EVERQUOTE, INC. The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our consolidated financial statements and the related notes and other financial information included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , on file with theSecurities and Exchange Commission . The following discussion and analysis contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in the section titled "Risk Factors."
We operate a leading online marketplace for insurance shopping, connecting consumers with insurance providers. Our mission is to empower insurance shoppers to better protect life's most important assets-their family, property, and future. Our vision is to become the largest online source of insurance policies by using data and technology to make insurance simpler, more affordable and personalized, ultimately reducing cost and 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. We present consumers with a single starting point for a comprehensive and cost-effective insurance shopping experience. Our marketplace reduces the time consumers spend searching across multiple sites by delivering broader and more relevant results than consumers may find on their own. In addition to our marketplace, we also operate a direct to consumer, or DTC, insurance agency. Our DTC agents bind policies for consumers, further streamlining the consumer shopping experience. Our services are 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 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. We connect providers to a large volume of high-intent, pre-validated consumer referrals that match the insurers' specific requirements. The transparency of our marketplace, as well as the campaign management tools we offer, make it easy for insurance 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. In pursuing this goal, we have consistently innovated through our disruptive data driven approach. Highlights of our history of innovation include: • In 2011, we launched theEverQuote marketplace for auto insurance.
• In 2013, we launched EverQuote Pro, our provider portal, for carriers.
• In 2015, we launched EverQuote Pro for agents. • In 2016, we added home and life insurance in our marketplace. • 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
Financial Services, LLC , or Crosspointe, which we later renamed Eversurance.
• In
home and renters verticals via the acquisition of
affiliates, or PolicyFuel.
In the three months endedMarch 31, 2022 and 2021, our total revenue was$110.7 million and$103.8 million , respectively, representing year-over-year growth of 6.6%. We had net losses of$5.7 million and$3.8 million for the three months endedMarch 31, 2022 and 2021, respectively, and had$2.4 million and$4.8 million in adjusted EBITDA for the three months endedMarch 31, 2022 and 2021, 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 inthe United States , or GAAP. 21
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Table of Contents COVID-19 The COVID-19 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 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 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 throughMarch 31, 2022 , such disruptions may impact consumer insurance shopping behavior. We continue to monitor and are managing our operations for the ongoing impact of COVID-19.
Factors Affecting Our Performance
We believe that our performance and future growth depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section titled "Risk Factors."
Auto insurance industry risk
We derive a significant portion of our revenue from auto insurance providers and our financial results depend on the performance of the auto insurance industry. For example, in 2016, theU.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. 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 during 2022.
Expanding consumer traffic
Our success depends in part on the growth of our consumer traffic. 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, 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
Our success also depends on our ability to retain and grow our insurance provider network. Historically, we have generally expanded both the number of insurance providers and the spend per provider on our platform.
Key Business Metrics
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,
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 Quarterly Report
on Form 10-Q to supplement
the financial information we present on a GAAP basis. We monitor and present
Adjusted EBITDA because it is a key measure used by our management and board of
directors to understand and evaluate our operating
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performance, to establish budgets and to develop operational goals for managing our business. Adjusted EBITDA should not be considered in isolation from, or as an alternative to, measures prepared in accordance with GAAP. Adjusted EBITDA should be considered together with other operating and financial performance measures presented in accordance with GAAP. Also, Adjusted EBITDA may not necessarily be comparable to similarly titled measures presented by other companies. 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.
Key Components of Our Results of Operations
Revenue
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:
• Clicks: An
online-to-online
referral, with a handoff of the consumer to the provider's website.
• Data: An
online-to-offline
referral, with quote request data transmitted to the provider for
follow-up.
• Calls: An
online-to-offline
referral for outbound calls and an
offline-to-offlinereferral for inbound calls, with the consumer and provider connected by
phone.
