What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-25 compared with 2021-03-01 · 182 added, 102 removed, 288 unchanged (50% of the section changed)

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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.

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 risk.

Our results-driven marketplace, powered by our proprietary data and technology platform, is reshaping the insurance shopping experience for consumers and improving the way insurance providers attract and connect with consumers shopping for insurance.

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

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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 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

Our direct to consumer, or DTC, agents bind policies for consumers, further streamlining the consumer shopping experience.

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

Insurance providers, which we view as including carriers, our own DTC agents, and third-party agents, operate in a highly competitive and regulated industry and typically specialize in pre-determined

subsets of consumers.

As a result, not every consumer is a good match for every provider, and some providers struggle to efficiently reach the segments that are most desirable for their business models.

As a result, not every consumer is a good match for every provider, and some providers can struggle to reach the segments that are most desirable for their business models.

Traditional offline and online advertising channels reach broad audiences but lack the fine-grained consumer acquisition capabilities needed for optimally matching consumers to specific insurance products.

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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.

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

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

We are working to build the largest and most trusted online insurance marketplace in the world.

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

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 years ended December 31, 2020 and 2019, our total revenue was $346.9 million and $248.8 million, respectively, representing year-over-year growth of 39.4%.

We had net losses of $11.2 million and $7.1 million for the years ended December 31, 2020 and 2019, respectively, and had $18.4 million and $8.3 million in adjusted EBITDA for these same periods, respectively.

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

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

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

In the years ended December 31, 2021, 2020 and 2019, our total revenue was $418.5 million, $346.9 million and $248.8 million, respectively, representing year-over-year growth of 20.6% and 39.4%, respectively.

We had net losses of $19.4 million, $11.2 million and $7.1 million for the years ended December 31, 2021, 2020 and 2019, respectively, and had $14.6 million, $18.4 million and $8.3 million in adjusted EBITDA for these same periods, respectively.

See the section titled “—Non-GAAP Financial

Measure” for information regarding our use of adjusted EBITDA and its reconciliation to net income (loss) determined in accordance with generally accepted accounting principles in the United States, or GAAP.

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

pandemic has continued to spread throughout the United States and the world and has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place

orders, and business limitations and shutdowns.

pandemic has had a significant adverse impact on global commercial activity and has created significant volatility in financial markets.

Many governmental authorities have implemented travel bans and restrictions, quarantines, shelter-in-place

orders, business limitations and shutdowns and other measures to attempt to contain the spread of the virus.

Government recommendations and requirements are continuing to change and there remains significant uncertainty as to the breadth and duration of business disruptions related to COVID-19,

as well as its impact on the global economy and consumer confidence.

While we are unable to accurately predict the full impact that COVID-19

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 and containment measures, our compliance with these measures has impacted our day-to-day

will have on our results from operations, financial condition, liquidity and cash flows due to these uncertainties, our compliance with measures to contain the spread of the virus has impacted our day-to-day

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.

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, our employees continue to work remotely as of March 1, 2021.

orders went into effect consumers performed fewer 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, however our offices are open for use.

While such disruptions have not had a material adverse impact on our financial results through December 31, 2021, such disruptions may impact consumer insurance shopping behavior.

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For example, in 2016, the U.S.

commercial auto

insurance industry experienced its worst underwriting performance in 15 years, with higher loss ratios that were driven by both adverse claim severity and frequency trends.

commercial auto insurance industry experienced its worst underwriting performance in 15 years, with higher loss ratios that were driven by both adverse claim severity and frequency trends.

As a result, our auto insurance carrier customers reduced marketing spend and cost per sale targets the following year, ultimately impacting our revenue growth in the auto insurance vertical in 2017.

More recently, and specifically starting in the third quarter of 2021, the auto

insurance industry has experienced similar challenges, which is impacting our revenue growth in the auto insurance vertical.

We believe this trend will continue into 2022.

Expanding consumer traffic

Our success depends in part on the growth of our consumer traffic, as measured by quote requests.

