Goosehead Insurance, Inc (GSHD) Earnings

Management highlights

### Leadership Transition - Outgoing CEO Mark Miller announced his retirement at the end of 2026, after 4 years leading the company and a 40-year professional career; he will remain a member of the board of directors. - President & COO Mark Jones Jr. will succeed Miller as CEO, bringing nearly 10 years of experience with Goosehead and deep institutional knowledge of the business. - The company's core long-term strategy remains unchanged: the objective is to become the largest distributor of personal lines insurance in the founder's lifetime. - Mark Jones Jr.'s priorities for his tenure are increased speed of execution, operational simplification, and faster decision-making. ### Core Operational Progress - Total written premiums grew 14% year-over-year to $1.36 billion, accelerating from 13% growth in Q1 2026, reaching over $4 billion in cumulative written premiums, up from ~$2 billion in 2022. - Policies in force grew 15% year-over-year, accelerating from 14% growth in Q1 2026, and client retention improved 100 basis points sequentially to 86%, the highest level since the hard insurance market began, with a target of reaching the prior high of 89%. - The agency staffing program (ASP) launched in 2023 to support franchise owners with hiring has placed hundreds of producers into franchise operations, driving higher average monthly franchise payments (now over $28,000, up more than 35% year-over-year) and a self-reinforcing growth flywheel. - Newly launched corporate offices are scaling rapidly, with an average of nearly 20 agents per location, and several rank among the top corporate offices for new business production, while seeding the pipeline for future franchise owners. ### Technology Updates - Digital Agent 2.0, the first U.S. end-to-end multi-carrier choice shopping platform, has been fully launched in Texas, allowing consumers to complete the entire shopping and binding process digitally, while still retaining access to a licensed Goosehead agent when desired. - The AI voice assistant Lilly now handles 20% of inbound service calls from start to finish, and up to 30% during peak periods, automating routine administrative tasks and freeing service staff to focus on complex, high-impact client needs. - Technology investment is disciplined: the company only invests in automation that improves client experience, increases producer productivity, or boosts retention, and avoids automation that would harm client outcomes. ### Financial Performance Highlights - Total revenues grew 21% year-over-year to $113.4 million; adjusting for a $4 million one-time recovery of unpaid commissions in Q2 2025, total revenues grew 26% year-over-year. - Core revenues grew 10% year-over-year to $95.6 million, or 16% adjusted for the 2025 one-time item. - New business commissions grew 27% year-over-year to $9.6 million, marking the first consecutive quarters of over 20% new business commission growth since 2021. - Ancillary revenues (largely contingent commissions) grew 180% year-over-year to $16.3 million, driven by improved underwriting loss ratios, favorable carrier mix, and optimized carrier contracts. - Adjusted EBITDA grew 30% year-over-year to $37.9 million, for a 33% adjusted EBITDA margin. Trailing four quarter adjusted EBITDA exceeds $130 million, up from under $40 million in 2022. - The company generated $15.9 million in operating cash flow in Q2, repurchased 95,000 Class A shares for $3.9 million, and now has fewer outstanding Class A shares than at the 2018 IPO.

Guidance

- Management increased the lower bound of its 2026 full year total organic revenue growth guidance range to 12% to 19%, driven by better than expected performance from contingent commissions, which are now tracking well above prior projections. The updated full year expectation for contingent commissions as a percentage of total written premiums is 70 to 100 basis points, up from the prior 60 to 85 basis point range. - Core revenue growth guidance remains unchanged; the guidance update only reflects outperformance in contingent commissions. Management continues to expect core revenue growth to accelerate in the second half of 2026 from the 12% year-over-year growth delivered in the first half. - Full year 2026 organic total written premium growth guidance is maintained at 12% to 20% year-over-year. - Expense guidance remains unchanged: compensation and G&A are expected to grow in the high teens to low 20% for the full year, outpacing core revenue growth due to ongoing strategic growth investments.