We also generate revenue from commission fees for the sale of policies, primarily in our health and automotive verticals. Commission revenue represented approximately 13% of total revenue in the three months endedMarch 31, 2022 and less than 10% of total revenue in the three months endedMarch 31, 2021 . We recognize revenue from commission fees 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: Three Months Ended March 31, 2022 2021 (in thousands) Automotive$ 87,675 $ 84,481 Other 23,006 19,341 Total Revenue$ 110,681 $ 103,822 We expect revenue to remain relatively flat or decrease slightly in 2022 as we anticipate increases in commission revenue to be 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
Our cost and operating expenses consist of cost of revenue, sales and marketing, research and development, and general and administrative expenses and acquisition-related costs.
We allocate certain overhead expenses, such as rent, utilities, office supplies
and depreciation and amortization of general office assets, to cost of revenue
and operating expense categories based on headcount. As a result, an overhead
expense allocation is reflected in cost of revenue and each operating expense
category. Personnel-related costs included in cost of revenue and each operating
expense category include wages, fringe benefit costs and stock-based
compensation expense.
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Cost of Revenue
Cost of revenue is comprised primarily of the costs of operating our marketplace and delivering consumer referrals to our customers. These costs consist primarily of technology service costs including hosting, software, data services, and third-party call center costs. In addition, cost of revenue includes depreciation and amortization of our platform technology assets and personnel-related costs. Sales and Marketing 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. Marketing costs consist primarily of content and creative development, public relations, memberships, and event costs. 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, 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
Research and development expenses consist primarily of personnel-related costs for software development and product management. We have focused our research and development efforts on improving ease of use and functionality of our existing marketplace platform and developing new offerings and internal tools. We primarily expense research and development costs. Direct development costs related to software enhancements that add functionality are capitalized and amortized as a component of cost of revenue. We expect that research and development expenses will increase as we continue to enhance and expand our platform technology.
General and Administrative
General and administrative expenses consist of personnel-related costs and related expenses for executive, finance, legal, human resources, technical support and administrative personnel as well as the costs associated with professional fees for external legal, accounting and other consulting services, insurance premiums and payment processing and billing costs. We expect general and administrative expenses to increase as we continue to incur the costs of compliance associated with being a publicly traded company, including legal, audit, insurance and consulting fees.
Acquisition-related
Acquisition-related costs include expenses associated with third-party professional services we utilize for the evaluation and execution of 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 (expense) consists of miscellaneous income (expense) unrelated to our
core operations.
Non-GAAP Financial
Measure
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 Quarterly Report on
Form 10-Q
adjusted EBITDA as a
non-GAAP financial
measure. Adjusted EBITDA is not based on any standardized methodology prescribed
by GAAP and is not necessarily comparable to similarly titled measures presented
by other companies.
Adjusted EBITDA
. We define adjusted EBITDA as our net income (loss), excluding the impact of
stock-based compensation expense; depreciation and amortization expense;
acquisition-related costs; legal settlement expense;
one-time
severance charges; interest income; and our provision for (benefit from) income
taxes. The most directly comparable GAAP measure to adjusted EBITDA is net
income (loss). We monitor and present in this Quarterly Report on
Form 10-Q 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. In particular, we
believe that excluding the impact of these items in calculating adjusted EBITDA
can provide a useful measure
for period-to-period comparisons
of our core operating performance.
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We use adjusted EBITDA to evaluate our operating performance and trends and make planning decisions. We believe adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in the calculation of adjusted EBITDA. Accordingly, we believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects. Adjusted EBITDA is not prepared in accordance with GAAP and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of adjusted EBITDA rather than net income (loss), which is the most directly comparable financial measure calculated and presented in accordance with GAAP. Some of these limitations are:
• adjusted EBITDA excludes stock-based compensation expense as it has
recently been, and will continue to be for the foreseeable future, a
significant
recurring non-cash expense
for our business;
• adjusted EBITDA excludes depreciation and amortization expense and,
although this is
a non-cash expense,
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 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;
• adjusted EBITDA does not reflect income tax expense (benefit) that
affects cash available to us; and
• the expenses and other items that we exclude in our calculation of
adjusted EBITDA may differ from the expenses and other items, if any,
that other companies may exclude from adjusted EBITDA when they report
their operating results.
