Ethos Technologies Inc. Class A Common Stock Q2 2026 Earnings Call Transcript

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Provided by Quartr
August 3, 2026

Key Takeaways

  • Positive Sentiment: Q2 revenue rose 113% year over year to $189.6 million, with direct-channel revenue up 131% and third-party revenue up 90%. Adjusted EBITDA reached $35.2 million, a 19% margin and a Rule of 40 score of 132.
  • Positive Sentiment: Ethos activated 107,847 policies in the quarter, bringing cumulative activated policies above 700,000. Management said its growing data set is improving underwriting, marketing efficiency, agent productivity and product expansion.
  • Positive Sentiment: The company raised its fiscal 2026 outlook to $727 million–$731 million of revenue and $119 million–$123 million of adjusted EBITDA; Q3 guidance calls for $160 million–$164 million of revenue and $23 million–$25 million of adjusted EBITDA.
  • Positive Sentiment: The board authorized up to $100 million in share repurchases, citing a strong balance sheet and confidence in cash generation. Ethos ended Q2 with $252.9 million in cash, cash equivalents and investments.
  • Negative Sentiment: Profit margins are expected to face mix pressure as the faster-growing third-party channel represents a larger share of revenue; management said that channel has thinner unit economics than direct sales. Operating cash flow also benefited from an $8 million carrier-settlement timing item that is expected to reverse in Q3.
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Earnings Conference Call
Ethos Technologies Inc. Class A Common Stock Q2 2026
00:00 / 00:00

There are 11 speakers on the call.

Operator

Good day, and thank you for standing by. Welcome to the Ethos Technologies Second Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Aaron Turner. Please go ahead.

Speaker 1

Good afternoon, and welcome everyone to Ethos Technologies' second quarter of fiscal year 2026 earnings call. We will be discussing the results announced in our press release issued after the market closed today. With me today are Ethos CEO Peter Colis and our CFO Chris Capozzi. Today's call is being webcast and will also be available for replay on our investor relations website at investors.ethos.com. A slide presentation accompanies this call and can be viewed in the events section of our investor relations website.

Speaker 1

During this call, we will make forward-looking statements within the meaning of the Federal Securities Laws, including statements regarding potential share repurchases, our financial outlook for the third quarter and fiscal year 2026, our expectations regarding financial and business trends, impacts from go-to-market initiatives, growth strategy and business aspirations, and product initiatives, including future product releases and white label platform arrangements, and the expected benefit of such initiatives. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends. These forward-looking statements are subject to a number of risks and other factors.

Speaker 1

For a discussion of these risks and other factors, please see the information under forward-looking statements and our financial results press release issued today and our presentation materials as well as the more detailed discussion in our SEC filings available on our investor relations website and on the SEC website at www.sec.gov. Although we believe that the expectations reflected in the forward-looking statements are reasonable, our actual results may differ materially. All forward-looking statements made during this call are based on information available to us as of today. We do not assume any obligation to update these statements as a result of new information or future events except as required by law. In addition to the U.S. GAAP financials, we will discuss certain non-GAAP financial measures.

Speaker 1

While the company believes these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliation to the most directly comparable U.S. GAAP measures is available in the presentation that accompanies this call, which can be found on our investor relations website. Let me turn the call over to Peter.

Speaker 2

Good afternoon, everyone, and welcome to our second quarter 2026 earnings call. Q2 was another exceptional one. We delivered $190 million in revenue, representing 113% year-over-year growth, our second consecutive quarter of over 100% year-over-year growth. We are also on pace for our fourth consecutive year of over 50% annual growth, and our full year 2026 guidance implies accelerating growth for 2026. We generated adjusted EBITDA of $35 million, and we achieved a Rule of 40 score of 132, further demonstrating our ability to generate robust growth and profitability. We protected over 100,000 new families, bringing our cumulative total to over 700,000 activated policies to date. When we started Ethos, it took us 54 months to protect our first 100,000 families. Fast-forward to today. At our current scale, we activated 100,000 new policies in just three months.

