What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-05-06 compared with 2020-11-06 · 117 added, 158 removed, 219 unchanged (56% of the section changed)

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Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q,

particularly in the section titled

“Risk Factors.”

particularly in the section titled “Risk Factors.”

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.

Our goal is to reshape insurance shopping for consumers and improve the way insurance providers attract and connect with customers shopping for insurance.

With over 11 million consumer visits per month, our results-driven marketplace, powered by our proprietary data and technology platform, matches and connects consumers seeking to purchase insurance with relevant options from our broad direct network of insurance providers, saving consumers and providers time and money.

Consumers may view insurance as a simple commodity with standard pricing.

However, 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 operate a leading online marketplace for insurance shopping, connecting consumers with insurance providers.

Our mission is to empower insurance shoppers to better protect life’s most important assets—their family, property, and future.

Our vision is to become the largest online source of insurance policies by using data and technology to make insurance simpler, more affordable and personalized, ultimately reducing cost and

Our results-driven marketplace, powered by our proprietary data and technology platform, is reshaping the insurance shopping experience for consumers and improving the way insurance providers, which we view as including both carriers and agents, attract and connect with customers shopping for insurance.

Finding the right insurance product is often challenging for consumers, who face limited online options, complex, variable and opaque pricing, and myriad coverage configurations.

We present consumers with a single starting point for a comprehensive and cost-effective insurance shopping experience.

Our marketplace reduces the time consumers spend searching across multiple sites by delivering broader and more relevant results than consumers may find on their own.

Our service is free for consumers, and we derive our revenue from sales of consumer referrals to insurance providers.

Our service is free for consumers, and we derive our revenue from sales of consumer referrals to insurance providers and, in select verticals, directly from commissions on the sale of policies.

Insurance providers operate in a highly competitive and regulated industry and typically specialize on pre-determined subsets of

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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.

We connect providers to a large volume of high-intent, pre-validated consumer referrals

that match the insurers’ specific requirements.

The transparency of our marketplace, as well as the campaign management tools we offer, make it easy for insurance providers to evaluate the performance of their marketing spend on our platform and manage their own return on investment.

Since our founding in 2011, our core mission has been to make finding insurance easy and more personal, saving consumers and insurance providers time and money.

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.

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

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

In 2019, we announced our partnership with Bold Penguin to add commercial insurance in our marketplace.

In September 2020, we completed the acquisition of Crosspointe Insurance & Financial Services, LLC, or Crosspointe.

In the three months ended September 30, 2020 and 2019, our total revenue was $90.0 million and $67.1 million, respectively, representing year-over-year growth of 34%.

We had a net loss of $3.2 million and net income of $0.2 million for the three months ended September 30, 2020 and 2019, respectively, and had $5.2 million and $3.9 million in Adjusted EBITDA for the three months ended September 30, 2020 and 2019, respectively.

In the nine months ended September 30, 2020 and 2019, our total revenue was $249.6 million and $175.0 million, respectively, representing year-over-year growth of 43%.

We had net losses of $7.4 million and $6.2 million for the nine months ended September 30, 2020 and 2019, respectively, and had $13.0 million and $4.1 million in Adjusted EBITDA for the nine months ended September 30, 2020 and 2019, 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.

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

In 2020, we launched our direct-to-consumer

insurance offerings in our life vertical and in our health vertical via the acquisition of Crosspointe Insurance & Financial Services, LLC, or Crosspointe.

In the three months ended March 31, 2021 and 2020, our total revenue was $103.8 million and $81.4 million, respectively, representing year-over-year growth of 28%.

We had net losses of $3.8 million and $1.4 million for the three months ended March 31, 2021 and 2020, respectively, and had $4.8 million and $3.8 million in adjusted EBITDA for the three months ended March 31, 2021 and 2020, 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.

In March 2020, the World Health Organization declared the outbreak of COVID-19

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operations and could disrupt our business and operations, as well as that of our customers and consumer traffic to our marketplace for an indefinite period of time.

To support the health and well-being of our employees, customers, partners and communities, our employees are working remotely as of November 6, 2020.

While such disruptions have not had a material adverse impact on our financial results through September 30, 2020, such disruptions may impact consumer insurance shopping behavior.

We are monitoring and managing our operations for the ongoing impact of COVID-19.