In addition, other companies may use other measures to evaluate their performance, all of which could reduce the usefulness of adjusted EBITDA as a tool for comparison.
The following table reconciles adjusted EBITDA to net income (loss), the most directly comparable financial measures calculated and presented in accordance with GAAP.
Reconciliation of Net Loss to Adjusted EBITDA:
Three Months Ended March 31,
2022 2021
(in thousands)
Net loss $ (5,715 ) $ (3,801 )
Stock-based compensation 7,530 7,520
Depreciation and amortization 1,511 1,174
Acquisition-related (892 ) (79 )
Interest income (8 ) (14 )
Adjusted EBITDA $ 2,426 $ 4,800
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Results of Operations
Comparison of the Three Months Ended
The following tables set forth our results of operations for the periods shown:
Three Months Ended March 31,
2022 2021
(in thousands)
Statement of Operations Data:
Revenue(1) $ 110,681 $ 103,822
Cost and operating expenses(2): Cost of revenue 5,984 5,953 Sales and marketing 96,150 87,569 Research and development 8,196 8,573 General and administrative 6,941 5,596 Acquisition-related (892 ) (79 ) Total cost and operating expenses 116,379 107,612 Loss from operations (5,698 ) (3,790 ) Other income (expense): Interest income 8 14 Other expense, net (25 ) (25 ) Total other expense, net (17 ) (11 ) Net loss$ (5,715 ) $ (3,801 ) Other Financial and Operational Data: Variable marketing margin$ 34,264 $ 31,438 Adjusted EBITDA(3)$ 2,426 $ 4,800
(1) Comprised of revenue from the following distribution channels:
Three Months Ended March 31,
2022 2021
Direct channels 88 % 90 %
Indirect channels 12 % 10 %
100 % 100 %
(2) Includes stock-based compensation expense as follows:
Three Months Ended March 31,
2022 2021
(in thousands)
Cost of revenue $ 59 $ 91
Sales and marketing 3,210 3,391
Research and development 2,411 2,327
General and administrative 1,850 1,711
$ 7,530 $ 7,520
(3) See
"-Non-GAAPFinancial Measure" for information regarding our use of adjusted EBITDA as a
non-GAAP
financial measure and a reconciliation of adjusted EBITDA to its comparable
GAAP financial measure.
Revenue:
Three Months Ended March 31, Change
2022 2021 Amount %
(dollars in thousands)
Revenue $ 110,681 $ 103,822 $ 6,859 6.6 %
Revenue increased by $6.9 million from $103.8 million for the three months ended
March 31, 2021 to $110.7 million for the three months ended March 31, 2022 . The
increase in revenue was due to increases of $3.2 million and $3.7 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 commission revenue of $5.2 million , partially offset by a
decrease in carrier spend for referrals. The increase in revenue from our other
marketplace verticals was primarily due to an increase of $6.6 million in
commission revenue, partially offset by a decrease in number of referrals sold.
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Cost of Revenue
Three Months Ended March 31, Change
2022 2021 Amount %
(dollars in thousands)
Cost of revenue $ 5,984 $ 5,953 $ 31 0.5 %
Percentage of revenue 5.4 % 5.7 %
Cost of revenue was relatively consistent for the three months ended March 31,
2022 and 2021. Cost of revenue increased due primarily to increased third-party
call center costs of $0.4 million , which were primarily related to increased
volume of call referrals and to increased amortization expense of $0.2 million .
These increases were partially offset by a decrease in hosting costs of
$0.5 million .
