What changed in this filing

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Item 1A. Risk Factors

2021-08-09 compared with 2021-05-06 · 51 added, 34 removed, 634 unchanged (12% of the section changed)

35 unchanged sentences

Quote requests increased to 7,392,000 in the three months ended March 31, 2020, decreased to 6,777,000 in the three months ended June 30, 2020 decreased to 6,291,000 in the three months ended September 30, 2020 and increased to 6,553,000 in the three months ended December 31, 2020.

Quote requests increased to 7,720,000 in the three months ended March 31, 2021.

Quote requests increased to 7,720,000 in the three months ended March 31, 2021 and decreased to 6,781,000 in the three months ended June 30, 2021.

Additionally, even if we are successful in generating traffic to our websites, we may not be able to convert these visits into consumer quote requests.

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will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic, containment measures and the potential economic impact on our insurance provider customers and our users.

To support the health and well-being of our employees and communities, our employees began working remotely starting in March 2020.

To support the health and well-being of our employees and communities, our employees began working remotely starting in March 2020, however our offices are now open for use.

Work-from-home and other measures introduce additional operational risks, including cybersecurity risks, and have affected the way we conduct our product and business development efforts as well as other activities, which could have an adverse effect on our operations.

35 unchanged sentences

A significant portion of our revenue in recent periods was derived from one customer, and our results of operations could be adversely affected and stockholder value harmed if we lose business from this customer.

Sales to Progressive Casualty Insurance Company accounted for 22% of our revenue for the year ended December 31, 2020 and 20% of our revenue for the three months ended March 31, 2021.

Sales to Progressive Casualty Insurance Company accounted for 22% of our revenue for the year ended December 31, 2020 and 19% of our revenue for the six months ended June 30, 2021.

This customer made purchases from us under short-term agreements and may decrease or cease doing business with us at any time with no notice.

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A substantial majority of the insurance purchased through our marketplace is automobile insurance and our financial prospects depend significantly on the larger automotive industry ecosystem.

Revenue from automotive insurance providers accounted for 81% of our total revenue for the three months ended March 31, 2021 and 82% of our revenue for the year ended December 31, 2020.

Revenue from automotive insurance providers accounted for 82% of our total revenue for the six months ended June 30, 2021 and 82% of our revenue for the year ended December 31, 2020.

If insurance carriers experience large or unexpected losses through the offering of insurance, these carriers may choose to decrease the amount of money they spend with us.

73 unchanged sentences

We use emails to attract consumers to our marketplace.

Our systems may not be

adequately designed with the necessary reliability and redundancy to avoid performance delays or outages that could be prolonged and harmful to our business.

Our systems may not be adequately designed with the necessary reliability and redundancy to avoid performance delays or outages that could be prolonged and harmful to our business.

If our websites are unavailable when users attempt to access them, or if they do not load as quickly as expected, users may not return as often in the future, or at all.

58 unchanged sentences

Our past growth may not be indicative of our future growth, and our revenue growth rate may decline in the future.

Our revenue grew from $96.8 million in 2015 to $122.8 million in 2016, to $126.2 million in 2017, to $163.3 million in 2018, to $248.8 million in 2019 and to $346.9 million in 2020, increases of 26.8%, 2.8%, 29.4%, 52.3% and 39.4%, respectively, and from $81.4 million for the three months ended March 31, 2020 to $103.8 million for the three months ended March 31, 2021, an increase of 27.6%.

Our revenue grew from $78.3 million for the three months ended June 30, 2020 to $105.1 million for the three months ended June 30, 2021 and from $159.7 million for the six months ended June 30, 2020 to $208.9 million for the six months ended June 30, 2021, increases of 34.2% and 30.8%, respectively.

This growth may not be indicative of our future growth, if any, and we will not be able to grow as expected, or at all, if we do not accomplish the following:

6 unchanged sentences

Our dedication to making decisions based primarily on the best interests of our company and stockholders may cause us to forgo short-term gains in pursuit of potential but uncertain long-term growth.

Our guiding principle is to build our business by making decisions based primarily upon the best interests of our entire marketplace, including consumers and insurance providers, which we believe has been essential to our success in increasing our user

growth rate and engagement and best serves the long-term interests of our company and our stockholders.

In the past, we have forgone, and we will in the future continue to forgo, certain expansion or short-term revenue opportunities that we do not believe are in the best interests of our marketplace and its users, even if such decisions adversely affect our results of operations in the short term.

