EVER, INSP, CDLX and KPTI Report
EverQuote (EVER) reported Q3 results that beat on the top line and missed on the bottom line. Revenue was up 34% to $90 million, beating by $4.8 million. GAAP EPS of -$0.12 missed consensus by $0.05. Details included higher-than-expected growth in automotive insurance (83% of revenue) but slower-than-expected growth in other revenue (17% of quarterly revenue). Revenue per quote request improved, likely due to the work management has done around deep integrations with insurance carriers, a trend that’s likely to continue. The quarter was good enough for management to modestly raise full-year revenue guidance. The midpoint is now $341 million, implying 37% growth.
However, analysts are now modeling in significant declines in the growth rate in 2021 (up just 22%) and 2022 (up just 17%), which implies EverQuote’s premium valuation will get harder to justify. The slowdown is mainly in the insurance verticals outside of auto, including home and life, and likely explains some of the reasoning behind the Crosspoint health insurance acquisition. The flip side is that profitability is likely to keep going up, with EverQuote losing roughly -$0.33 this year and -$0.04 in 2021, then turning quite profitable in 2022.
The bottom line here is that as verticals outside of autos gain a larger share of revenue their importance increases. It is a little concerning that we’re not seeing faster growth there. EverQuote is on the cusp of transitioning to a slower growth but higher profit company, which is something we typically want to see once more scale has been achieved (market cap is just around $1 billion). I think we’re getting a little bit of a relief rally today as EVER is up nicely despite numerous price target cuts by analysts, which are mostly in the low 50s but still 30% above where EVER is now. I’m dubious that there’s enough in this report and in the outlook to kick EVER into high gear again and send it careening back toward previous highs. Even after the summer retreat we’re still up over 200%. Let’s take the gain and move on. EverQuote will go back on the watch list. SELL
Cardlytix (CDLX) beat expectations that had been slashed in the face of the pandemic. Revenue in Q3 was down 18% to $46 million but beat by $7.3 million. Adjusted EPS of -$0.16 beat by $0.12. Management said monthly average users are now nearly 162 million as the Wells Fargo launch continues and that average revenue per user was $0.29, roughly $0.05 better than expected.
The business is continuing to benefit from the economic recovery as advertisers (even retail, restaurants and travel) come back to the platform and emerging strength in direct-to-consumer and eCommerce helps fill in around the edges. That’s in the U.S. Overseas, the story isn’t as good as the U.K. remains extremely weak (down 52% versus down 15% in the U.S.). Management’s Q4 guidance was light, reflecting the current state of the pandemic. Management continues to work on the self-service platform and will be rolling out the first version of its improved user experience with US Bank in the first half of 2021, likely featuring richer media (pictures, etc.).
Stepping back the story remains a little murky due to the pandemic but the platform and potential for Cardlytics remains big. I think it’s worth staying patient here as we look into 2021 and see potential for better than 50% revenue growth. HOLD
Last week I advised taking partial profits in Inspire (INSP), and said that, “Ideally, this is the wrong decision.” Well, as of this minute it was. Shares of Inspire are trading over 20% higher today after a huge Q3 beat. Revenue of $35.8 million was up 72% and beat by $13.2 million (a HUGE beat) while GAAP EPS of -$0.39 beat by $0.34. Performance was driven by a lot of good things, including coverage wins (Humana, etc.), 42 new centers (twice the amount expected) and approval of a CPT code application, likely to be finalized in early 2022. Altogether, Inspire’s management feels good enough about the business to raise 2020 guidance by 23% to $110 million to $112 million, implying growth of 34% to 37%. Looking into 2021, revenue growth could approach 70%. Of course, this all assumes hospitals are able to continue doing procedures and aren’t flooded with COVID-19 patients, which is one of the concerns I highlighted last Friday. Still, with a big rally in the stock today and a wave of analyst upgrades it looks like we should stick with Inspire. HOLD
Karyopharm Therapeutics (KPTI) reported Q3 results yesterday and gave a positive update on the Phase 3 SEAL trial for Xpovio in 3L liposarcoma. First, on the results: Xpovio generated $21.3 million in sales for both multiple myeloma and diffuse large B-cell lymphoma, an increase of 15% over Q2 2020. This puts the company on target for roughly $102 million in revenue in 2020. No big surprises here.
On the SEAL trial results, this is a very positive incremental development as it suggests Xpovio has potential to fight other solid tumors, including glioblastoma and endometrial cancer. As the only approved cancer treatment out there that works by activating tumor suppressing proteins continued progress on a wide variety of cancers is bullish for the Karyopharm story.
Now, we await a ruling out of Europe on Xpovio in late line multiple myeloma. Management is expecting to hear back from CHMP by the end of this year. The real big news is still expected on March 19, 2021 when there is a PDUFA date for Xpovio + Velcade to treat 2L+ multiple myeloma.
Stepping back, if all goes well then in a couple years we could easily see a stock that’s worth multiples of what it’s worth now if Xpovio is approved for five to eight forms of cancer (and counting). Let’s stick with it. HOLD