Q1 Results: EverQuote (EVER) Blasts off. Appfolio (APPF) Stable
EverQuote (EVER) has exploded over 25% to all-time highs following a beat and raise Q1 that seemed in the cards, but still comes very much as a surprise to me. Regarding the report, last week I said, “… I’m torn on what to expect. Theoretically, with everyone at home it’s reasonable to expect an uptick in web traffic to EverQuote’s insurance comparison websites. The company derives most of its revenue from quotes. On the flip side, it’s also reasonable to expect a big dip in car and homebuying.”
What happened? The company beat on both the top and bottom line and raised full-year guidance. Revenue was up 56% to $81.4 million (beating by $3.9 million) while GAAP EPS of $0.05 beat by a penny. Quote volume was up by 80%. Auto insurance revenue was up 50% to $67.6 million while revenue from other verticals (home, renters, life, health and commercial) was up 90% to $13.7 million. Full-year guidance goes up by 1% to $3 million (roughly the amount of the Q1 beat) to a range of $318 million to $327 million (implying roughly 30% growth). Guidance on adjusted EBITDA, a measure of profit, goes up 20%. It’s hard to not be impressed with a company that’s confident enough in the trends and business model to raise (even if modestly on revenue) right now.
Digging deeper, management said quote requests stayed about the same before and after March 13. There was some variability in revenue and cost per quote request due to disruptions at insurance carriers, but they essentially canceled each other out, with a modest net benefit, and things appear back to normal now.
Stepping back, the combination of reports from Goosehead Insurance and EverQuote suggest insurance is weathering the COVID-19 storm extremely well. EverQuote, as on online comparison site and broker, is in a sweet spot for grabbing eyeballs throughout the pandemic, and beyond. In hindsight, we played it conservative going into the report with a hold rating. But by the same token we didn’t freak out when the stock was cut in half back in March. Let’s continue to hold. We’re up around 340% since last June. HOLD
AppFolio (APPF) reported Q1 result yesterday that beat expectations by a modest amount. Revenue of $72.5 million was up 27% and beat by $80,000 while GAAP EPS of $0.06 was down from $0.11 in the year-ago quarter (when the company had a $4.28 million income tax benefit). Management pulled 2020 guidance due to COVID-19 and acknowledged that while demand was strong in Q1 it expects variability throughout the year due to the pandemic. Interestingly, management said, “… it is presently unclear whether the cumulative impacts will be positive or negative,” which suggests that, at least as of now, the positives and negatives are just about cancelling each other out.
As a cloud-based software provider AppFolio’s solutions permit customers to run aspects of their business remotely. That’s a plus, especially while property managers are trying to keep residents, vendors, homeowners, etc. safe and taken care of. I believe that any property manager client that expects to be in business after this all passes is relying more on Appfolio now than ever, and potential customers that haven’t signed up could be considering doing so. In the legal vertical, MyCase allows lawyers to work remotely as well.
Stepping back, this stock is 30% off its high. While the stock likely got ahead of itself at the prior peak, investors looking to pick up “deals” will likely still see APPF as heavily discounted. I don’t think that makes it a buy since we really don’t have a good sense of what Q2 and beyond will look like. At the same time I haven’t heard enough negatives to say we should step away, and the share price seems stable in the early goings today (it dipped at the open and is roughly flat now).
For now, let’s let the stock price be our guide and maintain a hold rating. We’re up 240% since June of 2017 on this stock because we’ve sat on our hands. Perhaps that strategy will continue to pay off! HOLD