In addition, with many insurance carriers reporting strong profitability as a result of the COVID-19

pandemic, we believe that carriers will further invest in online customer acquisition to increase their volume of new premiums and that the COVID-19

pandemic may accelerate the transition from offline to online customer acquisition in the insurance industry.

For example, we believe that immediately after shelter-in-place

orders went into effect consumers performed less searches for insurance online.

To support the health and well-being of our employees, customers, partners and communities, a majority of our employees continue to work remotely as of May 6, 2021.

While such disruptions have not had a material adverse impact on our financial results through March 31, 2021, 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

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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.

Shift from indirect to direct distribution channels

We have shifted the majority of our revenue from our indirect channel, consisting of aggregators and media networks, to our direct channel, consisting of carriers and agents.

This shift has been an important part of our maturity and evolution.

The benefits of direct distribution include improved consumer experience, higher pricing per referral, improved pricing stability, greater revenue predictability, richer data feedback, better performance and stronger relationships with providers and consumers.

In 2018, direct distribution accounted for 90% of total revenue.

In 2019, direct distribution accounted for 94% of total revenue.

In the three and nine months ended September 30, 2020, direct distribution accounted for 93% of total revenue.

Expanding consumer traffic

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Insurance provider bids are influenced by competition in our marketplace auctions, the performance of our consumer referrals for insurance providers relative to other consumer acquisition channels, as well as by market conditions, insurance provider budgets and insurance providers’ new customer acquisition targets.

Increases in revenue per quote request allow us to increase advertising and consumer traffic to our marketplace while maintaining or increasing profitability.

We believe revenue per quote request will increase over time.

Increases in revenue per quote request allow us to increase advertising and consumer traffic to our marketplace while

maintaining or increasing variable marketing margin.

Cost per quote request

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

Cost per quote request is influenced by the cost of advertising and the conversion rate of marketplace visitors who request an insurance quote.

Cost per quote request is influenced by the cost and mix of advertising and the conversion rate of marketplace visitors who request an insurance quote.

While we seek to minimize cost per quote request, we may incur increased cost per quote request in order to achieve profitability at relative volumes of quote requests and revenue per quote request.

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Quote Requests

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

As we attract more consumers to our platform and they complete quote requests, we are able to refer them to our insurance provider customers, selling more referrals while also collecting data, which we use to improve user experience, conversion rates and, we believe, consumer satisfaction.

Quote requests are consumer-initiated requests for an insurance quote that result from a website form, telephones calls with a consumer, or other interactions we have with consumers through third-party websites that result in a revenue generating transaction.

Variable Marketing Margin

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

We 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 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

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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.

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.

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Our revenue is comprised of consumer referral fees from the automotive and other insurance verticals, which includes home and renters, life, health and commercial insurance verticals, as follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

Three Months Ended March 31,

(in thousands)

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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, promoting our marketplace to carriers and agents, and increasing downloads of our social safe-driving mobile app EverDrive.

In November 2019, we announced that we would no longer support EverDrive.

Advertising expenditures consist of variable costs that are related to attracting consumers to our marketplace, generating consumer quote requests, and promoting our marketplace to carriers and agents.

Advertising costs are expensed as incurred.

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General and administrative expenses consist of personnel-related costs and related expenses for executive, finance, legal, human resources, technical support and administrative personnel as well as the costs associated with professional fees for external legal, accounting and other consulting services, insurance premiums and payment processing and billing costs.

General and administrative expenses also include acquisition-related costs, which include expenses associated with third-party professional services we utilize for the evaluation and execution of successful acquisitions as well as changes in the fair value of our contingent consideration liability recorded as the result of the Crosspointe acquisition.

We expect general and administrative expenses to increase as we incur the costs of compliance associated with being a publicly traded company, including legal, audit, insurance and consulting fees.

We expect general and administrative expenses to increase as we continue to incur the costs of compliance associated with being a publicly traded company, including legal, audit, insurance and consulting fees.

Acquisition-related

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

Other income consists of interest income and other income.

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Other income consists of miscellaneous income unrelated to our core operations.

We have not recorded income tax benefits for the net losses we have incurred in the three or nine months ended September 30, 2020 and 2019 or for our research and development tax credits generated, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credits will not be realized.