17 unchanged sentences

However, it is possible that these obligations may be interpreted and applied in new ways or in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices or that new regulations could be enacted.

Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to consumers or other third parties, or our privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of sensitive information, which could include personally identifiable information or other user data, may result in governmental investigations, enforcement actions, regulatory fines, litigation or public statements against us by consumer advocacy groups or others, and could cause consumers and insurance providers to lose trust in us, all of which could be costly and have an adverse effect on our business.

addition, new and changed rules and regulations regarding privacy, data protection and cross-border transfers of consumer information could cause us to delay planned uses and disclosures of data to comply with applicable privacy and data protection requirements.

enforcement actions, regulatory fines, litigation or public statements against us by consumer advocacy groups or others, and could cause consumers and insurance providers to lose trust in us, all of which could be costly and have an adverse effect on our business.

In addition, new and changed rules and regulations regarding privacy, data protection and cross-border transfers of consumer information could cause us to delay planned uses and disclosures of data to comply with applicable privacy and data protection requirements.

Moreover, if third parties that we work with violate applicable laws or our policies, such violations also may put consumer or insurance provider information at risk and could in turn harm our reputation, business and operating results.

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Also, the anticipated benefits of any acquisitions may not be realized.

We have limited experience operating an insurance agency and if we are unable to successfully add insurance carriers and products, as well as hire and retain insurance agents, and successfully sell policies at the volumes we anticipate, our results of operations and financial condition could be materially adversely affected.

We have limited experience operating a direct-to-consumer insurance agency where we are compensated based on policies sold.

If we are unable to obtain or maintain insurance carrier appointments, or if we have limited insurance products that we are able to sell, we may not be able to successfully operate as an insurance agency.

In addition, we also have limited experience hiring, training, and licensing new insurance agents to sell insurance products for us.

In the event we are unable to increase the number of licensed agents selling insurance products for us, retain the agents that we have hired, or successfully manage our agents to meet our sales objectives, our business and growth plans could be materially adversely affected.

We use third-party contractor insurance agents to sell insurance for our direct-to-consumer

13 unchanged sentences

If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to pursue our business objectives and to respond to business opportunities, challenges or unforeseen circumstances could be significantly limited, and our business, operating results, financial condition and prospects could be materially adversely affected.

Litigation could distract management, increase our expenses or subject us to material money damages and other remedies.

Litigation could distract management, increase our expenses or subject us to material monetary damages and other remedies.

We were previously subject to class action lawsuits alleging violations of the Telephone Consumer Protection Act, or TCPA, and were subject to a class action lawsuit alleging federal securities law violations in connection with our IPO, and may be involved from time to time in various additional legal proceedings, including, but not limited to, actions relating to breach of contract, breach of federal and state privacy laws, and intellectual property infringement that might necessitate changes to our business or operations.

7 unchanged sentences

We are also dependent on our third-party vendors to comply with applicable laws.

For example, with the commencement of our verified partner network in 2019, we depend upon these third-party vendors to obtain consent from consumers to receive telemarking calls in compliance with the TCPA.

For example, with the commencement of our verified partner network in 2019, we depend upon these third-party vendors to obtain consent from consumers to receive telemarketing calls in compliance with the TCPA.

We may be alleged to have indemnification obligations to third-party customers for alleged breaches of privacy laws like the TCPA, which could increase our defense costs and require that we pay damages if there were an adverse ruling in any such claims.

1 unchanged sentence

Companies in the internet, technology and media industries are frequently subject to allegations of infringement or other violations of intellectual property rights.

We have been and may continue to become subject to intellectual property claims by third

We have been and may continue to become subject to intellectual property claims by third parties.

We plan to vigorously defend our intellectual property rights and our freedom to operate our business;

140 unchanged sentences

licensing companies and agents to transact business and authorizing lines of business;

and regulating unfair trade and claims practices, including through the imposition of restrictions on marketing and sales practices, distribution

arrangements and payment of inducements.

and regulating unfair trade and claims practices, including through the imposition of restrictions on marketing and sales practices, distribution arrangements and payment of inducements.

In some cases, these insurance and other laws and regulations may impose operational limitations on our business, including on the products and services we may offer or on the amount or type of compensation we may collect.

9 unchanged sentences

In the future, additional federal regulation may be enacted, which could affect the way we conduct our business and could result in higher compliance costs.

