EverQuote, Inc. Fair Value Disclosure
4. Fair Value of Financial Instruments
The following tables present the Company’s fair value hierarchy for its assets and liabilities which are measured at fair value on a recurring basis as of December 31, 2024 and 2023 (in thousands):
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Fair Value Measurements at December 31, 2024 Using: |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Assets: |
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Cash equivalents: |
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Money market funds |
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$ |
7,403 |
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$ |
— |
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$ |
— |
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$ |
7,403 |
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Fair Value Measurements at December 31, 2023 Using: |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Assets: |
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Cash equivalents: |
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Money market funds |
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$ |
3,210 |
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$ |
— |
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$ |
— |
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$ |
3,210 |
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There were no transfers into or out of Level 3 during the years ended December 31, 2024, 2023 or 2022.
Money market funds were valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy.
Contingent consideration liabilities were valued by the Company using significant inputs not observable in the market, which represent a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions and estimates to forecast a range of outcomes for the contingent consideration. The Company assesses these assumptions and estimates on a quarterly basis as additional data impacting the assumptions is obtained. Changes in the fair value of contingent consideration related to updated assumptions and estimates were recognized as acquisition-related costs within the consolidated statements of operations and comprehensive income (loss).
The Company used a Monte Carlo simulation model in its estimates of the fair value of the contingent consideration liabilities related to the PolicyFuel acquisition in 2021. The most significant assumptions and estimates utilized in the model included forecasted revenue (an acquisition specific input) and the market value of the Company’s 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 the contingent consideration liability was zero at both December 31, 2024 and 2023. The decrease in fair value of the contingent consideration liability during the year ended December 31, 2023 was due to a change in estimate of forecasted revenue. The decrease in fair value of the contingent consideration liability during the year ended December 31, 2022 was due to a change in estimate of forecasted revenue and the decrease in market value of the Company’s Class A common stock. In December 2022, the Company issued shares of Class A common stock in settlement of the first annual milestone, at which time the fair value of the contingent consideration liability for the first milestone was reclassified to stockholders' equity.
The Company estimated the fair value of the contingent consideration liability related to the Eversurance acquisition in 2020 (see Note 3) using probability of achievement of the revenue target (acquisition specific input) and the market value of the Company’s Class A common stock (observable input). Shares of Class A common stock were issued in December 2022 to settle the third and final milestone at which time the fair value of the contingent consideration liability was reclassified to stockholders' equity.
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About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.