As of December 31, 2019, we had federal net operating loss carryforwards of $31.1 million, which may be available to offset future taxable income, of which $9.0 million of the total net operating loss carryforwards expire at various dates beginning in 2029, while the remaining $22.1 million do not expire but may be limited in their usage to an annual deduction equal to 80% of annual taxable income.

We have not recorded income tax benefits for the net losses we have incurred in the three months ended March 31, 2021 and 2020 or for our research and development tax credits generated, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credits will not be realized.

As of December 31, 2020, we had federal net operating loss carryforwards of $72.9 million, which may be available to offset future taxable income, of which $9.0 million of the total net operating loss carryforwards expire at various dates beginning in 2029, while the remaining $63.9 million do not expire but are limited in their usage to an annual deduction equal to 80% of annual taxable income.

As of December 31, 2020, we had state net operating loss carryforwards of $60.7 million, which may be available to offset future taxable income and expire at various dates beginning in 2027.

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depreciation and amortization expense;

acquisition-related costs, interest income;

acquisition-related costs;

interest income;

and our provision for (benefit from) income taxes.

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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

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 items that we exclude in the calculation of Adjusted EBITDA.

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.

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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;

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;

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Reconciliation of Net Loss to Adjusted EBITDA:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

Three Months Ended March 31,

(in thousands)

Net income (loss)

Stock-based compensation

Depreciation and amortization

Acquisition-related costs

Acquisition-related

Interest income

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Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2020 and 2019

The following table sets forth our results of operations for the periods shown:

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Comparison of the Three Months Ended March 31, 2021 and 2020

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

Three Months Ended March 31,

(in thousands)

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General and administrative

Acquisition-related

Total cost and operating expenses

Loss from operations

Other income:

Other income (expense):

Interest income

Total other income

Net income (loss)

Other income (expense), net

Total other income (expense), net

Other Financial and Operational Data:

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Comprised of revenue from the following distribution channels:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

Direct channels

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Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

Cost of revenue

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General and administrative

See “—Non-GAAP Financial

Measure” for information regarding our use of Adjusted EBITDA and a reconciliation of such measure to the comparable GAAP financial measure.

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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.

Three Months Ended

(dollars in thousands)

The increase in revenue in the three months ended September 30, 2020 was due to an increase of $17.5 million and $5.4 million from our automotive and other insurance marketplace verticals, respectively.

The increase in revenue in the nine months ended September 30, 2020 was due to an increase of $54.9 million and $19.7 million from our automotive and other insurance marketplace verticals, respectively.

The increase in revenue from our automotive vertical in the three months ended September 30, 2020 was primarily due to an increase in revenue per quote request.

The increase in revenue from our automotive vertical in the nine months ended September 30, 2020 was due to an increase in quote requests resulting from increased advertising to attract consumers and an increase in revenue per quote request.

The increase in revenue in the three and nine months ended September 30, 2020 from other verticals was due to an increase in quote requests resulting from increased advertising to attract consumers, partially offset by a decline in revenue per quote request.

Revenue increased by $22.5 million from $81.4 million for the three months ended March 31, 2020 to $103.8 million for the three months ended March 31, 2021.

The increase in revenue was due to increases of $16.8 million and $5.6 million from our automotive and other insurance marketplace verticals, respectively.

The increase in revenue from our automotive vertical was primarily due to an increase in revenue per quote request as a result of increased demand for higher performing consumer referrals by our insurance providers.

The increase in revenue from our other marketplace verticals was primarily driven by an increase in the volume of quote requests resulting from increased advertising to attract consumers and an increase in revenue per quote request as a result of increased demand for higher performing consumer referrals by our insurance providers.

Cost of Revenue

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

Three Months Ended March 31,

(dollars in thousands)

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Percentage of revenue

Cost of revenue increased in the three and nine months ended September 30, 2020 primarily due to increased third-party call center costs of $0.2 million and $1.4 million, respectively, due primarily to increased volume of call referrals and to increased hosting costs of $0.6 million and $1.1 million, respectively.

Technical services increased by $0.3 million and $0.9 million in the three and nine months ended September 30, 2020, respectively, due primarily to increased volume of consumer referrals.

Depreciation and amortization expense also increased by $0.1 million and $0.6 million, respectively, in the three and nine months ended September 30, 2020.

Cost of revenue increased by $0.6 million from $5.3 million for the three months ended March 31, 2020 to $6.0 million for the three months ended March 31, 2021.