Speaker 2

As one of the largest volumetric underwriters in the life insurance industry, we continue to amass an ever-increasing data moat that gives our carrier partners and ourselves great confidence in our risk management capabilities. Ethos gets better as it gets bigger. Our goal at Ethos is to become the largest provider of life insurance in the world. We built a vertically integrated platform that owns the full consumer journey from marketing and application through underwriting, policy issuance, policy administration, and long-term servicing. We believe that control enables us to deliver a level of speed, accessibility, and approval rates that simply do not exist in the legacy life insurance industry. Our automated data-driven underwriting engine processes hundreds of thousands of data points per application, leveraging pharmaceutical records, medical claims billing data, and more.

Speaker 2

The engine applies over a million rules of logic and over 800 adaptive questions to make accurate risk-adjusted pricing decisions in real time. Our 95% instant decisioning rate would be tremendously difficult to achieve without our proprietary engine and the logic IP developed over the previous six years. A sample of these automated underwriting decisions are then audited by the Ethos human underwriting team, and then many of those outcomes are re-audited by our carrier partners' human underwriting teams, providing further validation and optimization of our underwriting engine. Turning to the business highlights that drove this quarter's performance. In our direct channel, the virtuous data cycle of our product and marketing experimentation continues to spin faster and deliver gains. Increased user volumes allowed us to scale experimentation, driving more unit economic improvements, which build on each other quarter after quarter.

Speaker 2

We've been able to increase marketing spend on the back of these gains and continue to build our reputation and solidify our position as the leading D2C brand for the industry. This leads to more families protected, more learnings, and increased revenue. Q2's direct revenue growth of 131% reflects that compounding advantage. In our third-party channel, we're seeing continued growth from new and existing agencies, driven by both an increase in the number of agents using the platform and improving agent productivity. Revenue in the third-party channel reached $73 million in Q2, representing 90% year-over-year growth. That makes two sequential quarters of material acceleration. Importantly, this growth is broad-based, coming from wide product adoption across our existing agents and continued recruitment of new ones.

Speaker 2

The combination of our agent technology and operating system, our instant transactional experience, and a differentiated product portfolio is what's driving the kind of product market fit that we're seeing within our large market. On the product front, we deepened our relationship with North American Sammons by expanding our Accumulation IUL product to include children, the first time Ethos has ever been able to support juveniles. This was one of the top product requests we received from our distribution network. More importantly, we were able to take what we were hearing from those agents and quickly bring that product to market. Last quarter, we discussed that annuities were a key market we are interested in. This quarter, we began investing in our nascent D2C annuities opportunity.

Speaker 2

We are optimizing the client experience, growing our sales team, and expanding our annuity carrier panel, allowing us to broaden our selection and increase conversions. We're still in the early days of this initiative. We do not expect this product to materially contribute to our 2026 results. However, we believe annuities is a massive market opportunity. We're optimistic about its long-term potential for Ethos. I want to briefly touch on the evolving AI landscape. As we look across the broader life insurance market, we view the potential future shift towards agentic commerce as a material tailwind. Because we own a vertically integrated, fully digital technology stack and the leading direct-to-consumer distribution platform, we are uniquely positioned to benefit from AI-driven demand. We're already leaning into this transition, ensuring that our infrastructure integrates seamlessly into the emerging AI ecosystem.

Speaker 2

While traditional insurance models must spend heavily to learn and adapt to these new consumer habits, our digital foundation allows us to efficiently capture demand, expand our data moat, and continue taking outsized market share. As we look to the rest of 2026, we are focused on our three durable growth vectors: ecosystem, platform, and product. On ecosystem, we are bringing more consumers into our direct channel and recruiting more agents onto our platform. On platform, we are making our distribution network more productive in capturing more of their sales. On product, we're broadening our portfolio to reach a wider addressable audience. These three reinforce each other. Every new client sharpens our risk model and improves the experience for both clients and agents. Those same models train the machine learning that powers our advertising spend.

Speaker 2

More intelligent risk models mean better pricing and unit economics for our clients, our carriers, and for Ethos. That scale and underwriting experience is also what lets us expand our product portfolio and carrier panel. A wider product portfolio helps us win more of an agent's business and recruit new types of agencies. All of it runs through one platform that captures granular data across the entire consumer and agent journey. The legacy industry is still running on on-prem systems and manual processes. We have built a vertically integrated end-to-end technology platform specifically to make this cycle spin, and it keeps spinning faster. This compounding strength gives us the conviction to raise our full year outlook. I'll now turn the call over to Chris to walk you through our Q2 results and the details of our updated guidance.

