Goosehead Insurance, Inc. Q2 FY2024 earnings call

Key Points

• Mark Miller highlighted the enormous growth opportunity in the personal lines insurance market, where Goosehead accounts for less than 1% of the over $450 billion total personal lines industry.
• Despite macro challenges like frequent billion-dollar insurance claim disasters and carrier pricing issues, Goosehead posted strong results in Q2, including growing total producers for the first time in seven quarters, total written premium up 30% YOY, core revenue up 20% YOY, and same store sales up 29% YOY.
• Three-pronged approach to add agents: hiring quality corporate agents, optimizing in-house agent staffing, and increasing franchise development team.
• Significant technology investments to drive agent productivity, with QTI technology reducing reentry time and increasing policy binds.
• Focus on being a great partner to carriers, delivering quality clients, and expecting growth acceleration in the back half of 2024 and 2025.

In the second quarter of 2024, total written premiums grew 30% year-over-year to $999 million. Franchise premium grew 35% to $793 million, and corporate premium grew 15% to $206 million. Core revenue increased 20% year-over-year. Adjusted EBITDA for the quarter was $24.7 million, up from $23.1 million in the year-ago period. Policies in force grew 11% versus the prior year quarter.

Forward-Looking Statements

• Total written premiums are expected to be between $3.62 billion and $3.82 billion, representing 22% to 29% growth YOY.
• Total revenues are expected to be between $290 million and $310 million, with 11% to 19% organic growth YOY.
• Adjusted EBITDA margin is expected to expand for the full year, with most expansion in the fourth quarter.
• Corporate agent headcount is expected to exceed 400 by year end.

Risks Discussed

• Macro factors such as frequent weather events and carrier profitability issues impacting product availability.
• Uncertainty in property insurance profitability leading carriers to limit new agents and policies.
• Temporary moderation in client retention due to carrier pricing actions resulting in more shopping behavior from existing clients.

Q: Matt Carletti asked about product availability improvement, particularly in auto and property homeowner markets.

A: Mark Miller and Brian Pattillo responded that product availability is improving state-by-state and market-by-market, but it remains uncertain and varies by location.

Q: Tommy McJoynt inquired about commission rates and state-backed plans.

A: Mark Miller stated that average commission rates have slightly declined due to writing in geographies with lower commission rates and more business going to state-run plans.

Q: Brian Meredith asked about revenue growth acceleration and carrier capacity.

A: Mark Jones Jr. responded that core revenue is expected to accelerate, and carrier markets ebb and flow as carriers adjust pricing and underwriting models.

Q: Mark Hughes asked about corporate agents target and commission retention.

A: Mark Miller confirmed the target of over 400 corporate agents by year end and mentioned that retention rates are showing signs of improvement with slower decline in client retention.

Q: Katie Sakys asked about margin expansion and franchise expansion.

A: Mark Jones Jr. stated that margin expansion has flexibility, and focus is on states with better product availability.

Q: Scott Heleniak asked about corporate headcount and share buyback.

A: Mark Miller and Mark Jones Jr. discussed strong university recruiting and opportunistic share buybacks.

Q: Michael Zaremski asked about revenue-premium ratio and commission structure.

A: Mark Jones Jr. responded that aligning growth and profitability is key, and Goosehead's agent compensation is structured to be competitive with high productivity.

Q: Paul Newsome asked about the competitive environment in home insurance.

A: Mark Jones Jr. stated no significant shift in the home insurance environment from the first quarter.

Q: Pablo Singzon asked about housing market impact and agent compensation.

A: Mark Jones Jr. mentioned no housing market assumption needed for growth and that franchisee agent compensation is ultimately up to the franchisee.