Goosehead Insurance, Inc. Q4 FY2024 earnings call

Key Points

• Acknowledged the impact of natural catastrophes and the critical role of insurance. 2024 saw 20% total revenue growth, 17% core revenue growth, 29% premium growth, and EBITDA near $100 million (up 43% y/y) with a 32% margin.
• Reaccelerated growth by increasing producer headcount, with PIF growth 13% in Q4. Enhanced profitability through disciplined cost management while investing in people and technology.
• Extended technology leadership with tools like quote to issue, AviR agent platform, and referral partner marketing tech. Strengthened talent by onboarding over 800 top-tier sales agents.
• Franchise distribution: 83% of producers, average producers per franchise at 1.9 (up from 1.6), franchise producers up 7% y/y, new business productivity up 49% in 2024, total average gross pay to franchises up 47% y/y.
• 2025 plans: accelerate franchise distribution expansion, expand corporate distribution, launch Goosehead mobile app, expand quote to issue technology, and invest in AI for sales and service.

In the fourth quarter, franchise premiums were $778 million, up 33%, and corporate premiums were $187 million, up 9%. Quarterly premiums grew 28% year over year to $966 million. Full-year 2024 premiums were $3.81 billion, up 29%. Core revenues grew 19% to $68 million in Q4. Franchise distribution accounts for 83% of the producer force.

2025 Guidance

• Total revenues expected between $350 million and $385 million, representing 11% organic growth on the low end and 22% on the high end.
• Premiums expected between $4.65 billion to $4.88 billion, with 22% organic growth on the low end and 28% on the high end. Forecast is conservative due to potential decline in pricing tailwinds and client retention levels.

• Uncertainties in underwriting results and loss trends affecting contingent commissions.
• Market conditions vary by state and product, potentially impacting growth.
• Dependence on carrier relationships and potential trade-offs in resource allocation.

Q: Tommy McJoynt asked about the large contingent commission and EBITDA margin outlook.

A: Mark Jones Jr. said contingent commissions were higher than expected in 2024 due to better core loss ratios, conservative forecasting for 2025, and EBITDA margin expected to expand with core revenue growth.

Q: Matt Carletti asked about product availability in California.

A: Mark Miller said product is coming back in California, with admitted market still tight but E and S thriving, and significant potential for independent brokers there.

Q: Brian Meredith asked about commission rates and client retention.

A: Mark Jones Jr. said planning for lower contingencies in 2025, expecting average commission rates to rise as admitted market heals, and conservative on client retention but expecting improvement.

Q: Andrew Kligerman asked about producer count growth and written premium guidance.

A: Mark Jones Jr. discussed franchise producer count growth, stable franchise turnover, and written premium guidance being conservative due to pricing and client retention uncertainties.

Q: Katie Sakys asked about hiring and geographies.

A: Mark Jones Jr. and Mark Miller discussed hiring timelines for franchises (nearly accretive on day one) and corporates (6-8 months), and geographies with product demand and capacity coming online.

Q: Michael Zaremski asked about corporate agent growth and mortgage servicer relationships.

A: Mark Miller and Mark Jones Jr. discussed corporate agent growth slowing due to spreading agents, and mortgage servicer relationships as a growing but not yet material part of the business.

Q: Mark Hughes asked about retention differences between franchise and corporate.

A: Mark Jones Jr. said corporate retention dropped due to Texas being a hard market, while franchise retention is better due to geographic dispersion.

Q: Pablo Singzon asked about California business and pricing.

A: Mark Jones Jr. said California business doesn't massively impact results, and homeowners pricing is higher than overall book average.

Q: Scott Heleniak asked about special dividend and QTI.

A: Mark Jones Jr. discussed capital management including special dividends and share buybacks, and QTI volume growing significantly with plans to expand further.