We have historically increased consumer traffic to our marketplace by expanding existing advertising channels and adding new channels.

We have historically increased consumer traffic to our marketplace by expanding existing advertising channels and adding new channels such as by engaging with consumers through our verified partner network.

We plan to continue to increase consumer traffic by leveraging the features and growing data assets of our platform.

While we plan to increase consumer traffic over the long term, we also have the ability to decrease advertising, which would likely result in a decrease in quote requests from consumers targeted by such advertising, if we believe the revenue associated with such consumer traffic does not result in incremental profit to our business.

We have also increased the number of quote requests acquired from our verified partner network.

While we plan to continue to increase the number of quote requests we acquire from our verified partner network, our ability to acquire quote requests in significant volume, at prices that are attractive, and that represent high-intent shoppers that insurance providers will purchase referrals for will impact our profitability.

Increasing the number of insurance providers and their respective spend in our marketplace

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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.

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

We believe revenue per quote request will decrease in the near term as a result of reduced marketing spend from our auto insurance carrier customers.

Cost per quote request

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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.

We believe cost per quote request will decrease in the near term as a result of reduced marketing spend by the auto insurance industry.

Key Business Metrics

We regularly review a number of metrics, including United States generally accepted accounting principles, or GAAP, operating results and the key metrics listed below, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections, and make operating and strategic decisions.

Some of these metrics are non-financial metrics or

are financial metrics that are not defined by GAAP.

Quote Requests

Quote requests are consumer-submitted website forms that contain 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.

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 use VMM to measure the efficiency of individual advertising and consumer acquisition sources and to make trade-off decisions to

manage our return on advertising.

We do not use VMM as a measure of profitability.

We regularly review a number of metrics, including GAAP operating results and the key metrics listed below, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections, and make operating and strategic decisions.

Some of these metrics are non-financial

metrics or are financial metrics that are not defined by GAAP.

Adjusted EBITDA

We define Adjusted EBITDA as net income (loss), adjusted to exclude:

stock-based compensation expense, depreciation and amortization expense, acquisition-related costs, legal settlement expense, interest income and the provision for (benefit from) income taxes.

Adjusted EBITDA is a non-GAAP financial measure

that we present in this Annual Report on Form 10-K to supplement

the financial information we present on a GAAP basis.

stock-based compensation expense, depreciation and amortization expense, acquisition-related costs, legal settlement expense, one-time

severance charges, interest income and the provision for (benefit from) income taxes.

Adjusted EBITDA is a non-GAAP financial measure that we present in this Annual Report on Form 10-K to supplement the financial information we present on a GAAP basis.

We monitor and present Adjusted EBITDA because it is a key measure used by our management and board of directors to understand and evaluate our operating performance, to establish budgets and to develop operational goals for managing our business.

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For further explanation of the uses and limitations of this measure and a reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure, net income (loss), please see “—Non GAAP Financial Measure”.

Variable Marketing Margin

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

We use VMM to measure the efficiency of individual advertising and consumer acquisition sources and to make trade-off

decisions to manage our return on advertising.

We do not use VMM as a measure of profitability.

Quote Requests

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.

Key Components of Our Results of Operations

We generate our revenue by selling consumer referrals to insurance provider customers, consisting of carriers and agents, as well as to indirect distributors.

We generate our revenue primarily by selling consumer referrals to insurance provider customers, consisting of carriers and agents, as well as to indirect distributors.

To simplify the quoting process for the consumer and improve performance for the provider, we are able to provide consumer-submitted quote request data along with each referral.

We recognize revenue from consumer referrals at the time of delivery.

We support three secure consumer referral formats:

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referral for inbound calls, with the consumer and provider connected by phone.

We recognize revenue from consumer referrals at the time of delivery.

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:

We also generate less than 10% of our revenue from commission fees for the sale of policies, primarily in our health and automotive verticals.

We recognize revenue based on our constrained estimate of commission payments we expect to receive over the lifetime of the policies sold, which we refer to as constrained lifetime values, or constrained LTVs, of commission payments.