Speaker 3

Thanks, Peter, and good afternoon, everyone. I'll begin with a review of our second quarter results, then walk through our outlook for the third quarter and for the full year 2026 before opening it up for questions. As Peter noted, Q2 was another exceptional quarter. We more than doubled revenue year-over-year, maintained strong profitability, and raised full year guidance. Before reviewing the details, I'd like to remind everyone that some of the financial measures and metrics that I'll discuss today are presented on a non-GAAP basis, which we believe provides additional insight into our performance. With that in mind, let me walk you through the details behind our results. In the second quarter, we delivered $189.6 million in revenue, representing 113% growth from the same period last year.

Speaker 3

In our direct channel, second quarter revenue was $116.5 million, representing 131% year-over-year growth, highlighting our ability to sustain the growth rate acceleration that we unlocked in the fourth quarter. Our virtuous data cycle is accelerating top-line growth and rapidly expanding our market share. Because our platform is vertically integrated, we can refine everything from the initial user experience to our core underwriting algorithms, expanding our addressable market. We continue to pair this rapid expansion with highly disciplined unit economics, driving a sequential improvement in our return on advertising spend in the second quarter. In our third-party channel, second quarter revenue was $73.1 million, representing 90% year-over-year growth. This marks the second consecutive quarter of sequential acceleration in our year-over-year growth rates, up from 27% in the fourth quarter and 42% in the first quarter.

Speaker 3

This compounding growth was driven by contributions from both new and existing agencies, alongside enhancements to our agent portal and improved conversion rates and agent productivity. Moving to our non-financial metrics, we activated 107,847 policies in the second quarter. The average revenue per policy was $1,758. The sequential decline in ARPU was the result of a product mix that skewed more heavily towards our whole life products, which make up a growing portion of the policies written in our third-party channel. Our second quarter contribution profit grew 66% year-over-year to $62.3 million, representing a 33% contribution margin. Our contribution margin is a function of our revenue mix between our two channels and the products sold within these channels. In Q2, we saw a higher mix of products sold in our third-party channel, which naturally shifted our blended contribution margin rate.

Speaker 3

As a reminder, all of our products are independently profitable. We remain focused on scaling total contribution profit dollars and adjusted EBITDA dollars rather than optimizing for a specific margin rate. Our second quarter adjusted EBITDA was $35.2 million, representing a margin rate of 19%. Combined with our 113% revenue growth, this quarter's Rule of 40 score was 132. As of June 30th, 2026, our cash equivalents, and investments total $252.9 million. We ended the quarter with a commission receivable balance of $381.5 million, up 11% from the prior quarter and up 51% from the prior year, representing estimated future cash flows already earned but not yet received. This balance is a direct reflection of the scale and quality of our activated policy base. We view it as an important indicator of the embedded cash generation potential of our platform.

Speaker 3

Our Q2 cash flow from operating activities was $35.7 million. Given the strength of our balance sheet and our confidence in the durability of our cash generation, our board has authorized a share repurchase program of up to $100 million of our Class A common stock. We intend to be opportunistic in how we deploy this authorization. We're purchasing shares only when we believe the market price does not reflect the underlying value of the business. We expect to adopt this program under a Rule 10b5-1 trading plan following the filing of our 10-Q. We'll disclose repurchase activity in our filings going forward. Turning now to our financial outlook. The momentum we generated in the first half of 2026 positions us exceptionally well for the remainder of the year.

Speaker 3

Our revised guidance reflects this sustained top-line acceleration, a higher revenue mix from our third-party channel, and strategic growth investments that we are actively pursuing. For the third quarter of 2026, we expect total revenue in the range of $160 million-$164 million. At the midpoint, this represents 73% year-over-year growth. We also expect adjusted EBITDA in the range of $23 million-$25 million. For the full year 2026, we are raising our total revenue guidance and now expect revenue in the range of $727 million-$731 million. At the midpoint, this represents 88% year-over-year growth, marking an acceleration over our 2025 growth rate and reinforcing the durability of our top-line momentum. We're also raising adjusted EBITDA to a range of $119 million-$123 million. In closing, our performance in the first half of 2026 shows the power of the Ethos platform.