Cost of revenue increased due primarily to increased hosting costs of $0.3 million and to increased third-party call center costs of $0.2 million related to volume increases.

Sales and Marketing

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

Three Months Ended March 31,

(dollars in thousands)

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Percentage of revenue

Sales and marketing expenses increased in the three and nine months ended September 30, 2020 primarily due to an increase in advertising expenditures of $14.3 million and $49.4 million, respectively, and an increase in personnel-related costs of $4.7 million and $9.2 million, respectively.

Personnel-related costs for the three months ended September 30, 2020 and 2019 included stock-based compensation expense of $3.1 million and $1.0 million, respectively.

Personnel-related costs for the nine months ended September 30, 2020 and 2019 included stock-based compensation expense of $7.3 million and $2.7 million, respectively.

Sales and marketing expenses increased by $21.1 million from $66.5 million for the three months ended March 31, 2020 to $87.6 million for the three months ended March 31, 2021.

The increase in sales and marketing expense was primarily due to an increase in advertising expenditures of $14.8 million and an increase in personnel-related costs of $5.4 million.

Personnel-related costs for the three months ended March 31, 2021 and 2020 included stock-based compensation expense of $3.4 million and $1.7 million, respectively.

Research and Development

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

Three Months Ended March 31,

(dollars in thousands)

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Percentage of revenue

Research and development expenses in the three and nine months ended September 30, 2020 increased primarily due to an increase in personnel-related costs as a result of our continued hiring of research and development employees and a shift towards hiring more senior personnel, to further develop and enhance our marketplace websites and technology.

Personnel-related costs for the three months ended September 30, 2020 and 2019 included stock-based compensation expense of $2.2 million and $1.1 million, respectively.

Personnel-related costs for the nine months ended September 30, 2020 and 2019 included stock-based compensation expense of $5.4 million and $2.9 million, respectively.

Research and development expenses increased by $2.1 million from $6.5 million for the three months ended March 31, 2020 to $8.6 million for the three months ended March 31, 2021.

The increase in research and development expense was primarily due to an increase in personnel-related costs of $2.1 million as a result of our continued hiring of research and development employees and a shift towards hiring more senior personnel, to further develop and enhance our marketplace websites and technology.

Personnel-related costs for the three months ended March 31, 2021 and 2020 included stock-based compensation expense of $2.3 million and $1.3 million, respectively.

General and Administrative

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

Three Months Ended March 31,

(dollars in thousands)

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Percentage of revenue

General and administrative expenses increased in the three and nine months ended September 30, 2020 primarily due to an increase in personnel-related costs of $1.2 million and $2.5 million, respectively.

We also incurred $0.5 million of acquisition-related costs in the three and nine months ended September 30, 2020 related to our acquisition of Crosspointe.

Insurance costs increased by $0.2 million and $0.4 million in the three and nine months ended September 30, 2020, respectively, compared to the three and nine months ended September 30, 2019.

These increases were partially offset by a decrease in our provision for bad debt of $0.1 million and $0.5 million in the three and nine months ended September 30, 2020, respectively, and a decrease in legal fees related to the settlement of prior litigation.

Personnel-related costs for the three months ended September 30, 2020 and 2019 included stock-based compensation expense of $1.8 million and $1.2 million, respectively.

Personnel-related costs for the nine months ended September 30, 2020 and 2019 included stock-based compensation expense of $5.0 million and $3.5 million, respectively.

Interest income was less than $0.1 million in the three months ended September 30, 2020, compared to $0.2 million in the three months ended September 30, 2019 and was $0.2 million in the nine months ended September 30, 2020 compared to $0.5 million in the nine months ended September 30, 2019.

The decreases in interest income were primarily due to lower interest rates on invested cash balances.

Other income included sublease income of $0.1 million in each of the three months ended September 30, 2020 and 2019, and $0.3 million and $0.2 million in the nine months ended September 30, 2020 and 2019, respectively.

General and administrative expenses increased by $0.9 million from $4.7 million for the three months ended March 31, 2020 to $5.6 million for the three months ended March 31, 2021.

The increase in general and administrative expenses was primarily due to an increase in personnel-related costs of $0.4 million, an increase in professional fees of $0.4 million and an increase in insurance costs of $0.2 million.