Sales and Marketing
Three Months Ended March 31, Change
2022 2021 Amount %
(dollars in thousands)
Sales and marketing expense
86.9 % 84.3 %
Sales and marketing expenses increased by $8.6 million from $87.6 million for
the three months ended March 31, 2021 to $96.2 million for the three months
ended March 31, 2022 . The increase in sales and marketing expense was primarily
due to an increase in advertising expenditures of $4.0 million and an increase
in personnel-related costs of $4.0 million . The increase in personnel-related
costs was primarily due to an increase in headcount, a significant portion of
which was in DTC agency.
Research and Development
Three Months Ended March 31, Change
2022 2021 Amount %
(dollars in thousands)
Research and development expense $ 8,196 $ 8,573 $ (377 ) -4.4 %
Percentage of revenue 7.4 % 8.3 %
Research and development expenses decreased by $0.4 million from $8.6 million
for the three months ended March 31, 2021 to $8.2 million for the three months
ended March 31, 2022 . The decrease in research and development expense was
primarily due to a decrease in personnel-related costs of $0.5 million .
General and Administrative
Three Months Ended March 31, Change
2022 2021 Amount %
(dollars in thousands)
General and administrative expense $ 6,941 $ 5,596 $ 1,345 24.0 %
Percentage of revenue 6.3 % 5.4 %
General and administrative expenses increased by $1.3 million from $5.6 million
for the three months ended March 31, 2021 to $6.9 million for the three months
ended March 31, 2022 . The increase in general and administrative expenses was
primarily due to an increase in personnel-related costs of $0.7 million . Other
increases included legal fees of $0.2 million and hosting, insurance and credit
card fees of $0.1 million each.
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Acquisition-related
Acquisition-related costs for the three months endedMarch 31, 2022 and 2021 consisted solely of the change in fair value of our contingent consideration liabilities recorded as the result of our acquisitions, which were comprised of income of$0.9 million and$0.1 million for the three months endedMarch 31, 2022 and 2021, respectively. The decrease in our contingent consideration liability for the three months endedMarch 31, 2022 related primarily to our future revenue forecasts. Other Income (Expense) Other expense, net was not significant for either of the three months endedMarch 31, 2022 or 2021. Variable Marketing Margin Three Months Ended March 31, Change 2022 2021 Amount % (dollars in thousands) Revenue$ 110,681 $ 103,822 $ 6,859 6.6 % Less: total advertising expense (a component of sales and marketing expense) 76,417
72,384
Variable marketing margin$ 34,264 $ 31,438 $ 2,826 9.0 % Percentage of revenue 31.0 % 30.3 %
The increase in variable marketing margin was due primarily to growth in commissions revenue.
Liquidity and Capital Resources
At
Borrowings under our revolving line of credit are collateralized by substantially all of our assets and property. Additionally, we are subject under our revolving line of credit to affirmative and negative covenants to which we will remain subject until maturity. These covenants include limitations on our ability to incur additional indebtedness and engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses. As ofMarch 31, 2022 , we were in compliance with these covenants. In addition, we are required to maintain a minimum asset coverage ratio of 1.5 to 1 calculated as the sum of unrestricted cash and qualified accounts receivable divided by borrowings outstanding under the revolving line of credit. Events of default under our revolving line of credit include failure to make payments when due, insolvency events, failure to comply with covenants and material adverse events with respect to us. In the event of a default, the lender may declare all borrowings immediately due and payable. 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 ofMarch 31, 2022 ,$18.9 million of our$28.1 million commissions receivable contract asset was classified as long-term. We believe our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next 12 months, without considering the borrowing availability under our revolving line of credit. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of spending on business initiatives, purchases of capital equipment to support our growth, the expansion of sales and marketing activities, expansion of our business through acquisitions or our investments in complementary offerings, technologies or businesses, market acceptance of our platform and overall economic conditions. If we do not achieve our revenue goals as planned, we believe that we can reduce our operating costs. If we need additional funds and are unable to obtain funding on a timely basis, we may need to significantly curtail our operations in an effort to provide sufficient funds to continue our operations, which could adversely affect our business prospects. 28
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Cash Flows