Speaker 3

As we continue to scale, our structural advantages compound, allowing us to grow well above market rates while maintaining a strong profitability profile. As we look ahead to the second half, we believe we are well positioned to maintain this high rate of growth while scaling new products and partners well into the future. With that, I'll turn the call over to the operator to begin the Q&A session. Operator?

Operator

Thank you, ladies and gentlemen. If you have a question or comment at this time, please press star one one on your telephone. If your question has been answered and you wish to remove yourself from the queue, please press star one one again. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Eric Sheridan with Goldman Sachs. Your line is open.

Speaker 4

Thanks so much for taking the question. Maybe just one big picture one. You guys talked during your prepared remarks about the durability of growth. Can you talk a little bit about what you're most excited about that could sustain durability levels of growth well above industry levels of growth? Also, as you continue to lap accelerated growth rates that you've been putting up as a public company the last couple of quarters, how should we just think about broadly more normalization of revenue growth as you run into tougher revenue comps as you move out of 2026 and into 2027, just so we understand the interplay between the durability theme against just the math of lapping revenue growth as you get further down the road. Thank you so much.

Speaker 2

Hey, Eric, thanks for the question. This is Peter. On the overall durability of growth, it's important to remember every year around 10 million Americans buy individual life insurance. So we are a single-digit percentage of that market to date. That demand for life insurance really exists whether or not Ethos exists. We have developed, obviously, a transformative client experience, which allows people to just take the initiative and buy it in a much easier and more streamlined fashion than anything else available in the market today. Then I think equally important is we transform the agent selling experience and our value proposition with agents is unmatched, both due to the transactional acceleration that we provide, but also the full range of features and benefits for agencies and agents to build and keep recruiting more agents on.

Speaker 2

I think one is there's just a durable amount of people showing up to buy the product in the market every single year, and we have the best offering for, I think, the vast majority of them. Then, second is our virtuous data cycle is really what allows us to continuously optimize our unit economics through improvements to our underwriting algorithms, persistency, mortality, client experiences, agent selling experiences, data infrastructure, marketing and whatnot. So we believe we'll be able to eat into a larger and larger percent of that 10 million people buying each year. Then there's the opportunity that we're driving incremental people to the market who otherwise wouldn't buy without us. So we're equally excited to be protecting more families that way. Chris, do you have any other thoughts on growth rates?

Speaker 3

Just in terms of the future outlook, Eric, I would just note that the growth that you've seen us unlock over the past couple of quarters and the acceleration that we've seen in our year-over-year growth rates is very structural in nature, and we expect those benefits to carry through into the second half of the year here. That's, of course, reflected in our guidance for the third quarter and the full year. As we turn the corner in 2027, we'll provide an outlook in February for the full year 2027.

Speaker 2

One additional thing I'll just add. On the third-party business, it's also quite reoccurring in nature, where you recruit an agency, they roll you out to all their agents. Those agents sell repeat policies with Ethos. That agency is constantly recruiting more agents onto the platform at no incremental cost. We can make those agents more productive through optimizing the agent experience, so they go and sell more net new policies than they otherwise would. There's a lot of embedded reoccurring nature to the revenue, both in the client demand and the agent model.

Speaker 3

Great. Thank you.

Operator

One moment for our next question. Our next question comes from Ron Josey with Citi. Your line is open.

Speaker 5

Thanks for taking the question. Maybe as a follow-up to Eric. Peter, you talked about on the call better. Let's see, as we get bigger, we get better or something. I might have butchered that, but I think that's what you said specifically on the call. As we get bigger, we get better. I wanted to understand, as you get bigger, sort of unpack that a little bit more in terms of experimentation with product, investing in distribution. Talk to us about sort of the methods and means to get bigger, branding on the consumer side and on the agent side. Chris, as a follow-up to that, talk to us a little bit more about the top of funnel and the investments in marketing overall that might have led to this growth.