Personnel-related costs for the three months ended March 31, 2021 and 2020 included stock-based compensation expense of $1.7 million and $1.5 million, respectively.

Acquisition-related costs

Acquisition-related costs for the three months ended March 31, 2021 included a decrease in the fair value of our contingent consideration liability related to the Crosspointe acquisition of $0.1 million.

Interest income was less than $0.1 million for the three months ended March 31, 2021 and was $0.1 million for the three months ended March 31, 2020.

Other income (expense), net included net foreign transaction losses of less than $0.1 million for the three months ended March 31, 2021 and included sublease income of $0.1 million for the three months ended March 31, 2020.

Quote Requests

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands except percentages)

Three Months Ended March 31,

(in thousands except percentages)

Quote requests

Quote requests increased for the three and nine months ended September 30, 2020 due to increased spending on advertising and improvements in our traffic acquisition.

Quote requests increased for the three months ended March 31, 2021 due to increased spending on advertising.

Variable Marketing Margin

Three Months Ended

September 30,

Nine Months Ended

September 30,

(dollars in thousands)

Three Months Ended March 31,

(dollars in thousands)

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Percentage of revenue

The increase in variable marketing margin was due primarily to an increased volume of quote requests and, in the three months ended September 30, 2020, an increase in revenue per quote request.

The increase in variable marketing margin was due primarily to increased revenue per quote request, partially offset by increased cost per quote request.

Liquidity and Capital Resources

Since our inception, we have primarily funded our operations through issuances of shares of redeemable convertible preferred stock and common stock, debt, including a revolving line of credit with Western Alliance Bank, which we renewed in August 2020, cash flows from operations and proceeds from our IPO.

As of September 30, 2020, we had cash and cash equivalents of $45.9 million and availability of $25.0 million under our revolving line of credit.

At March 31, 2021, our principal sources of liquidity were cash and cash equivalents of $46.9 million and availability of $25.0 million under our revolving line of credit.

Borrowings under our revolving line of credit are collateralized by substantially all of our assets and property.

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In addition, we are required to maintain a minimum asset coverage ratio of 1.5 to 1 calculated as the sum of unrestricted cash and qualified accounts receivable divided by borrowings outstanding under the revolving line of credit.

As of March 31, 2021, we were in compliance with these covenants.

Events of default under our revolving line of credit include failure to make payments when due, insolvency events, failure to comply with covenants and material adverse events with respect to us.

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

We believe our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next 12 months.

We believe our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next 12 months, without considering the borrowing availability under our revolving line of credit.

Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of spending on business initiatives, purchases of capital equipment to support our growth, the expansion of sales and marketing activities, expansion of our business through acquisitions or our investments in complementary offerings, technologies or businesses, market acceptance of our platform and overall economic conditions.

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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.

The following table shows a summary of our cash flows for the nine months ended September 30, 2020 and 2019:

Nine Months Ended

September 30,

The following table shows a summary of our cash flows for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

(in thousands)

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Net cash provided by financing activities

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

Effect of exchange rate changes on cash, cash equivalents and restricted cash

Net increase in cash, cash equivalents and restricted cash

Net cash provided by operating activities

During the nine months ended September 30, 2020, operating activities provided $13.9 million of cash, which primarily resulted from the offset of net non-cash

charges of $20.2 million to our net loss of $7.4 million and net cash provided by changes in our operating assets and liabilities of $1.2 million.

Net cash provided by changes in our operating assets and liabilities for the nine months ended September 30, 2020 consisted primarily of a $7.7 million increase in accounts payable and accrued expenses and other current liabilities and a $2.0 million decrease in prepaid expenses and other current assets, partially offset by a $9.3 million increase in accounts receivable.

Other long-term liabilities also increased by $0.8 million primarily due to the deferred payment of employer tax remittances.

During the nine months ended September 30, 2019, operating activities provided $0.5 million of cash, primarily resulting from our net loss of $6.2 million being offset entirely by net non-cash charges

of $11.3 million, partially offset by net cash used by changes in our operating assets and liabilities of $4.7 million.

Net cash used by changes in our operating assets and liabilities for the nine months ended September 30, 2019 consisted primarily of a $12.9 million increase in accounts receivable and a $1.8 million increase in prepaid expenses and other current assets, both partially offset by an aggregate $9.9 million increase in accounts payable and accrued expenses and other current liabilities.