Commission revenue is recognized upon satisfaction of our performance obligation, which we consider to be submission of the policy application.

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

Year Ended December 31,

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Total Revenue

We expect a modest overall increase in revenue in 2022 as we anticipate increases in commission revenue to be mostly offset by decreases in referral revenue in our automotive vertical as a result of challenges in the automotive insurance industry described above.

We expect revenue to fluctuate from quarter to quarter and, in particular, for our commission revenue to be impacted by the open enrollment period and annual enrollment period in our health vertical.

Cost and Operating Expenses

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Sales and Marketing

Sales and marketing expense consists primarily of advertising and marketing expenditures as well as personnel-related costs for employees engaged in sales, marketing, data analytics and consumer acquisition functions and amortization of sales and marketing-related intangible assets.

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

Sales and marketing expenses consist primarily of advertising and marketing expenditures as well as personnel-related costs for employees engaged in sales, marketing, data analytics and consumer acquisition functions and amortization of sales and marketing-related intangible assets.

Advertising expenditures consist of variable costs that are related to attracting consumers to our marketplace, generating consumer quote requests, including the cost of quote requests we acquire from our verified partner network, and promoting our marketplace to carriers and agents.

Advertising costs are expensed as incurred.

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In order to continue to grow our business and brand awareness, we expect that we will continue to commit substantial resources to our sales and marketing efforts.

We expect our sales and marketing expense will increase in the near term, both as a percentage of revenue and in absolute dollars, but decrease in the longer term as a percentage of revenue due to efficiencies of scale and improvements in our marketplace technology.

We expect our sales and marketing expense will increase in the near term, both as a percentage of revenue and in absolute dollars, especially as we continue to expand our DTC agency.

In the longer term, we expect sales and marketing expense to decrease as a percentage of revenue due to efficiencies of scale and improvements in our marketplace technology.

Research and Development

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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 costs

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.

Legal settlement

Legal settlement includes costs associated with the settlement of securities litigation in connection with our initial public offering (see Note 12 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K)

representing the net of the settlement amount and the insurance proceeds.

Other income consists of interest income and other income.

Acquisition-related

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

Other Income (Expense)

Other income (expense) consists of interest income and other income (expense).

Interest income consists of interest earned on invested cash balances.

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

Other income (expense) consists of miscellaneous income (expense) unrelated to our core operations.

We have not recorded income tax benefits for the net losses we have incurred in the years ended December 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.

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As of December 31, 2021, we also had federal and state research and development tax credit carryforwards of $5.1 million and $3.1 million, respectively, which may be available to reduce future tax liabilities and expire at various dates beginning in 2030 and 2029, respectively.

We have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date.

During the year ended December 31, 2021, we released $2.5 million of our valuation allowance related to the net deferred tax liability recorded as a result of the PolicyFuel acquisition.

We maintain a valuation allowance on our overall net deferred tax asset as it is deemed more likely than not the net deferred tax asset will not be realized.

Non-GAAP Financial

To supplement our consolidated financial statements presented in accordance with GAAP and to provide investors with additional information regarding our financial results, we present in this Annual Report on Form 10-K

adjusted EBITDA as a non-GAAP financial

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legal settlement expense;

severance charges;

interest income;

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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 legal settlement expense 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 excludes legal settlement expense that affected cash available to us;

adjusted EBITDA excludes severance charges incurred and paid in the fourth quarter of 2021 related to our reduction in non-marketing operating

expenses that affected cash available to us;

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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Legal settlement

Severance under a plan

Interest income

Benefit from income taxes

Adjusted EBITDA

Results of Operations

Comparison of the Years Ended December 31, 2020 and 2019

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

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Loss from operations

Other income:

Other income (expense):

Interest income

Total other income

Other income (expense), net

Total other income (expense), net

Loss before income taxes

Benefit from income taxes

Other Financial and Operational Data:

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financial measure and a reconciliation of adjusted EBITDA to its comparable GAAP financial measure.