Speaker 5

I know we're investing more in brand. Specifically, we're also. I'd love to hear how you're managing profitability with growth. Thank you.

Speaker 2

Thanks, Ron. Great question. As we get larger, we have more clients flowing through our systems, and we have more data to test on, and that testing unlocks gains up and down the vertical stack, as I mentioned before. The speed with which we can run a statistically significant test today is a fraction of what it was a couple of years ago. Because of that, we can run many more net new tests up and down the funnel or deploy many more resources to optimizing underwriting. We can look at de-averaged data sets in underwriting and come to conclusions more quickly.

Speaker 2

If you look at the industry, obviously everyone knows insurance is a data business. The typical carrier model has so much friction in their virtuous data flywheel between the manual medical exams and blood tests that you have to go through when you buy, them always being an agent between them and their client, the back end mainframe and on-prem technology infrastructure. I think what we're observing is by having eliminated so much of this friction in our data flywheel, it's really able to spin in a well-oiled and fast manner that allows us to accumulate this data, act on it with great tests, observe what is driving gains, institute that as our new baseline, reinvest those improved unit economics in incremental marketing spend at our target ROAS, drive even more data and so on and so forth.

Speaker 2

Financial services companies often improve as they get bigger, and I think within our industry, we're doing that at an accelerated rate, and we do so without the constraint of the typical balance sheet capacity constraint. By working with a portfolio of carrier partners who are each strong in individual parts of the market but

Speaker 3

Allow our total product portfolio to be strong in almost all respects in the market. Carrier partners that are very well capitalized and have hungry demand for our premiums. It allows us to grow in a risk-conscious manner, much faster than a typical carrier learning their way into the market would. Then, Ron, in terms of how that's translated into capital deployment for us, if you look at this business over the past three or four years, you'll see as we continue to unlock unit economics, we have scaled marketing spend at the top of the funnel. Each year, top of the funnel, as a percentage of total marketing spend, continuing to grow and scale. That's really obviously allowed us to tap into much broader audiences, and it's noteworthy, I think, that we've been able to do that while maintaining or improving unit economics.

Speaker 3

Here in the second quarter, as Peter noted earlier, we more than doubled our ad spend while maintaining year-over-year return on ad spend and saw a nice sequential improvement quarter-over-quarter. We've been able to deliver this growth while also maintaining disciplined unit economics and profitability.

Speaker 5

Thank you, Peter. Thank you, Chris.

Operator

One moment for our next question. Our next question comes from Pablo Zúñiga with J.P. Morgan. Your line is open.

Speaker 6

Hi, good afternoon. First question, I was hoping you could unpack the EBITDA guide for the second half a bit. Clearly, you're raising the revenue guide, I guess compared to that EBITDA it's sort of flattish and therefore, it seems like margins are going to compress first half versus second half. If you sort of talk through that, what's driving that outlook from a margin perspective? Thanks.

Speaker 3

Sure. Pablo, if you look at our Q2 reported results, you'll see from Q1 direct as a percentage of our total revenue mix down 14 points. As we've seen the significant acceleration in the third-party business, as we noted earlier, year-over-year growth rates in the fourth quarter were 27%, then accelerated up to 42% in the first quarter, and then 90% here in the second quarter. That dynamic is just naturally causing margins to mix down with a significant acceleration of growth in third party. As we've noted in previous discussions with you, the unit economics in our third party business are skinnier than the direct business, but we still like the business. We highlight for you that every one of the policies that we activate on our platform are independently profitable. Every one of those policies are variable cash flow positive within 60 days of activation.

Speaker 3

Our North Star from a capital allocation perspective has always been and will continue to be focused on scaling absolute contribution profit dollars and absolute EBITDA dollars. That momentum in the third party business in particular, is really what's reflected in the EBITDA guidance that you see in the second half.

Speaker 6

Thanks for that. For my second question, cash flow from operations is better than what we had thought. Was there anything one-off in this quarter from, I guess, a working capital perspective or anything else? Just sort of broad expectations for the remainder of the year there on cash flow. Thanks.

