TWFG, Inc. Q3 FY2025 earnings call

• TWFG delivered strong quarter with total revenues up 21% QoQ, adjusted EBITDA up 45%. • Personal lines normalization seen with carrier appetite returning, rate increases moderating. • Third quarter recruiting and M&A activities productive with 8 new retail locations, 1 new corporate location, and 370 independent agents added to MGA platform. • Following the quarter, acquired Alabama Insurance Agency, adding 23 retail locations. • Priorities remain investing in technology, executing accretive M&A, expanding distribution channels, and disciplined capital deployment.

Total revenues increased 21% quarter-over-quarter to $64.1 million. Written premium increased by $67.6 million or 16.9% over the prior year period to $467.7 million. Insurance services grew $56 million or 16.5%, and the MGA had a spike in growth of $11.7 million or 19.2%. Adjusted EBITDA grew 45% to $17 million, expanding margins by 430 basis points to 26.5%. Organic revenues increased $5 million, reaching $54.2 million with an organic growth rate of 10.2%.

• Full year 2025 guidance: total revenues between $240 million and $245 million, organic revenue growth rate in the range of 11% to 13%, and adjusted EBITDA margins between 24% and 25%. • Expect to execute earlier in the cycle in 2026 than 2025 and exceed 2026 M&A pace compared to 2025.

• Market environment changes, such as transitioning from hard to soft market impacting renewal rate and premium retention. • Availability issues in hard market affecting organic growth, and soft market with more carrier options potentially leading to lower average premiums. • Geographical variations in market conditions, like California remaining a hard market for personal lines while other areas are soft.

Q: Could you clarify the $10 million line attributed to other investments in the statement of cash flows?

A: We deployed our own capital into premium finance operations, which is highly accretive, getting 4% plus interest and above 7% yield after swapping credit facilities.

Q: Maybe a little bit of additional color on the market environment?

A: Transition from hard to soft market impacts renewal rate and premium retention; availability of additional capacity allows more clients but lower average premiums, with growth in exposure offsetting some reduction.

Q: On the MGA channel, good premium growth this quarter. What drove the strong results?

A: Launched a program in Florida at end of second quarter, including an exclusive TPA, MGA for Florida Property Program with takeout creating TPA revenue stream without commission expense, and voluntary organic program writing new business.

Q: Back on the MGA, will capacity becoming more available create pressures on growth?

A: Our MGA programs are currently all admitted, so capacity shifting back from ENS into admitted space inures to our benefit.

Q: Break out product environment improvement geographically and near-term P&L flow?

A: Hard market for personal lines started softening in early 2025; California remains hard on personal lines but soft on commercial lines; cat-exposed, hurricane-driven geographies relatively soft.

Q: Contingent line and what contingents might look like in 4Q?

A: We have high confidence in achieving full year guidance as we locked in third quarter contingencies.