Comparison of the Years Ended December 31, 2021 and 2020

Year Ended December 31,

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Revenue increased by $71.6 million from $346.9 million for the year ended December 31, 2020 to $418.5 million for the year ended December 31, 2021.

The increase in revenue was due to an increase of $70.9 million and $27.2 million from our automotive and other insurance marketplace verticals, respectively.

The increase in revenue from our automotive vertical 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.

The increase in revenue from our other marketplace verticals was primarily due to an increase in quote requests resulting from increased advertising to attract consumers, partially offset by a decline in revenue per quote request.

The increase in revenue was due to increases of $47.7 million and $23.9 million in revenue from our automotive and other insurance marketplace verticals, respectively.

The increase in revenue from our automotive vertical was primarily due to an increase in the volume of quote requests resulting from increased advertising to attract consumers and to an increase in commission revenue of $4.7 million.

The increase in revenue from our other marketplace verticals was primarily due to an increase of $14.9 million in commission revenue, primarily in our health vertical, and an increase in revenue per quote request as a result of increased demand for consumer referrals by our insurance providers.

Cost of Revenue

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Cost of revenue increased by $2.6 million from $21.4 million for the year ended December 31, 2020 to $23.9 million for the year ended December 31, 2021.

Cost of revenue increased due primarily to increased hosting costs of $1.8 million related to increased marketplace activity and to increased third-party call center costs of $1.5 million, which were primarily related to increased volume of call referrals.

Technical services increased by $1.0 million due primarily to increased volume of consumer referrals and amortization of capitalized software costs increased by $0.7 million.

Cost of revenue increased due primarily to increased third-party call center costs of $2.5 million, which were primarily related to increased volume of call referrals.

Amortization of capitalized software costs increased by $0.4 million.

Sales and Marketing

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The increase in sales and marketing expense was primarily due to an increase in advertising expenditures of $50.7 million and an increase in personnel-related costs of $16.2 million.

The increase in personnel-related costs was primarily due to an increase in headcount, a significant portion of which was in DTC agency.

Personnel-related costs for the year ended December 31, 2021 included severance costs of $0.4 million.

Personnel-related costs for the years ended December 31, 2021 and 2020 included stock-based compensation expense of $12.4 million and $10.2 million, respectively.

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Personnel-related costs for the years ended December 31, 2021 and 2020 included stock-based compensation expense of $9.6 million and $7.8 million, respectively.

Technical service costs also increased by $1.3 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020.

General and Administrative

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General and administrative expenses increased by $4.3 million from $20.4 million for the year ended December 31, 2020 to $24.7 million for the year ended December 31, 2021.

The increase in general and administrative expenses was primarily due to an increase in personnel-related costs of $2.9 million and an increase in insurance costs of $0.6 million.

The increase in general and administrative expenses was primarily due to an increase in personnel-related costs of $2.9 million and increases in accounting fees and insurance costs of $0.5 million each.

Personnel-related costs for the years ended December 31, 2021 and 2020 included stock-based compensation expense of $7.7 million and $5.8 million, respectively.

Acquisition-related Costs

Acquisition-related costs for the year ended December 31, 2020 were $2.3 million and consisted of costs for third-party professional services we utilized for the evaluation and execution of our Crosspointe acquisition of $0.5 million and expense of $1.8 million related to the change in the fair value of our contingent consideration liability recorded as the result of the Crosspointe acquisition.

Legal Settlement

Legal settlement expenses for the year ended December 31, 2019 were $1.2 million and were associated with the settlement of securities litigation in connection with our initial public offering (see Note 12 to the Consolidated Financial Statements).

The decrease in interest income from $0.7 million for the year ended December 31, 2019 to $0.2 million for the year ended December 31, 2020 was due to lower interest rates on invested cash balances.

Other income also included sublease income of $0.3 million in each of the years ended December 31, 2020 and 2019.