Operating activities provided $3.5 million and $3.9 million of cash during the three months ended March 31, 2021 and 2020, respectively.

Cash provided by operating activities in the three months ended March 31, 2021 primarily resulted from the offset of net non-cash

charges of $8.6 million to our net loss of $3.8 million and net cash used by changes in our operating assets and liabilities of $1.3 million.

Net cash used by changes in our operating assets and liabilities consisted primarily of a $2.9 million increase in accounts receivable and a $0.7 million increase in other assets, partially offset by an aggregate $2.1 million increase in accounts payable and accrued expenses and other current liabilities.

Cash provided by operating activities in the three months ended March 31, 2020 primarily resulted from the offset of net non-cash

charges of $5.4 million to our net loss of $1.4 million.

Net cash provided by changes in our operating assets and liabilities for the three months ended March 31, 2020 was less than $0.1 million and consisted primarily of a $3.5 million net increase in accounts payable and accrued expenses and other current liabilities, partially offset by an increase of $3.5 million in accounts receivable.

Changes in accounts receivable, accounts payable and accrued expenses and other current liabilities in both periods were generally due to growth in our business, timing of customer and vendor invoicing and payments.

Net cash used in investing activities

Net cash used in investing activities was $17.6 million and $2.2 million for the nine months ended September 30, 2020 and 2019, respectively.

Net cash used in investing activities for the nine months ended September 30, 2020 included cash paid of $14.9 million to purchase Crosspointe.

Net cash used in investing activities for the nine months ended September 30, 2020 and 2019 also included the acquisition of property and equipment, which included the purchase of computer equipment for our operations and employees, equipment, furniture and leasehold improvements and the capitalization of certain software development costs.

Net cash used in investing activities was $0.8 million and $0.9 million for the three months ended March 31, 2021 and 2020, respectively.

Net cash used in investing activities for the three months ended March 31, 2021 and 2020 included the acquisition of property and equipment, which included the purchase of computer equipment for our operations and employees, equipment, furniture and leasehold improvements and the capitalization of certain software development costs.

During each of the three months ended March 31, 2021 and 2020, we capitalized $0.7 million of software development costs.

Net cash provided by financing activities

During the nine months ended September 30, 2020 and 2019, net cash provided by financing activities was $3.6 million and $2.1 million, respectively, consisting of proceeds received from the exercise of common stock options.

During the three months ended March 31, 2021 and 2020, net cash provided by financing activities was $1.3 million and $1.4 million, respectively, and consisted of proceeds received from the exercise of common stock options.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations and commitments as of December 31, 2020:

Payments Due By Period

(in thousands)

Operating lease commitments(1)

Amounts in table reflect payments due for our office leases under operating lease agreements that expire at various dates through 2030.

There have been no material changes to our contractual obligations and commitments from those disclosed in the table above as of December 31, 2020.

Critical Accounting Policies and Significant Judgments and Estimates

We prepare our condensed consolidated financial statements in accordance with GAAP.

The preparation of condensed consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures.

Significant estimates and assumptions reflected in our condensed consolidated financial statements include, but are not limited to, revenue recognition and collectability of accounts receivable, the expensing and capitalization of website and software development costs, goodwill and acquired intangible assets, commissions receivable, the valuation of stock-based awards and income taxes.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

Actual results could differ significantly from the estimates made by our management.

Due to the COVID-19

pandemic, there has been uncertainty and disruption in the global economy and financial markets.

We are not aware of any specific event or circumstance that would require an update to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of November 6, 2020, the date of issuance of these consolidated financial statements.

These estimates may change, as new events occur and additional information is obtained.

Actual results could differ materially from these estimates under different assumptions or conditions.

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.

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, 2019, on file with the Securities and Exchange Commission except for our new accounting policies for goodwill and acquired intangible assets and commissions receivable as described in Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

for the year ended December 31, 2020, on file with the Securities and Exchange Commission.

Sheet Arrangements

3 unchanged sentences

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.

Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company, as defined in Rule 12b-2 under

the Securities Exchange Act of 1934, as amended, for this reporting period and are not required to provide the information required under this item.

During the three months ended March 31, 2021 and 2020, inflation and changing prices have not had a material effect on our business.

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

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis