in Q1. As we think about the how we're going to expand the expense base will be on the application for EBITDA margin. And when a couple of things, we think operating expenses, cash operating expenses referred to, then we'll have modest increase as we progress through the year. And we'll so we'll be very disciplined as we do that, there will be tied to sort of the idea of maintaining adjusted EBITDA margin that is above the pre to pre-downturn levels that we've talked about as a goal and pre-downturn levels were like 5.56% and where they were in Q1 was around 8.25% in Q1, and we'll manage them in a disciplined way. We're adding modest incremental investment as we progress through the year and on the OpEx side positions for future growth at the same time that we're continuing to make sure we maintain that EBITDA margin and improving it as we get. And I think performance in the second half of the year.

Michael Graham

Okay, great. Thanks a lot, guys.

Ralph Schackart

Thank you, Michael, for the question.

Operator

Cory Carpenter, JPMorgan.

Cory Carpenter

Thanks for the questions. I to first, just hoping you could talk more about the incremental investments now you are are planning on making what maybe a little more specificity specificity and we plan on investing?
And then secondly, the home vertical growing 35%. If you could just talk about what you're seeing there and how you think about the sustainability of that growth going forward?

Jayme Mendal

Thank you for our best part. So astute cemented mentioned we the discipline and expense management will process. But as as we get comfortable with our adjusted EBITDA levels, we will begin ramping some targeted investments back and over as we progress through the course of the year by two areas I'd highlight for you, Corey, from mid point not exhaustive, but there'll be some concentrated investment in the areas of sort of Data Science & L and NAI. where we have applications across the business from traffic to improving carrier performance, station's performance. So that will be one area of investment and others going to be in continuing to extend our advantage with local agents. And over the last year we've spent a lot of time with the local Asian customer base. I think we've got a pretty good sense of them their needs and have begun making investments in improving our existing products and developing new products to better meet their needs to both sort of deepen and expand our relationships with that agent base. So that would be another area where we'll direct some resources.
Your second question about homeowners. No, we had home record revenue in home in the first quarter. We're starting to see had some improvement in the homeowners market from an underwriting profitability standpoint, it was similarly challenged auto. I think it's gone through a period of a lot of sort of cat losses. But in the first quarter of this year, carriers produced better underwriting results, and that was helped by a period of relatively light cat losses. So yes, the growth has been healthy. We've continued to maintain focus on it as we've stepped back from some of our previous vertical markets and shifted some of that focus to home. And we expect home to continue to grow over the course of the year knows that the comps will become a bit higher as we progress through the year, but we do expect to continue to grow that vertical as we progress. We expect pay for Great.

Cory Carpenter

Thank you. Next chart.

Operator

Zach Cummins, B. Riley Securities.

Zach Cummins

Yes, hi, good afternoon. Thanks for taking my questions and congrats on a strong results here in Q1. I really just had a question around is there a ramp up in advertising expenses as you start to see improvements in demand? Can you talk about some of the pricing that you're seeing in the ad environment and maybe which channels you could be prioritizing versus others as you start to see carrier demand really ramp up?

Jayme Mendal

Yes. So we yes, as carrier demand has come back. So so to have some competition in the advertising environment, particularly in the more vertical specific channels like paid search as an example. And So Zach, I mean, the way we're always managing the business to maximize our variable marketing margin dollars. So where we think we can get incremental volume or incremental dollars will will bid into that, which may cause some VMM margin percentage compression, but your results and more variable marketing margin dollars for us. So as we have as we've seen the advertising environment become more competitive. We've seen a little bit of compression of the amount, but it's more than made up for in the cost increases are more than made up for by volume and pricing with the higher pricing. What has that has changed from a channel standpoint? Is it now makes insurance as a category more competitive and some of the more broad-based channels. So channels that are industry specific display or social or things like that have really come back to life in the first part of the year. They may run at slightly lower margin, but there's a lot of incremental sort of volume and dollars to go get. And so we've been able to reactivate a number of those channels as monetization has come back over the first four months of this year.

Ralph Schackart

And maybe I can add, just to give you a good context on sort of VMM margins you think about what it means for that as we progress through the year. So we had QQ. one was just under 34%. We had sort of as expected was down from the levels we saw in Q4, which was it was an environment. It was very depressed. As we think about Q2, as we progress into Q2, you see our guide implies about 31% for VMM margin. We think it will be sort of in the low 30s for the year on balance and I guess sort of three factors that give you this should help understand what's driving it. One is, first and foremost, advertising costs as the auto as we get out of recovery, the cost around acquiring advertising is rising. There's more demand, and that's being of costs for the advertising. The second, which is driving it from our point of view, as we get as we especially in Q2 as we lean as we're ramping our traffic, you're effectively testing back into certain channels. And in doing that, it's less efficient to scale them. So that's a positive impact in Q2.
And the third is just at a high level from the business as we get more, we have a relatively higher VMM margin and agencies and enterprise. And generally speaking, as we've seen the ramp and enterprise carrier in Q1 driving being driven by enterprise care ramping a much higher rate that is helping in the mix shift.
Karen, just bringing down the VMM margin a whole in the business.