Acquisition-related costs for the years ended December 31, 2021 and 2020 were $1.1 million and $2.3 million, respectively, and included costs for third-party professional services we utilized for the evaluation and execution of our completed acquisitions of $0.9 million and $0.5 million, respectively.

Acquisition-related costs also included the change in the fair value of our contingent consideration liabilities recorded as the result of our acquisitions, which were comprised of expenses of $0.2 million and $1.8 million for the years ended December 31, 2021 and 2020, respectively.

Other Income (Expense)

Other income (expense), net was not significant for the year ended December 31, 2021.

Other income (expense), net included sublease income of $0.3 million for the year ended December 31, 2020.

The sublease ended in 2020.

Benefit from Income Taxes

We recorded an income tax benefit of $2.5 million for the year ended December 31, 2021 due to the release of a portion of our valuation allowance as a result of the PolicyFuel acquisition.

The net deferred tax liability recorded for PolicyFuel primarily relates to the intangible assets recognized in purchase accounting which are non-deductible

for tax purposes and result in a deferred tax liability.

The net deferred tax liability is a source of income to support the recognition of a portion of our existing deferred tax assets.

Therefore, we recorded a tax benefit for the release of a portion of our valuation allowance related to the net deferred tax liability recorded in purchase accounting.

We maintain a valuation allowance on our overall net deferred tax asset as we deem it more likely than not that the net deferred tax asset will not be realized.

Quote Requests

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Quote requests

Quote requests increased by 7.0 million for 2020 as compared to 2019 due to increased spending on online marketplace advertising as well as improvements in our traffic acquisition.

Quote requests increased by 3.3 million for 2021 as compared to 2020 due to increased spending on advertising.

Variable Marketing Margin

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Percentage of revenue

The increase in variable marketing margin was due primarily to an increased volume of quote requests.

The increase in variable marketing margin was due primarily to increased quote requests and growth in our commissions revenue.

Comparison of the Years Ended December 31, 2020 and 2019

For a discussion of our results of operations for the year ended December 31, 2020 as compared to the year ended December 31, 2019, see

Management’s Discussion and Analysis of Financial Condition and

Results of Operations—Results of Operations—Comparison of the Years Ended December 31, 2020 and 2019 included in our Annual Report on Form 10-K

for the fiscal year ended December 31, 2020.

Liquidity and Capital Resources

At December 31, 2021, our principal sources of liquidity were cash and cash equivalents of $34.9 million and availability of $25.0 million under our revolving line of credit.

In February 2022, we completed a private placement of shares of Class A common stock resulting in proceeds to us of $15.0 million.

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

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

We anticipate that our operating expenses and capital expenditures will increase substantially in the near term as we continue to expand our DTC agency, hire additional employees and improve our technology and infrastructure capabilities.

Additionally, a significant portion of the commission revenue we record will be collected over a multi-year time frame as policyholders renew their policies, and we are paid commissions on those renewals.

As of December 31, 2021, $13.4 million of our $22.7 million commissions receivable contract asset was classified as long term.

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

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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 each of the years ended December 31, 2020 and 2019:

The following table shows a summary of our cash flows:

Year Ended December 31,

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Operating activities provided $7.2 million and $10.7 million of cash during the years ended December 31, 2021 and 2020, respectively.

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

charges of $32.8 million to our net loss of $19.4 million, partially offset by net cash used by changes in our operating assets and liabilities of $6.1 million.

Net cash used by changes in our operating assets and liabilities consisted primarily of a $10.9 million and $3.6 million increase in other assets and prepaid expenses and other current assets, respectively, and a $1.3 million decrease in accounts payable and accrued expenses and other current liabilities.

These amounts were partially offset by a $10.5 million decrease in accounts receivable.

Cash provided by operating activities in 2020 primarily resulted from the offset of net non-cash

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Net cash used by changes in our operating assets and liabilities consisted primarily of a $14.0 million increase in accounts receivable, partially offset by an aggregate $5.3 million increase in accounts payable and accrued expenses and other current liabilities and a $0.8 million increase in other long-term liabilities.