Segment performance

Goosehead Insurance operates three core distribution segments with the following Q2 2026 performance: 1. Franchise Network: This is the company's largest segment. Total franchise producers grew 5% year-over-year to 2,190, reaching an all-time high, with average 2.4 producers per franchise. New business royalties (the core revenue stream for this segment) grew 20% year-over-year to $9.4 million, the fastest growth rate in the last six quarters. There was a 70% year-over-year increase in franchises generating over $100,000 in monthly gross new business commissions. 2. Corporate Sales: This segment has been operating for over 20 years and acts as a pipeline for future franchise owners. It has launched over 60 independent franchises to date, representing more than 170 producers. 3. Enterprise Sales: This is the fastest growing segment, founded three years ago. In Q2 2026, it generated $3 million in new business commissions and agency fees, and represented 21% of the company's total new business commissions and agency fees. It is now approximately one-third the size of the mature corporate sales segment.

Risks & headwinds

- Forward-looking statements are inherently uncertain, and actual results may differ materially from projections due to unforeseen risks and uncertainties, which are detailed in the company's recent SEC filings. - Contingent commission revenues can have a relatively wide range of annual outcomes depending on actual business flow and carrier results, creating uncertainty around top-line and bottom-line performance for the full year. - The company holds less than 1% market share in its large addressable market, meaning that hitting long-term growth targets requires continued successful market share capture, which is not guaranteed. - Product pricing trends vary across geographies and lines of business, creating some variability in premium per policy growth that could impact top-line results. - The pace of franchise producer hiring is ultimately controlled by independent franchise owners, so targeted producer count growth may not be achieved.

Analyst Q&A

• Q: A competitor recently adjusted agent compensation, leading to potential agent unrest. Have you seen increased interest from captive agents, and does this change your go-to-market strategy? /

  A: Management expects this industry development could be a tailwind for producer recruiting, as more agents may seek new opportunities. However, it does not change Goosehead's existing go-to-market strategy. The company will continue investing in Digital Agent 2.0 to boost existing agent productivity, and believes its existing independent model is already positioned to win long-term. (192 characters)

• Q: What is driving the recent step-up in franchise productivity, and how durable is this improvement? /

  A: The improvement comes from three main sources: the agency staffing program that helps franchises add more producers, a more open and stable product market compared to the prior multi-year hard market, and the pipeline of new high-quality franchises launched from the corporate sales team. Same-store franchise sales grew 22% year-over-year in Q2, and top 50 franchises saw 40% same-store sales growth. Management expects franchise unit productivity to keep growing for the foreseeable future. (328 characters)

• Q: With the stock price disconnected from underlying business value, how does Mark Jones Jr. approach long-term shareholder value creation, and is going private being considered? /

  A: Management states the priority is maximizing long-term profit dollars, not reacting to short-term equity price dislocations. The entire management team has purchased stock in the open market, demonstrating confidence in the business' direction. Goosehead's largest shareholder, co-founder Mark Jones Sr., added that there is no interest in taking the company private, and the focus remains on building long-term value for all public shareholders. (345 characters)

• Q: Could you provide details on the unexpectedly higher G&A expense in Q2, and was any of it due to timing of cost pulls forwards? /

  A: The modestly higher-than-expected G&A included a few one-time timing items: incremental costs from pulling forward depreciation for new technology implementation projects, and $1.5 million in incremental costs from holding the company's President's Club franchise conference in Q2 2026, which does not occur every year. There were also incremental costs associated with the launch of the new Digital Agent platform, which was delivered ahead of schedule in the first half. (387 characters)

• Q: What is the long-term target for the share of service calls handled by AI assistant Lilly, and what cost savings can be expected? /

  A: Management does not have a fixed long-term target for the share of calls handled by Lilly, as the priority is maintaining strong client satisfaction. Currently Lilly handles 20% of daily calls and up to 30% during peak periods, with high satisfaction for routine administrative requests like ID card requests and billing questions. Any cost savings from automation are reinvested back into new tools and technology to improve client experience, rather than falling directly to the bottom line. (362 characters)