Insurance laws or regulations that are adopted or amended, in addition to changes in federal statutes, including the Gramm-Leach-Bliley Act and the McCarran-Ferguson Act, financial services regulations and federal taxation laws or regulation, may be more restrictive than current laws or regulations and may result in lower revenues or higher costs of compliance and thus could have a material adverse effect on our results of operations and limit our growth.

Insurance laws or regulations that are adopted or amended, in addition to changes in federal statutes, including the Gramm-Leach-Bliley Act and the McCarran-Ferguson Act, financial services regulations and federal taxation laws or regulations, may be more restrictive than current laws or regulations and may result in lower revenues or higher costs of compliance and thus could have a material adverse effect on our results of operations and limit our growth.

Taxing authorities may assert that we should have collected or in the future should collect sales, use, value added or similar taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our operating results.

37 unchanged sentences

The market price of our Class A common stock has been and could continue to be subject to significant fluctuations.

For example, our Class A common stock traded within a range of a high price of $63.44 per share and a low price of $4.05 per share for the period beginning June 28, 2018, our first day of trading on the Nasdaq Global Market, through March 31, 2021.

Some of the factors that may cause the market price of our Class A common stock to fluctuate include:

37 unchanged sentences

If one or more of these analysts cease to cover our Class A common stock, we could lose visibility in the market for our Class A common stock, which in turn could cause our stock price to decline.

The dual-class structure of our common stock has the effect of concentrating voting control with the holders of our Class B common stock, including our directors, executive officers and Link Ventures and other significant stockholders, who collectively held in the aggregate approximately 77% of the voting power of our capital stock as of March 31, 2021;

and Link Ventures, directly or through a voting agreement, together with Cogo Labs, held approximately 76% of the voting power of our capital stock as of that date.

1 unchanged sentence

Our Class B common stock has 10 votes per share, and our Class A common stock has one vote per share.

Our directors, executive officers and holders of more than 10% of our common stock, and their respective affiliates, held in the aggregate approximately 77% of the voting power of our capital stock as of March 31, 2021;

and Link Ventures, directly or through a voting

agreement pursuant to which each of Seth Birnbaum, through his heirs and estate, and Tomas Revesz have agreed to vote on all matters presented to our stockholders all voting capital stock held by them in the manner directed by Link Ventures, together with Cogo Labs, held in the aggregate approximately 77% of the voting power of our capital stock as of that date.

and Link Ventures, directly or through a voting agreement pursuant to which each of Seth Birnbaum, through his heirs and estate, and Tomas Revesz have agreed to vote on all matters presented to our stockholders all voting capital stock held by them in the manner directed by Link Ventures, together with Cogo Labs, held in the aggregate approximately 76% of the voting power of our capital stock as of that date.

Because of the 10-to-one voting ratio

22 unchanged sentences

These sales, or the market perception that the holders of a large number of shares intend to sell shares, could reduce the market price of our Class A common stock.

In addition to our outstanding Class A common stock, as of March 31, 2021, there were 982,788 shares of Class A common stock subject to outstanding options, 982,397 shares of either Class A common stock or Class B common stock subject to outstanding options, 2,842,867 shares of Class A common stock subject to outstanding restricted stock unit awards, or RSUs, and an additional 2,414,810 shares of Class A common stock reserved for future issuance under our equity incentive plan.

In addition to our outstanding Class A common stock, as of June 30, 2021, there were 955,164 shares of Class A common stock subject to outstanding options, 948,335 shares of either Class A common stock or Class B common stock subject to outstanding options, 2,737,475 shares of Class A common stock subject to outstanding restricted stock unit awards, or RSUs, and an additional 2,264,762 shares of Class A common stock reserved for future issuance under our equity incentive plan.

Because we have registered 14,088,187 shares of our Class A common stock and Class B common stock that may be issued under our equity incentive plans pursuant to registration statements on Form S-8, any such

shares that we issue can be freely sold in the public market upon issuance, subject to the restrictions imposed on our affiliates under Rule 144.

Moreover, holders of a significant number of shares of our Class A common stock and Class B common stock as of March 31, 2021, have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.

Moreover, holders of a significant number of shares of our Class A common stock and Class B common stock as of June 30, 2021, have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.

Upon registration, such shares would be able to be freely sold in the public market.

19 unchanged sentences

346, 2019 (Del.

18, 2020), the Delaware Supreme Court, reversing the Delaware Court of Chancery, held that such federal forum selection provisions are “facially valid” under Delaware law, although there is uncertainty as to whether courts in other states will enforce these provisions and we may incur additional costs of litigation should such enforceability be challenged.