Speaker 3

Sure. For the quarter, the performance was largely organic. There is one call-out. There was an $8 million timing benefit related to a settlement with one of our carrier partners that we expect will reverse here in the third quarter. Other than that, performance was very much organic and linked to operations. As we've noted, cash conversion continues to improve in this business. It's tough to see it necessarily on a quarter-by-quarter basis, but when you look at it over the years, I track it from 2023 forward, you see strong sequential improvements. We continue to see that on an LTM basis. If you were to measure us at the end of the second quarter, we've seen 37% cash flow conversion, a number, as I've mentioned, that has continued to improve year-over-year.

Speaker 3

We think that trend likely continues to the back end of the year, as you look out over the next couple of years.

Speaker 6

Thanks, Chris.

Operator

One moment for our next question. Our next question comes from Ross Sandler with Barclays. Your line is open.

Speaker 7

Hey, guys. Could you talk a little bit more about the uptick in growth in the agent business? Obviously, really strong uptick there, even stronger kind of factoring in that adjustment from a year ago. Was there any additional products, additional agencies, anything going on in that channel that would describe that big uptick that you saw? Thanks a lot.

Speaker 2

Hey, Ross. Thanks for the question. It's Peter. There is no one individual thing that drove it. It's coming from a broad base of newer and longer-term partners. A lot of new agency partners who joined the platform in 2025 and 2026 are contributing very nicely to the growth. Then we have a robust pipeline of more agencies in the onboarding funnel as well. Just as a reminder, we have a fairly organic process of agency-to-agency or agent-to-agent referrals, and our fully loaded agent and agency recruitment costs are really a low single-digit percentage of the third-party revenue. Our agency model, I would say there's a lot of product market fit where the product portfolio is clicking, the agent operating system is clicking, the features and benefits are clicking.

Speaker 3

The word is getting out that Ethos really helps agencies sell many more policies per agent than they otherwise would, and that improvement in an agent's livelihood and career is allowing agencies to go and recruit more agents than they otherwise would. Boosting and benefiting both the writing agent and the agency managers and owners.

Speaker 3

Our operational systems have improved significantly over the last couple of years. The ability to handle very complex payments, commissions, debt, fraud management, all of it is really clicking and maturing. There's a lot more room to run in improving the platform. As we've said before, we have a single-digit % of the industry's estimated life insurance agents on our platform selling. There's a lot more market share to go out and take, not only from agencies that we're not yet partnered with, but also from the existing agencies we partner with. There's more wallet share to gain into the future.

Operator

Thank you. One moment for our next question. Our next question comes from Colin Sebastian with Baird. Your line is open.

Speaker 8

Thanks. Good afternoon and congratulations on the quarter, guys. I know you cited being, I think, one of the top sources of new policies for at least several of your carrier partners. My first question is, I guess, does the pace of growth have any implications for any of those carriers in terms of their appetite or their capacity limit as they work with you, either on a product basis or as you look to expand the portfolio? I have a follow-up.

Speaker 2

Hey, Colin, thanks for the question. With our existing panel of carrier partners, there's currently much more demand and capacity for our premiums than there is supply of premiums. We've got six partners today, 13 products with multiple term life products, multiple whole life products, multiple index universal life products. There's a fair amount of redundancy built into the existing portfolio. Now we're always in the carrier market speaking with prospective carriers about potential growth opportunities together, both in net new product categories and potential added redundancy to the platform. It's important to remember we don't want a panel of 30 off-the-shelf carrier products. We've intentionally built a very focused panel of carriers where we work to co-develop custom proprietary products with deep operational integrations from the carriers into our unified platform.

Speaker 2

Importantly, scale with our carrier partners really provides us the necessary position for getting the best unit economics, and it helps us get our priorities to the front of the carrier's IT and operational roadmaps, where oftentimes we have to dislodge some other important work on their roadmap related to maintaining a legacy IT system. Importantly, remember that we have extended notice of cancellation periods on our key contracts, which last well beyond the time required for us to build a new product with a new partner. We expect to continue building more products with more partners into the future. We're hard at work on products today and excited to keep broadening the portfolio.