The following table shows a summary of our cash flows for the three months endedMarch 31, 2022 and 2021: Three Months Ended March 31, 2022 2021 (in thousands) Net cash provided by (used in) operating activities$ (3,845 ) $ 3,520 Net cash used in investing activities (681 ) (777 ) Net cash provided by financing activities 15,558
1,272
Effect of exchange rate changes on cash, cash equivalents and restricted cash (5 ) 1 Net increase in cash, cash equivalents and restricted cash$ 11,027 $ 4,016
Net cash provided by operating activities
Operating activities used$3.8 million during the three months endedMarch 31, 2022 primarily resulting from our net loss of$5.7 million and net cash used by operating activities of$6.4 million , partially offset by net non-cash charges of$8.2 million . Net cash used by changes in our operating assets and liabilities consisted primarily of an$11.0 million decrease in accounts receivable and a$5.6 million increase in other assets, partially offset by a$10.4 million increase in accounts payable and accrued expenses and other current liabilities. Operating activities provided$3.5 million during the three months endedMarch 31, 2021 primarily resulting from the offset of net non-cash charges of$8.6 million to our net loss of$3.8 million and net cash used by changes in our operating assets and liabilities of$1.3 million . Net cash used by changes in our operating assets and liabilities consisted primarily of a$2.9 million increase in accounts receivable and a$0.7 million increase in other assets, partially offset by an aggregate$2.1 million increase in accounts payable and accrued expenses and other current liabilities. Changes in accounts receivable, accounts payable and accrued expenses and other current liabilities were generally due to growth in our business and timing of customer and vendor invoicing and payments. 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 is classified as long-term.
Net cash used in investing activities
Net cash used in investing activities was$0.7 million and$0.8 million for the three months endedMarch 31, 2022 and 2021, respectively. Net cash used in investing activities for the three months endedMarch 31, 2022 and 2021 included the acquisition of property and equipment, which included the capitalization of certain software development costs. During the three months endedMarch 31, 2022 and 2021, we capitalized$0.5 million and$0.7 million , respectively, of software development costs.
Net cash provided by financing activities
During the three months endedMarch 31, 2022 and 2021, net cash provided by financing activities was$15.6 million and$1.3 million , respectively. Net cash provided by financing activities during the three months endedMarch 31, 2022 consisted of$15.0 million of proceeds from the issuance and sale of shares of common stock in a private placement withRecognition Capital, LLC , an entity which is owned and controlled byDavid Blundin , Chairman of the Board of Directors and co-founder of the Company, and$0.6 million from the exercise of common stock options. Net cash provided by financing activities during the three months endedMarch 31, 2021 consisted of proceeds received from the exercise of common stock options.
Contractual Obligations and Commitments
There have been no material changes to the contractual obligations reported in our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
Critical Accounting Policies and Significant Judgments and Estimates
Our condensed consolidated financial statements are prepared in accordance with
GAAP. The preparation of our condensed consolidated financial statements and
related disclosures requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenue, costs and expenses, and the
disclosure of contingent assets and liabilities in our condensed consolidated
financial statements. We base our estimates on historical experience, known
trends and events, and various other factors that we believe are reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. We evaluate our estimates and assumptions
on an ongoing basis. Our actual results may differ from these estimates under
different assumptions or conditions. We believe that the accounting policies
discussed below are critical to understanding our historical and future
performance, as these policies relate to the more significant areas involving
management's judgments and estimates.
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The following critical accounting policies reflect significant judgments and estimates used in the preparation of our condensed consolidated financial statements:
• goodwill and acquired intangible assets; • valuation of contingent consideration; • revenue recognition; and • stock-based compensation expense. There have been no material changes to our critical accounting policies from those disclosed in our financial statements and the related notes and other financial information included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , on file with theSecurities and Exchange Commission . For further disclosure, refer to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual Report on Form 10-K.
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 unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
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