18, 2020), the Delaware Supreme Court, reversing the Delaware Court of Chancery, held that such federal forum selection provisions are

“facially valid” under Delaware law, although there is uncertainty as to whether courts in other states will enforce these provisions and we may incur additional costs of litigation should such enforceability be challenged.

Neither of these choice of forum provisions would affect suits brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended, or the Exchange Act, or the rules and regulations thereunder, jurisdiction over which is exclusively vested by statute in U.S.

federal courts,

or any other claim for which U.S.

federal courts, or any other claim for which U.S.

federal courts have exclusive jurisdiction.

10 unchanged sentences

These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee, and qualified executive officers.

We and our independent registered public accounting firm have identified material weaknesses in our internal control over financial reporting.

If we are unable to remediate these material weaknesses, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and the market price of our common stock.

We and our independent registered public accounting firm have identified material weaknesses in our internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

We and our independent registered public accounting firm have identified deficiencies in control over certain information technology (IT) general controls for revenue-related information systems that are relevant to the preparation of our financial statements that constitute material weaknesses.

Specifically, we did not design and maintain (i) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to certain financial applications, programs, and data to appropriate company personnel, (ii) program change management controls for certain financial applications to ensure that information technology program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately and (iii) controls over the completeness and accuracy of data relevant to certain automated revenue calculations.

These material weaknesses did not result in a misstatement to the financial statements.

However, the material weaknesses could impact the effectiveness of segregation of duties controls, as well as the effectiveness of IT-dependent

controls that could result in misstatements impacting revenue-related financial statement accounts and disclosures that would result in a material misstatement of the annual or interim consolidated financial statements that would not be prevented or detected.

We are in the process of developing and implementing a remediation plan designed to improve our internal control over financial reporting to remediate these material weaknesses with additional controls and procedures.

We cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to the material weaknesses in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses.

If we are unable to successfully remediate the material weaknesses in our internal control over financial reporting, the accuracy and timing of our financial reporting may be adversely affected, investors could lose confidence in the accuracy and completeness of our financial reports, the market price of our Class A common stock could decline, we could be subject to sanctions or investigations by the Nasdaq Stock Market, the SEC or other regulatory authorities, and our ability to access the capital markets could be limited.

We are obligated to maintain a system of effective internal control over financial reporting and any failure to maintain the adequacy of these internal controls may harm investor confidence in our company and, as a result, the value of our common stock.

1 unchanged sentence

We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting.

This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting.

This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting, such as the material weaknesses described above.

Our compliance with Section 404 necessitates that we incur substantial accounting expense and expend significant management efforts.

We will continue to dedicate internal resources, engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting and to compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404.

However, we cannot assure you that our independent registered public accounting firm will be able to attest to the effectiveness of our internal control over financial reporting.

We may not be able to remediate any material weaknesses that may be identified, or to complete our evaluation, testing and any required remediation in a timely fashion and our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.

Any failure to maintain adequate internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations.

If we are unable to assert that our internal control over financial reporting is effective, or if our auditors are unable to express an opinion on the effectiveness of our internal control when they are required to issue such opinion, investors could lose confidence in the accuracy and completeness of our financial reports, the market price of our Class A common stock could decline, and we could be subject to sanctions or investigations by the Nasdaq Stock Market, the SEC or other regulatory authorities.

Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

We will continue to dedicate internal resources, engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, including the remediation of the material weaknesses described above, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting and to compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404.

We may not be able to remediate the material weaknesses described above, or any future material weaknesses that may be identified, or to complete our evaluation, testing and remediation in a timely fashion and our independent registered public accounting firm may issue further reports that are adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.

Consequently, we cannot assure you that our independent registered public accounting firm will be able to attest to the effectiveness of our internal control over financial reporting.

Our failure to maintain adequate internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations.

If we are unable to assert that our internal control over financial reporting is effective, or if our auditors are unable to express an opinion on the effectiveness of our internal controls, investors could lose confidence in the accuracy and completeness of our financial reports, the market price of our Class A common stock could decline, and we could be subject to sanctions or investigations by the Nasdaq Stock Market, the SEC or other regulatory authorities.

Failure to remedy the material weaknesses described above, or any future material weaknesses in our internal control over financial reporting that may be identified, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

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 1A. Risk Factors