Zach Cummins

Understood. That's extremely helpful. Thanks for taking my question and best of luck here in 2Q.

Operator

Greg Peters, Raymond James.

Greg Peters

Yes, hey, good afternoon. This is Sid on for Greg. With the recovery in the auto carriers just doesn't feel like they've fully restored their budgets, but your second quarter guidance seems to imply revenue near the quarterly run rate you're achieving in 2021 so far. Just curious if you could discuss how you view your market share and if it's fair for us to assume that it's increased the last couple of years?

Joseph Sanborn

Yes, yes. So we know we are today the largest digital P&C insurance marketplace. If you just look at that by revenue, Al, now over the last couple of years, we've been in a very constrained budget environment and environment, and we've been mostly focused on maximizing profitability and proving more and improving the value we're delivering to our customers, whether that's through better targeting high-intent traffic and in some cases, that means actually pulling back on volume, but even still we remain the largest digital insurance marketplace in P&C. And so as we do that, we expect, as we continue to make these investments, we expect our position to continue to strengthen Tom, do you want to talk about the relative like benchmarking in terms of revenue versus historical periods?

Jayme Mendal

Yes, sure. So I mean, when you think about auto and think about auto revenues. Our peak was Q1 of 2023 for auto, not for total revenue for audits. And then we had the health business prior to June of 23 to look at us. Auto was just under 90 million in Q1 of 23. And if you look at that where our Q2 guide and what's implied with that Q2 guide, we're sort of at or near the peak levels implied in Q2 that we saw in Q1 to 23. So we look to the second half of the year. We believe the auto recovery. We're still very bullish on the outlook for auto recovery. I think what we're highlighting, though, is how for what exactly will happen in the second half of 24. Depends on factors. We don't yet know. So one is other carriers coming to the market. Some carriers have our my handful of carriers have been more aggressive in getting rate getting rate increases. They've been aggressively leaning to our marketing Q1, and we expect that to continue in Q2 as you get to the end of Q2 for those large. So these handful of very large carriers have leaned in aggressively. There's relatively few states they can open at this point in our marketplace, and they've opened so many the states that remain as some of these very large states with more relatively more challenging regulatory environments.
And how windows will open is an open question. Some are saying we will be in a meaningful way until 2025. So that's a piece to think about it.
The second piece, I'd say if you look at the second half of the year, we're expecting this year our strong year-on-year growth in second half of 23 to second half of 24.
I think the other thing we highlighted in response to Rob's question is how will the seasonality play out and I think as we look at it right now, we've had a very front end loaded recovery volatile. We expected. So it's harder than normal sequential increase you see from Q2 to Q3 will apply based on what we are seeing today, just given the environment.
But we were very bullish on a long-term view.

Joseph Sanborn

And as Jamie said, trying to measure it we are the largest P&C marketplace today. But as you look at measuring market share, I think we'll be talking about more of that over time. I think as we as we get to more SaaS, a market where there's more predictability in the market and you're seeing a more broad base of carriers coming.

Greg Peters

Okay. Thank you.

Operator

Jason Kreyer, Craig-Hallum Capital Group.

Jason Kreyer

Thank you. This is our Telguard is on for Jason on. So just to start, you know, following up on some of the commentary that you had on our agents. I'm just kind of curious what you're seeing there, what maybe the pockets of strength and if there's any green shoots that you're seeing from our captive carriers that would indicate the upswing in the agent channel?

Jayme Mendal

Sure. So our agent business performed well in the first quarter. We did see the return of some carrier subsidies note, it's been happening in a very targeted way, right, similar to how we've seen direct carriers kind of reenter the market state by state. We're seeing subsidy dollars reenter the market state by state. But overall, it's been a favorable trend going forward. As I mentioned earlier, we've spent a lot of time with agents over the last year. I think we're going to it's an area we'll continue to invest to extend our advantage. I think we have an opportunity to grow the agent base specifically in that independent agent channel and deepen our relationships with agents of more spend per agent, more more sticky relationships by improving the existing products and services. We're offering them as well, extending into sort of adjacent products and services to help them solve for their growth needs.

Jason Kreyer

Perfect, thanks. And then just second one from me quick. I just wanted to follow up on kind of some of the comments earlier about some of this new bidding technology and some of the things you guys are doing on the tech side, as we've seen VMM as the Q2 guide implies kind of getting back towards where it kind of has been historically. I mean, do you think that there's any upside to historic levels, particularly as you continue to roll out tech improvements?