Cash provided by operating activities in 2019 primarily resulted from the offset of net non-cash

charges of $15.5 million to our net loss of $7.1 million and net cash used by changes in our operating assets and liabilities of $4.0 million.

Net cash used by changes in our operating assets and liabilities consisted primarily of a $15.2 million increase in accounts receivable and a $5.6 million increase in prepaid expenses and other current assets, both partially offset by an aggregate $17.0 million increase in accounts payable and accrued expenses and other current liabilities.

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

The change in other long-term liabilities in 2020 was primarily due to the deferred payment of employer tax remittances.

Collection of commissions receivable, which are included in prepaid expenses and other current assets and other assets depends upon the timing of our receipt of commission payments from insurance carriers.

A significant portion of our commissions receivable asset is classified as long term.

Net cash used in investing activities

Net cash used in investing activities was $18.8 million and $3.0 million for the years ended December 31, 2020 and 2019, respectively.

Net cash used in investing activities for the year ended December 31, 2020 included cash paid of $14.9 million to purchase Crosspointe.

Net cash used in investing activities was $18.8 million for each of the years ended December 31, 2021 and 2020.

Net cash used in investing activities for the years ended December 31, 2021 and 2020 included cash paid of $16.0 million and $14.9 million to purchase PolicyFuel and Eversurance, respectively.

Cash used in investing activities for the years ended December 31, 2021 and 2020 also consisted of cash used to acquire property and equipment, which included the capitalization of software development costs.

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During the years ended December 31, 2021 and 2020, net cash provided by financing activities was $3.6 million and $4.9 million, respectively, and consisted of proceeds received from the exercise of common stock options.

For a discussion of our cash flows for the year ended December 31, 2019, see

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Cash Flows included in our Annual Report on Form 10-K

for the fiscal year ended December 31, 2020.

Contractual Obligations and Commitments

Our cash flows are dependent on a number of factors in addition to our operational expenditures, including our contractual and other obligations.

As a result, our liquidity and capital resources in future periods should be analyzed in conjunction with such factors.

We lease office space in Cambridge, Massachusetts under a non-cancelable

operating lease that expires in September 2024.

We lease office space at various other locations under non-cancelable

operating leases that expire at varying dates through 2030.

As of December 31, 2021, we were obligated to make total minimum lease payments of $8.9 million under such leases, of which $3.0 million is payable in 2022.

We have outstanding agreements with various vendors for hosting and other technical services.

We believe that we will be able to fund these obligations through our existing cash and cash equivalents.

Critical Accounting Policies and Significant Judgments and Estimates

Our consolidated financial statements are prepared in accordance with GAAP.

The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect

the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements.

The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements.

We base our estimates on historical experience, known trends and events, and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

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After the measurement period, all adjustments are recorded in the consolidated statements of operations and comprehensive loss as operating expenses or income.

Our preliminary estimate of the fair value of specifically identifiable assets acquired and liabilities assumed as of the date of acquisition of PolicyFuel is subject to change upon finalizing our valuation analysis.

We expect to finalize our fair value estimates in the first half of 2022.

Goodwill is not amortized, but rather is tested for impairment annually, or more frequently if facts and circumstances warrant a review, such as significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets.

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We amortize acquired intangible assets over their estimated useful lives based on the pattern of consumption of the economic benefits or, if that pattern cannot be readily determined, on a straight-line basis.

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

Valuation of Contingent Consideration

The Crosspointe acquisition provides for shares of Class A common stock to be issued to the former owners of Crosspointe upon achievement of certain revenue targets over three years.

Shares of Class A common stock issuable upon achievement of the first two annual targets are for a fixed number of shares of Class A common stock, and as such, we recorded the fair value of these shares within stockholders’ equity based on the number of shares issuable and the fair market value of Class A common stock on the acquisition date.

Achievement of the third annual target will result in the issuance of a variable number of shares of Class A common stock and, as such, we recorded the fair value of these shares as a long-term liability.

We estimated the fair value of the shares of Class A common stock issuable upon achievement of the three annual targets as of the acquisition date.