Speaker 8

Thanks for that. Maybe just a follow-up on the incremental margin question. I guess how much of the current margin profile is launch cycle investment in R&D and marketing as you launch and scale new products that reverse as those products mature, if that makes sense, versus maybe a structurally different margin mix?

Speaker 3

Yeah, Colin, the costs are marginal relative to launching new products. The platform is incredibly extensible, and we've gotten a lot of volume leverage on the technology spend over the years and would expect that trend to continue into the future.

Speaker 8

Okay, thanks guys.

Operator

One moment for our next question. Our next question comes from Kunal Madhukar with Deutsche Bank. Your line is open.

Speaker 9

Hi, thank you for taking my question. There has been a lot of discussion during the Q&A, especially about the market opportunity and about the appetite for growth. You guys are a very young company with a very small market share in a very large market, growing 100+% generating significant amount of cash, zero debt on the balance sheet. Your ROAS is increasing and is very strong already. Why not invest more on marketing and grow faster when you're thinking of share buybacks?

Speaker 2

That's a great question, Kunal. Thank you for it. This is Peter. We historically have targeted first-year cash profitability on a fully burdened variable basis as a unit economic threshold that we hold ourselves to in both our direct and our third-party channel. As a recently public company, we felt it's been important to deliver both a combination of growth and healthy margins and to grow profitably as we build out our investor reputation. It's something we always stay open-minded about and consider, but right now we feel like we have the right balance of unit economics and growth.

Speaker 9

Thank you. Then a quick one on the quarter, the 50 basis points impact on the gross margins, is that basically a channel mix?

Speaker 3

Yeah, I don't think there's anything particularly noteworthy to call out there, Kunal.

Speaker 9

Okay, great. Thank you.

Operator

One moment for our next question. Our next question comes from Michael McGovern with Bank of America. Your line is open.

Speaker 10

Hey, thanks for taking my question. Just following up on Peter's comments on AI and agentic commerce. You were among the early partners for ChatGPT's native app ecosystem. Have there been any important learnings so far in terms of customer behavior or engagement or conversion? Have the results been consistent with your expectations?

Speaker 2

Hey, Michael. Thanks for the question. It's still early days for the LLM-driven insurance distribution. I would say that there haven't really been any kind of significant changes in how we go to market and acquire clients. We have been very active in our GEO initiative to ensure to take advantage of the shift when it does occur. As the end-to-end digital buying platform, we believe we're best positioned to capture any change in the consumer behavior. At the minimum, we assume that LLMs will play a bigger role in consumer research ahead of a purchase, and could be a material source of client origination. To date, that has not been the case. We'll have to wait and observe how the LLM's monetization strategy evolves and if they start charging for client origination.

Speaker 2

We think that we would win at that game, just given the sophistication of our data models and our intelligent acquisition engine and our fully digital end-to-end transactional experience. I do think at this point, life insurance funnels are so complex with identity verification, reflexive questioning, third-party data pulls for underwriting. They're lengthy enough that it's not intuitive that the entire transactional process is going to shift into an LLM or that a chat format is best for it. We remain aggressively focused on being on the leading edge in whatever ways clients want to buy.

Speaker 10

Got it. Very helpful. One more follow-up on the acceleration from new agents and partners. Can you just talk about the sort of efficiency curves that you're seeing by cohort of agents and partners, and whether your more seasoned cohorts continue to improve their efficiency and productivity? How much runway they still have to be more efficient in the future?

Speaker 3

Yeah, Mike, as Peter noted, we're seeing broad strength across our full slate of agency partners in terms of what's driving the growth acceleration here. Those have two contributing factors, of course, new agents coming onto the platform, as well as increasing agent productivity. We saw contributions from both growth vectors here in the quarter, both volumetrically and from a productivity perspective. I think as you noted in your question, yeah, we generally do see the trend where the more seasoned, experienced agents tend to ramp and deliver higher productivity over time. That could be, and we would expect to be, a bigger part of the forward growth story.

Speaker 10

Got it. Thank you.

Operator

I'm not showing any further questions at this time. I'd like to turn the call back to Aaron for any further remarks.

Speaker 1

Well, thank you everyone for joining us today, and we will speak with you again next quarter.

Operator

Thank you, ladies and gentlemen. This does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.

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