Jayme Mendal

Yes, I wouldn't I wouldn't over-index any one quarter on the VMM front. Just to explain some of the factors that have contributed to the BMMI. compression on a percentage basis and over the from one quarter to the next, I think over the the over a longer period of time, certainly some of the investments we are making, particularly in our bidding platform have structurally improved the VMM of the business. We're now able to take data more data at more granular level in real time about a consumer about our distribution about what are the options in which we are competing and apply it now more effectively to generate profit, maximizing bids. And that has been responsible for just a structural expansion of the VMM as a percentage. Right now, we're in a period of time where the advertising landscape is in transition. We're testing back into new channels. Our distribution mix is shifting and so there's a bit of a fluctuation, but we do continue to expect our VMM levels to settle out probably somewhere between where they were at their peak and somewhat where they've been historically and the structural increase there largely can be attributed to some of the bidding technology that we've rolled out.

Joseph Sanborn

And maybe I can just expand on the numbers more specifically. So we talked about on our prior call on some of our public comments last quarter. But when you look at 2023, you had VMM margins that have lots of things going on your puts and takes of DTCA., not BTCA., you had also the very depressed environment for we're able to get advertising relatively cheaply, but we did say.
And if you look back on those comments, you said normalized VMM margin for the just for the marketplace, excluding DPC, it was sort of high 20s low 30s for the starting last year. We had some improvement as we progress through the year and then normalized marketplace. And what we said going into this year as we expected would settle up between that 30 to 35 range. And we said Q1 would be just under 34, Atlanta, just under 34. We continue to believe this year will and we'll have incremental improvement relative to the 30 last year. Maybe this year is in the 31, 32 range. So you should see a dynamic where you continue to build every year, incremental VMM margin percentage very much like we articulate. I appreciate it's not the perfect story to watch. But if you look over time, I think you'll see our investments, the bidding technology or what's really driving that as you sort of normalize behaviors for the quarter on, especially with advertising and recovery with an auto?
It's hard to look at those right now, but the bidding technology more sustainable, and we'll talk about as we progress through the year so far and very helpful.

Jason Kreyer

Thank you. Yes.

Operator

Jed Kelly, Oppenheimer.

Jed Kelly

Thanks for taking my questions. Looking at the industry and Hertz, it seems like everyone's doing pretty well. So we're assessing like how you're performing relative to your carriers or up relative to your other competitors. How should we assess what key metrics should we look at? And then on think you ended the quarter with 48 million of cash on you talk about that the right balance going forward and how you kind of do your own balance sheet things?

Jayme Mendal

Sure. Thanks, Ed. Yes. So as you say, I mean, I think what we're focused on us, right? And we've gotten off to a very strong start this year. We have results that exceeded the high end of the range on all metrics that we manage to. We've got record levels of adjusted EBITDA and operating cash flows of net income. And all that was really made possible by the actions we took last year to refocus the business into a capital efficient P&C focused digital insurance marketplace, JNI as we look out across the market, um, I think we view ourselves increasingly like the business is an element of it versus our model is digressing a bit from that of some of our peers simply in that we are more focused, but we are a pure play focused on P & C. We are of the mind that going deeper in this market with carriers with agents with consumers in a world where we are the leading player in the space. We have access to a tremendous amount of proprietary data in the space. And we think that using that data and going deeper in this market, we'll pay off over time and allow us to extend that advantage from. So I don't know exactly what metrics to point you to. We're really focused on delivering more value to our customers in the P&C insurance market. And I think that it's hard for us to find a comp that is similarly focused. And so I would just measure us on what we say we're going to do and how we do against that.
Maybe I mean, I think the second question you had was on capital allocation. Certainly just put a couple of things in context. See we ended the We ended Q1 with close to $50 million of cash, just under $50 million of cash. And obviously a significant improvement from where we were a year ago.
Right, and where we were in the summer of 2023. I think it reflects, as Jamie said, we have we're managing that as saying, well, we're going to do and we're doing that and we're executing upon it. And the operating leverage, we've driven more cash on the balance sheet. We do not need, and we expect to be cash flow positive going forward as a company. So we will, as we think about the cash position, we are we're pleased to see where it's at, but also to last year, what we're seeing is in our we are confident our ability to drive long-term growth organically. And as Jamie mentioned, we believe we can by going deeper top of the clients' needs within P&C, we're actually going to value that we'll make us increasingly differentiated from the broader market participants feel good, and that's what we feel comfortable driving long-term growth organically. But we'll continue to selectively evaluate acquisition opportunities to drive inorganic growth and what we'll have to we'll be very disciplined about this, and we'll follow the same disciplined approach. We've used to manage our operating expenses. We've sampled to look at acquisitions, but that certainly sort of something we'll consider with our cash over time.