We remeasure the fair value of the shares of Class A common stock issuable upon the estimated achievement levels of the third annual target at each subsequent reporting date until the liability is fully settled.

We use a Monte Carlo simulation model in our estimates.

Significant assumptions and estimates utilized in the model include the forecasted revenue, revenue volatility and discount rate.

In connection with our acquisitions of Eversurance and PolicyFuel we agreed to issue shares of Class A common stock to the former owners upon the achievement of certain revenue targets.

Achievement of revenue targets that will result in the issuance of a variable number of shares of Class A common stock are accounted for as a liability.

We estimated the fair value of the shares of Class A common stock issuable upon achievement of the targets as of the acquisition date.

We remeasure the fair value of the shares of Class A common stock issuable at each subsequent reporting date until the liability is fully settled.

We use Monte Carlo simulation models in our estimates.

The estimated fair value of the contingent consideration is based upon available information and

certain assumptions, known at the time of our estimates, which management believes are reasonable.

Changes in the fair value of contingent consideration related to updated assumptions and estimates are recognized as acquisition-related costs.

We estimate the fair value of the maximum 58,754 shares of Class A common stock issuable as contingent consideration upon achievement of certain Eversurance revenue targets in 2023 using probability of achievement of the revenue target (acquisition specific input) and the market value of our Class A common stock (observable input).

The fair value of our contingent consideration liability for the Eversurance shares was $0.9 million and $2.2 million as of December 31, 2021 and 2020, respectively.

The decrease in fair value of the contingent consideration liability for the year ended December 31, 2021 was due to the decrease in the market value of our Class A common stock during the year.

A hypothetical change in the market value of our Class A common stock of 10% would change the fair value of our estimated liability as of December 31, 2021 by $0.1 million.

We used a Monte Carlo simulation model in our estimates of the fair value of the contingent consideration related to the PolicyFuel acquisition that will be settled over the next three years.

The most significant assumptions and estimates utilized in the model include forecasted revenue (an acquisition specific input) and the market value of our Class A common stock (an observable input).

Other assumptions utilized in the model include equity volatility, revenue volatility and discount rate.

The fair value of our contingent consideration liability for the PolicyFuel shares was $3.8 million as of the date of acquisition and $5.3 million as of December 31, 2021.

The increase in the fair value of the contingent consideration liability for the PolicyFuel shares was primarily due to a change in estimate of forecasted revenue, partially offset by the decrease in the market value of our Class A common stock during the period.

A hypothetical change of 10% in our estimate of the number of shares of our Class A common stock to be released upon achievement of the revenue targets, assuming no change to the market value of Class A common stock, would change the fair value of our estimated liability as of December 31, 2021 by $0.4 million.

A hypothetical change of 10% in the market value of our Class A common stock, assuming no change to the estimated number of shares to be released upon achievement of the revenue targets, would change the fair value of our estimated liability as of December 31, 2021 by $0.3 million.

Revenue Recognition

We derive our revenue by selling consumer referrals to insurance provider customers, including insurance carriers and agents.

On January 1, 2019, we adopted the new revenue standard ASC 606, which amended revenue recognition principles and provides a single, comprehensive set of criteria for revenue recognition within and

across all industries.

We derive our revenue primarily by selling consumer referrals to our insurance provider customers, including insurance carriers, agents and indirect distributors.

We also generate less than 10% of our revenue from commission fees for the sale of policies, primarily in our health and automotive verticals.

To determine revenue recognition for arrangements that we determine are within the scope of the revenue standard, we perform the following five steps:

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and (v) recognize revenue when (or as) we satisfy a performance obligation.

Revenue is recognized when control of promised goods or services is transferred to a customer at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

We only apply the five-step model to contracts when collectability of the consideration to which we are entitled in exchange for the goods or services we transfer to the customer is determined to be probable.

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We do not assess whether a contract has a significant financing component if the expectation at contract inception is that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.

We recognize revenue when we satisfy our performance obligations by delivering the referrals to our customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those referrals.

Referral Revenue

We recognize referral revenue when we satisfy our performance obligations by delivering the referrals to our customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those referrals.

Commission Revenue

Our commission revenue is primarily comprised of commissions from health insurance carriers and, to a lesser extent, auto insurance carriers.

Commission revenue is comprised of the estimated constrained lifetime values, or the constrained LTVs, of commission payments we expect to receive for selling an insurance policy.

Commission revenue is recognized upon satisfaction of our performance obligation.

We consider our performance obligation to be satisfied upon submission of the policy application.

Commission revenue represents less than 10% of total revenue in each of the years ended December 31, 2021, 2020 and 2019.

We estimate commission revenue for each health insurance product by using a portfolio approach to a group of policies by product type and the application submission date of the relevant policy, which are referred to as “cohorts.” Our estimate of constrained LTVs is based on an analysis of historical commission payment trends for relevant policies to establish an expected lifetime value and incorporates management’s judgment in interpreting those trends to calculate LTVs and to apply constraints to such LTVs.

Significant factors impacting historical trends include carrier mix, average policy duration and conversion rates of paying policies.

Commission revenue from auto insurance carriers is comprised of constrained LTVs of commission payments we expect to receive for selling an insurance policy based on the effective date of the policy.

Our estimate of constrained LTVs is based on an analysis of historical commission payment trends for relevant policies to establish an expected lifetime value and incorporates management’s judgment in interpreting those trends to calculate LTVs and to apply constraints to such LTVs.

The most significant factor impacting historical trends is average policy duration.

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

To the extent that commission payment trends change or the underlying factors impacting commission payments change, our estimate of constrained LTVs could be materially impacted.

To the extent we make changes to our estimates of constrained LTVs, we recognize any material impact of the change to commission revenue in the reporting period in which the change is made, including revisions of estimated lifetime commissions either below or in excess of previously estimated constrained LTVs recognized as an adjustment to revenue and the related contract asset.

We have not recorded material adjustments to revenue or commissions receivable resulting from changes to estimated LTVs.

We recognize revenue for new policies by applying the latest estimated constrained LTV for that product.

Stock-Based Compensation

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and directors using the Black-Scholes option-pricing model, which uses as inputs the fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our common stock options, the risk-free interest rate for a period that approximates the expected term of our common stock options, and our expected dividend yield.

We measure stock options with market-based vesting based on the fair value on the date of grant using a Monte Carlo simulation model.

We estimate the fair value of each restricted stock unit, or RSU, based on the fair value using the market value of our common stock.

We account for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the consolidated financial statement and tax basis of assets and liabilities, as measured by enacted tax rates anticipated to be in effect when these differences reverse.

This method also requires the recognition of future tax benefits to the extent that realization of such benefits is more likely than not.

Deferred tax expense or benefit is the result of changes in the deferred tax assets and liabilities.

We assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, we establish a valuation allowance through a charge to income tax expense.

We evaluate the potential for recovery of deferred tax assets by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.

Off-Balance Sheet

We did not have during the periods presented, and we do not currently have, any off-balance sheet

arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.

We measure stock options with

vesting based on the fair value on the date of grant using a Monte Carlo simulation model.

We estimate the fair value of each restricted stock unit, or RSU, based on the market value of our common stock.

The fair value of performance-based RSUs that are liability classified will be recorded as compensation expense based on the fair value of the number of shares issued at vesting.

Prior to vesting, compensation expense is recognized over the period during which services are rendered, based on the performance conditions deemed to be probable of achievement.

At the end of each financial reporting period prior to the vesting date, the fair value of these awards is remeasured using the then-current fair value of our Class A common stock.

For a description of liability-classified performance-based RSUs refer to Note 10 of the Notes to Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our audited consolidated financial statements appearing in Part II, Item 8 of this Annual Report on Form 10-K.

Inflation Risk

During the last two years, 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.

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What changed 10-K

Item 7. Management’s Discussion and Analysis