Joseph Sanborn

As we've said in our prior call. With regards to M&A, we believe that M&A will make sense over time for this sector consolidates with maybe more M&A. And we believe that we are well-positioned to be a leader in this space long term, and we have the team and the approach that we think will win long term for growth.

Jed Kelly

Thank you.

Operator

Mayank Tandon, Needham.

Mayank Tandon

Thank you. Good evening. Congrats, Jamie and Joseph on a strong quarter. A couple of clarifying questions. Joseph, sorry, I missed this, but I think you walked through some of the assumptions for the back half, even though you're not giving formal guidance. But just to be clear, if the recovery hold that you're seeing right now, would you still expect to see sequential growth, maybe not the same seasonality that you've seen historically, as you said, but some sequential growth in the back half three and 4Q based on what you're seeing in the market right now?

Jayme Mendal

Yes, I guess is the comments I said earlier, Mike, and I'll just repeat them. I think group which is when going into the year, we expected to have a gradual auto coverage, good Q. one and the seasonal pattern would be Q2 will go down Q3.
Got Q4. Go down what we've actually seen plant or something quite different, which is we've had we've seen a much stronger start to Q1, and that is progressing into Q2. And as we progress into Q2, you're seeing in our guide implied by our guy that auto is now at or near the peak levels we saw in Q1 of 2023. So we look at that backdrop, we say what's going to happen as we progress into the second half of the year. So first, we know what's been driving a lot of the growth in the first half of the year and making it more front end loaded that a handful of the very large carriers have leaned in aggressively, and they've been opening more and more space. They progress through Q1 and certainly as they're progressing into Q2. And we expect that to continue as we think to the end of Q2 in the second half of the year. We think it's going to be limited opportunity for these for these handful of our carriers have leaned in aggressively to open more states this year because of the contingent upon some of the larger states was more challenging regulatory environment and they may or may not open this year. They may not open until 2025 based on how rate increases are going in those states. If we look at that piece, we overlay and what do we know about the broader carrier landscape? We see the broader carriers. We see carriers who are not as advanced in getting rates efficiency as couple of the large carriers we've come in, certainly bullish about want to get back to growth mode. The specificity of the plants the second half are female. As a result, we are not we are seeing as an unpredictable environment. So in that in that context, based on what we know right now, we're not expecting a sequential increase from Q2 to Q3. And the same reason, we didn't have a sequential pattern of sequential seasonal pattern effectively didn't hole from Q1 to Q2. It's hard to think it would close in Q2 continue into Q3 and Q4. So we're not expecting sequential growth right now based on what we know. But as I said, as it progresses, we will we'll see I think what the wildcard will be. The other carriers come back in faster. So they get confidence in rate adequacy and it still remains to be seen how fast number, but we remain bullish about auto recoveries here. It's just a question of how how many is it, how fast it progresses through the year. But really, we view it as a multiyear recovery and will drive growth in 25 and beyond as well as this year. And the second half of this year, we'll have strong year-on-year comps relative to 2023 right now.

Mayank Tandon

That's very clear. Thank you so much for clarifying. And then a quick follow-up. Jamie, I think you were asked about pricing, and I just wanted to go back to some of the key underlying drivers. So could you just walk through what is driving RPQ? I know you don't provide the details like maybe in the past but just know, is it more bundled offering that better integration with the carriers? So what are some of the underlying factors that are driving our expense for you?

Joseph Sanborn

Yes. So I think it's actually a bit more straightforward than that in the recent upticks in revenue and revenue per quote request are largely driven by the we've got the auto recovery. So we have had carriers stepping back into the marketplace really since the beginning of this year. And that means more carriers participating expanding their state footprints and increasing their budgets and their bids their willingness to pay. So you've got it in a competitive dynamic beginning to form, which is resulting in pricing going up and more carriers in I'm willing to pay for the traffic that we're generating. And if you have a similar dynamic on the agent side, so we've seen a meaningful step up in demand from Q2 sequentially from Q4 into Q1. So on I'll vote, we are seeing an increase in volume and quote request volume. We're seeing an even larger increase in revenue per quote requests sequentially as weak as we come into this year.

Mayank Tandon

Okay. That sounds simple out. Thank you so much for taking my questions. Appreciate it.

Jayme Mendal

Thanks, Mike.

Operator

That concludes our Q&A session. I will now turn the conference back over to the management for closing remarks.

Jayme Mendal

Thank you. I just want to thank everyone once again for joining us on the call today. The team and I are energized by how strong start to the year. We have here over the last couple of years, we've made a number of difficult decisions to realign the business towards a brighter future and the benefits of those decisions are now very clear as we produced record levels of net income, adjusted EBITDA and operating cash flow in Q1. And now with a solid foundation, a battle-hardened team and more focused than ever before. We're excited to continue building a great business into this incredible market opportunity of bringing insurance distribution into the digital age.

Joseph Sanborn

Thanks, Al.

Operator

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.